We think it clear that when the framers of the present Constitution said, as they did by Section 18 of Article xi. of that instrument, that “ no county, city, town, township, board of education, or school district shall incur any indebtedness or liability, in any manner or for any purpose, exceeding in any year the income and revenue provided for it for such year, without the assent of two thirds of the qualified electors thereof, voting at an election to be held for that purpose,” etc., they meant that no such indebtedness or liability should be incurred (except in the manner stated) exceeding in any year the income and revenue actually received by such county, city, town, township, board of education, or school district. In other words, that each year’s income and revenue must pay each year’s indebtedness and liability, and that no indebtedness or liability incurred in any one year shall be paid out of the income or revenue of any future year. The system previously prevailing in some of the municipalities of the State, by which liabilities and indebtedness were incurred by them far in excess of their income and revenue for the year in which the same were contracted, thus creating a floating indebtedness which had to be paid out of the income and revenue of future years, and which, in turn, necessitated the carrying forward of other indebtedness, was a fruitful source of municipal extravagance. The evil consequences of that system had been felt by the people at home and witnessed elsewhere. It was to put a stop to all of that, that the constitutional provision in question was adopted. The change was eminently wise. A somewhat similar provision in the old Constitution with respect to State indebtedness saved the people of the State a vast amount of money. (People v. Johnson, 6 Cal. 503; Nongues v. Douglass, 7 id. 65.)
We have neither the right nor the disposition, by judicial interpretation, to take away the wholesome restriction upon municipalities thus imposed by the Constitution. Of course, in giving effect to this radical change from the pre-existing condition of things, it will not be strange if some shall be found to suffer. But it must be remembered that all are presumed to know the law, and that whoever deals with a munici*643pality is bound to know the extent of its powers. Those who contract with it, or furnish it supplies, do so with reference to the law, and must see that limit is not exceeded. With proper care on their part and on the part of the representatives of the municipality, there is no danger of loss.
From the petition and the answer before us we are unable to ascertain the facts essential to the proper determination of the petitioner’s application. The answer sets up affirmatively certain matters of fact, which are by the law deemed denied by the petitioner. For the purpose of ascertaining the ultimate facts in respect to the income and revenue of the city and county for the fiscal year 1881-2, and in respect to the disposition and disbursement of that income and revenue, and in respect to petitioner’s demands, we must refer the cause for proof and findings.
Ordered that the cause be and is hereby referred to Honorable J. F. Finn, Judge of the Superior Court of the City and County of San Francisco, who will, on proper notice to the respective parties, take proof and report findings of fact to this Court in accordance with the views above expressed.
Myrick and McKee, JJ., concurred.