Board of County Com'rs of Oklahoma County v. Warram

• Decision Date: 05 July 1955
• Docket Number: No. 36937,36937
• Citation: 285 P.2d 1034,1955 OK 198
• Parties: The BOARD OF COUNTY COMMISSIONERS OF OKLAHOMA COUNTY and James Geddes and Sylvia Geddes, Plaintiffs in Error, v. ames H. WARRAM, Russell L. Whisenant, and Grady D. Harris, Jr.; The Fidelity National Bank & Trust Company of Oklahoma City; R. J. Edwards, Inc.; and Metropolitan Water Company, Defendants in Error.
• Court: Oklahoma Supreme Court

Page 1034

285 P.2d 1034

1955 OK 198

The BOARD OF COUNTY COMMISSIONERS OF OKLAHOMA COUNTY and James Geddes and Sylvia Geddes, Plaintiffs in Error, v. ames H. WARRAM, Russell L. Whisenant, and Grady D. Harris Jr.; The Fidelity National Bank & Trust Company of Oklahoma City; R. J. Edwards, Inc.; and Metropolitan Water Company Defendants in Error.

No. 36937.

Supreme Court of Oklahoma.

July 5, 1955.

Syllabus by the Court.

1. A valid trust in property, with a governmental entity as beneficiary, may be created for the furtherance, or the providing of funds for the furtherance, of any public function which the governmental entity might be authorized by law to perform; and the fact that such function had not been authorized to the beneficiary at the time of creation of the trust does not impair its validity.

2. The common law, as modified by Constitution and statutory law, remains in force in Oklahoma, 12 O.S.1951 § 2; and statutes which generally are declaratory of common law righs, should not be treated as enabling statutes and the source of the declared rights, but as limitations on existing rights to the extent which the statute modifies the common law.

3. Trusts for the benefit of governmental entities are 'charitable trusts'; and the common law recognizes that the purposes for which such trusts may be established include a broad field of objectives for the benefit of a large class of the public or for lessening the burdens of government.

4. Although the trust objectives of a charitable governmental trust may be such as to prevent the governmental entity from acting as trustee, it may be the beneficiary if the trust objectives are authorized.

5. A provision in a declaration of trust for subsequent governmental entities to succeed to or share in the beneficial interest at a future time does not impair the validity of the trust.

6. The trustees of an express trust, unless restrained by the provisions of the trust instrument, may raise money by mortgaging or otherwise encumbering all or any part of the trust property. 60 O.S.1951 § 175.24.

7. The trustees of trusts for the furtherance of public functions being by law a state agency, indebtedness incurred by them and payable solely from the trust estate and its revenues, is not violative of Article X, sections 23 and 25 of the Constitution; and the fact that such trustees also are designated as regularly constituted authorities of a beneficiary governmental subdivision does not violate sections 26 and 27 of Article X of the Constitution.

8. Trusts with one or more governmental entities as beneficiary are exempt from all forms of taxation in Oklahoma. 60 O.S.1951-1953 Supp. § 382.

Appeal from the District Court of Oklahoma County; Glen O. Morris, Judge.

A proceeding instituted pursuant to 60 O.S.1951 § 175.23, to determine the validity of a trust instrument and the powers, duties and liabilities of trustees thereunder, particularly in the issuance of bonds and debentures secured by a mortgage on the trust property, and its revenues. The trustees instituted the proceedings; and all persons affected by the administration of the trust were parties, either by service of summons or by intervention. Validity of the trust, of bond indenture provisions, and proceedings for issuance of debentures were formally challenged by the Board of County Commissioners of Oklahoma County for the beneficiary, Oklahoma County, and by taxpayers who also are served by a privately owned water system proposed to be purchased by the trustees with the bond proceeds and mortgaged to secure the indebtedness. From a decree sustaining the validity of the trust, the bond indenture and debenture issuance proceedings, the Board of County Commissioners and the taxpayer-system patrons appeal. Affirmed.

Granville Scanland, County Atty., Nathan S. Sherman, Asst. County Atty. Valdhe F. Pitman, Oklahoma City, for plaintiffs in error.

Leon S. Hirsh, Johnson, Gordon, Cook & Cotter, Oklahoma City, for defendants in error.

HALLEY, Justice.

This is an appeal from a judgment of the District Court of Oklahoma County. This action was instituted by James H. Warram, Russell L. Whisenant and Grady Harris, Jr., as trustees of a trust styled, The Oklahoma County Utility Services Authority, praying for a consideration of the trust instrument and actions taken and proposed to be taken by the trustees under that instrument.

