Legal Services Membership
LEGAL
Lathrop & Clark
NOTES
October
1989
"Does a school d i s t r i c t h a v e the p o w e r to e n t e r
into a c o n t r a c t of i n d e m n i t y as an i n d e m n J t o r ? "
W h e n a school b o a r d c o n t e m p l a t e s c o n t r a c t i n g for the
s e r v i c e s of a r c h i t e c t s , e n g i n e e r s or o t h e r s to p r o v i d e s e r v i c e s
w h i c h i n v o l v e e v a l u a t i o n , r e m o v a l and d i s p o s a l of p o l l u t a n t s
such as a s b e s t o s or o t h e r h i g h l y toxic m a t e r i a l s , it is not
u n c o m m o n to find that the p r o v i d e r will r e q u e s t or d e m a n d that
the c o n t r a c t i n c l u d e an i n d e m n i t y - s a v e h a r m l e s s c l a u s e to
p r o t e c t the p r o v i d e r from l i a b i l i t y c l a i m s w h i c h m a y a r i s e out
of the s e r v i c e c o n t e m p l a t e d b y the c o n t r a c t .
At the same time,
the school b o a r d m a y be a d v i s e d b y legal c o u n s e l that it s h o u l d
seek an i n d e m n i t y - s a v e h a r m l e s s a g r e e m e n t from the p r o v i d e r of
the s e r v i c e to p r o t e c t a g a i n s t l i a b i l i t y c l a i m s a r i s i n g out of
the p r o j e c t w h i c h may be m a d e a g a i n s t the school d i s t r i c t .
I n d e m n i f i c a t i o n p r o t e c t i o n h a s b e c o m e m o r e i m p o r t a n t in
r e c e n t y e a r s b e c a u s e of the i n a b i l i t y of the school d i s t r i c t
and p r o v i d e r of the s e r v i c e to s e c u r e a d e q u a t e i n s u r a n c e
c o v e r i n g the risks of l i a b i l i t y to w h i c h t h e y are e a c h e x p o s e d
p a r t i c u l a r l y w h e r e p o l l u t a n t s are involved.
A l t h o u g h b e y o n d the scope of this Legal Notes, the
a u t h o r i t y of the school b o a r d to o b t a i n an i n d e m n i t y a g r e e m e n t
in its favor, as i n d e m n i t e e is g e n e r a l l y a s s u m e d to exist.
M c Q u i l l i n , M u n i c i p a l C o r p o r a t i o n s , (3rd Ed. rev.), sec. 53.77.
The w o r d " i n d e m n i t y " m e a n s " s e c u r i t y or p r o t e c t i o n a g a i n s t
h u r t or loss or d a m a g e . "
W e b s t e r s T h i r d New I n t e r n a t i o n a l
Dictionary (Unabridged).
To i n d e m n i f y is to h o l d h a r m l e s s ,
i.e., to s e c u r e a g a i n s t future loss or damage.
Persons may
l e g a l l y c o n t r a c t for a d i v i s i o n b e t w e e n t h e m s e l v e s of t h e i r
l i a b i l i t y and c o n s e q u e n c e s of t h e i r n e g l i g e n t acts t o w a r d t h i r d
persons.
C e r n o h o r s k y v. N o r t h e r n L i q u i d Gas Company, 268 Wis.
586, 68 N . W . 2 d 429 (1955).
The q u e s t i o n of w h e t h e r school
d i s t r i c t s can l e g a l l y e n t e r into c o n t r a c t s of i n d e m n i t y is
Wisconsin Association of School Boards, 122 W. Washington Ave., Madison, W153703
(608) 257-2622
a n o t h e r m a t t e r , h o w e v e r , a b o u t w h i c h t h e r e is s o m e d o u b t . 1
N o s t a t u t e e x p r e s s l y a u t h o r i z e s a s c h o o l d i s t r i c t in W i s c o n s i n
to e n t e r into a c o n t r a c t of i n d e m n i t y .
Such authority,
if it
exists, must therefore be derived by implication from express
statutory powers.
In H. H o h e n s e e C o n s t r u c t i o n
Co. v. C h i c a g o , M i l w a u k e e ,
St.
Paul & P a c i f i c R.R. Co., 218 Wis. 390, 2 6 1 N . W .
