City of Kingsville, Tex. v. Meredith, 8985.

• Decision Date: 20 April 1939
• Docket Number: No. 8985.,8985.
• Citation: 103 F.2d 279
• Parties: CITY OF KINGSVILLE, TEX., et al. v. MEREDITH et al.
• Court: U.S. Court of Appeals — Fifth Circuit

103 F.2d 279 (1939)

CITY OF KINGSVILLE, TEX., et al. v. MEREDITH et al.

No. 8985.

Circuit Court of Appeals, Fifth Circuit.

April 20, 1939.

E. H. Crenshaw, Jr., and Gus L. Kowalski, both of Kingsville, Tex., and Marcellus G. Eckhardt and L. Hamilton Lowe, both of Corpus Christi, Tex., for appellants.

W. L. Matthews, of San Antonio, Tex., Jas. B. Hubbard, of Corpus Christi, Tex., A. B. Huguenin, of Dallas, Tex., and James G. Martin, of Wichita, Kan., for appellees.

Before FOSTER, HUTCHESON, and McCORD, Circuit Judges.

HUTCHESON, Circuit Judge.

The suit was against the City of Kingsville on warrants issued by it for street paving, and other city improvements. The claim was that validly issued, for full and adequate consideration received, the City was yet neglecting and refusing to pay matured interest and warrants, though it was paying other bonds and warrants.

The defense was (1) that the warrants sued on were invalid, because given in payment for work done under a contract not let on competitive bids, as required by the City Charter;¹ (2) that if the whole of them were not invalid, those issued for the paving of thirty-five additional streets without competitive bids were, because in payment of public work done without taking competitive bids; (3) that the major part of them were invalid, because the attempted provision for them was in excess of the City's taxing power,² and therefore their issuance represented an unconstitutional attempt to create debts without making provision therefor.³

The Equitable Life Insurance Company and other holders of city bonds intervened to set up the same defenses the City had advanced, and to insist that if the City was estopped by receipt of benefits from contesting the validity of the warrants, they were not.

There was a general reference to a Special Master. He found (1) that the City was estopped from claiming that the work for which the warrants were given was not done on competitive bids, and that the estoppel of the City extended to the intervening bondholders who claimed under it. But he found, too, that approximately $200,000 of warrants and interest were invalid, as issued in excess of the City's taxing power.

The District Judge, agreeing with part, disagreeing with part of these findings, made the following findings of his own: (1) All contracts for the improvements for which the warrants in suit had been given were let on competitive bids, in substantial compliance with the provisions of the City charter. (2) None of the warrants were issued in excess of the City's taxing power, but all were issued in full compliance with charter and constitutional provisions, and all of them are valid. (3) If the warrants are affected by any defects or irregularities, they are formal and procedural alone. They do not extend to their constitutional validity. (4) The City has received full value, has had the use and benefit thereof for more than ten years, and for more than seven years has recognized as valid and made payments on account of all the warrants. (5) It has therefore ratified, and is now estopped to question, their validity, especially as against plaintiffs, who, innocent purchasers thereof, had paid par and accrued interest therefor. (6) The bondholders stand as against the warrants sued on, in like case with the City, and no defenses are available to them which are not available to the City. Defendants and intervenors appeal from the judgment in favor of plaintiffs on these findings.

They make four prime contentions here: (1) That the warrants issued for the improvements are invalid, because the improvements were made upon contracts not let upon bids, as required by the City charter; (2) that this invalidity has not been waived, and the City has not been estopped, by accepting the improvements and warrants, from asserting this defense; (3) that the intervening bondholders do not stand in the same case with the City, and that they may assert this defense against the warrants, so that if the City is estopped to assert this defense against the warrants, they are not; (4) that the greater part of the warrants are invalid, because the City charter dedicates 75¢ of the taxing power to general maintenance purposes, thus withdrawing it from other uses, and the remaining taxing power is insufficient to sustain the warrants.

Appellees on their part, insist that the District Judge was right in finding that, in making provision for the warrants, the City did not exceed its taxing power, or in any manner violate any constitutional debt-making limitation. They insist, too, that he was right in finding that there was substantial compliance with the charter provision for competitive bids, and that if there are any defects in the warrants they are not substantial, but only formal and procedural, and the City having received full value, and having fully ratified, by accepting both the doing of the work, and the warrants issued in payment for it, is estopped now to contest them.

We agree with appellees. The point appellants make against the warrants, that they are invalid because issued in violation of constitutional limitations on the City's debt making and taxing power, finds support, we think, neither in the language of the charter, nor in the Carroll case⁴ appellants cite. The only constitutional limitations on the taxpaying and debt creating power of the City of Kingsville are those imposed by Section 5, Article 11 of the Texas Constitution. Without attempting to apportion it, they limit the taxing power generally for all purposes to 2½%, and prohibit the creation of a debt without providing for interest and sinking fund. The City was likewise authorized by its charter, without apportionment, "to levy and collect taxes not exceeding, for all purposes, $2.50 on each $100 of assessed valuation." The provision in the charter that the City is authorized "to levy and collect not exceeding 75¢ for general maintenance purposes" is not as appellants claim it is, an apportionment, a setting apart exclusively to maintenance purposes, of that much of the taxing power. It is merely a limitation imposed upon the use of the taxing power for that purpose. The words "not exceeding," in themselves, are words not of grant or apportionment, but of limitation only, and standing alone are ordinarily so construed. Stuyvesant Ins. Co. v. Jacksonville Oil Mill, 6 Cir., 10 F.2d 54. The context in which they are here used makes that construction more imperative, for instead of a following provision for $1.75 "for all other purposes," as would have been the case, if apportionment had been intended, there follows a general provision for the levy and collection, without apportionment, and "for all purposes," of the full $2.50 constitutional levy.

The Carroll case, on which appellants rely, is not at all in point. It had to do with county levies, and with a wholly different constitutional provision, Section 9, Article 8. That section, unlike the constitutional and charter provision in question here, contained no general clause authorizing a total levy. It specifically authorized separate and specific levies for separate and distinct purposes.

The constitutional and charter provisions controlling here are not so drawn. Without apportionment, they fix the taxing limit at 2½%. C/f...