City of Vernon v. Montgomery

• Decision Date: 25 June 1924
• Docket Number: (No. 2344.)
• Citation: 265 S.W. 188
• Parties: CITY OF VERNON et al. v. MONTGOMERY.<SMALL><SUP>*</SUP></SMALL>
• Court: Texas Court of Appeals

265 S.W. 188

CITY OF VERNON et al. v. MONTGOMERY.^*

(No. 2344.)

Court of Civil Appeals of Texas. Amarillo.

June 25, 1924.

Rehearing Denied October 8, 1924.

Appeal from District Court, Wilbarger County; J. V. Leak, Judge.

Suit by Charlotte Montgomery against the City of Vernon, its mayor and other officials, to restrain issuance and sale of bonds. Decree for plaintiff, and defendants appeal. Reversed and rendered.

Bonner, Storey & Storey, Cook, Cook & Cole, and Harry Mason, all of Vernon, for appellants.

Berry, Stokes & Killough, of Vernon, and Templeton, Brooks, Napier & Brown, of San Antonio, for appellee.

HALL, C. J.

On the 3d day of January, 1923, the property tax paying voters of the city of Vernon, at an election held for that purpose, voted for the issuance of $100,000 of municipal bonds by said city, for the purpose of erecting and constructing an electric light plant for the city. The appellee, Mrs. Montgomery, alleging that she owned property in the city subject to taxes, filed this suit agains the mayor and other officials of the city to restrain them from causing the bonds to be issued and sold.

She alleges, in substance, that on the 3d day of January, 1922, said city had outstanding against it legal and binding obligations, in the form of municipal bonds, amounting in the aggregate to $194,460, and city warrants amounting to approximately $25,000, upon which said city was required annually to pay the sum of $16,146 as interest and sinking fund; that it would require an additional amount of at least $8,000 annually to provide for interest and a sinking fund for the proposed bonds; that on the 21st day of November, 1921, the city commission passed a resolution submitting to the qualified voters of said city a proposition for the issuance of the bonds; that the order calling said election and said resolution are, under the terms of the city charter, null and void; that by section 12, art. 2, of said city charter it is provided that, whenever said city shall operate and maintain an electric lighting system or other public utility, the right to operate and maintain such public utilities shall be exclusive; that the election for the issuance of said bonds was held under the provisions of said charter and that on or about the 25th day of April, 1913, the city commission had granted to Albert Emanuel, his heirs, successors, and assigns, the right, power, and authority, to erect, maintain, extend, and operate a system of works, poles, wires, underground conduits, cables, and all necessary apparatus and appurtenances within the corporate limits of the city, for the purpose of generating electricity for sale and distribution to the public generally for light, heating, and power; that the franchise so granted expressly provided that it should run for a term of 50 years from and after that date; that only 9 years thereof had expired; that acting under said franchise an electric light plant, fully equipped, had been erected and was then serving the public, for which reason the said condition of the charter cannot be carried out; that, if the city is permitted to erect the proposed plant, its right to maintain and operate the same cannot be exclusive, as required by the charter, but will be operated for more than 40 years in competition with the existing light plant and will consequently be run at a great loss, incurring the levy and assessment of enormous additional taxes to pay said losses; that under the provisions of section 10, art. 2, of said chapter that said city has no power to issue tax bonds or to levy any tax to pay interest or provide a sinking fund for the purpose of building an electric light plant, but that said city is only authorized to issue bonds or notes or other evidence of indebtedness and secure the payment thereof by fixing a lien on said public utility; that it is specially provided in said section that the security shall apply alone to said public utility; that there is not property subject to taxation in said city of sufficient value to provide for the payment of its outstanding indebtedness and create a sinking fund for the payment of principal and interest of the proposed bonds.

The appellants answered by general demurrer, general denial, and specially answered to that portion of the appellee's petition, wherein it is alleged that—

"Defendants passed an ordinance No. 387, on the 10th day of January, 1922, providing for the issuance of the bonds in suit."

They admitted that said ordinance was duly passed, but that thereafter, by Ordinance No. 389, or resolution duly and regularly passed by the city commission on the 13th day of April, 1923, the first above-mentioned ordinance was regularly and legally repealed, and that the defendants were not now attempting to issue bonds under the first mentioned ordinance and did not intend to do so; that on, to wit, the 13th day of April, 1922, the city commission legally and regularly adopted an ordinance providing for the issuance of said bonds, and thereafter, prior to the institution of plaintiff's suit, certified copies of all proceedings pertaining to the issuance of said bonds were placed in the hands of the Attorney General of Texas, and were approved by him.