242 (1935), the
W i s c o n s i n S u p r e m e C o u r t c o n s i d e r e d w h e t h e r a c i t y h a d the p o w e r
to e n t e r i n t o a c o n t r a c t of i n d e m n i t y o b l i g a t i n g it to
r e i m b u r s e a r a i l w a y c o m p a n y for l o s s or d a m a g e r e s u l t i n g f r o m
the c i t y ' s c o n s t r u c t i o n
of s e w e r s o n l a n d s o w n e d b y t h e r a i l w a y
comany.
F i n d i n g no s t a t u t e w h i c h e x p r e s s l y a u t h o r i z e d the c i t y
to u n d e r t a k e a c o n t r a c t u a l o b l i g a t i o n as i n d e m n i t o r , t h e c o u r t
took n o t i c e of s t a t u t e s w h i c h p r o v i d e d t h a t a c i t y h a d " p o w e r
to act for its c o m m e r c i a l b e n e f i t , " a n d p o w e r to c o n t r a c t for
the c o n s t r u c t i o n of s e w e r s as w e l l as "for the d o i n g of p u b l i c
work."
The c o u r t h e l d t h a t " [ t ] h ~ s e n u m e r a t i o n of p o w e r s
i m p l i e s the p o w e r to e n t e r i n t o an a g r e e m e n t of i n d e m n i t y
w h e n e v e r s u c h a n a g r e e m e n t is n e c e s s a r y to its p r o t e c t i o n o r to
its a d v a n t a g e in c o n n e c t i o n w i t h a n y c o n t r a c t it h a s e x p r e s s
p o w e r to m a k e . "
In f i n d i n g that the c i t y c o u l d g i v e a p r o m i s e to i n d e m n i f y
the d o n o r of an e a s e m e n t a g a i n s t l i a b i l i t y r e s u l t i n g f r o m the
use c o v e r e d b y the e a s e m e n t , the C o u r t s t a t e d t h a t if the c i t y
c a n e n t e r i n t o a c o n t r a c t of i n d e m n i t y as ~ n d e m n i t e e , w h i c h is
g e n e r a l l y r e c o g n i z e d as p e r m i s s i b l e ,
t h e n ~t h a s the p o w e r to
e n t e r into s u c h a c o n t r a c t as i n d e m n i t o r .
The C o u r t r e a s o n e d
f u r t h e r that in t h i s i n s t a n c e the e a s e m e n t c o n t r a c t c o n t a i n i n g
the i n d e m n i t y a g r e e m e n t w a s a p p a r e n t l y to the c i t y ' s a d v a n t a g e
in t h a t it r e l i e v e d t h e c i t y of the e x p e n s e of c o n d e m n a t i o n
proceedings.
"And ~f a c i t y m a y c o n t r a c t as i n d e m n i t o r w h e n
s u c h c o n t r a c t is to its a d v a n t a g e , "
the C o u r t c o m m e n t e d ,
"it
m a y d o so w h e n the c o n t r a c t t u r n s o u t to b e to its
disadvantage."
238 W~s. at 394.
H o h e n s e e r u n s c o u n t e r to the r u l e in s e v e r a l o t h e r s t a t e s
that c o n s i d e r an i n d e m n i t y a g r e e m e n t b e y o n d the p o w e r of
subordinate governmental
entities.
For e x a m p l e , in W h e e l e r v.
C i t y of S a u l t Ste. M a r i e , 1 6 4 M i c h . 338, 129 N.W. 68b (1911),
the M i c h i g a n S u p r e m e C o u r t h e l d t h a t in the a b s e n c e of
statutory authority,
" I t ] h e c a r r y i n g of c a s u a l t y a n d i n d e m n i t y
T h i s Legal N o t e s w i l l
indemnify arising out
the d u t y to i n d e m n i f y
a r i s i n g out of a c t i o n s
employment imposed by
f o c u s will i n s t e a d b e
specifically a school
indemnitor.
not discuss a municipality's
d u t y to
of a s t a t u t o r y o b l i g a t i o n , s u c h as
o f f i c e r s a n d e m p l o y e e s for j u d g m e n t s
c o m m i t t e d w i t h i n the s c o p e of t h e i r
S e c t i o n 895.46, Wis. Stats.
