City of Birmingham v. Wood

• Citation: 243 Ala. 480,10 So.2d 666
• Decision Date: 27 November 1942
• Docket Number: 6 Div. 32.
• Parties: CITY OF BIRMINGHAM v. WOOD.
• Court: Supreme Court of Alabama

10 So.2d 666

243 Ala. 480

CITY OF BIRMINGHAM v. WOOD.

6 Div. 32.

Supreme Court of Alabama

November 27, 1942

Wm L. Clark, of Birmingham, for appellant.

Basil A. Wood, of Birmingham, for appellee.

FOSTER Justice.

The questions presented on this appeal hinge upon a proper application and disbursement of what is termed the municipal stadium fund of the city of Birmingham, created under the following circumstances:

The Park and Recreation Board of the city of Birmingham was created by an Act of the Legislature of 1923 General Acts 1923, page 707, see Title 62, section 721, Code of 1940. It is an arm of the city government and in that capacity only serves the municipality. It does not own the property and has no separate corporate existence.

In 1926 there was a proposal inaugurated by the Junior Chamber of Commerce of the city of Birmingham for the construction of a municipal stadium. It was contemplated that a structure which would seat as many as 25,000 would approximately cost $250,000. After negotiations with the Park and Recreation Board and the City Commission, a resolution was passed on December 22, 1926, by the board and on the same date the City Commission passed a resolution looking to the construction of the stadium.

The resolution of the Park Board was approved by resolution of the City Commission, and contained as a part of its preamble a recital of the fact that certain citizens of Birmingham proposed to furnish $100,000 to go into the construction of the stadium. Whereupon it was resolved with the approval of the City Commission of the city of Birmingham, and upon a pledge of the City Commission of an advance not to exceed $150,000, that the city shall erect a concrete stadium to seat not less than 25,000, and to maintain and operate it, and that a stadium fund shall be set up by the city of Birmingham which shall constitute a trust fund into which shall be deposited all the gross income derived from the use of the stadium, and out of which shall be paid certain amounts in the order of their priority, as follows:

(a) Proper and reasonable expenses of maintaining, repairing, and operating the stadium and its equipment.

(b) Repayment to the city, without interest, of such funds as it shall have advanced for the construction and equipment of the stadium.

(c) Payment and retirement of the certificate with interest at five percent. from date as thereinafter described.

Such resolution declared in paragraph four that it was contemplated that $100,000 was to be raised through the Junior Chamber of Commerce by the sale of 1,000 city of Birmingham certificates in the denomination of $100 each, and in form as prescribed in the resolution. The form of the certificate did not express any limitation on the amount to be advanced by the city, as set out in other features of the resolution, but broad terms were used in declaring its priority of payment, so that the city was to be repaid in priority to the certificates "such funds as it has advanced for the building and equipment of the said stadium." The certificates were not a general obligation of the city, and were payable only out of the stadium fund.

The resolution of the City Commission adopted at the same time assented to all the terms and conditions of the resolution of the Park and Recreation Board, and resolved to advance to the stadium fund such amount as shall be necessary for the construction of the stadium after exhaustion of the $100,000, "but in no event to exceed $150,000."

At this time technical estimates had not been made as to the cost of the contemplated structure, and the sum of $250,000 appeared to be merely the unofficial estimate of interested parties.

It developed that the stadium cost $108,000 more than was contemplated, and that instead of the city advancing $150,000, as was pledged, it advanced $258,000. The stadium was completed in 1928, and has been in operation ever since under the direction of the Park and Recreation Board, and the stadium trust fund has been administered through the general treasury of the city. The seating capacity of it, as finished, was approximately 21,000.

The bill in equity was filed by this appellee in 1935 whereby some of the expenditures made out of this trust fund are questioned, and whereby a construction is sought of the rights of the certificate holders in connection with those of the city under the priority provisions of the resolution and certificates. Appellee is a certificate holder. He claims that under the resolutions and terms of his certificate the proceeds of the trust fund should be used in paying the city in priority over the rights of the certificate holder only to the extent of $150,000, and that when that amount shall be paid the certificate holders are entitled to be reimbursed with interest at five percent. until they are paid, and only then is the city entitled to be reimbursed out of such fund for the remainder advanced over the $150,000.

The broad terms of the priority feature of the resolution and certificate taken alone tend to show that the city should have priority of payment over the certificate holders to the extent of the entire sum advanced by it though it may exceed $150,000. The city contends that such is its meaning even when construed in connection with the resolution in which the form of the certificate is set up. And that when the resolution of the board refers to a pledge to be made by the city to advance not to exceed $150,000, and when the resolution of the City Commission resolved to advance such amount as shall be necessary after exhausting the $100,000, supra, "but in no event to exceed $150,000," it was meant thereby to limit the obligation to $150,000, but not to limit the power of the city to exceed that amount, and that the certificate holders are bound to understand that such was its purpose, and that the priority extended to the full amount. The register found that "this provision (limitation to $150,000) of the said resolution was a material inducement to the purchasers of stadium certificates and is an integral part of the contract between the city of Birmingham and the stadium certificate holders." This conclusion is predicated on the terms of the two resolutions. It is therefore a legal question, and in it the trial court concurred and reflected that interpretation of the situation in the final decree. This is seriously challenged by appellant.

But we are in accord with that view. A prospective buyer of a certificate finds that the city declares that in no event will it advance more than $150,000. It could be less than that. So that if the amount is less, the priority will be only to the extent of the amount so advanced. But the buyer could well understand that, since the city declares that it will not advance exceeding $150,000: that sum was intended to limit the amount of its priority. That is not an unreasonable interpretation of a resolution which the city itself prepared and adopted using language of its own choice. It should be therefore strictly construed against the city. Penn Mut. Life Ins. Co. v. Fiquett, 229 Ala. 203, 155 So. 702; King v. Capitol Amusement Co., 222 Ala. 115, 130 So. 799; Shepherd Lumber Co. v. Atlantic Coast Line R. Co., 216 Ala. 89, 112 So. 323.

Appellant also contends that as trustee it would be authorized to incur the amount of this additional cost and thereby create a lien upon the estate payable out of the trust fund. But the city is only a trustee of the fund for disbursement as provided in the resolution, not of the property. The city otherwise was the owner of the property and continued to own and operate it as such owner in its own way, without material restrictive requirements or supervision, but with the proviso that the funds derived from its use were to be held in trust and applied pursuant to the...