The trial court erred in denying an injunction. The almost axiomatic statement of Chief Justice Marshall that "The power to tax is the power to destroy," has led the people, in the first instance, in adopting Constitutions to limit the power of legislatures, and, in the second instance, legislatures to limit the power of other taxing authorities as definitely as possible in order to prevent destruction at the hands of taxing authorities. This is clearly reflected in the Constitution of Montana and in the various Code provisions applicable to the powers of school boards, county commissioners, and city and town councils. (61 C.J. 153, secs. 91 et seq.) Such limitations are found in section 36, Article V; sections 5 and 9 of Article XII; section 6 of Article XIII of the Constitution. Limitation of levies is prescribed for county purposes in sections 4465 to 4465.12, 2150 Rev. Codes; bridges: Sections 227, 1704, 2148 and 5283; cities and towns: Sections 5194, 5216 to 5283; schools: Sections 1019.12, 1036.1, 1202, 1219, 1223; state purposes: Sections 2147, 2148; bond issues: Sections 4630.24, 4630.25; budget system: Sections 4613.1 to 4613.10, Revised Codes, and Chapter 98 of the Laws of 1937.
In 44 C.J. 1288, it is said: "A tax for a sinking fund in excess of the amount needed for such purposes in any one year is invalid as to the excess." (St. Louis-San Francisco R. Co. v.Forbess, 111 Okla. 48, 237 P. 596.) Again it is said in 61 C.J. 557, section 681: "It is against the policy of the law to raise taxes faster than the money is likely to be needed by the government, and, in the absence of statutory authority, a tax *Page 39 can not be levied for the sole purpose of accumulating funds in the public treasury, such as for remote or future contingencies that may never occur; nor can it be levied in excess of the amount required for the purpose for which it is levied, with the intention of using the excess for another purpose."
The excessive levy, whether in excess of constitutional limitations, or in excess of necessity, is illegal and void. "In general a levy of county taxes for a certain purpose should not exceed the amount necessary for that purpose." (15 C.J. 635, sec. 349.) "Where taxes are levied to the prescribed limit, the power is exhausted, and any taxes levied in excess thereof are illegal and void." (61 C.J. 556, sec. 679; El Reno Wholesale GroceryCo. v. Taylor, 87 Okla. 140, 209 P. 749; St. Louis S.F.R.Co. v. Thompson, 35 Okla. 138, 128 P. 685; St. Louis S.F.R. Co. v. Forbess, supra; Quint v. Hoffman, 103 Cal. 506,37 P. 514.)
When, in the light of these principles, the court considers the provisions of section 4630.25, it is made apparent that the limitation upon the taxing power is clearly expressed because the legislature declares that the securing of funds for sinking funds shall be arrived at "by dividing the whole amount for which such series or issue of bonds were originally issued by the number of years for which the same were originally issued to run." In this connection see, also, the provisions of the budget law (secs. 4613.1 to 4613.4, the latter as amended by Chapter 98, Laws of 1937) to ascertain the method that must be followed by the local taxing authorities in arriving at the rate of levy to be made, if any.
Mr. Chief Justice Brantly in Barnard Realty Co. v. City ofButte, 50 Mont. 159, 145 P. 946, said: "The assessment being wholly illegal, because without authority, its validity may be questioned by any available method." In 1 Cooley on Taxation, fourth edition, page 376, it is said: "All provisions are mandatory which expressly or by implication limit the amount of taxes which may be levied. A levy in excess of the tax limit is illegal, and is void at least as to the excess." (Hammond v.Lester, 159 Ky. 310, 166 S.W. 976; Boyce v. Sebring,
*Page 40 66 Mich. 210, 33 N.W. 815.) After saying that a threatened levy cannot be enjoined, or a levy claimed to be merely unwise, Cooley in volume 4, section 1658, says: "On the other hand, injunction lies to restrain a levy clearly illegal, at least if there is some special ground for equitable relief. Thus a levy in excess of the statutory limit may be enjoined." (See, also, Hensley v. Cityof Butte, 33 Mont. 206, 83 P. 481; Johnson v. Johnson,92 Mont. 512, 15 P.2d 842; Northern P. Ry. Co. v.Musselshell County, 54 Mont. 96, 169 P. 53; People v.Toledo etc. Co., 248 Ill. 489, 94 N.E. 128; Schneewind v.City of Niles, 103 Mich. 301, 62 N.W. 498; Union P. R. Co. v. Howard County, 66 Neb. 663, 92 N.W. 579, 97 N.W. 280;Birkholz v. Dinnie, 6 N.D. 511, 72 N.W. 931.) In view of the legislative declaration made in section 2268, Revised Codes, we urge that it is the clear intent of the Montana Legislature to forbid injunctions to restrain the collection of a tax, except where the tax "is