The
on contractual
indemnity and
d i s t r i c t ' s a u t h o r i t y to a c t as
-2-
risks for i n d i v i d u a l s or o t h e r c o r p o r a t i o n s is c l e a r l y b e y o n d
the p o w e r of the d e f e n d a n t city."
T h e s e s t a t e s e m p h a s i z e the
u s u a l i n c a p a c i t y of a g o v e r n m e n t a l e n t i t y to m a k e a s u r e t y or
guaranty contract.
The H o h e n s e e case, w h i c h was d e c i d e d in 1935, h a s not b e e n
c i t e d s i n c e b y the W i s c o n s i n S u p r e m e Court for the p r o p o s i t i o n
that a m u n i c i p a l i t y m a y e n t e r into an i n d e m n i t y a g r e e m e n t as an
indemnitor.
The r e a s o n i n g of the H o h e n s e e d e c i s i o n d i d p r o v e
p e r s u a s i v e to the U n i t e d S t a t e s Court of A p p e a l s for the F i f t h
Circuit, h o w e v e r , in S e a b o a r d A i r l i n e R. Co. v. S a r a s o t a Fruitville Draina@e District, 251F.2d
583, 588 (5th Cir.
1958).
The F i f t h C i r c u i t a d o p t e d the W i s c o n s i n S u p r e m e C o u r t ' s
h o l d i n g in H o h e n s e e in d e c i d i n g that a F l o r i d a D r a i n a g e D i s t r i c t
was l i a b l e to a r a i l w a y c o m p a n y on an i n d e m n i t y - h o l d - h a r m l e s s
agreement.
The W i s c o n s i n S u p r e m e Court h a s n e v e r h a d o c c a s i o n to a p p l y
the H o h e n s e e h o l d i n g in a case i n v o l v i n g a s c h o o l d i s t r i c t .
We
must be c a u t i o u s in o u r a p p l i c a t i o n of the H o h e n s e e c a s e to
school d i s t r i c t s , b e c a u s e school d i s t r i c t s , u n l i k e W i s c o n s i n
m u n i c i p a l i t i e s , do not h a v e e i t h e r c o n s t i t u t i o n a l or s t a t u t o r y
h o m e rule p o w e r s .
A l t h o u g h the H o h e n s e e d e c i s i o n d i d not refer
to a m u n i c i p a l i t y ' s c o n s t i t u t i o n a l h o m e rule p o w e r s as
p r o v i d i n g a u t h o r i t y for the m u n i c i p a l i t y to e n t e r into an
i n d e m n i t y a g r e e m e n t , the fact is that A r t i c l e XI, s e c t i o n 3(1)
of the W i s c o n s i n c o n s t i t u t i o n p r o v i d e s that W i s c o n s i n c i t i e s
and v i l l a g e s "may d e t e r m i n e t h e i r local a f f a i r s a n d g o v e r n m e n t ,
s u b j e c t o n l y to this c o n s t i t u t i o n and to such e n a c t m e n t s of the
l e g i s l a t u r e of s t a t e w i d e c o n c e r n as w i t h u n i f o r m i t y shall
a f f e c t e v e r y c i t y or e v e r y v i l l a g e . "
A d d i t i o n a l l y , sec.
62.11(5), Wis. Stats. p r o v i d e d at the t i m e of the H o h e n s e e
d e c i s i o n , a n d still p r o v i d e s , that a c o m m o n c o u n c i l "shall h a v e
the m a n a g e m e n t and c o n t r o l of the c i t y p r o p e r t y , finances, ...
and the p u b l i c service, a n d shall h a v e p o w e r to act for the
g o v e r n m e n t and g o o d o r d e r of the city, for its c o m m e r c i a l
b e n e f i t , ... and m a y c a r r y out ~ts p o w e r s b y license,
r e g u l a t i o n , s u p p r e s s i o n , b o r r o w i n g of money, tax levy,
appropriation,
fine, i m p r i s o n m e n t , c o n f i s c a t i o n , and o t h e r
n e c e s s a r y or c o n v e n i e n t m e a n s . "
M o r e o v e r , sec. 62.11(5)
s p e c i f i c a l l y p r o v i d e s that "[t]he p o w e r s h e r e b y c o n f e r r e d shall
be in a d d i t i o n to all o t h e r grants, and shall be l i m i t e d o n l y
by express language."
