Frost v. Central City

134 Ky. 434 | Ky. Ct. App. | 1909

Opinion of ti-ie Court by

Judge Barker

— Affirming.

Central City belongs to tbe fourth class of mnnci-. palities of this commonAvealfch. Its general council, desiring to aid tbe common schools of tbe city by erecting íavo neAV school bnildings, duly and legally passed an ordinance submitting tbe question to the qualified voters as to whether or not the city authorities should be empowered to issue $24,000 of bonds for the purpose .of raising sufficient money to erect the buildings in question. The question of the issuance of the bonds was submitted to the voters of the city at the regular election in November, 1908, and of the votes cast upon the question 310 were in favor of the issuance of the bonds and 37 against the proposition. Thereupon the city officials were proceeding to issue and sell the bonds thus authorized when the appellants, who are citizens and taxpayers of Central City, instituted this action to enjoin this being done. The petition is carefully and skillfully drawn, and sets forth all of the facts concerning the election and the power of the city to issue the bonds in such manner as that a general demurrer raises all the legal questions to be adjudicated in order to determine whether or not the bonds so issued would be valid and legal. A general demurrer was interposed to the petition >'.nd sustained by the circuit court. The plaintiffs (appellants) declining to amend further, their petition was dismissed, and of this judgment they are now complaining. In' discussing the questions necessary to be' adjudicated, we find it convenient to assume in the argument that all the procedure leading up to the issuance of the bonds was regular and valid except when the contrary is stated.

The first question raised by the demurrer is whether or not the election was invalid because .the vote was taken by secret ballot instead of viva voce. The appellants insist that, inasmuch as this was an election concerning common school matters, the vote should have been taken viva voce instead of by secret ballot, as was done. In disposing of this question we shall assume (although we do not so decide) that under the statutes regulating the matter all elections concerning public schools, whether for trustees or for the imposition of taxes, must be by viva voce vote. The election which was held in this case was not held under the statute regulating common school elections, although the common schools of the city are to be the beneficiaries of the proceeds of the bonds when sold. Cities of the fourth class have a complete system of common schools established by sections 3588-3606, Ky. St., inclusive, and these schools are under the .dominion .and supervision of the board of education consisting of two trustees from each ward of the city; and for the .support of these schools the .city is authorized by subsection 2 of section 3490 (Russell’s St., § 1511, sub-sec. 2) to collect certain taxes, but it is manifest that the taxes so authorized are only for the purpose of maintaining schools, and not to meet the extraordinary expense of erecting new buildings. By sub-section 34 of section 3490 the city has general power, when authorized in the manner therein pointed out, to .issue municipal bonds for the purpose of meeting municipal needs and liabilities. This subsection is as follows: “If at any time the board of council shall deem it necessary to incur any indebtedness, the payment of which cannot be met without exceeding the income and .revenue provided'for the city for that particular year, they shall give notice of an election by the qualified voters of the town to be held, to determine whether such indebtedness shall be incurred. Such notice shall specify the amount of the indebtedness proposed to be incurred, the purpose or purposes of the same, and the amount of money necessary to be raised annually by taxation for an interest and sinking fund, as herein provided. Sncli notice shall be published for at least two weeks in some newspaper published in, or of general circulation in such town, or by posting written or printed notices at three or more public places in such town. If, upon a canvass of the votes cast at such election, it appears that two-thirds of all the qualified electors in such town shall have voted in favor of incurring such indebtedness, it shall be .the duty of the board of council to pass an ordinance providing for the mode of creating such indebtedness, and of paying the same. But such indebtedness shall not in any event exceed the limit provided in the Constitution for cities ,of the fourth class. And in such ordinances provision shall be made .for the levy and collection of an annual tax upon all real and personal property subject to taxation within such town, sufficient to pay the interest .on such indebtedness as it falls due; and also to constitute a sinking fund for the payment of the principal thereof, within a period of not .more than twenty years from .the time of contracting the same. It shall be the duty of the board of council in each year thereafter, at the time at which other taxes are levied, to levy a tax sufficient for such purpose, in .addition to the taxes by this chapter authorized to be levied. Such tax, when collected, shall be kept in .the treasury as .a separate fund, to be inviolably appropriated to the payment of the principal and interest of such indebtedness.” The election under discussion was .held under this statiite, and not under any statute concerning graded or common schools. The erection of the school buildings is clearly a municipal purpose, and the city is authorized by the statute to issue bonds in furtherance of its purposes whenever authorized by a two-thirds majority of the qualified voters so to do. When the buildings are erected they will be .under the supervision and control of the board of education, as all the other property dedicated to public education is held and controlled. Therefore the election which was held was a municipal election ,and was properly taken by secret ballot, as provided by .the Constitution. The case of Bowman, etc., v. City of Middlesboro, etc., 91 S. W., 726, 28 Ky. Law Rep., 1290, is not authority for the position that this election should have been taken by viva voce vote. The opinion bolds expressly to the contrary. In that case there were two questions submitted to the people : One was concerning the imposition of a tax for the maintenance of the public schools, and the other was whether or not the city was authorized to issue $12,000 of bonds for the erection of a school building. The tax question was submitted under the law regulating common school elections, and was properly taken by a ,viva voce vote; but the question of the issuance ,of the bonds, which was precisely similar to that in the .case at bar, was submitted to the voters by secret ballot,/and the election was expressly approved in the opinion. On the question in hand it is said: “It will be observed that the question of whether or not a tax should be imposed was submitted to the .voters at a viva voce election, and the question whether or not the indebtedness of $12,000 should be incurred was submitted to them upon the official ballots. Both propositions were adopted by a vote of 480 ,for and 18 against. The result was duly declared, and .thereupon the -city council proceeded by ordinance to provide for the issual of $12,000 of bonds.!’ It is also held in the opinion that the bonds were municipal bonds with which the board of education had nothing to do, but that the fact that they were signed and ratified by that board did not invalidate them.

