Board of Educ. of Hancock County v. Slack

• Decision Date: 01 March 1985
• Docket Number: No. 16555,16555
• Citation: 174 W.Va. 437,327 S.E.2d 416
• Court: West Virginia Supreme Court
• Parties: , 23 Ed. Law Rep. 1068 The BOARD OF EDUCATION OF the COUNTY OF HANCOCK v. E. Russell SLACK, as Secretary of the Board of Education of the County of Hancock.

Page 416

327 S.E.2d 416

174 W.Va. 437, 23 Ed. Law Rep. 1068

The BOARD OF EDUCATION OF the COUNTY OF HANCOCK v. E. Russell SLACK, as Secretary of the Board of Education of the County of Hancock.

No. 16555.

Supreme Court of Appeals of West Virginia March 1, 1985.

[174 W.Va. 441] Syllabus by the Court

1. Once it is determined that a bond issue authorized by a governmental agency is lawful, mandamus will lie to compel the secretary of the agency or other ministerial official responsible for executing the necessary documents to execute such documents.

2. "Mandamus lies to require the discharge by a public officer of a nondiscretionary

duty." Syllabus Point 1, State ex rel. Bache & Co. v. Gainer, 154 W.Va. 499, 177 S.E.2d 10 (1970)

3. "The issuance ... of refunding bonds to retire existing ... bonds ... under article 2 of chapter 13 of the Code, does not create a new indebtedness, and levies to provide debt service for the new (refunding) bonds may be laid to the same extent and with like effect as they could have been laid for the original bonds." Syllabus, in part, Keeney v. County Court, 115 W.Va. 243, 175 S.E. 60 (1934).

4. The rule that refunding bonds do not create a new debt and, therefore, may be issued without voter approval under Article X, Sections 8 and 10 of the West Virginia Constitution is subject to one important qualification: that the amount of refunding bonds cannot increase the total indebtedness authorized by the voters on the original bond issue.

5. Refunding bonds may be issued at a higher rate of interest than existed on the original bonds so long as this does not cause the refunding bond plan to exceed the total indebtedness originally approved by the voters.

6. The general rule is that the maturity schedule of bonds may be varied over that which was originally authorized so long as there has been no increase in the indebtedness originally authorized.

7. The general rule is that in the absence of some constitutional or statutory prohibition, the right to sell bonds carries with it the right to sell at a discount, i.e., at less than par.

8. W.Va.Code, 18-9-2c, which authorizes the transfer of funds remaining from the liquidation of school bonds to the school current fund, does not preclude the use of excess money from an escrow fund established with the Bond Commission and derived from the sale of refunding bonds under W.Va.Code, 13-2-1 through -9, as long as the county board of education complies with W.Va.Code, 13-3-9(c). This latter subsection enables a bond-issuing authority to withdraw excess funds held by the Bond Commission that are not needed to liquidate the original bond issue. These funds can be spent on school improvements when they are made part of a refunding bond plan for school improvements.

9. Under W.Va.Code, 13-1-14, relating to an original bond issue, it appears that the legislature intended that a bond-issuing authority could issue less than the total amount of bonds authorized at the election, if under all the circumstances the projects authorized by the voters can still be completed.

10. W.Va.Code, 13-2-2, gives bond-issuing authorities the option of structuring their refunding bond plan to maintain either level debt service or level principal payments. Where level debt service is chosen, then the test is that the "total amount payable in each year shall be as nearly equal as practicable." W.Va.Code, 13-2-2.

11. It is apparent from W.Va.Code, 13-1-4, that the special bond levy is set annually based upon the current year's appraised values. This is reinforced by W.Va.Code, 13-1-20, which requires the bond-issuing authority "to pay annually the interest on such debt and the principal thereof falling due in each year, such tax to be levied and collected by the same officers, at the same time and in the same manner as the general taxes of the political division."

12. Where a bond-issuing authority has been unable to market all of its original bond issue and is unable to complete the project financed by the bond issue, it may utilize for the project any unencumbered funds in its account with the Bond Commission in accordance with the provisions of W.Va.Code, 13-3-9(c), as a part of a refunding bond plan to complete the original project.

13. W.Va.Code, 13-2-2, and W.Va.Code, 13-1-14, which authorize a bond-issuing authority to have bonds payable at the office of the State Treasurer and at such other places that the bond-issuing authority may designate, provide sufficient authority to permit the bonds to be registered at the place of payment.

James K. Brown, Lee O. Hill, Taunja Willis, Jackson Kelly, Holt & O'Farrell, Charleston, for appellant.