In c o n t r a s t to t h e s e b r o a d p o w e r s c o n f e r r e d u p o n cities,
W i s c o n s i n p u b l i c school d i s t r i c t s h a v e o n l y t h o s e p o w e r s g i v e n
to t h e m e x p r e s s l y b y s t a t u t e or n e c e s s a r i l y i m p l i e d from
statutory powers.
B u s e v. Smith, 74 Wis. 2d 550, 601, 247
N . W . 2 d 141 (1976).
S c h o o l d i s t r i c t p o w e r s are m u c h m o r e
c i r c u m s c r i b e d t h a n m u n i c i p a l powers, and H o h e n s e e thus c a n n o t
be r e g a r d e d as p r e c e d e n t for the p r o p o s i t i o n that s c h o o l
d i s t r i c t s h a v e a u t h o r i t y to enter into i n d e m n i t y a g r e e m e n t s as
indemnitors.
-3-
This c o n c l u s i o n is b o l s t e r e d b y a r e c e n t A t t o r n e y G e n e r a l ' s
O p i n i o n w h i c h c o n c l u d e d that the U n i v e r s i t y of W i s c o n s i n S y s t e m
h a s no a u t h o r i t y to e n t e r into an i n d e m n i f i c a t i o n a g r e e m e n t by
w h i c h the U W w o u l d h o l d h a r m l e s s a c o u n t y from a n y and all
l i t i g a t i o n a r i s i n g from the acts of c a m p u s p o l i c e o f f i c e r s
e x e r c i s i n g the p o w e r s of a d e p u t y s h e r i f f on o f f - c a m p u s
property.
O A G 1-89.
The A t t o r n e y G e n e r a l o p ~ n e d as follows:
"This d e p a r t m e n t h a s c o n s i s t e n t l y a d v i s e d s t a t e a g e n c i e s
that t h e y lack p o w e r to a g r e e to i n d e m n i f y a n o t h e r .
The
r e a s o n for that p o s i t i o n h a s been, first, that no s t a t u t e
e m p o w e r s a state a g e n c y to enter into such an a g r e e m e n t and
s t a t e a g e n c i e s h a v e o n l y such p o w e r s as are e x p r e s s l y
g r a n t e d or n e c e s s a r i l y implied.
[citation omitted]
I
r e a l i z e the a p p l i c a t i o n of this g e n e r a l rule to the B o a r d
of R e g e n t s m a y be limited, since it is g i v e n all p o w e r s
' n e c e s s a r y or c o n v e n i e n t ' to the d ~ s c h a r g e of its
responsibilities...but
that o n l y leads to the s e c o n d g r o u n d
for the n o - i n d e m n i f i c a t i o n rule.
S e c t i o n 2 0 . 9 0 3 [Wis.
S t a t s . ] p r o v i d e s that no state a g e n c y m a y c o n t r a c t for any
debt or l i a b i l i t y a g a i n s t the state for a n y p u r p o s e w i t h o u t
a u t h o r i t y of law.
G i v e n the s p e c i f i c i t y of this statute,
the c o n s i s t e n t p o s i t i o n of this d e p a r t m e n t h a s b e e n that a
state a g e n c y n e e d s e x p r e s s a u t h o r i t y to enter into s u c h an
agreement.
This rule a g a i n s t i n d e m n i t y a g r e e m e n t s , h o w e v e r , is
limited.
It r e l a t e s o n l y to a g r e e m e n t s c r e a t i n g a d u t y
be r e s p o n s i b l e for the l i a b i l i t y the law i m p o s e s on
another."
to
O A G 1-89.
S i g n i f i c a n t l y , H o h e n s e e was not d i s c u s s e d in the A t t o r n e y
G e n e r a l ' s Opinion, w h i c h c o n f ~ r m s the fact that H o h e n s e e ' s
p r e c e d e n t i a l v a l u e is l i m i t e d as far as school d i s t r i c t s a r e
concerned.
A f u r t h e r r e a s o n to be c a u t i o u s in o u r i n t e r p r e t a t i o n of
the H o h e n s e e case, is that H o h e n s e e d o e s not deal w i t h the
q u e s t i o n of w h e t h e r a c o n t r a c t of i n d e m n i t y runs a f o u l of the
debt l i m i t a t i o n c o n t a i n e d in A r t i c l e XI, s e c t i o n 3 of the
Wisconsin Constitution.
