May 7, 1975
Mr. Jay Tapken
States Attorney
Hutchinson County
Olivet, South Dakota 57052
OFFICIAL OPINION NO. 75-81
Can the city council co-sign a note with the care center for a loan with the FHA, provided the city will not be obligated more than $20,000 a year?
Dear Mr. Tapken:
You have requested an official opinion from this office based on the following factual situation:
Can the city council of Menno co-sign a note with the Menno-Olivet care center for a loan with the FHA, provided that any city obligation would be limited to no more than $20,000 in anyone year?
SDCL 28-18-6 provides:
The boards of county commissioners of the several counties and the governing bodies of municipalities of this state, may, in their discretion, contribute sums of money annually not to exceed twenty thousand dollars per annum to nonprofit self-sustaining corporations formed for the care and accommodation of aged persons under the provisions of § 28-18-1 to 28-18-4 inclusive.
For the purpose of carrying out the provisions of this section, such boards of county commissioners and such governing bodies of municipalities may appropriate out of the general fund of their respective counties or municipalities.
On the basis of the above statute, it is clear that the city could contribute money to the appropriate care center for the aged if the governing body chose to do so. The ultimate question that needs to be answered is whether or not the city may co-sign a note for a loan to such a care center.
It is elementary that a municipality possesses only such authority as is expressly granted by the Legislature or such as is necessarily implied from such a legislative grant. 1967-1968 AGR 496. Hurley v. Rapid City, 80 S.D. 180, 121 N.W. 2d 21 (1963), Schryver v. Schirmer, 84 S.D. 352, 171 N.W. 2d 634 (1969).
SDCL 9-12-1 (1) gives a municipality the power to contract in its corporate name. This does not mean, however, that such contracts can be made for purposes not within the scope of the municipality's authority. (See SDCL 9-21-3.)
The co-signing of this note with the care center, whether as a co-principal or as a surety, is in essence a contract whereby the city would be incurring potential if not actual liability for a debt. It is my opinion that although the city could give money to the center pursuant to SDCL 28-18-6, there is really no authority which permits the city to co-sign a note whereby the city actually or potentially obligates itself to make payments on behalf of the center. In making this determination one must look to the authority expressly granted to municipalities by the Legislature and to any authority necessarily implied from those specific powers granted. There is not any specific authority, nor in my opinion any implied powers or authority which would specifically authorize this co-signing of a note arrangement. In the absence of such authorization the conclusion is inescapable that such an arrangement is not lawful.
Respectfully submitted,
WILLIAM J. JANKLOW
ATTORNEY GENERAL
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