Page:Harvard Law Review Volume 5.djvu/177

161 DECISION UPON MUNICIPAL BONDS. l6l The opinion then proceeds to speak of the necessity of hold- ing municipal corporations within strict limits of authority, and very properly quotes to that effect from Judge Dillon's work on Municipal Corporations, as well as cites the decision of that able jurist in Gause v. Clarksville, 5 Dillon, 165. It quotes extracts from the State statutes, of which the most material is section 27 of the Act of 1852, for the incorporation of towns, being section 3342 of the revised statutes of Indiana, as follows: " No incorporated town under this Act shall have power to borrow money or incur any debt or liability, unless the citizen-owners of five- eighths of the taxable property of such town, as evidenced by the assessment roll of the preceding year, petition the Board of Trustees to contract such debt or loan ; and such petition shall have attached thereto an affidavit verifying the genuineness Of the signatures to the same; and for any debt created thereby, the Trustees shall add to the tax duplicate of each year, successively, a levy sufficient to pay the annual interest on such debt or loan, with an addition of not less than five cents on the hundred dollars, to create a sinking fund for the liquidation of the principal thereof." The learned justice then reaches the conclusion that no " ex- press power is given by these sections, either for the purpose of raising money or funding a previous indebtedness." 1 Continuing to examine the question whether the bonds were authorized by legislative authority, Mr. Justice Lamar remarks : — - " The town had no power to pay off those bonds in this way, viz., by the issue of new bonds, or it could perpetuate a debt for- ever. Bonds once issued for a lawful purpose must be paid by taxation. This is manifest from the provision which requires a tax to be levied each year, ' sufficient to pay the annual interest, with an addi- tion of not less than five cents on the hundred dollars to create a sinking fund for the liquidation of the principal.' When bonds are once issued for lawful purposes, the town is functus officio as to that matter. To argue that the old bonds are a debt for school purposes which may be liquidated by new bonds is a refinement of construction which the sound sense of the law rejects." 2 . 1 Page 684. It appears that on the 24th August, 1879, an act went into effect expressly conferring power upon towns to fund their indebtedness by issuing negotiable bonds — a date sub- sequent to the issue of the bonds in this suit. 2 Page 685. 21