Bd. Of Com'rs For Mcdowell County v. Assell, (No. 531.)

• Decision Date: 26 October 1927
• Docket Number: (No. 531.)
• Citation: Bd. Of Com'rs For Mcdowell County v. Assell, 194 N.C. 412, 140 S.E. 34 (N.C. 1927)
• Court: North Carolina Supreme Court
• Parties: BOARD OF COM'RS FOR McDOWELL COUNTY. v. ASSELL, GOETZ & MOERLEIN, Inc.

140 S.E. 34

(194 N. c. 412)

BOARD OF COM'RS FOR McDOWELL COUNTY.

v.ASSELL, GOETZ & MOERLEIN, Inc.

(No. 531.)

Supreme Court of North Carolina.

Oct. 26, 1927.

Appeal from Superior Court, McDowell County; Moore, Judge.

Controversy without action between the Board of Commissioners of McDowell County and Assell, Goetz & Moerlein, Inc. From a judgment that certain bonds issued by County Commissioners of McDowell County were valid, defendant appeals. Affirmed.

This is a controversy without action. The facts agreed upon are:

"That prior to the 7th day of March, 1927, the date upon which the County Finance Act (chapter 81, Public Laws of 1927), was ratified, there was an accumulated deficit in the general county fund in McDowell county, N. C, in the form of floating indebtedness, in the sum of $50,000, all of which was incurred prior to the said date, and was on and prior to that date a legal obligation, represented by certaincontracts in the form of notes executed in the name of McDowell county, which notes were held by various banks and individuals, all of which indebtedness was created for necessary expenses of said county.

"That pursuant to the provisions of the said County Finance Act, at the regular May meeting, 1927, of the board of commissioners of the county of McDowell, an order was introduced looking to the permanent financing of the said flouting indebtedness of the said county, notice of which order was published as provided by said chapter, and after publicly hearing and considering the order as introduced, to wit:

" 'It is ordered by the board of county commissioners of McDowell county, N. C:

" 'Section 1. That negotiable coupon bonds of McDowell county, N. C, be issued in the maximum principal amount of $50,000, to be known as "funding bonds, " for the purpose of funding valid indebtedness for necessary expenses incurred before July 1, 1927, and payable at time of passage of this order or within one year thereafter.

" 'Section 2. That a tax sufficient to pay the principal and the interest of the bonds when due shall be annually levied and collected.

" 'Section 3. That statement of the county debt has been filed with the clerk, pursuant to the County Finance Act, and is open to public inspection.

" 'Section 4. That this order shall take effect upon its passage, and shall not be submitted to the voters.'

"The same was read, and, upon motion, unanimously passed by the affirmative vote of the members of the said board, and was so declared by the chairman of the said board at a special meeting of the said board held on the 17th day of May. 1927; and thereupon the board passed a resolution authorizing the issuance of funding bonds pursuant to the provisions of the said County Finance Act, in the sum of $50,000, and advertised notice of the sale of said bonds to be held on Tuesday, the 7th day of June, 1927, at which time the defendant, Assell, Goetz & Moerlein, Inc., became the highest and best bidder therefor, at the price of par and accrued interest, for bonds, properly and legally issued, bearing interest at the rate of 4³/₄ per cent. per annum, payable semiannually, and maturing as set forth in said resolution, and its bid was unanimously accepted, and the bonds ordered to be executed, issued, and delivered to the purchaser, together with the approving opinion of a firm of attorneys agreed upon.

"That all matters and things required by the County Finance Act to be done, preliminary and leading up to the actual issuance of the said bonds, have been done and fully complied with, and the bonds as offered by the plaintiff to the defendant are in all respects in the form required by, and in full compliance with, the terms of the said act.

"That during the session of the North Carolina General Assembly of 1927 an act (chapter 523, Public Local Daws 1927) entitled 'An act to regulate issue of bonds in McDowell county, ' was passed and ratified on the 7th day of March, 1927.

"That the necessary expenses of the county of McDowell, chargeable to the general county fund, for the fiscal year beginning July 1, 1927, will require the levy of a tax to the constitu tional limitation of fifteen cents on the hundred dollars valuation of property, or approximately that amount, making it impossible that the said accumulated deficit, as aforesaid, might be made up from a tax levy, and the finding of the said indebtedness or deficit by the issuance of funding bonds, under the provisions of the County Finance Act, is necessary, and the only avenue open to the board of commissioners for the county of McDowell for making up such accumulated deficit, as required by the County Fiscal Control Act (chapter 146 of the Public Laws of 1927).