A r t i c l e XI, s e c t i o n 3(2) of the
W i s c o n s i n C o n s t i t u t i o n p r o v i d e s in r e l e v a n t p a r t as follows:
"(2) No county, city, town, village, s c h o o l d i s t r i c t ,
s e w e r a g e d i s t r ~ c t or o t h e r m u n i c i p a l c o r p o r a t i o n m a y b e c o m e
i n d e b t e d in an a m o u n t that e x c e e d s an a l l o w a b l e p e r c e n t a g e
of the t a x a b l e p r o p e r t y l o c a t e d t h e r e i n e q u a l i z e d for state
p u r p o s e s as p r o v i d e d b y the l e g i s l a t u r e .
In all c a s e s the
a l l o w a b l e p e r c e n t a g e shall be 5 p e r c e n t e x c e p t as s p e c i f i e d
in p a r a [ ] . . . (b):
-4-
(b) For a n y school d i s t r i c t w h i c h o f f e r s no less t h a n
g r a d e s one to 12 and w h i c h at the time of i n c u r r i n g such
debt Js e l i g i b l e for the h i g h e s t level of s c h o o l aids, I0
p e r c e n t shall be p e r m i t t e d . "
The q u e s t i o n is w h e t h e r an i n d e m n i t y a g r e e m e n t o b l i g a t i n g a
school d i s t r i c t to act as i n d e m n i t o r w o u l d c o n s t i t u t e a "debt"
w i t h i n the m e a n i n g of the c o n s t i t u t i o n a l d e b t l i m i t a t i o n .
In
T e x a s and N e w O r l e a n s R . R . v .
G a l v e s t o n C o u n t y R.R., 141 Tex.
34, 169 S . W . 2 d 713 (1943), the T e x a s court h e l d that an
i n d e m n i t y a g r e e m e n t was a "debt" w i t h i n the m e a n i n g of the
Texas constitution's debt limitation provision.
In f i n d i n g an
i n d e m n i t y a g r e e m e n t to be in v i o l a t i o n of the c o n s t i t u t i o n a l
debt limitation, the T e x a s court c o m m e n t e d that "the p a r t i e s
c o u l d not c o n t e m p l a t e , from a n y r e a s o n a b l e s t a n d p o i n t , that the
i n d e m n i t y c l a u s e w o u l d not s o m e t i m e fix a d e b t on the c o u n t y in
v i o l a t i o n of the c o n s t i t u t i o n . "
169 S . W . 2 d at 715.
The
p a r t i e s " s i m p l y c o u l d not k n o w w h e n the o p e r a t o r s of the d r a w
b r i d g e w o u l d b e c o m e n e g l i g e n t or h o w m a n y t r a v e l e r s on the
c a u s e w a y w o u l d s u f f e r t h e r e f r o m or w h a t the f i n a n c i a l c o n d i t i o n
of the c o u n t y w o u l d t h e n b e . "
Id.
The terms of the i n d e m n i t y
c l a u s e "created for G a l v e s t o n C o u n t y for m o r e than 30
g e n e r a t i o n s a c o n t i n u i n g h a z a r d that its tax p a y e r s m i g h t be
c o n f r o n t e d w i t h an o b l i g a t i o n g r o w i n g out of the n e g l i g e n t
o p e r a t i o n of the d r a w b r i d g e , w h i c h t h e y c o u l d not p a y out of
c u r r e n t funds or out of funds t h e n w i t h i n their i m m e d i a t e
control."
169 S . W . 2 d at 715-716.
A c c o r d i n g to the T e x a s court, the i n d e f i n i t e n e s s of the
i n d e m n i t y c l a u s e as to w h a t o b l i g a t i o n m i g h t a r i s e t h e r e u n d e r
t r a n s g r e s s e d the p u b l i c p o l i c y that d e m a n d s "that d e f i n i t e
l i m i t a t i o n s be p l a c e d on the p o w e r of the several p o l i t i c a l
s u b d i v i s i o n s of our g o v e r n m e n t to s p e n d p u b l i c m o n e y . "
169
S . W . 2 d at 715.
