STATE OF SOUTH DAKOTA
OFFICE OF
THE ATTORNEY GENERAL

June 4, 1975

Mr. Ralph C. Hoggatt
City Attorney
Executive Department
Lead, South Dakota 57754

OFFICIAL OPINION NO. 75-100

Lead city garbage collection contract

Dear Mr. Hoggatt:

You have requested a supplemental opinion to Official Opinion No. 75-68 based on the following factual situation, submitted in your letter of May 20, 1975:

On August 7, 1911, pursuant to section 12.29(63), the city of Lead, “... awarded the contract to remove the city garbage for one year at $275.00 per month." The contractor was paid from the tax levy.

On September 5, 1911, the city of Lead gave the second reading and passed Ordinance No. 259, the provisions of which established the first regulations that the residents had to comply with in order to have their garbage removed.

Since the first ordinance in 1911, the garbage collection ordinance has been revised by complete revisions of all city ordinances in 1927, 1948, and 1970. A separate change in the garbage provisions was made in 1955.

The garbage contract has been continuously renewed (after bids) up until December 1973. After this time, the contract was extended for one year because of uncertainty concerning the Lead dumping ground and the possibility of having to haul the garbage to a landfill site at Sturgis, South Dakota. In December 1974, the contract was again extended until March 31, 1975. The contractor has always been paid from the tax levy.

In February 1975, bids for a new contract were approved by the city of Lead, which provided for a $3.47 per month pick-up per dwelling unit, a cost of living increase clause and option to renew the contract for nine successive years. As part of the bid, the contractors were to continue on with the previously extended contract until the time that they began operation under the new contract. On March 5, 1975, the formal draft of the garbage collection contract was approved, except for filling in the number of dwelling units within each municipality. This information was finally available during the last week of March and the contract was approved by the city of Lead on March 27, 1975.

Shortly thereafter, the city of Lead approved the bid of contractor "X" on February 13, 1975. The city of Lead, along with the city of Deadwood and the town of Central City, met jointly with Northern Hills Sanitation, Inc. in hopes of establishing a uniform garbage collection contract for the three municipalities.

After the time that the formal draft of the contract was approved, the three municipalities went about drafting an ordinance which would be similar in each of the cities. In Lead, the ordinance was number 680. Said ordinance was different from the present garbage collection ordinance in that it provided for a mandatory collection charge. It more thoroughly spells out health safety guards, provides for different types of containers for storing garbage and allows homeowners to place a larger variety of items in their garbage containers for collection. Larger apartment houses were eliminated from residential ordinances by definition and any residents having a paid-up bill can dump other compactible items at a transfer station owned by contractor "A."

The contract spells out what contractor "X" will be paid, procedures to notify the city of starts and stops, term and option to renew the contract, cost of living and fuel increases, expenses and pay to contractor, employee insurance, liability insurance, performance bond, collection schedule, collection of garbage, contractor owns items, compliance with law, transfer station, deliver to landfill site, no charge for city buildings, no overnight parking, and breach of contract.

There is nothing in the contract which refers to the ordinance, and nothing in the ordinance which refers to the contract.

On May 7, 1975, ordinance number 680 was referred to the people of Lead, and said ordinance was denied approval. Because of the defeat of the ordinance, many of the people of Lead believe that the contract should also be void. This opinion is contrary to that of the majority of the board of commissioners, who feel that they are still bound by the contract with Contractor "X.”

The question presented is whether the contract between the city of Lead and contractor "X" is void because of the May 7 referendum defeat of ordinance number 680.

The power to enter into garbage collection contracts is granted to municipalities under SDCL 9-32-11. The city's power to contract is limited by referendum. Roush v. Town of Esmond, 73 S.D. 406, 43 N.W. 2d 547 (1950). (See Official Opinion No. 75-68.)

The exception to the general rule that referendum limits the power of a municipality to make contracts is discussed in the case of State ex rel. Martin v. Eastcott, 53 S.D. 191, 220 N.W. 613 (1928), which held that ordinances and resolutions except such as may be necessary for immediate preservation of public peace, health, or safety, or support of municipal government and existing public institutions are subject to referendum. This exception is extremely limited in its application. A law may be necessary for the preservation of the public peace, health or safety and still be subject to referendum, unless the Legislature declares it necessary for the immediate preservation of the public peace, health or safety. Hodges v. Snyder, 43 S.D. 166, 178 N.W. 575 (1920).

There is nothing in the record that would indicate that the existing garbage collection system constituted an immediate threat to health or safety which could only be averted by a contract with contractor "X." Hence the exception is inapplicable here-the contract was subject to referendum.

It has been argued that the contract and ordinance number 680 were not the same document, and hence the contract itself was not defeated in the May election, only the ordinance was defeated. Admittedly, this argument is persuasive on its face. However, without the ordinance's financing provision, the contract would be illegal.

SDCL 9-21-10 provides:

No contract shall be made by the governing body of any municipality and no expense shall be incurred by any department or any officer thereof ... unless an appropriation shall have been previously made concerning such expense, or the governing body authorized to issue bonds for a specific purpose.

The legality of the contract depended on funding, which in turn depended upon passage of ordinance number 680. An appropriation or a local assessment was a condition precedent to the right to contract. McQuillin, Municipal Corporations, 1966 Revised Ed., Section 29.20. Failure of the condition precedent made the contract void ab initio. The power to contract must exist at the time the agreement is entered into, for a city cannot make a valid contract in anticipation of authority being conferred on it in the future. Big Spring v. Ward, 140 Tex. 609, 169 S.W. 2d 151 (1943). McQuillin, Municipal Corporations, 1966 Revised Ed., Section 29.05. Thus, the requirements of SDCL 9-21-10 effectively limit the power of a municipality to enter into garbage collection contracts granted under SDCL 9-32-11.

Emergency appropriations can be made under SDCL 9-21-7 for "indispensable functions" or "discharge of municipal duties." In order for SDCL 9-21-7 to have been operative in the present case, the governing body of the city of Lead would have first needed to declare the collection of garbage by contractor "X" to be an "indispensable function" or a "municipal duty." Then, the governing body would have been required to pass a supplemental appropriations ordinance "governed by the same laws pertaining to the adoption of the annual appropriations ordinance." Only after the governing body had passed the supplemental appropriations ordinance would the municipality have been authorized to enter into the contract with contractor "X." Even then, the final contract would have been subject to referendum.

The city will not be liable to Northern Hills Sanitation, Inc. It is fundamental that one who contracts with officers or agents of a municipal corporation must at his own peril see to it that such officers or agents are acting within their authority. Stone v. Bank of Commerce, 174 U.S. 112, 19 S. Ct. 747, 43 L. Ed. 1028 (1899); Boush v. Town of Esmond, 73 S.D. 406, 43 N.W. 2d 547 (1950).

I therefore reaffirm my position as expressed in Official Opinion No. 75-68. The contract between the city of Lead and Contractor “X” is void.

Respectfully submitted,

William Janklow
Attorney General