Byars v. City of Griffin

• Decision Date: 14 February 1929
• Docket Number: 6585.
• Parties: BYARS v. CITY OF GRIFFIN et al.
• Court: Georgia Supreme Court

147 S.E. 66

168 Ga. 41

BYARS v. CITY OF GRIFFIN et al.

No. 6585.

Supreme Court of Georgia

February 14, 1929

Syllabus by the Court.

Under the pleadings and the evidence in this case, a controlling question is whether the obligations of the city, outlined in the proposed contract set forth in the petition, would amount to the creation of a debt, within the meaning of that clause in article 7, § 7, par. 1, of the Constitution of this state (Civil Code 1910, § 6563), which declares: "The debt hereafter incurred by any county, municipal corporation, or political division of this state, except as in this constitution provided for, shall not exceed seven per centum of the assessed value of all the taxable property therein."

Upon a proper construction of the proposed contract, giving due consideration to its substance and looking to the intention of the parties as revealed from the paper in its entirety the obligations of the city would amount to the creation of a debt within the meaning of the above-quoted provision of the constitution. In view of this ruling, it is unnecessary to deal with other questions of law involved in the case.

It was erroneous to refuse a temporary injunction.

Error from Superior Court, Spalding County; W. E. H. Searcy, Jr. Judge.

Suit for injunction by C. A. Byars against the City of Griffin and others. To review a judgment refusing an injunction plaintiff brings error. Reversed.

Russell C.J., dissenting.

Obligations of city under contract for construction of waterworks created "debt," within provision limiting debt to 7 per cent. of taxable property. Const. art. 7, § 7, par. 1.

The city of Griffin owned and operated a system of public utilities, embracing electric light, water, and sewerage plants. The growth of the city was such as to demand a greater water supply for promotion of health and safety of property. A sufficient water supply could be obtained by the construction of a pumping and transmission system at Flint river. Plans were prepared for construction of such a system, and an estimate was made of the cost of the improvement. The city had a certain amount of available funds on hand, but not sufficient to cover the cost of the improvement. It desired to use a certain portion of this amount, but the balance necessary to pay the cost of the improvement was such as, when added to the outstanding bonded indebtedness of the city, would exceed 7 per cent. of the assessed value of all the taxable property therein. In these circumstances certain citizens of Griffin applied to the judge of the superior court and obtained a charter for incorporation of the Griffin Waterworks Company. The capital stock was $100,000, divided into 10 shares of common stock, of the par value of $100 each; said stock to be issued and held upon the following conditions:

"In the event that it becomes necessary to issue bonds of the company, secured by a trust deed, the holders of said stock shall not receive any dividend in excess of the rate of interest paid on said bonds until said bonds are fully paid. And whenever all the bonds shall have been retired, and the company's debts, except current expenses, fully paid, then, upon the assumption of the current expenses by the city of Griffin, Georgia, and the payment by it of one thousand dollars, plus accrued dividends, calculated at the same rate as the interest on said bonds, to be distributed among the holders of the common stock, the corporation shall convey all of its assets to the city of Griffin and be dissolved. Whenever any trust deed is executed to secure the payment of bonds issued by the company, the holders of said common stock may endorse said stock and deliver the same to the trustee of the bondholders, to be held in trust, as hereinafter set forth, as additional collateral security for said bonds. The said trustee shall not be authorized to vote said stock or participate in the management of the company, unless and until there is a default in the payment of the principal or interest due on said bonds; and when said bonds are fully paid, the said trustee shall surrender the said shares to their respective owners. In the event there is a default in the payment of principal or interest on said bonds, the trustee is authorized to have said certificates of stock transferred to it on the books of the company for the benefit of the bondholders."