From a judgment holding the trust instrument valid and that a Mortgage Revenue Bond Indenture executed by the trustees to be within their powers and authority and approving all the actions of the trustees, the Board of County Commissioners of Oklahoma County and two intervening taxpayers have appealed.

The trustees of the above named trust alleged that it was formed as an express trust under the provisions of Section 175.23, 60 O.S.1951, and that the defendants are those affected by the administration of the trust estate and Oklahoma County, a body corporate and politic, and a governmental subdivision of the State of Oklahoma, is the beneficiary of the trust and that this action was instituted because the County Attorney of Oklahoma County has asked that the validity of the trust and the proposed actions of the trustees thereunder be passed upon by this Court.

A copy of the trust instrument was attached to the petition, together with the acceptance of the beneficial interest thereunder by the Board of County Commissioners of Oklahoma County, February 16, 1955, for the purpose of furnishing utility services to the unincorporated areas of Oklahoma County.

It was alleged that an economic emergency existed because the incorporated municipalities of this county were unable to furnish water and fire protection to unincorporated areas of the county, resulting in housing construction in such areas being brought to a standstill, and that an urgent demand for both housing and commercial construction existed. The Declaration of Trust recites that it was formed '* * * under the laws of the State of Oklahoma (generally but not exclusively pursuant to Title 60, sections 176 to 180, inclusive, Oklahoma Statutes 1951, as amended, and to the Oklahoma Trust Act) * * *.' The primary trust purpose was stated to be:

'To institute, furnish, provide and supply * * * in the presently unincorporated areas of Oklahoma County and any all improvements, services and physical facilities for the safeguarding of public health, the protection of persons and property, and the conservation and implementation of public welfare, of such kinds and characters that the same may be an authorized or proper function of the Beneficiary of this Trust, or by law made subject to the supervision of its governing body or of its officers, which said improvements, services and physical facilities may be supplementary or wholly extraneous to any * * * that presently is, or hereafter may be furnished, provided or supplied by or under the supervision of the Beneficiary.'

It further provides for the acquisition and disposition of property by the trustees, the borrowing of money to provide funds, and that the net revenues, after payment of operating expenses and indebtedness, should be distributed to the beneficiary 'without restrictions or limitations by the Trustees.'

It provided for succession of trustees and other beneficiaries as follows: (1) Should some other governmental entity succeed the county in governmental authority, it should succeed to the beneficial interest; (2) If a part of the territory being served by the trust should come within the boundaries of a governmental entity charged with governmental functions in which the trust is engaged, such entity might succeed to the beneficial interest or become a joint beneficiary upon acceptance of such interest.

It is expressly provided that the trust shall have no authority to obligate the beneficiary in any manner. The term of the trust is fixed as the duration of the beneficiary, or the trustee may, with the approval of the Governor of Oklahoma, terminate the trust if all indebtedness is paid or waived by obligees.

On March 7, 1955, the trustees organized as a board and contracted to purchase two privately owned water properties to enable it to commence operations. To make a cash down-payment for these properties and to pay other expenses, the trustees entered into a Trust Mortgage Revenue Bond Indenture with the Fidelity National Bank & Trust Company of Oklahoma City as bond trustee, for the issuance of $166,000 of bonds secured by mortgage upon the properties purchased and their revenues.

There was attached to the petition a copy of the minutes of the meeting of the trustees held March 7, 1955, setting out all of the actions of the trustees here sought to have construed. The petition prayed the court to construe the trust instrument pursuant to Title 60 O.S.1951 § 175.23 to determine the validity of the trust, the Bond Indenture, the powers, duties, liabilities and rights of the trustees as to their previous and future actions and their liability to pay taxes on trust property out of the trust funds.

The Fidelity National Bank & Trust Company and R. J. Edwards, Inc., who had contracted to purchase the bonds, filed an answer adopting the allegations of plaintiffs' petition and prayed that the court decree the validity of all actions of the trustees, and the Metropolitan Water Company, the vendor of the properties purchased by the trustees, intervened and prayed that the trust and all proceedings thereunder be approved.

The Board of County Commissioners and the County Treasurer of Oklahoma County filed an answer and cross-petition demanding strict proof, denying the legality of the instruments and the proceedings had by the trustees and praying that they be decreed null and void and that all such instruments be cancelled.

Two taxpayers, residents of the areas served by the water systems proposed to be purchased by the authorities, James and Sylvia Geddes,...