There was a trial before the court without a jury, and a decree entered perpetually enjoining the city and its officials from issuing, printing, negotiating, or disposing of said bonds, in any manner whatever.

It is first contended that the bonds have been illegally issued because no ordinance was passed by the city council calling the election. It appears that at a regular session of the city council on the 21st day of November, 1921—

"It was moved by Commissioner Rogers, and seconded by Commissioner Blockwood, that there be submitted to the qualified voters of the said city, who are property tax payers therein, a proposition for the issuance of the bonds of said city, in the sum of $100,000, for the purpose of the construction and erection of an electric light plant in the said city of Vernon, Tex., the election to be held on the 3d day of January, A. D. 1922. The motion carried by the following vote: Commissioners Rogers, Blackwood, Napier, and Mason voting aye; none voting no. Thereupon the following election order was adopted."

The general rule relating to such matters is expressed in volume 5, McQuillin Mun. Corp., § 2299, as follows:

"A bond issue is preceded by certain proceedings, usually provided for by statute or charter; such statutory or charter requirements, in so far as essential and mandatory, must be observed in substance, especially in regard to conditions precedent, but slight irregularities in such proceedings of course are not fatal. If an ordinance or resolution is necessary, bonds issued without any such ordinance or resolution are void. If the statute or charter requires an ordinance a resolution is insufficient, but if there is no provision in regard thereto, a resolution is proper or a motion."

There is no statutory or charter provision requiring that an ordinance, or even a resolution, is necessary to authorize an election to determine an issue of bonds of this character. In the absence of any such statute, or charter provisions, we hold that the motion or order above quoted is all that is required. This question has not been directly passed upon by the courts of this state, but in cases involving the validity of bonds our courts have upheld them without the formality of a previous ordinance, authorizing the election on the issuance of the bonds. Thornburgh v. Tyler, 16 Tex. Civ. App. 439, 43 S. W. 1054; Conklin v. El Paso (Tex. Civ. App.) 44 S. W. 879; Simpson v. City of Nacogdoches (Tex. Civ. App.) 152 S. W. 858; McCarthy v. McElvaney (Tex. Civ. App.) 182 S. W. 1181; Hunter v. Rice (Tex. Civ. App.) 190 S. W. 840. This holding is in accord with the weight of authority in other jurisdictions. Atchison Board of Education v. De Kay, 148 U. S. 591, 13 Sup. Ct. 706, 37 L. Ed. 573; Wrought-Iron Bridge Co. v. Arkansas City, 59 Kan. 259, 52 Pac. 869; State v. Babcock, 20 Neb. 522, 31 N. W. 8; Common Council v. Engel, 207 Mich. 106, 173 N. W. 547; 28 Cyc. 1585. It is not clear why an ordinance is ever necessary to the calling of an election within a municipality to determine upon the issuance of bonds, since the calling of such an election is in no sense a legislative act. The call results in the enactment of no law, but is purely an administrative and ministerial matter.

It is next contended that the bonds are void because the order for the election does not state the date of the maturity of the bonds. V. S. C. S. art. 606 (1922 Supp.), provides:

"The proposition to be submitted for the issuance of bonds shall distinctly specify the purpose for which the bonds are to be issued, the amount thereof and the rate of interest, and shall further state the maturity of the bonds to be issued, or that the bonds may be issued to mature serially within any given number of years, not to exceed forty years, within the discretion of the governing body issuing the same."

The election order provides for the holding of an election at which the following proposition should be submitted:

"Shall the city commission of the city of Vernon, Texas, be authorized to issue bonds of said city in the sum of one hundred thousand ($100,000) dollars, payable in forty (40) years after date, bearing interest at the rate of six (6%) per cent. per annum, payable annually, said bonds maturing at such times as may be fixed by the city commission serially? Said bonds to become due and paid for serially as issued."

It will be observed that the order describes the bonds to be issued as "payable in forty (40) years after date." And further recites, "said bonds maturing at such times as may be fixed by the city commission serially." We do not construe the article of the...