It is further objected that the right to issue the bonds did not carry at the election, not having received two-thirds of the votes cast at the election. This objection, is based upon the fact that, while the affirmative of the question of the issuance of the bonds received more than two-thirds of the votes cast upon that question, yet it is conceded that it did not receive two-thirds of the highest number of votes cast on other matters at the general election. In the case of Belknap v. City of Louisville, et al., 99 Ky. 474, 36 S. W. 1118, 18 Ky. Law Rep. 313, 34 L. R. A. 256, 59 Am. St. Rep. 478, we held that, where the issuance of .municipal bonds was required to be submitted to the people, the affirmative of the proposition should receive the requisite majority of all the votes cast at the ..election, /whether on the particular proposition of the issuance of the bonds or on other questions; but this rule was changed in the case of Montgomery County Fiscal Court v. Trimble, 104 Ky. 629, 47 S. W. 773, 20 Ky. Law Rep. 827, 42 L. R. A. 738, wherein the Belknap case was overruled and the principal established that in such elections the affirmative was only required to receive the requisite majority of the votes actually cast upon the question. This last rule has been reaffirmed in Worthington v. Board of Education of City of Lexington, 71 S. W. 879, 24 Ky. Law Rep. 1510, Turpin v. Madison County Fiscal Court, etc., 105 Ky., 226, 48 S. W. 1085, 20 Ky. Law Rep. 1131, and Board of Education of Winchester v. City of Winchester, 120 Ky. 591, 87 S. W. 768, 27 Ky. Law Rep. 994.

The third and last objection to the validity of the bonds is that at the time the .election ,was held the city already had a bonded debt so great that, under section 158 .of the Constitution, no additional indebtedness could be created. Prior to the adoption of the present Constitution, Central City had guaranteed $30,000 of the bonds of the Central City Water Company, a private corporation, and these bonds were outstanding and unpaid at the time the election was held; but since and before the institution of this action all these bonds were paid off by the principal debtor and the bonds are now canceled. So that the city has no bonded indebtedness whatever at the present time. The assessed value of all the property of the municipality is $483,000. By the terms.of section 158, cities of the fourth class are authorized to contract an indebtedness when properly authorized by vote, not exceeding 5 per cent, of the assessed value of its property. With $30,000 of water bonds outstanding clearly no further indebtedness could be created. With the water bonds paid off and discharged the city, will be authorized to incur an indebtedness of $24,000, the amount involved here. The question, then, is whether or not the indebtedness is created at the time of the election or at the time of the issuance and sale of the bonds. Clearly the election is only one of the steps necessary to be taken in order to legally create the indebtedness, and the indebtedness itself is not created until the bonds are sold. No good would .result in holding that the election is void because at the time it was held the city could not under the Constitution have issued the bonds which the voters authorized. Every substantial good intended to be effectuated by the Constitution will be subserved by holding that the right to issue the bonds is to be determined by the condition of the indebtedness of the municipality at the time the bonds are sold. The intention of the Constitution was to limit the aggregate amount of the bonded indebtedness of municipalities; and, when this is effectuated and the indebtedness kept within, the prescribed limits, the whole intent of the framers of that instrument is subserved. In 28 Cyc. p. 1584, the rule on the subject in hand is thus stated: “The time of the actual issue of municipal bonds is the time for determining whether the debt limit is exceeded.” And in support of this text the following cases are cited: Redding v. Esplen, 207 Pa. 248, 56 Atl. 431: Thompson-Houston Electric Co. v. Newton (C. C.) 42 Fed. 723; Prickett v. Marceline (C. C.) 65 Fed. 469. It will be observed that there is a difference in the language of section 157 of the Constitution and that of subsection 2 of section 3490 of the Kentucky Statutes as to what shall constitute a majority vote on the .question of the issuance of the bonds. It is apparent, however, that the Legislature intended to conform the act to the Constitution; but whether it did or not the Constitution prevails. With this construction, all that was necessary for the affirmative of the proposition as to the issuance of the bonds to parry was that it should receive two-thirds of .the votes cast upon the question at the election; and this the demurrer concedes it received.

In conclusion, we are of opinion that there are no substantial objections to the validity of the bond issue involved in the case before us, and therefore the judgment of the circuit court sustaining the general demurrer of the appellees and dismissing the petition is affirmed.