The board of commissioners of the city of Griffin, created under the Act approved August 20, 1917 (Acts 1917, p. 677), adopted an ordinance calling an election for the purpose of determining whether the city of Griffin will make and enter into a contract with the Griffin Waterworks Company. Omitting section 11 and the attesting clause, the proposed contract was as follows:

"This agreement, made and entered into in duplicate this -- day of --, 1928, by and between the city of Griffin, a municipal corporation of Spalding county, Georgia, party of the first part, hereinafter called the city, and Griffin Waterworks Company, a corporation of said state and county, party of the second part, hereinafter called the company, witnesses:

"Whereas, the city is possessed of a system of electric lights, waterworks, and sewerage, owned and operated by the city as a single department under and by virtue of the charter and ordinances of said city; and whereas, the public ownership of said utilities has continued a long number of years, and has proven to be valuable assets to the city, and a great economy and convenience to its inhabitants; and whereas the supply of water for the waterworks is obtained from deep wells in and about the city, and said supply is wholly inadequate to the needs of the city, and is such that at certain seasons of the year the safety of the city, the health of its inhabitants, and the needs of the water users thereof cannot be taken care of or safeguarded, and the public health and safety are endangered; and whereas, it has been found impracticable to increase the supply by drilling additional wells, and after long and careful investigation it has been found that the only solution is to extend the system to a stream of sufficient size to furnish the amount of water required, Flint river being the nearest available stream; and whereas, in order to obtain an adequate supply of water from Flint river, it will be necessary to construct and equip a pumping station, dam, reservoir, filtering plant, and transmission line outside of the city; and whereas, the city has neither the funds nor the credit to construct and equip said extension of its present plant, and its distribution plant within the city is almost useless [unless] an adequate supply [of] water can be obtained therefor; and whereas, the company is financially able to build, construct, and equip the necessary pumping station, dam, reservoir, filtering plant, and transmission line, so as to deliver to the city for use in its distribution system an adequate supply of pure water; and whereas, the two systems combined would constitute a complete plant, and, jointly operated, would give the city and its inhabitants the water supply it needs; and whereas, the two systems are distinct and independent, and will be operated hereunder jointly without any intermingling of properties, or any loss to the city of Griffin of its present plant and equipment or any part thereof; and whereas, said company has issued bonds in the sum of $300,000.00 principal, besides interest at the rate of six per cent. per annum, due and payable semiannually, on the first day of January and the first day of July of each year, secured by a first mortgage deed to all of its properties, contracts, and franchises, and maturing as follows:

Principal. Interest. Total.

1st year .. $ 8,000 00 $ 18,000 00 $ 26,000 00

2d year ... 8,500 00 17,520 00 26,020 00

3d year ... 9,000 00 17,010 00 26,010 00

4th year .. 9,500 00 16,470 00 25,970 00

5th year .. 10,100 00 15,900 00 26,000 00

6th year .. 10,700 00 15,294 00 25,994 00

7th year .. 11,300 00 14,652 00 25,952 00

8th year .. 12,000 00 13,974 00 25,974 00

9th year .. 12,800 00 13,254 00 26,054 00

10th year .. 13,000 00 12,486 00 25,986 00

11th year .. 14,300 00 11,676 00 25,976 00

12th year .. 15,200 00 10,818 00 26,018 00

13th year .. 16,100 00 9,906 00 26,006 00

14th year .. 17,100 00 8,940 00 26,040 00

15th year .. 18,100 00 7,914 00 26,014 00

16th year .. 19,200 00 6,828 00 26,028 00

17th year .. 20,300 00 5,676 00 25,976 00

18th year .. 21,600 00 4,458 00 26,058 00

19th year .. 22,900 00 3,162 00 26,062 00

20th year .. 29,800 00 1,788 00 31,588 00

----------- ----------- -----------

$300,000 00 $225,726 00 $525,726 00

"Therefore said parties contract and agree as follows:

"Sec. 1. The company agrees to acquire the necessary lands, easements, and water rights, and to build, construct, and equip a pumping plant, dam, reservoir, filtering plant, and transmission line on Flint river, and leading from there to a point at or near the corporate limits of the city of Griffin, in strict compliance with plans and specifications prepared by Weiderman & Slaughter, engineers, and now on file in the office of the city manager of the city of Griffin, which plans and specifications are hereby made a part of this contract as if copied herein. It is understood and agreed that the company shall own and pay for all of said storage, pumping, filtering, and transmitting system, and shall defend all suits and pay all final judgments for damages to persons or property arising from the construction, equipment, and maintenance of said reservoir, dam, pumping station, filtering plant, and transmission line up to the point where the same connects with and delivers the water to the distribution

...