Almond v. Gilmer

• Decision Date: 10 January 1949
• Citation: 188 Va. 822,51 S.E.2d. 272
• Parties: ALMOND, Attorney General. v. GILMER, Comptroller.
• Court: Virginia Supreme Court

51 S.E.2d. 272

188 Va. 822

ALMOND, Attorney General.

v.GILMER, Comptroller.

Supreme Court of Appeals of Virginia.

Jan. 10, 1949.

Original mandamus proceeding by J. Lindsay Almond, Jr., Attorney General, against Henry G. Gilmer, Comptroller, to test the constitutionality of State Revenue Bond Act, and the validity of bonds authorized to be issued thereunder.

Mandamus awarded.

Before HUDGINS, C. J., and GREGORY, EGGLESTON, SPRATLEY, BUCHANAN, STAPLES, and MILLER, JJ.

J. Lindsay Almond, Jr., Atty. Gen., and C. Champion Bowles, Asst. Atty. Gen., for petitioner.

Irby Turnbull, of Boydton, and Guy B. Hazelgrove, and Ralph T. Catterall, both of Richmond, for respondent.

MILLER, Justice.

This proceeding is to determine the constitutionality of an act of the General Assembly approved April 1, 1940, Acts 1940, Chap. 399, p. 711, known as the "State Revenue Bond Act, " and the validity of bonds authorized to be issued thereunder.

The State Highway Commission, which will be hereinafter called the Commission, is thereby authorized and empowered to acquire by purchase or by condemnation, and to construct, improve, operate and maintain any one or more of the following projects, or properties:

A. York River Bridge, extending from the town of Yorktown, or some point in York county, across the York River to Gloucester Point, or some point in Gloucester county; B. Rappahannock River Bridge, extending from Greys Point, or vicinity, in Middlesex county, across the Rappahannock River to the vicinity of White Stone, in Lancaster county;

C. Claremont Ferry, operating from Charles City county, Route 617, across the James River to Claremont, in Surry county, to Route 40;

D. James River Bridge, from the city of Hopewell across James River to Charles City county;

E. James River Bridge, from Jamestown, James City county, across James River to or near Scotland Wharf, in Surry county;

F. The Kings Highway, including the Nansemond River Bridge, in Nansemond county, between Route 192, near Chucka-tuck, and Route 627 at Driver Station;

G. Old Point Ferry, operating from Old Point, Elizabeth City county, across Hampton Roads to Willoughby, in the city of Norfolk;

H. James River, Chuckatuck and Nansemond River Bridges, with necessary connecting roads, in Warwick, Isle of Wight and Nansemond counties;

I. Newport News Ferry, operating across Hampton Roads, from Newport News to Pine Beach, in Norfolk.

The authorization to acquire, construct and operate includes all approaches, property, easements and franchises convenient to the use and maintenance of the projects.

The Act consists of sections 1-24, both inclusive. They set forth in detail the means and manner by which the several properties and projects may be acquired and constructed, and how the cost of acquisition and construction may be financed by issuance and sale of bonds, to be solely paid from the tolls to be derived from the operation of such enterprises.

In its discretion, the Commission is allowed to unite in one unit for financing any two or more of the projects or properties.

To provide the necessary funds for the acquisition and construction, sections 2(b) and (c) of the Act empower the Commission "To issue revenue bonds of this State, to be known and designated as 'State of Virginia Toll Revenue Bonds, ' payable solely from earnings, to pay the cost of such projects; and to fix and collect tolls and other charges for the use of such projects."

The cost, which includes all expenses of acquisition or construction, shall be paid solely from proceeds received for the bonds or from any grant or contribution which may be made pursuant to the Act.

That the issuance and sale of bonds may not be violative of the terms of sections 184a and 184b of the State Constitution, section 3 of the Act expressly states:

"Revenue bonds issued under the provisions of this act shall not be deemed to constitute a debt of the State of Virginia or a pledge of the faith and credit of the State, but such bonds shall be payable solely from the funds herein provided therefor from tolls and revenues. All such bonds shall state on their face that the State of Virginia is not obligated to pay the same or the interest thereon except from the special fund provided therefor from tolls and revenues under this act, and that the faith and credit of the State are not pledged to the payment of the principal or interest of such bonds. The issuance of revenue bonds under the provisions of this act shall not directly or indirectly or contingently obligate the State to levy or to pledge any form of taxation whatever therefor or to make any appropriation for their payment, other than to appropriate available funds derived as revenues from tolls and charges collected under this act."

