Bankhead v. Town of Sulligent

• Decision Date: 14 June 1934
• Docket Number: 6 Div. 576.
• Citation: 229 Ala. 45,155 So. 869
• Parties: BANKHEAD v. TOWN OF SULLIGENT et al.
• Court: Alabama Supreme Court

155 So. 869

229 Ala. 45

BANKHEAD v. TOWN OF SULLIGENT et al.

6 Div. 576.

Supreme Court of Alabama

June 14, 1934

Appeal from Circuit Court, Lamar County; Ernest Lacy, Judge.

Bill for injunction by G. E. Bankhead against the Town of Sulligent and the municipal officers thereof. From a decree sustaining a demurrer to the bill, complainant appeals.

Affirmed.

ANDERSON C.J., and BOULDIN and FOSTER, JJ., dissenting in part.

M. E Nettles, of Jasper, for appellant.

Wm. B White, W. M. Neal, and Bradley, Baldwin, All & White, all of Birmingham, amici curiæ.

Cabaniss & Johnston, of Birmingham, for appellees.

Jas. H. Willis, of Birmingham, and S. P. Gaillard, Jr., of Mobile, amici curiæ.

GARDNER Justice.

The complaint is by a taxpayer and resident of the town of Sulligent (a municipality with a population of less than 6,000), and seeks injunctive relief against the municipality in its proposal to issue bonds and enter into a contract as to the acquisition and operation of a combined waterworks and sewerage system for said town, as authorized by what is known as the Kelly Act, approved March 29, 1933. See Acts 1933 (Ex. Sess.) p. 88.

The bonds to be issued are known as "revenue bonds," payable as to principal and interest solely out of the revenue derived from the operation of the proposed waterworks system.

In Oppenheim v. City of Florence (Ala. Sup.) 155 So. 859 (this day decided), the holding was that such bonds did not create an indebtedness of the municipality, and that their issuance did not contravene either section 225 or section 222 of our Constitution. The entire discussion of that question is equally applicable to this case, and needs no repetition here.

The bonds to be issued in the instant case are, as provided by the Kelly Act above noted, to have written upon their face that they are issued pursuant to said act, and do not constitute an indebtedness of the borrower within any state constitutional provision or statutory limitation. Differing in this particular from Oppenheim v. City of Florence, under the Kelly Act, these bonds are further secured by a mortgage lien on the newly acquired waterworks and sewerage system, but without authority to compel a sale thereof. But, as observed by the Kentucky court in City of Bowling Green v. Kirby, 220 Ky. 839, 295 S.W. 1004, this statutory lien is "not a meaningless expression."

In the event of default, a receiver may be appointed at the instance of a bondholder who may compel the imposition of rates for sufficient revenue to pay the interest on the bonds and for their retirement in accordance with the provisions of the ordinance. The Kelly Act specifically authorizes the municipality to fix rates sufficient to meet these obligations, and, while no restriction is expressly stated, yet we are of the opinion, in view of the language of section 18 of the act, and section 22 of our Constitution, adverted to in Alabama Water Co. v. City of Attalla, 211 Ala. 301, 100 So. 490, that the act is to be properly construed with a restriction that the rates imposed be reasonable and subject to review by the courts in that regard upon complaint of a consumer. 32 Corpus Juris, 421; Springfield Gas Co. v. Springfield, 292 Ill. 236, 126 N.E. 739, 18 A. L. R. 929.

Presumably, of course, the rates to be fixed will be reasonable as well as sufficient to meet the specified payments, and the authorities generally recognize the validity and binding force of such rate-making agreements enforceable in an appropriate proceedings. Barnes v. Lehi City, 74 Utah, 321, 279 P. 878; Shields v. City of Loveland, 74 Colo. 27, 218 P. 913; City of Bowling Green v. Kirby, 220 Ky. 839, 295 S.W. 1004; Bell v. Fayette, 325 Mo. 75, 28 S.W.2d 356; Kentucky Utilities Co. v. Paris, 248 Ky. 252, 58 S.W.2d 361; Shelton v. Los Angeles, 206 Cal. 544, 275 P. 421.

The instant case differs from that of Smith v. Town of Guin (Ala. Sup.) 155 So. 865, this day decided, in most part in immaterial details, except as to the matters herein discussed. Greater administrative detail is perhaps provided for in the instant case than in that of the town of Guin, but in essential factors the cases are the same, and governed by like principles. Each sufficiently discloses no pecuniary liability on the part of the municipality, and no bondholder could possibly be misled in that regard.

The bonds carry that message upon their face, but for convenience of transfer by delivery merely the act provides (section 14) that they shall have the qualities of negotiable instruments under the law merchant and the Negotiable Instruments Law.

All matters not herein discussed are treated in Oppenheim v. City of Florence and Smith v. Town of Guin, supra, and need no elaboration here.

There is, however, one vital exception, which relates to the treatment of section 22 of the act, and which needs further consideration. Evidently the Legislature considered the ownership by these towns of waterworks and sewerage a matter of great benefit, and thought it advisable they be permitted, though having already reached their constitutional debt limit, to take advantage of federal aid at this time in their construction. It is also evident the lawmakers were apprehensive that in communities of this size the revenues may possibly at times be insufficient to meet all purposes, if operating expenses are first to be deducted, and thus it was intended to authorize such municipalities to make a voluntary appropriation out of its available income from other sources for operating expenses to the end that the bonds and interest thereon may be promptly paid when due.

In section 22 of the act, therefore, operating expenses are put secondary to the bonded indebtedness payments. This section...