W h i l e the T e x a s c o u r t d i s c u s s e d at some l e n g t h the e f f e c t s
of the "debt" c r e a t e d b y the i n d e m n i t y a g r e e m e n t , the c o u r t ' s
c o n c l u s i o n that an i n d e m n i t y a g r e e m e n t c o n s t i t u t e s "debt" was
a r r i v e d at in s u m m a r y fashion.
S i g n i f i c a n t l y , in c o n c l u d i n g
that a "debt" h a d b e e n c r e a t e d , the T e x a s court s e e m e d
u n c o n c e r n e d w i t h the fact that the s u p p o s e d "debt" c r e a t e d b y
the i n d e m n i t y a g r e e m e n t was i n d e f i n i t e in amount.
In c o n t r a s t ,
in Janes v. Racine, 155 Wis. i, 23 (1913), the W i s c o n s i n
S u p r e m e Court h e l d that " w i t h i n the m e a n i n g of the c o n s t i t u t i o n
a d e b t is not i n c u r r e d until its a m o u n t is a s c e r t a i n a b l e . "
The
Court r e a s o n e d as f o l l o w s :
" B e c a u s e u n t i l s u c h a m o u n t is a s c e r t a i n a b l e it is
i m p o s s i b l e to a p p l y the test r e q u i r e d b y the c o n s t i t u t i o n ,
n a m e l y , the r a t i o b e t w e e n the i n d e b t e d n e s s of the c i t y and
the last a s s e s s e d v a l u a t i o n .
It c a n n o t be that s u c h a test
was i n t e n d e d to b e a p p l i e d b e f o r e it was p o s s i b l e to do
-5-
so.
[I"ne c o n s t i t u t i o n e v i d e n t l y c o n t e m p l a t e s t h a t t h e r e
s h o u l d b e a d e f i n i t e d e b t to w h i c h the test c a n b e a p p l i e d ,
a n d if t h e r e Js no s u c h (~efJnite d e b t it c a n n o t b e a d e b t
w i t h i n the m e a n i n g of the c o n s t i t u t i o n . "
]55 Wis. at 23.
At the t i m e an i n d e m n i t y a g r e e m e n t is s i g n e d , it Js higl%)y
un] J k e l y t h a t the o b l J a a t i o n u n d e r t a k e n w i l l be a s c e r t a i n a b l e
Jn amount.
A n o t h e r e l e m e n t e s s e n t i a l to the c r e a t i o n of a d e b t in
Wisconsin
is t h a t the u n ~ e r t a k i n Q m u s t b e a b s o l u t e , i.e., "if
the m u n i c i p a l i t y m a y a v o i d its o b ! i a a t i o n or if t h e r e r e m a i n
c o n d i t i o n s p r e c e d e n t to it, t h e r e Js no i n d e b t e d n e s s . "
Kiernan,
"Wisconsin Municipal Indebtedness:
Part I, The P o w e r
to B e c o m e I n d e b t e d and its L ~ m ~ t s , " 1 9 6 4 Wis. L. Rev. 173, ]07
(footnote omitted).
C l e a r l y an in.Hemnity a g r e e m e n t c o n t a i n s a
c o n d i t i o n p r e c e d e n t , Jn t h a t t h e r e m u s t b e a loss s u f f e r e d ~ y
t}~e i n d e m n i t e e b e f o r e the i n d e m n i t o r b e c o m e s o b l i a a t e d to p a y .
A n i n d e m n i t y a g r e e m e n t is t h u s not Bn " a b s o l u t e u n d e r t a k i n g .
A n y o b l i g a t i o n to p a y u n d e r an i n d e m n i t y a g r e e m e n t m a y b e
a v o i d e d if the J n d e m n J t e e s u f f e r s no loss.
A ! t h o u g b the T e x a s c o u r t s h a v e c o n t i n u e d to f o l l o w the
h o l d i n g of the G a ] v e s t o n C o u n t y case, see e.g., C o u n t y of E c t o r
v. C i t y of O d e s s a , 492 S . W . 2 d 360 (Ct. App. Tex. !973) a n d
G a r t h Co. v. J e f f e r s o n C o u n t y , 587 S . W . 2 d 64 (Ct. App. T e x a s
1 9 7 9 ) , the T e x a s S u p r e m e C o u r t h a s r a i s e d q u e s t i o n s a b o u t the
G a l v e s t o n C o u n t y h o l d i n g t h a t an i n d e m n i t y a g r e e m e n t
c o n s t i t u t e s a " d e b t " w i t h i n the m e a n i n g of T e x a s c o n s t i t u t i o n a l
debt limitation provision.
