First National Bank v. City of Jackson

199 Ky. 94 | Ky. Ct. App. | 1923

Opinion of the Court by

Judge Clay

— Affirming.

The city of Jackson sold to the First National Bank of Jackson an issue of waterworks bond's of the par value of $25,000.00, and thereafter brought this suit against the bank to enforce specific performance of the contract. From a judgment in favor of the city the bank appeals.

It is conceded that the election was regularly called, properly advertised and regularly held, and that the bond issue was carried by the overwhelming vote of 274 to 5.

The only ground on which the validity of the bonds is assailed is that the indebtedness, together- with other outstanding indebtedness, exceeds the debt limit prescribed by section 158 of the Constitution. Jackson is a city of the fourth class, and the debt limit is five per cent of the value of the taxable property therein, to be estimated by the assessment next before the last assessment previous to the incurring of the indebtedness. It is admitted that the assessed valuation of all taxable property in the city for the year 1921 was $680,389.00, five per cent of which is $34,019.45. It is agreed, however, that the city also has outstanding a street bond indebtedness of $11,250.00, but that there is in the sinking fund created for the purpose of retiring those bonds the sum of $4,492.04. As the outstanding street bond indebetedness added to the proposed bond issue will exceed five per cent of the taxable property, it is apparent that the proposed waterworks, bond issue will exceed the debt limit, unless the sum in the sinking fund to the credit of the street bonds may be deducted from that issue. Ordinarily, of course, one is indebted although he may be abundantly able to pay, but under a constitutional provision that no municipality shall incur an indebtedness beyond a certain amount, the word “indebtedness” is ordinarily held to mean the contraction of an obligation of which there is no present means of payment. Brashear v. City of Madison, 142 Ind. 685, 33 L. R. A. 474. In other words, an obligation cannot be reckoned as an indebtedness when there are funds in the treasury available to meet it. 19 R. C. L., p. 986; Veatch v. Moscow, 18 Idaho 313, 109 Pac. 722, 21 Ann. Cas., 1332; National Life Ins. Co. v. Meade, 13 S. D. 37, 82 N. W. 78, 79 A. S. R. 876, 48 L. R. A. 785. Here the city of Jackson has provided a sinking fund pursuant to the mandate of the Constitution. It cannot be used now to retire the street bonds, as none of them are due. However, it has been inviolably set apart for the payment of those bonds when due, and cannot be expended for any other purpose. Therefore, it sems to us that the only street bond indebtedness beyond the city’s ability to pay is the difference between the entire indebtedness and the amount on hand to the credit of the sinking fund. As this difference, added to the waterworks bond issue, will not exceed five per cent of the assessed value of the taxable property in the city, estimated as required by the Constitution, it follows that the proposed indebtedness will not exceed the constitutional limit.

As the waterworks bonds will be a valid obligation of the city, it results that the court did not err in adjudging specific performance of the contract of purchase.

Judgment affirmed.