I am in accord with what is said in the majority opinion as to the purpose of the constitutional provisions limiting the amount of indebtedness of school districts and other subdivisions of the state. I am unable to agree, however, with the conclusion there stated that the defendant school district has exceeded its limit of indebtedness within the meaning of section 6, Article XIII of our Constitution. It should be kept in mind, too, that this section of the Constitution does not deal with expenditures, but with indebtedness. If the present indebtedness of the defendant school district is valid, the contemplated bond issue would be also, because it is simply contemplating a change in the form of an existing indebtedness. This much must be conceded.
In effect, the majority opinion holds that outstanding warrants of the school district are invalid because issued when the district had already reached its limit of indebtedness. In my opinion the majority are in error in their method of computing the indebtedness of the school district. Taxes levied and in the process of collection are to be treated as cash on hand and to be deducted from the gross indebtedness in determining whether the district has exceeded its constitutional limit of indebtedness. The more recent cases sustain this view. The rule is stated in 44 C.J. 1124 as follows: "According to a few decisions, some of which are weakened or overturned as authorities by subsequent decisions or statutes in the same jurisdiction, a limitation of municipal indebtedness refers to outstanding debts and not net indebtedness, but it is generally held that in computing the existing indebtedness of a municipality, a deduction may be made from gross indebtedness of municipal assets applicable to the payment of such indebtedness; *Page 547 and in some jurisdictions it is so provided by statutes which are held to be constitutional. Particular assets which may be deducted include cash on hand and solvent debts due the municipality."
Delinquent taxes should be considered as in the process of collection and are deductible. In Seymour v. Ellensburg,81 Wn. 365, 142 P. 875, 876, the supreme court of Washington, in speaking of this question, said: "In determining whether the indebtedness exceeds the limit fixed by the Constitution, this court has held that, not only current taxes, but also delinquent taxes, and the interest thereon, may be treated as cash assets. In other words, that there shall be deducted from the total indebtedness the amount of current and delinquent taxes, together with interest. (State ex rel. Barton v. Hopkins, 14 Wn. 59,44 P. 134, 550; Graham v. Spokane, 19 Wn. 447,53 P. 714; State ex rel. American Freehold-Land M. Co. v. Mutty,39 Wn. 624, 82 P. 118.) The reason given for this rule is that, in legal contemplation, the collection of the taxes and interest is certain, and therefore they are the equivalent of cash."
The supreme court of Iowa, in Council Bluffs v. Stewart,51 Iowa, 385, 1 N.W. 628, took the opposite view and went so far as to hold that, when a warrant is issued without cash on hand to pay it, a debt is incurred. That court has receded from this position as to a school district in the case of Holst v.Consolidated etc. District, 203 Iowa, 288, 211 N.W. 398, 402. It there held that "unquestionably the taxes which had been levied and which were due and collectible were assets belonging to the corporation proper, to be computed with the other assets of the corporation as though they were cash in the treasury, subject to proper offsets." The court in that case also permitted as a deduction from the gross indebtedness the value of school buildings and school sites available for sale.
In 56 C.J. 538 it is said: "In computing the existing indebtedness of a school organization, there is generally deducted all of the property or assets, both real and personal, including funds in the treasury available for the payment of its liabilities. *Page 548 This includes taxes levied which are due and collectible, in the absence of a showing that there were current expenses which would consume such taxes, money due the school district from another school district upon an adjustment of the assets and liabilities between them, but not the right of a new school board to levy a tax."
Taxes assessed and in the process of collection are constructively in the treasury. (McCavick v. Florence Ind.School District, 25 S.D. 449, 127 N.W. 476, 33 L.R.A. (n.s.) 606.) As this court said in State ex rel. Rankin v. StateBoard of Examiners, 59 Mont. 557, 197 P. 988, 991: "The taxes levied and in process of collection are treated as in the state treasury, though not yet actually paid over to the state treasurer."
