City of Del Rio v. Lowe, 10179.

• Decision Date: 27 October 1937
• Docket Number: No. 10179.,10179.
• Citation: 111 S.W.2d 1208
• Parties: CITY OF DEL RIO v. LOWE et al.
• Court: Texas Court of Appeals

111 S.W.2d 1208

CITY OF DEL RIO v. LOWE et al.

No. 10179.

Court of Civil Appeals of Texas. San Antonio.

October 27, 1937.

Rehearing Denied December 15, 1937.

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Appeal from District Court, Val Verde County; Brian Montague, Judge.

Action by H. J. (Jap) Lowe and others against the City of Del Rio. Judgment for plaintiffs granting relief in part, and the defendant appeals.

Affirmed in part; reversed in part.

Conger, Low & Spears and Lester Whipple, all of San Antonio, and Roger Thurmond, of Del Rio, for appellant.

John L. Dodson, of Del Rio, for appellees.

CLAUDE V. BIRKHEAD, Special Justice.

This action was brought by H. J. (Jap) Lowe and others, taxpaying citizens of the City of Del Rio, Tex., to temporarily enjoin said city from paying certain warrants, bonds, and other obligations theretofore issued by the city. Upon the hearing the trial judge granted, in part, the injunction as prayed for, and the city has appealed. The facts are stated in the discussion of the various assignments of error to follow.

Appellant's first assignment of error complains of the action of the trial court in overruling the general demurrer of the defendant, City of Del Rio, to plaintiffs' petition, contending that the warrants, bonds, and other obligations, the payment of which was sought to be enjoined, were in the hands of various unknown owners, and that plaintiffs, as shown by their petition, were guilty of laches. This assignment is overruled. The petition does not show, upon its face, that the rights of unknown owners or bona fide purchaser for value and without notice have intervened. Furthermore, plaintiffs' petition does not disclose that they were guilty of laches as a matter of law. In the case of City of Corpus Christi ex rel. Harris v. Flato (Tex. Civ.App.) 83 S.W.2d 433, cited by appellant in support of its contention, the plaintiffs' petition disclosed that the bonds involved therein passed into the hands of various persons referred to in the petition as "unknown owners and holders," and the suit in that case was filed more than five years after the first bonds were issued and more than three years after the last bonds were issued, and it is clear that the court, in holding that such delay constituted laches as a matter of law, based its decision on the further fact that during such delay the rights of others had intervened. In the case at bar, suit was instituted in December, 1936, within two years after the issuance of the first of such warrants, and approximately four months after the issuance of the last of the obligations here involved. In view of this fact, and since the petition does not show, upon its face, that the rights of unknown owners or bona fide purchasers for value without notice have intervened, it cannot be held, as a matter of law, that plaintiffs were guilty of laches.

Appellant's second assignment of error, divided into parts (a), (b), (c), (d), and (e), complains of the trial court's action in enjoining appellant from the enforcement of a tax levy and the use of tax funds and revenues from the city's waterworks system to pay certain City of Del Rio waterworks warrants in the sum of $20,000 issued to C. A. Cripe under an ordinance of said city dated May 28, 1935. These warrants are numbered 1 to 20, inclusive, each in the sum of $1,000, bearing interest, payable semiannually, at 6 per cent. per annum, 2 of which mature annually on the first of June from the year 1936 to and including the year 1945, and were issued for the purpose of evidencing an indebtedness of the City of Del Rio to C. A. Cripe for the contract price of certain improvements made by Cripe upon the city's waterworks system in accordance with a certain contract between said Cripe and the city. The ordinance levied a tax and created a special fund for the payment of the principal and interest of the warrants at maturity. The ordinance also recites that "the Mayor of said City caused a notice to be published in the `Del Rio Evening News' calling for bids for said Water Works Improvements, and setting out the intention of the City Commission to issue Time Warrants in payment of the contract price, which notice was published on the 10th day of May and 17th day of May, respectively, and was in all respects in conformity with the provisions of the law covering such notices," and each of the warrants provides that "it is hereby certified and recited that all acts, conditions and things required to be done precedent to and in the issuance of this warrant, have been properly done, have happened and been performed in regular and due time, form and manner, as required by law." Notwithstanding the above recitals, the notice of intention to issue said time warrants was published one time only and that on the 10th day of May, 1935.

