City of Fort Lauderdale v. State Ex Rel. Elston Bank & Trust Co.

• Decision Date: 29 July 1936
• Citation: City of Fort Lauderdale v. State Ex Rel. Elston Bank & Trust Co., 169 So. 584, 125 Fla. 89 (Fla. 1936)
• Court: Florida Supreme Court
• Parties: CITY OF FORT LAUDERDALE et al. v. STATE ex rel. ELSTON BANK & TRUST CO.

169 So. 584

125 Fla. 89

CITY OF FORT LAUDERDALE et al. v. STATE ex rel. ELSTON BANK & TRUST CO.

Florida Supreme Court

July 29, 1936

En Banc.

Error to Circuit Court, Broward County; George W. Tedder, Judge.

Mandamus proceedings by the State of Florida, on the relation of the Elston Bank & Trust Company, against the city of Fort Lauderdale and others. To review a judgment directing issuance of a peremptory writ, the defendants bring error.

Affirmed.

COUNSEL George W. English, Jr., of Fort Lauderdale, for plaintiffs in error.

Casey &amp Walton, of Miami, and William K. Whitfield, of Tallahassee for defendant in error.

OPINION

DAVIS Justice.

In 1926 the city of Fort Lauderdale issued negotiable bonds with negotiable interest coupons annexed. The bonds recited that the full faith and credit of the city was thereby irrevocably pledged for the punctual payment of principal and interest and that provision had been made for the levy and collection of a tax sufficient to pay the principal and interest when due. The bonds were validated by court decree of the circuit court, from which no appeal was taken. Elston Bank & Trust Company acquired certain of the bonds and interest coupons, for a valuable consideration, before maturity, without notice of any defects or infirmities therein, or defenses thereto, if any such defects, infirmities, or defenses then existed.

The bonds of Fort Lauderdale were floated as an indicent to the accomplishment of a public works project by which the cities of Fort Lauderdale and Hollywood each issued bonds in the sum of $2,000,000 for the construction of a harbor now called Port Everglades. The harbor was later taken over by a legislatively created taxing district embracing the territory of the two cities and other large areas. The purpose of the statute was to relieve the cities involved of the payment of their bonds and to assume on the part of the taxing district the primary obligation of their payment. There has been considerable litigation in this court relative to the bonds issued by the two cities and so assumed by the Broward County Port Authority. The bonds involved in this case are a part of the bonds above referred to. For the judicial history of such litigation and the statutory references incident to its determination see the following decisions and statutes: Martha Bright Farms, Inc., v. Broward County Port Authority, 117 Fla. 361, 158 So. 70; State ex rel. Davis v. Ryan, 103 Fla. 1136, 139 So. 138; Id., 118 Fla. 42, 151 So. 416, 158 So. 62; State ex rel. Ake v. Broward County Port Authority, 107 Fla. 303, 144 So. 656; Id., 118 Fla. 42, 151 So. 718, 158 So. 62; chapter 12562, Special Acts of 1927; chapters 13940 and 13941, Special Acts of 1929; chapter 15107, Special Acts of 1931; chapters 17506 and 17507, Special Acts of 1935.

The present controversy originated as a proceeding in mandamus in the court below. In that court the relator, defendant in error here, alleging itself to be the holder of seven bonds aggregating $7,000, together with interest coupons thereon long over due, procured an alternative writ of mandamus setting up that by reason of the issuance, sale, and delivery of the bonds it became and was the duty of the city to pay relator's past-due bonds and interest coupons at maturity, and to levy and collect in each of its fiscal years 1930-1931 to 1934-1935, both inclusive, on all real and personal taxable property within the limits of the respondent city of Fort Lauderdale a tax sufficient to pay relator's said bonds due and to become due during the fiscal years aforesaid. But, notwithstanding its duties aforesaid, so it was alleged the respondent city had not paid, and would not pay, any or either of relator's said coupons or bonds, nor would it levy or collect any tax for either of the fiscal years mentioned, nor did it pretend to have on hand sufficient applicable funds with which to make payment. Upon the foregoing basis the levy and collection of a special tax for payment of the obligations so held by relator was commanded by the alternative writ.

A motion to quash the alternative writ of mandamus was denied. Respondent thereupon interposed a return, against which relator moved for a peremptory writ, the return notwithstanding. The motion for peremptory writ was granted and judgment thereupon rendered directing the issuance of the peremptory writ sought. That judgment is now before the court on writ of error, whereon it is contended by the unsuccessful respondent in the court below that the return should have been sustained as sufficient and judgment entered thereon in favor of the respondent, city of Fort Lauderdale.

When the bonds sued on were issued there is no controverting the fact that the city of Fort Lauderdale thereby became and was the sole obligor thereon under a contractual obligation that in terms pledged the full faith and credit, and the inexhaustible taxing power of the city of Fort Lauderdale, to provide for their payment. Subsequent acts of the Legislature passed in 1927, 1929, and 1931 have undertaken to release the city of Fort Lauderdale from its primary obligation as obligor by making the Port Authority the sole obligor in so far as providing payment on the city's behalf as to said bonds is concerned. But the bonds themselves are now admittedly in default. So relator, looking to and relying upon the statutes under which the same were issued and sold, and the terms of the contract comprehended in the bonds themselves, has resorted to legal proceedings by which it seeks to enforce the obligation of its contract as originally made by the obligor therein named.

So the controlling proposition required to be decided on this writ of error may be stated as follows: 'Was it within the power of the Legislature to constitutionally release the City of Fort Lauderdale from any and all liability upon its validly issued bonds for the payment of which it had lawfully pledged unlimited ad valorem tax levies, where the proceeds of the bonds were used to defray a part of the construction cost of the deep water port now situate in a special port district embracing the cities of Fort Lauderdale and Hollywood and other territory, it appearing that the Legislature has created by statute enacted subsequent to the issuance of the municipal bonds a special taxing district which is now required to assume payment of such bonds, but the only tax which the district is authorized to levy for that purpose is a special assessment limited to actual benefits accruing for construction and operation of the port, the proceeds of which tax are limited in their application to an equitable distribution among the bond holders of the City of Fort Lauderdale?'

The court below answered the foregoing question in the negative, and such must be our answer here.

When municipal bonds of a class known as general obligations payable from an inexhaustible taxing power have been issued, the holder of such bonds becomes entitled to have the pledged taxes levied whenever and as often and for so long a period of time as may be necessary to pay such bonds in full, and such is the promise embraced in the bond contract.

The Legislature cannot constitutionally release an existing municipality from all liability for payment of its validly incurred debts, even though it imposes liability therefor upon another public entity, unless the creditor accepts the new arrangement as a novation amounting to an extinguishment of the pre existing promise, although so long as payment of the debts in question is not allowed to go into default, the action of the...