illegal or not authorized by law," or "the property is exempt from taxation." In this case, the tax is legal, it is authorized by law, and it was imposed upon property which is subject to taxation. This section and the one giving the right to pay under protest and sue to recover (2269) have frequently been before this court. (See Montana OrePurchasing Co. v. Maher, 32 Mont. 480, 81 P. 13; Cobban v.Meagher, 42 Mont. 339, 113 P. 290; Cobban v. Hinds,23 Mont. 338, 59 P. 1.) These decisions of an early time are very clear that injunction does not lie unless the tax is wholly illegal. They have been summarized and a historical review thereof made by Mr. Justice Callaway in a decision handed down in 1929, and finally in summing up, the court makes the very clear and positive statement that injunction does not lie unless the tax "is wholly illegal or the legal and illegal portions thereof appear to be inseparable." (First Nat. Bank v. SandersCounty, 85 Mont. 450, 279 P. 247.) In this *Page 41 connection, we call the court's attention to the citations in counsel's brief. They cite and depend upon Corpus Juris and citations from Oklahoma which are given in Corpus Juris in support of the rather extreme text. We call attention to the fact that Corpus Juris itself says that Oklahoma has a different tax law from any of the other states. Its tax proceedings are "neither an action at law nor a suit in equity but a special proceeding authorized by the people (it was an initiated law) to settle controversies involving the legality of tax levies. It partakes of the nature of an equitable proceeding." (57 C.J. 577.)
We, therefore, urge that the Corpus Juris citations, which have only the Oklahoma cases for their authority (with one exception), are inapplicable.
What we have said also applies to the affirmative matter set forth in the third affirmative defense, which is that section 2268, Revised Codes, forbids this action, and that sections 2269 and 2272 furnish the ample, plain, speedy and adequate remedy. In addition to this third affirmative defense, there is a first and second affirmative defense which are in their nature pleas in estoppel, to-wit: that the laws provide for and the plaintiff had ample opportunity to be heard in objection to this levy before it was made and before the county tax rolls were made up and he failed to avail himself of these opportunities which were provided for his benefit.
We urge by these defenses, the application of the rules declared by sections 4613.1 et seq.; Revised Codes (the Budget Law) and sections 2007, 2115 and 2150, Id., to a person who fails to appear at the budget meeting or at the tax levy meeting. (SeeBelknap Realty Co. v. Simineo, 67 Mont. 359, 215 P. 659;Thwing v. Weiser, 65 Mont. 28, 210 P. 750; 61 C.J. 784.) Plaintiff not having come in before the fact-finding tribunal and objected to the budget as he now would attempt to do and not having objected to the levy which he now asks shall be stricken in its entirety, should be held to be estopped from making objections which he had the right to make at a proper time and proper place, particularly when, by his conduct or his silence and that of other taxpayers, the county was *Page 42 led to believe there was no objection, extended the taxes upon the roll, caused its tax receipts to be printed, and sent out and has collected $19,000 in taxes.
Appellant cites much authority to the effect that it is against public policy to raise taxes faster than the money can be used. This principle is correct in so far as it applies to general taxation for governmental purposes. But the rule has never been, nor can it ever be, applied to taxation for a debt of the county in the form of a bond, especially when the tax, and the formula for its determination, are specifically provided for by law, nor can that formula be changed before the then existing bond issues are paid. Also, it is true that a tax for a sinking fund cannot be "in excess of the amount needed for such purpose in any one year." But that rule is inapplicable here, because the actual revenue from this twenty-mill levy by uncontroverted testimony will be fifty per cent. of $19,647, or approximately the same as the $9,250 required to be raised by section 4630.25 in this particular case.
If this contention is not correct and the law is, as appellant claims, that taxes cannot be levied so long as there are sufficient funds in the bond sinking fund to pay the principal and interest for a particular year (or years), then sections 4622.1, 4630.30 (sinking fund provisions), and 4630.29 (retiring bonds before maturity) are absolute nullities. For how can the excess in bond sinking funds be invested in securities or used to retire bonds before maturity if the fund must be used for the payment of principal and interest only?
