Consolidated School District v. Day

• Decision Date: 17 November 1931
• Docket Number: No. 30461.,30461.
• Citation: 43 S.W.2d 428
• Parties: IN MATTER OF AUTHORIZING ISSUANCE OF FUNDING BONDS BY CONSOLIDATED SCHOOL DISTRICT No. 4, GREENE COUNTY, APPELLANT, v. CHARLES DAY ET AL., TAXPAYING CITIZENS OF CONSOLIDATED SCHOOL DISTRICT No. 4, GREENE COUNTY, INTERVENERS AND RESPONDENTS.
• Court: Missouri Supreme Court

43 S.W.2d 428

IN MATTER OF AUTHORIZING ISSUANCE OF FUNDING BONDS BY CONSOLIDATED SCHOOL DISTRICT No. 4, GREENE COUNTY, APPELLANT, v. CHARLES DAY ET AL., TAXPAYING CITIZENS OF CONSOLIDATED SCHOOL DISTRICT No. 4, GREENE COUNTY, INTERVENERS AND RESPONDENTS.

No. 30461.

Supreme Court of Missouri.

Court en Banc, November 17, 1931.

Appeal from Greene Circuit Court. — Hon, Warren L. White, Judge.

AFFIRMED.

Farrington & Curtis and Sturgis & Henson for appellant.

