City of Dayton v. Allred

• Decision Date: 07 February 1934
• Docket Number: Nos. 1520-1758-6650.,s. 1520-1758-6650.
• Citation: 68 S.W.2d 172
• Parties: CITY OF DAYTON et al. v. ALLRED, Atty. Gen.
• Court: Texas Supreme Court

Page 172

68 S.W.2d 172

CITY OF DAYTON et al. v. ALLRED, Atty. Gen.

Nos. 1520-1758-6650.

Commission of Appeals of Texas, Sections A and B.

February 7, 1934.

Mandamus by the City of Dayton and others against James V. Allred, Attorney General.

Mandamus refused.

John D. McCall and W. P. Dumas, both of Dallas, for relators.

James V. Allred, Atty. Gen., and Pat Dougherty, Asst. Atty. Gen., for respondent.

CRITZ, Judge.

This is an original mandamus proceeding instituted by the city of Dayton et al., hereinafter called relators, against the Honorable James V. Allred, Attorney General of Texas, hereinafter called respondent, to compel his approval of certain bonds of such city in the sum of $22,500 designated as "City of Dayton Sewer System Revenue Bonds." All fact questions are admitted; only law questions being involved.

It appears from this record that on January 4, 1934, the city council of the city of Dayton, Texas, passed an ordinance authorizing the borrowing by such city of the sum of $22,500 to be used for the purpose of constructing a complete new sanitary sewer system in and for the city. In order to borrow the above sum, the ordinance provides for the issuance of thirty bonds, numbered consecutively from 1 to 30, both inclusive, in the denomination of $750 each, bearing 4 per cent. interest, payable semi-annually, and the principal maturing in numerical order, one bond each year beginning February 1, 1935, and ending February 1, 1964.

In order to secure the payment of the above bonds with interest, the ordinance provides that the holder thereof shall have a mortgage and an incumbrance on such sewer system when completed, together with the franchise, and income thereof, and everything pertaining thereto, acquired or to be acquired. In addition to the security just mentioned, the ordinance also pledges or mortgages the sum of $83.33 per month out of the net revenues of the city of Dayton's waterworks system for the 360 months during which the bonds run.

As we understand this record, the city of Dayton is a municipal corporation, duly organized under the laws of the state of Texas, with a population of less than 160,000. It now owns its own waterworks plant, and no lien has ever been placed thereon, or on any of its revenues. The city does not own a sewer system. The money borrowed from these bonds will not be used to purchase a system already built, but to defray the cost of building an entirely new sewer system.

Also we understand from this record that none of the propositions involved in the ordinance under consideration have been submitted to a vote of the qualified voters of the city.

When the bonds provided by the above ordinance were presented to the Attorney General, together with the record pertaining thereto, he declined to approve the same, and gave his reasons for such refusal as follows:

"(a) That the proposed bonds constitute a debt of the City of Dayton within the provisions of Sections 5 and 7 of Article 11 of the Constitution of Texas, and that under the Statute attempting to authorize such bonds, no provision has been or can be made for the levy of a tax to pay them, as required by said Sections 5 and 7 of Article 11 of the Constitution.

"(b) That the pertinent Statute, as originally enacted in 1911, and each and every amendment thereto, is without force and effect, because it is an attempt on the part of the Legislature to do indirectly that which the Constitution declares can not be done, i. e., to create a debt on the faith and credit of a city or town without first making provision to pay such debt by the levy of a direct ad valorem tax on all taxable property therein; hence, said Articles 1111 et seq., as amended by said chapter 122, Acts of 1933, are violative of the provisions of Sections 5 and 7, of Article 11 of the Constitution.

"(c) That under Article 1112, as amended, and if a valid enactment, a City can not make any such loan as here attempted without an election; that the proposed bonds would aggregate the sum of Twenty Two Thousand Five Hundred ($22,500.00) Dollars, and are to be issued for the purpose of `construction of a complete new sanitary sewer system in and for said city', and, if issued, payment thereof will be secured by a first mortgage on the entire sewer system of the City; whereas, the Statute (Article 1112, as amended) expressly provides that no such system shall be encumbered for more than Five Thousand ($5,000.00) Dollars, `except for purchase money, or to refund any existing indebtedness lawfully created', until authorized by a majority vote of the qualified voters of the city or town, which election shall be held and notice thereof given as is provided in the case of the issuance of municipal bonds by such cities or towns. Therefore, as the bonds are not being issued for the purpose of acquiring an existing plant or system, or to refund an existing indebtedness lawfully created, an election authorizing their issuance is required by the pertinent Statute.