We next urge that the discretion as to the amount of the levy is a discretion to be exercised by the board of county commissioners and not to be interfered with by the courts, except it be void. The statute (sec. 4630.26, Rev. Codes), clearly indicates that as to sinking fund levies the courts have no control, save and except where the county commissioners have failed to provide a proper levy. Expressio unius est exclusioalterius. (61 C.J. 569, 576; People v. N.J. Sandberg Co.,277 Ill. 567, 115 N.E. 741; People v. Chicago Alton Ry.Co., 289 Ill. 282, *Page 43 124 N.E. 658; People v. Chicago N.W. Ry. Co., 331 Ill. 544,163 N.E. 355.) Plaintiff, as a resident taxpayer of Petroleum county, brought this action in his own behalf and on behalf of all other taxpayers of the county to enjoin the collection of a tax levy of twenty mills for a bond sinking and interest fund. His claim is that the tax levy was and is illegal.
Upon the filing of the complaint, an order to show cause and restraining order was issued. Defendants thereafter filed a motion to quash the restraining order, and an answer to the complaint. The cause was heard before the court without a jury. The court dissolved the restraining order and entered judgment in favor of defendants for the dismissal of the action. This appeal is from the order dissolving the restraining order and from the judgment in favor of defendants.
From admissions in the pleadings, a stipulation entered into at the trial or undisputed evidence, the following facts are made to appear: Petroleum county has outstanding bonds in the sum of $86,000 of an issue of $185,000 executed in 1926 and maturing in 1945; they were made payable over a period of years at the rate of $9,000 per year, with the exception of the last five years, when $10,000 thereof were made payable each year; all payments on principal and interest to the date of the filing of the complaint had been made; for the fiscal year commencing July 1, 1937, and ending July 1, 1938, and for the further period to November 30, 1938, the requirements for principal were $9,000 and $5,160 on interest. At the time of the levy for that fiscal year, which is the one involved here, there was on hand in the bond sinking fund $8,622.80, and in the bond interest sinking fund $13,396. While the county apparently kept the bond sinking fund separate and apart from the bond interest sinking fund, there is in fact but one fund known as the sinking and interest fund. (Sec. 4630.27.) A *Page 44 twenty-mill levy upon the county valuation will produce $19,647, if collected.
It is the contention of plaintiff that, since the county had on hand in the bond sinking and interest fund the sum of $22,019.76, and since the only requirements from the fund for the fiscal year in question for principal and interest was $14,160, a levy of taxes to raise money for that fund for that fiscal year was illegal and unauthorized.
The general rule governing this question is stated in 61 C.J.[1, 2] 557, as follows: "It is against the policy of the law to raise taxes faster than the money is likely to be needed by the government, and, in the absence of statutory authority, a tax cannot be levied for the sole purpose of accumulating funds in the public treasury, such as for remote or future contingencies that may never occur; nor can it be levied in excess of the amount required for the purpose for which it is levied, with the intention of using the excess for another purpose." Again it is stated in 44 C.J. 1288: "A tax for a sinking fund in excess of the amount needed for such purpose in any one year is invalid as to the excess."
Of course, it does not follow that the county commissioners have no discretion in determining the rate of taxation which, in their judgment, is necessary to produce the required revenue needed for any fiscal year. In other words, they are not obliged to do the impossible, that is, levy such a rate of taxation that will produce exactly enough money for the various needs of the county, and no more.
The test usually applied in determining whether a levy is excessive, is whether it is so grossly excessive as to constitute a constructive fraud upon the taxpayers. (State ex rel. Johnson v. St. Louis-San Francisco Ry. Co., 315 Mo. 430, 286 S.W. 360;People ex rel. Browne v. Chicago E.I. Ry. Co., 306 Ill. 402,138 N.E. 127.)
Our statute, section 4630.24, in part provides: "Whenever any[3, 4] county has any issue or series of bonds outstanding and there is not sufficient funds on hand available for the payment of the full amount of the interest and principal thereof, *Page 45 the county treasurer of such county shall * * * each year * * * make out and deliver to the board of county commissioners * * * a statement showing the amount required to be raised by tax levy during the then current fiscal year for payment of interest and principal becoming due and payable during such fiscal year * * * on each issue or series of bonds outstanding." That the board of county commissioners in preparing its budget and making its levy must take into consideration the amount of money already available in each fund for which a levy is made, is made plain by sections 4613.1, 4613.2 and 4613.4. In other words, these sections declare the policy in Montana to be in favor of counties levying taxes as needed.