The trial court's action is evidently based upon its conclusion that since these $20,000 warrants were issued in payment of the contract price for certain improvements upon the city's waterworks system, the issuance thereof is governed by articles 1111, 1112, 1114, as amended, Acts 1933, 43d Leg., p. 320, c. 122, Vernon's Ann.Civ. St. arts. 1111, 1112, 1114, under which statutes said warrants could never become a debt of said city, payable by taxation, but, if properly issued, could only be an obligation of the city's waterworks system, payable only out of the revenues thereof; and that the warrants are void, because same were not submitted to a vote of the people of the city, as required by said statutes, and the notice of intention to issue same was not published as required by sections 2, 3, and 4, of article 2368a, Vernon's Ann.Civ.St., Acts 1931, 42d Leg., p. 269, c. 163.

Appellant's contention that the mere fact that the $20,000 warrants were issued for the purpose of "improvements" of the city's waterworks system does not bring such warrants within articles 1111, 1112, 1113 and 1114, Acts 1933, 43d Leg. p. 320, c. 122, nor prevent same from becoming a debt of the city, payable out of funds raised by taxation, if such warrants were authorized by other provisions of the law, should be sustained. Articles 1111 to 1114, inclusive, have no application to these warrants, as there was no attempt in this instance to encumber the city's waterworks system. Those articles provide principally for the encumbrance of light, water, sewer, and gas systems and certain other municipal properties, and for the creation of obligations against such systems and properties in the form of bonds, notes, or warrants, for the purposes of building, purchasing, improving, enlarging, extending, or repairing such systems or properties, and further provide that "no such obligation of any such systems shall ever be a debt of such city or town, but solely a charge upon the properties of the system so encumbered." Article 1111. Article 1112 provides that no such system shall "be encumbered for more than Five Thousand ($5,000.00) Dollars, except for purchase money, or to refund any existing indebtedness lawfully created," until "authorized by a majority vote of the qualified voters of such city or town." Article 1114a provides that "projects financed in accordance with this law are hereby declared to be self liquidating in character and supported by charge other than by taxation."

It is therefore apparent that, when such systems or properties of a municipality have been encumbered under the above statutory provisions, the obligations evidencing such encumbrance can be paid only from the revenues from such systems or properties and cannot constitute a debt against the city or town to be paid by taxation. However, where there has been no attempt to create such encumbrance, as in this instance, such provisions will not apply and will not prohibit the city's improving its waterworks system and paying for such improvements by the issuance of warrants to be paid by taxation.

There are other provisions of the law under which municipal warrants may be issued for the purpose of improving the city's waterworks system, providing for the issuance of time warrants to be paid by taxation, and which warrants, upon certain conditions, may be issued without a vote of the people of the city or town. Article 2368a, §§ 2, 3, and 4; article 1015, subds. 30 and 43; and article 8, section 9, Constitution of Texas.

Under the above constitutional and statutory provisions, a city has the power to improve its waterworks system and to pay for such improvements with funds raised by issuance of time warrants to be paid by taxation, and such warrants may be issued without a vote of the people, if issued in compliance with article 2368a, §§ 2, 3, and 4.

The facts clearly show that the $20,000 warrants were issued under article 2368a, §§ 2, 3, and 4, and all provisions thereof were complied with, except the provisions requiring publication of notice of the intention of the city commissioners to issue such warrants, it appearing that such notice was published only once, whereas section 2, of article 2368a, requires such notice to be published once a week for two consecutive weeks. Therefore, the failure to publish the required notice brings in question the validity of the warrants. Sections 2 and 9, of article 2368a, expressly provide that all contracts or agreements, and any warrant or other evidence of debt or obligation, created under said article, without complying with the terms thereof, shall be void and unenforceable. It is obvious that under these provisions both the warrants and the original contract with Cripe are void, by reason of the city's failure to comply with the requirement as to publication of notice. The appellant contends, however, that by reason of the recitals in the ordinance and the warrants issued thereunder to the effect that the required notice was published and that all provisions of the law had been complied with, and the further fact that the City of Del Rio received the...