"(d) The Indenture or mortgage, executed to secure payment of the proposed bonds, contains the following stipulation, to-wit:

"Also, the net revenues of the present waterworks system owned, controlled and operated by said City, to the amount of thirty thousand dollars ($30,000.00), or so much thereof which, together with the net income and revenues of the sanitary sewer system, will be sufficient to promptly pay both principal of and interest on said bonds, when and as the same shall become due, and which said sum of thirty thousand dollars ($30,000.00), or so much thereof as shall be necessary to supplement the net income and revenues of the sewer system, for the purpose stated, has been appropriated by ordinance of the City Council of said City adopted on the ____ day of December, 1933, authorizing the issuance of the aforesaid bonds, and the amount or amounts so appropriated shall be paid into the `special sewer system revenue bond fund,' in three hundred sixty (360) monthly installments, and beginning the 30th day of January, 1934, the sum of eighty-three dollars and thirty three cents ($83.33), or so much thereof as shall be necessary to supplement the net income and revenues of the sewer system, for the purpose stated, shall be deposited in said bond fund, and such amounts as shall be necessary for said purpose shall be deposited in said Fund on or before the First Day of each month for and during said period of three hundred sixty (360) months, and a lien is hereby created on said net revenues of the said waterworks system for said purpose; provided, however, that no lien or mortgage shall attach to any part of said waterworks system, or its revenues other than a sufficient amount of the net revenues which, together with the net revenues of the sewer system, will be sufficient each month to meet the semi-annual interest and principal payments on said bonds; and it is expressly agreed and understood that whenever the monthly net income and revenues of the sewer system shall be sufficient to pay in full the amount needed in such month for interest and sinking fund on said bonds, it shall not be necessary to transfer any money from the waterworks system in and for that particular month.

"The bond ordinance contains a provision similar in scope and purpose. Therefore, it is the opinion of the Attorney General that the governing body of this city is without power and authority to pledge, mortgage or encumber any part of the income and revenue of one public utility system for the use and benefit of another public utility system; hence, the attempted pledge of a part of the income and revenue of the water system to pay, or to aid in payment of, the principal and interest of the proposed sewer system bonds is not permitted by the Statute.

"(e) That the pertinent Statute is without force and effect because it attempts to authorize cities and towns to mortgage and encumber their light, water, sewer and other utility systems; whereas, it is expressly declared in Section 9, of Article 11 of the Constitution of Texas, that—

"`The property of counties, cities and towns, owned and held only for public purposes, such as public buildings and the sites therefor. Fire engines and the furniture thereof, and all property used, or intended for extinguishing fires, public grounds and all other property devoted exclusively to the use and benefit of the public shall be exempt from forced sale and from taxation, provided, nothing herein shall prevent the enforcement of the vendors lien, the mechanics or builders lien, or other liens now existing.'

"The Indenture or mortgage executed by the governing body of the City of Dayton makes provision for sale of the properties of the sewer system in event of default in payment of principal and interest of the proposed bonds.

"(f) That if it were legal or permissible for the governing body of a City to pledge the net income and revenue of one utility system for the use and benefit of another utility system, owned and operated by said city or town, the attempt here to pledge and encumber the net income and revenue of the water system throughout a period of thirty years, and in the maximum sum of Thirty Thousand ($30,000.00) Dollars, was and is in violation of said Article 1112, as amended, in that, it attempts to mortgage and encumber the water system in excess of Five Thousand ($5,000.00) Dollars without first submitting the proposition or question to a vote of the qualified voters of such city.

"(g) That if it were legal or permissible for the governing body of this City to issue the proposed bonds without first obtaining authority therefor from the qualified electors, at an election held for the purpose, the proceedings of such governing body attempting to authorize such bonds still do not conform to the requirements of the statute, because Section 11, of Chapter 163, Acts 1931, (the Bond and Warrant Law) requires notice of intention of a governing body to...