The supreme court of Oklahoma, in El Reno Wholesale Co. v.Taylor, 87 Okla. 140, 209 P. 749, declared the policy which has application under our statutes. The court said: "The clear purpose of the law is that if the expenses of state government should have been less than was expended during the preceding year, and the amount of revenue collected during such year were greater than was expected, thereby leaving a cash balance in the treasury over and above all legal requirements and outstanding indebtedness, such cash balance should serve toward lessening the burden of the taxpayer for the ensuing year, otherwise the very condition would be brought about which plaintiff claims was intended to be brought about by the Board of Equalization, namely, the creation of a large surplus fund for the purpose of exploitation. The proposition is too simple to need further discussion. In our opinion the Board of Equalization, not only had authority to include the surplus cash on hands, but it was its duty, under the law, to do so in order thereby that the rate upon the taxpayer would be lessened for the ensuing year." To the same effect are St. Louis-S.F. Ry. Co. v. Forbess,111 Okla. 48, 237 P. 596, People v. Millard, 307 Ill. 556,139 N.E. 113, In re Protest of Chicago, R.I. P. Ry. Co., 143 Okla. 161,288 P. 337, and Texas Empire Pipe Line Co. v. Excise Board,165 Okla. 90, 24 P.2d 988. *Page 46
Since, in the instant case, there was more money in the sinking and interest fund than needed for the fiscal year in question, the board was without authority to make any levy for the purpose of raising money for that fund.
Defendants contend that they had the authority to make the levy in order to have funds available with which to buy outstanding bonds at a discount and thus make a saving to the taxpayers. The evidence shows without conflict that such bonds are available for purchase by the county at a discount. Our research has found but one case that discussed this question. That is the case of State ex rel. Johnson v. St. Louis-SanFrancisco Ry. Co., supra. After stating that "exactions from the people, as taxes or otherwise, in advance of any needs of the government are not only condemned by sound public policy but are violative as well of fundamental rights guaranteed by our organic law. The county court of Cass county was therefore without power to levy a tax clearly in excess of what could at the time have been reasonably anticipated as necessary to pay the interest and principal of the funding bonds," the court went on and upheld the levy because of the discretion in the board to raise money with which to buy the bonds at a discount. On this point it said: "Respondent argues that the levy was excessive because only $30,000 of the bonds had been called and the remainder were not due for eight years thereafter, and not even payable at the county's option for more than three years after that time. But the bonds had to be paid some time. If they could be bought up before maturity at such prices that the taxpayers would thereby be entirely relieved of further interest payments, why should it not be done? Private interests in the exercise of sound business judgment frequently follow that course with respect to their own bonded obligations. It certainly cannot be said that the county court, in employing in the county's business a method that has long obtained in the industrial and commercial world, abused the discretion with which it was invested."
We are not impressed with the reasoning upon which the court rested its conclusion in that case. Private interests doas they[5] please with their own funds. County commissioners *Page 47 have only such authority with reference to tax matters as the legislature sees fit to give them. (State ex rel. Tillman v.District Court, 101 Mont. 176, 53 P.2d 107, 103 A.L.R.[6] 376.) There is no express authority on the part of the board to levy taxes to raise funds with which to buy the county bonds before they mature. Implied authority to do so cannot be said to exist because in so holding we would, in effect, be declaring that a bond issue extending over a period of twenty years, in the discretion of the board might be retired in a lesser time over the protests of the taxpayers. Such a holding would in effect change the obligation of the taxpayers who assumed the bonded indebtedness on the understanding that they would not be called upon to meet the obligations until they matured according to their terms.
Defendants also contend that plaintiff's remedy was to pay the[7] tax under protest and then bring an action to recover it. This is not the exclusive remedy where, as here, the levy is illegal. (First Nat. Bank v. Sanders County, 85 Mont. 450,279 P. 247; sec. 2268, Rev. Codes.)
Defendants further contend that plaintiff is estopped from[8] maintaining this action because he did not appear before the board at the time the preliminary budget was noticed for hearing under section 4613.3 and make protest. Had there been discretion in the board to make some levy for the purpose involved here and were the only point involved that of the excessiveness of the levy, there might be merit in defendants' contention. We do not decide that point. Under the facts here the board had no authority or discretion to make any levy for the purpose for which the 20-mill levy was made. Such being the case, plaintiff was not estopped from questioning the validity, as distinguished from the excessiveness, of the purported levy.
The judgment and order are reversed and the cause is remanded with direction to enter judgment in favor of plaintiff as prayed for.
ASSOCIATE JUSTICES STEWART, ANDERSON and MORRIS concur.
MR. CHIEF JUSTICE SANDS, absent on account of illness, takes no part in the foregoing decision. *Page 48