Casto v. Town of Ripley

• Decision Date: 06 March 1934
• Docket Number: C. C. 500.
• Parties: CASTO et al. v. TOWN OF RIPLEY et al.
• Court: West Virginia Supreme Court

173 S.E. 886

114 W.Va. 668

CASTO et al. v. TOWN OF RIPLEY et al.

C. C. No. 500.

Supreme Court of Appeals of West Virginia.

March 6, 1934

Submitted February 27, 1934.

Syllabus by the Court.

Bonds issued by a municipal corporation, under legislative sanction, to finance a self-liquidating public project, do not create a debt within the meaning of section 8, article 10 of the Constitution.

Case Certified from Circuit Court, Jackson County.

Suit by W. E. Casto and another, citizens and taxpayers of the Town of Ripley, who sue on behalf of themselves and all other residents and taxpayers therein, against the Town of Ripley and others. A demurrer to the bill was sustained, and the ruling certified for review.

Affirmed.

Robert L. Hogg and Somerville & Somerville, all of Point Pleasant for plaintiffs.

Burton Crow, of Ripley, for defendants.

LITZ Judge.

W. E Casto and R. A. Shinn, residents and taxpayers of Ripley, a municipal corporation, who sue on behalf of themselves and all other residents and taxpayers therein, seek to enjoin the corporation and the common council thereof from improving and extending its present water works by the issuance and sale of bonds to be retired from the revenue thereof, pursuant to chapter 26, Acts (First Extraordinary Session) 1933. The trial court sustained a demurrer to the bill, and, upon joint application of the parties, certified his ruling to this court under Code 1931, 58-5-2.

On October 3, 1933, the council adopted an ordinance authorizing the issuance and sale of revenue bonds in the sum of $26,500.00, for the purpose of extending, equipping, and improving the existing municipal water system (constructed from public funds), and thereafter published the same as required by the statute.

The scheme is challenged upon two general grounds: (1) That the statute is unconstitutional, and (2) that the ordinance does not conform to the requirements of the act. It is charged that the statute infringes section 7, article 7 of the Constitution, forbidding legislation at an extraordinary session not contemplated by the executive proclamation convening the Legislature, and that it authorizes the creation of a public debt, without a vote of the people, in violation of section 8, article 10 of the Constitution.

These questions were decided against the contention of plaintiffs in Brewer v. City of Point Pleasant (W. Va.) 172 S.E. 717, decided at this term, involving a similar statute, enacted at the same session and authorizing the issuance and sale of bonds by municipalities for acquiring, constructing, improving, operating, and maintaining sewage systems. Bonds issued by a government agency to finance a public utility and payable solely out of the revenues therefrom do not create a debt within the meaning of a constitutional inhibition against the creation of public debt. Bates v. State Bridge Commission. 109 W.Va. 186, 190, 153 S.E. 305; Cooley on Taxation (4th Ed.) § 29; 12 C.J. § 414; City of Bowling Green v. Kirby, 220, Ky. 839, 295 S.W. 1004; Searle v. City of Haxtun, 84 Colo. 494, 271 P. 629; Ward v. City of Chicago, 342 Ill. 167, 173 N.E. 810; Twichell v. City of Seattle, 106 Wash. 32, 179 P. 127; Sowell v. Griffith (Tex. Com. App.) 294 S.W. 521; Barnes v. Lehi City, 74 Utah 321, 279 P. 878; Jones v. City of Corbin, 227 Ky. 674, 13 S.W.2d 1013; McCutchen v. City of Siloam Springs, 185 Ark. 846, 49 S.W.2d 1037; Williams v. Village of Kenyon, 187 Minn. 161, 244 N.W. 558.

The statute requires that the ordinance proposing the issue and sale of bonds "shall provide, find and declare in addition to the other requirements set out in this act, the value of the then existing system and the value of the property proposed to be constructed, and the revenues derived from the entire system when the contemplated betterments and improvements are completed, shall be divided according to such values and so much of the revenue as is in proportion to the value of such betterments and improvements as against the value of the previous existing plant as so determined, shall be set aside and used solely and only for the purpose of paying the revenue bonds issued for such betterments, together with costs of the operation and the depreciation thereof, and such revenue...