"That, upon the proceedings authorizing the issuance of the funding bonds being submitted to attorneys for their approving opinion, the questions were raised: (a) As to whether chapter 523, Pub. Local Laws of 1927, prohibited the board of commissioners of McDowell county from issuing funding bonds under the terms of the County Finance Act (chapter 81, Public Laws 1927), without a vote of the people; and (b) as to whether the County Finance Act, authorizing the levy of a special tax under the provisions of section 8 of said act, is in conflict with section 6 of article 5 of the Constitution of North Carolina, that is, the question was raised as to the constitutionality of the provision of the County Finance Act relating to the issuance of funding bonds and the levy of a special tax therefor; and thereupon the defendant refused to take and pay for the said bonds in accord with its bid.

"That, if the plaintiff is authorized and empowered to issue bonds under the County Finance Act, as aforesaid, the defendant stands ready, able, and willing to take and pay for the same."

The court below held that the bonds "are valid and legal and are authorized by legal authority and that the levy of the tax is not prohibited by the Constitution of North Carolina."

Morgan & Ragland, of Marion, for appellant.

Pless, Winborne, Pless & Proctor, of Marlon, for appellee.

CLARKSON, J. The questions of law involved:

1. Whether or not, under Public Laws 1927, c. 81 (section 8, subsec. [j] of the County Finance Act), bonds may be issued by the county commissioners to fund floating indebtedness of the county incurred before July 1, 1927, for necessary expenses, which will require a tax levy in excess of 15 cents on the $100 valuation of property to pay such bonds.

2. Whether such bonds issued for such purposes without a vote of the people are prohibited by chapter 523, Public Local Laws 1927, entitled "An act to regulate the issuance of bonds in McDowell county."

Subsection (j), supra, is as follows:

"Funding or refunding of valid indebtedness incurred before July first, one thousand nine hundred twenty-seven, if such indebtedness be payable at the time of the passage of the orderauthorizing the bonds or be payable within one year thereafter, or, although payable more than one year thereafter, is to be cancelled prior to its maturity and simultaneously with the issuance of the funding or refunding bonds, and all debt not evidenced by bonds which was created for necessary expenses of any county and which remains outstanding at the ratification of this act is hereby validated."

The agreed case shows that the $50,000 deficit was created for necessary expenses, and a valid and legal obligation of the county, and incurred prior to July 1, 1927. To fund this floating indebtedness by issuing bonds will require a tax levy in excess of 15 cents on the $100 value of property.

Const. N. O. art. 5, § 6, is as follows:

"The total of the state and county tax on property shall not exceed fifteen cents on the one hundred dollars value of property, except when the county property tax is levied for a special purpose and with the special approval of the General Assembly, which may be done by special or general act: Provided, this limitation shall not apply to taxes levied for the maintenance of public schools of the state for the term required by article nine, section three, of the Constitution: Provided, further, the state tax shall not exceed five cents on the one hundred dollars value of property."

In Herring v. Dixon, 122 N. C. at page 424, 29 S. E. 369, the decisions are summed up as follows:

"(1) For necessary expenses, the county commissioners may levy up to the constitutional limitation without a vote of the people or legislative permission. (2) For necessary expenses, the county commissioners may exceed the constitutional limitation by special legislative authority without a vote of the people. Constitution, art. V, § 6. (3) For other purposes than necessary expenses a tax cannot be levied either within or in excess of the constitutional limitation except by a vote of the people under special legislative authority. Constitution, art. VII, § 7." Tate v. Com'rs, 122 N. C. 812, 30 S. E. 352; Smathers v. Com'rs, 125 N. C. at page 488, 34 S. E. 554; Henderson v. Wilmington, 191 N. C. 269, 132 S. E. 25.

In R. R. v. Cherokee County, 177 N. C. 86, 97 S. E. 758, the language of the act in controversy is "to provide for any deficiency in the necessary expenses and revenue of said respective counties." In Director General of Railroads v. Com'rs, of Bladen County, 178 N. C. 449, 101 S. E. 91, the language of the act is "to meet the current and necessary expenses of the county." Railroad v. Reid, 187 N. C. 320, 121 S. E. 534, approves a case cited, the language of the act in the case cited being "to supplement the general county fund."

The defendant cites some of the above cases to sustain its contention that the agreed case shows that the proposed bond issue is intended to fund indebtedness created for necessary expenses of the county, and was an accumulated deficit in the general county fund in McDowell county. In other words, the indebtedness proposed to be funded was for ordinary expenses of the county, or...