(1) The two judgments against the petitioner school district which are to be funded and paid by these bonds were final and conclusive as to the validity of the indebtedness against the school district. Any defense or inquiry into the validity of the indebtedness sued for in the cases resulting in such judgments is precluded by the judgments, and it was not competent in this action to inquire into the origin of such indebtedness and whether or not the debt was lawfully contracted and the constitutional requirements complied with. All such matters were res judicata. The court, however, based its judgment in this case on its finding "that the indebtedness which these bonds are intended to fund was incurred in 1928, without the assent of two-thirds of the voters and without any tax being levied to pay interest or provide a sinking fund; that said indebtedness was reduced to judgment in 1929," etc. These matters could not be issues in this case. State ex rel. v. Weinrich, 291 Mo. 461; Heather v. City of Palmyra, 311 Mo. 32; State ex rel. v. Continental Zinc Co., 273 Mo. 43. (2) The court, therefore, erred in overruling plaintiff's numerous objections to evidence, the purpose of which was to go behind, open up, and attack collaterally the judgments against the school district which were to be refunded and paid off by these bonds. Judgments, absent fraud in their procurement, are conclusive of the amount and validity of the indebtedness sued for and are res judicata of every defense, inclusive of constitutional requirements, which was or could have been interposed at the trial resulting in such judgments, and no evidence should be admitted tending to open up such issues. City Water Co. v. Sedalia, 288 Mo. 411. (3) The statute providing for the issuing of bonds to take care of and providing a means of paying judgment indebtedness against school districts and other municipalities does not violate the Constitution and yet does not attach any conditions or limitations except that the indebtedness funded be reduced to a final and valid judgment. Such judgments in their nature are final and conclusive against all defenses antedating or existing at the time of the rendition of such judgments, and the school district can do nothing except to pay the same and it became its duty to do so. The authority, therefore, is given such school districts by statute to pay and discharge such judgments — "to fund all or any part of their judgment indebtedness, including any judgment, whether based on bonded or other indebtedness, at the same or a lower rate of interest, and for that purpose may issue, sell and deliver funding bonds and with the proceeds pay off and discharge such judgments." The only condition precedent is that the indebtedness to be funded shall have been reduced to a judgment, which necessarily implies and is conclusive of the fact that the indebtedness is valid, has lawfully been incurred, and that no defense is available to the school district. Sec. 1042, R.S. 1919, Laws 1929, p. 127; State ex rel. Sedalia v. Weinrich, 291 Mo. 472. (4) When it was therefore shown, and not controverted, that the school district had and was complying with all the requirements of Section 1042, supra, in regard to issuing and the terms of the refunding bonds, and that said bonds were being issued to fund and pay these two valid judgments against the school district, the court should have ended the case and granted plaintiff's relief. The defendants or interveners have not and could not interpose any valid defense or objection to validating these bonds. (5) The main reason why the trial court held the proposed bonds invalid was that the court also held that the continuing tax of ten cents on the $100 valuation attempted to be levied to pay interest and create a sinking fund to pay off these bonds when due, was void and violative of the Constitution, for the reason that the school district was also levying the maximum rates allowed except by a two-thirds vote of the legal voters. This was held to make the bonds void because of the constitutional requirement, Sec. 12, Art. 10, that at the time of incurring any indebtedness in excess of the income provided for the year, an adequate annual tax to pay interest and create a sinking fund to pay same when due shall be provided for. What the school board did in this respect was to order "that an annual tax sufficient to pay the interest accruing on such bonds as same becomes due and payable and to create a sinking fund for the payment of the principal thereof as said bonds become due and payable, is hereby ordered to be levied and assessed each year hereafter on all the taxable property of this school district until said bonds and interest are fully paid. An annual tax of ten cents on the $100 valuation is estimated as being sufficient for that purpose on the present valuation of the taxable property of the school district." Aside from the fact that this objection and defense goes to the validity of the judgments against the school district and should have been interposed then, if at all, and likely was interposed and overruled and is res judicata, the law is well settled that the validity of bonds issued by school districts or other such corporate bodies is not dependent on the validity or adequacy of the particular means designated or provided for their payment. The bonds are valid and binding obligations of the district, just as are the judgments on which they are founded, though the means provided for paying same may be wholly inadequate or totally fail. State ex rel. v. Walker, 193 Mo. 693; State ex rel. v. Gordon, 217 Mo. 103; Water Works Co. v. Carterville, 142 Mo. 101; Water Works Co. v. Carterville, 153 Mo. 128; State ex rel. v. Continental Zinc Co., 272 Mo. 53; State ex rel. Sedalia v. Weinrich, 291 Mo. 461; State ex rel. v. Hackman, 272 Mo. 600. (6) Valid indebtedness against a school district or like corporation may be incurred in more than one way without the assent of two-thirds of the voters of the district at an election. Whether a particular indebtedness is invalid because not so created or incurred is a matter of defense by the school district when sued on same, and if a suit results in a judgment against the school district, it is conclusive that the judgment debt is not invalid for want of such assent by the voters. Indebtedness sounding in tort is not subject to the constitutional provisions requiring a two-thirds vote of the people in order to be valid, and it may well have been held by the trial court in the two cases against the school district resulting in the two judgments to be funded by these bonds, that the original indebtedness of the school district was created by its wrongful diversion of the funds derived from the former bond issue. That bond issue was to raise $30,000 to erect a high school building and was ample for that purpose. Instead of using it for that purpose, another building was erected. Costly furniture and equipment was purchased until there was not enough money left to pay for the high school building, though such building was completed within the estimate and within the amount derived from such former bonds. Where ample funds are lawfully raised to pay for matters and things contracted for by a school district or other such corporation, but are misappropriated and used for other purposes, or fail of collection, a valid debt is created for the amount of the deficiency, and if such debt arises ex delicto, a vote of the people is not necessary to make it valid. State ex rel. v. Railroad, 169 Mo. 563; State ex rel. v. Zinc Co., 272 Mo. 43; State ex rel. v. Neosho, 203 Mo. 82; Conner v. City of Nevada, 188 Mo. 148; Heather v. City of Palmyra, 311 Mo. 32. (7) The trial court tried to distinguish the present case from State ex rel. v. Weinrich, 291 Mo. 461, by saying that "in that case the court qualified its sanction of the bonds by saying that they were valid but uncollectible except out of the surplus, if any, in the current expense fund," and held that he could not give such qualified validation in this procedure. The case referred to was a mandamus suit and what the court did was to order the proper officers to sign the bonds, thus sending them forth as valid bonds. The court did not order its opinion to be attached to the bonds. The bonds went forth as a "courier without luggage," as much so as will these bonds. The court gave no qualified validation of those bonds. It found the bonds to be valid and ordered them to be signed and issued as valid obligations of the district. That is all that is asked here.

Allen & Allen for respondents.

(1) No county, city, town, township, school district or other political corporation, or sub-division of the State, shall be allowed to become indebted in any manner, for any purpose, in an amount exceeding its income, and revenue, for any year, without first obtaining the assent of two-thirds of the voters thereof, voting at an election held for that purpose (Constitution of Missouri, section 10, article 12), and statutes giving counties the power to incur indebtedness in excess of the revenue for the current year by any manner or means, without requiring an election and a two-thirds majority of the voters, as provided for by article 10, section 12, of the Constitution, are unconstitutional and void. State ex rel. Christian County v. Gordon, 265 Mo. 181; Union Trust Co. v. Pagenstacher, 221 Mo. 121; State ex rel. v. Railroad, 169 Mo. 563. (a) A bond issue to...