Robert R. Harpold, Jr., Charleston, for appellee.

MILLER, Justice:

In this original mandamus action, we are asked to require the Secretary of the Hancock County Board of Education to perform certain nondiscretionary duties in connection with refunding bonds proposed by the Board pursuant to our Refunding Bond Act, ¹ W.Va.Code, 13-2-1 through -9. ² The Secretary has refused to act, contending that the refunding of bonds violates the applicable statutes, Article X, Sections 8 and 10 of the West Virginia Constitution, which relate to county, municipal, and school bonded indebtedness, and the mandate of the voters who approved the issuance of the general obligation bonds, which are to be refunded. The primary purpose of this litigation is to test the validity of the proposed refunding bond plan so that the bonds can be issued and marketed.

Both parties agree that if we find that the Board's refunding bond plan meets the constitutional and statutory requirements and does not conflict with the initial authorization approved by the voters, then mandamus will lie to direct the Secretary to execute the required documents. This procedure is in line with our other bond cases, where we have held that once it is determined that a bond issue authorized by a governmental agency is lawful, mandamus will lie to compel the secretary of the agency or other ministerial official responsible for executing the necessary documents to execute such documents. E.g., State ex rel. Ohio County Comm'n v. Samol, W.Va., 275 S.E.2d 2 (1980); State ex rel. County Court v. Kemp, 151 W.Va. 349, 151 S.E.2d 680 (1966); State ex rel. County Court v. Demus, 148 W.Va. 398, 135 S.E.2d 352 (1964). This principle is related to the general rule in mandamus cases that holds that:

"Mandamus lies to require the discharge by a public officer of a nondiscretionary duty." Syllabus Point 1, State ex rel. Bache & Co. v. Gainer, 154 W.Va. 499, 177 S.E.2d 10 (1970).

See also Syllabus Point 2, Reed v. Hansbarger, W.Va., 314 S.E.2d 616 (1984); State ex rel. Hughes v. Bd. of Education, 154 W.Va. 107, 174 S.E.2d 711 (1970); Syllabus Point 1, State ex rel. West Virginia Housing Development Fund v. Copenhaver, 153 W.Va. 636, 171 S.E.2d 545 (1969). ³

The basic facts are not in dispute. The Hancock County Board of Education determined that general obligation bonds were needed to finance school construction and improvements. In an order adopted January 25, 1980 (hereinafter Election Order), the Board scheduled a special election for voter approval of school bonds in the aggregate principal amount of $13,885,000. The Election Order specified an interest rate not to exceed 8 percent per annum for The voters approved the bond issue and its accompanying tax levy at a special election on March 28, 1980. However, because of poor economic conditions, the Board was not able to sell any of the bonds until 1983, when bonds totalling $8,340,000 were sold, leaving $5,545,000 worth of bonds approved at the special election unissued. As of November 15, 1984, the date of the refunding resolution, the outstanding debt on the issued bonds was reduced to $7,645,000, after one annual payment of $695,000 had been made on the original issue of $8,340,000. ⁴

the bonds as well as a maturity schedule of twenty years. The first nineteen annual redemptions would be in the amount of $695,000 a year while the twentieth would be in the amount of $680,000.

The Board has used the money received from the sale of the bonds for school improvements, but desires to issue these refunding bonds in order to refinance its school bond indebtedness, which will produce additional funds that can be applied to the completion of the school construction program.

The main provisions of the Board's refunding bond proposal can be summarized as follows. First, refunding bonds in the aggregate principal amount of $7,645,000 will be issued, the purchase price of which will be no less than 93 percent of par value, with interest rates ranging from 8 percent per annum to 9.875 percent per annum, maturing annually beginning in 1987 and ending in 1997. Second, the monies acquired through the sale of the refunding bonds will be used to purchase United States Treasury obligations, which will be deposited in an escrow fund created and established with the Bond Commission.

The escrow fund will be used to liquidate the present outstanding school bonds as they mature, which will allow the tax revenues formerly reserved for the payment of the outstanding bonds to be applied to the retirement of the new refunding bonds. Third, $1,840,000 of the remaining $5,545,000 worth of bonds originally approved by the voters will be readvertised for sale. As a result of the savings achieved through this refunding bond plan, all of the school construction work approved by the voters in the special election will be completed without issuing the remaining $3,705,000 of the original bond issue.

According to the Board, this refunding bond plan provides several major benefits to it and the citizens of Hancock County. With the escrow fund available to liquidate the old outstanding bonds, the approximately $3,375,000 now in the Bond Commission account could be released to complete additional school improvements. The Board estimates that...