Under sections 7 and 8, title to all property acquired shall be taken in the name of the State and may not be encumbered or pledged to pay the cost of acquisition, construction, operation or maintenance. It shall be paid for, but only with the funds provided for under the Act.

Section 10 empowers the Commission by resolution to issue revenue bonds bearing interest not exceeding five per cent to pay the cost of acquisition and construction. The proceeds of the bonds may be used only to pay the cost of the project or projects for which issued. "The principal and in-terest of such bonds shall be payable solely from the special fund herein provided for such payment."

Section 11 requires that tolls and revenues received and all proceeds secured by sale of bonds or by grant or appropriation be held as trust funds to complete the acquisition, construction and maintenance of the projects, and all tolls and revenues thereafter received are to be used in payment of the principal and interest of said bonds. All funds received from sale of bonds or as tolls and revenues shall be paid into the State Treasury and carried on the books of the Comptroller in a special account. In the resolution, or by trust indenture mentioned below, it may be provided that all money paid into the State Treasury pursuant to this Act shall be appropriated for the purpose of carrying out these provisions.

The Commission is empowered by section 12 to execute a trust indenture pledging revenues and tolls received to the end that the same be held and applied solely as provided for in the Act, but no project or part thereof may be conveyed or mortgaged. The trust indenture "may contain such provisions for protecting and enforcing the rights and remedies of the bondholders as may be reasonable and proper and not in violation of law, including covenants setting forth the duties of the commission in relation to the acquisition, construction, improvement, maintenance, operation, repair and insurance of the projects * * *."

Under section 13, the Commission shall collect tolls for the use of the projects and shall from time to time fix and revise the schedule thereof. The proceeds so obtained, which are to be deposited in the special fund shall be used to pay the cost of operating, maintaining, and repairing the projects "unless such cost shall be otherwise provided for * * *." But there is no mandatory requirement that such cost shall be provided from any other source.

Though section 14 authorizes the Commission in its discretion to use "funds available for the construction of State highways, in any construction district in which any project is wholly or partly located, to aid

in the payment of the cost of such projects and for the payment purchase or redemption of revenue bonds issued in connection with any such project" or projects, yet there is no requirement that this shall be done.

Section 16 sets forth the rights and remedies of the bondholders. They may, by appropriate legal proceedings, enforce any rights under the laws of the United States or the State of Virginia or given by the Act, resolution or trust indenture, "including the fixing, charging, and collecting of tolls for the use of such project or projects.".

Some months prior to May 25, 1948, the Commission instituted condemnation proceedings against the owner of the Old Point Ferry and the Newport News Ferry (Chesapeake Ferries), which are herein designated as projects G and I, respectively. The purpose was to acquire such properties as a part of the State highway system. The final award of compensation and damages therefor amounted to $2,692, 976.98. That sum was, by order of court, required to be paid on or before May 25, 1948.

Before payment of the award, the Commission decided to acquire the bridge properties owned by the James River-Bridge System, commonly called the James River Bridges, projects F and H, herein, and to construct the bridges across the York and Rappahannock Rivers, comprising projects A and B herein.

It now desires to unite these several projects into a single unit for financing and issue from time to time revenue bonds to pay the cost of acquisition and construction. All bonds, when finally issued, are to constitute bonds of a single issue. But as it was necessary that payment of $2,692,-976.98, awarded for the Chesapeake Ferries, be made by May 25, 1948, the Commission, as it was empowered to do by section 14 of the Act, used available funds for the construction of State highways in the construction district or districts in which the Chesapeake Ferries were located to pay the award. This was authorized by resolution of May 24, 1948. It directed that the Commission advance and pay that sum and provide for issuance of a "State of Virginia Toll Revenue Bond" for $2,700,-000, payable in nine yearly installments of $200,000 each, beginning on the first day of May, 1949, and three yearly installments of $300,000 each, beginning on the first day of May 1958, bearing interest at three per-centum per annum on the yearly unpaid balance.

The trustees of the Virginia Retirement System have agreed to purchase that bond. Upon receipt of $2,700, 000, the face amount of the bond, the Commission will reimburse itself...