In u p h o l d i n g the a u t h o r i t y of a c o u n t y to g i v e a " h o l d and
s a v e h a r m l e s s " c l a u s e to the f e d e r a l g o v e r n m e n t for d a m a g e t h a t
m ~ g h t r e s u l t f r o m the f e d e r a l g o v e r n m e n t ' s c o n s t r u c t i o n of a
b r i d g e , the T e x a s S u p r e m e C o u r t Jn B r o w n v. J e f f e r s o n C o u n t y ,
406 S . W . 2 d 185 (Tex. ]966), r e j e c t e d the c l a i m t h a t the c l a u s e
c o n s t i t u t e d a " d e b t " and t h a t the c o n s t i t u t i o n a l
debt
]ilnitation w a s t h e r e b y v i o l a t e d .
The T e x a s S u p r e m e C o u r t
o b s e r v e d t h a t the " h o l d a n d s a v e " a g r e e m e n t w o u l d not
n e c e s s a r i l y r e s u l t in the a s s e r t i o n of a c l a i m a g a i n s t the
county.
406 S . W . 2 d at 1 8 9 - 9 0 .
M o r e o v e r , if a c l a i m w e r e to be
a s s e r t e d , it m i g h t b e o n e t h a t the c o u n t y c o u l d p a y f r o m the
c u r r e n t r e v e n u e s of a p a r t i c u l a r y e a r or f u n d e d a n d p a i d off
"without violating any constitutional
d e b t l i m i t or t a x i n a
r e s t r i c t i o n s a p p l i c a b l e to c o u n t i e s . "
Id.
Since a violation
of the c o n s t i t u t i o n a l
debt limit remained only a "possibility"
at t h e t i m e t h e i n d e m n i t y a g r e e m e n t w a s e n t e r e d into, the
agreement was valid.
" I L l e g i t i m a t e c o u n t y c o n t r a c t s s h o u l d not
be declared void upon possibilities,"
r e a s o n e d the T e x a s
court.
Id.
G i v e n the a p p r o a c h the Wiscons~,n S u p r e m e C o u r t h a s
t a k e n o n the i s s u e of w h a t c o n s t i t u t e s m u n i c i p a l debt, it is
] i k e l y t h a t W i s c o n s i n c o u r t s w o u l d r e j e c t the G a l v e s t o n C o u n t y
h o l d i n g t h a t an i n d e m n i t y a g r e e m e n t c r e a t e s a m u n i c i p a l d e b t .
-6-
Conclusion
A l t h o u g h H o h e n s e e s t a n d s as p r e c e d e n t for the a u t h o r i t y of
a m u n i c i p a l c o r p o r a t i o n to e n t e r into i n d e m n i t y c o n t r a c t s as
i n d e m n i t o r s , it c a n n o t be r e l i e d u p o n b y school d i s t r i c t s for
the same p r o p o s i t i o n b e c a u s e school d i s t r i c t s do not e n j o y the
same k i n d of b r o a d p o w e r s g r a n t e d to m u n i c i p a l i t i e s b y the
c o n s t i t u t i o n and statutes.
G i v e n the strict limits on s c h o o l
d i s t r i c t p o w e r s in W i s c o n s i n , it is d o u b t f u l that s c h o o l
d i s t r i c t s h a v e the a u t h o r i t y to e n t e r into an i n d e m n i t y
a g r e e m e n t as an i n d e m n i t o r .
A l t h o u g h the m a t t e r h a s not b e e n
s p e c i f i c a l l y a d d r e s s e d b y the W i s c o n s i n courts, it is l i k e l y
that the c o u r t s w o u l d find that an i n d e m n i t y a g r e e m e n t d o e s not
c o n s t i t u t e d e b t w i t h i n the m e a n i n g of the debt l i m i t a t i o n
p r o v i s i o n in the W i s c o n s i n c o n s t i t u t i o n .
-7-