It cannot be said that delinquent taxes are not in the process of collection. Under our system of collecting taxes, if not paid when due, the property is sold for the delinquent taxes. If no one appears to bid on the property, it is struck off to the county. After the county obtains deed it must sell the property, in which event the school district obtains its share of the proceeds of the sale. These various steps are but proceedings in the process of collecting the delinquent tax. (State ex rel.Souders v. District Court, 92 Mont. 272, 12 P.2d 852.)
The majority opinion seems to proceed upon the theory that the minute school district taxes become delinquent they are no longer an asset of the district. The legislature is not permitted to remit or release delinquent taxes or any part thereof. (Sec. 39, Art. V, Const.; Sanderson v. Bateman, 78 Mont. 235,253 P. 1100; State ex rel. Kain v. Fischl, 94 Mont. 92,20 P.2d 1057.)
In the absence of proof to the contrary, as here, it must be assumed that the delinquent taxes will ultimately be collected, and that a tax, being a prior lien upon property, is a solvent debt. This being so, it is my opinion that, in calculating the indebtedness of the school district, such taxes must be deducted. Reason and authority support this conclusion.
If the warrants in question here are in excess of the constitutional limit of indebtedness, they are absolutely void. If *Page 549 they are void to-day, they will be to-morrow. They cannot be void at one time and valid at another. It follows that, if the majority opinion is correct, these warrants are absolutely void. If to-morrow the school district receives $8,000 in delinquent taxes, levied to meet the obligations for which the warrants were issued, it could not lawfully pay the warrants. Such a conclusion, necessarily following from the majority opinion, seems to me preposterous.
It is true that the case of Jordan v. Andrus, 27 Mont. 22,69 P. 118, announced the view that "indebtedness" means what the city owes irrespective of the demands it may hold against others. But the force of that decision has been cut down by the opinion in State ex rel. Rankin v. State Board of Examiners, supra, where this court said: "In our opinion, the debt or liability intended to be prohibited by section 2 of Article XIII of our Constitution is such as is in excess of revenues available or provided for for the appropriation years — that is, for the two years intervening between sessions of the legislative assembly — and not current obligations of the state arising during such period of time for which revenues are actually available or provided. The constitutional limitation has reference to such a liability as singly or in the aggregate will obligate the state to an amount in excess of $100,000 over and above cash on hand and revenues having a potential existence by virtue of existing revenue laws. In the case before us, the funds must be considered in esse for the payment of the treasury notes, provision having been made for their levy and collection. The state, in conducting its business by such methods, is in no different position than the merchant doing business on an assured credit basis in anticipation of accounts due being paid to him at stated intervals. Revenue for which provision is already made may constructively be considered as cash on hand. (25 R.C.L. sec. 30.) Clearly the character of debts prohibited by the Constitution in excess of $100,000 without the majority approval of the people at a general election are such as pass the limit of available cash on hand and revenue for which adequate provision has been made by law for *Page 550 the two-year period intervening between regular sessions of the legislative assembly." To the same effect are State ex rel.Toomey v. State Board of Examiners, 74 Mont. 1, 238 P. 316, and State ex rel. Tipton v. Erickson, 93 Mont. 466, 19 P.2d 227.
True, the Rankin Case, supra, had relation to a state indebtedness, but no amount of rationalization can justify a different meaning of the word "debt," as applied to the state from that applied to a school district. The attempt to draw a distinction between the two because of section 12, Article XII, Constitution, cannot, in my opinion, be sustained. Section 12 is not a grant of power. It confers no rights upon the state. It is simply an additional limitation upon the power of the state legislature. No such constitutional limitation has been made as to a school district. This came by way of legislative enactment. (Secs. 964 and 1012, Rev. Codes 1921.)
It is my view that defendant school district is not indebted beyond its constitutional limit, and that the writ prayed for should be denied.
Rehearing denied December 27, 1933, MR. JUSTICE ANGSTMAN dissenting.