Commissioners of Johnston County v. Lacy

• Decision Date: 26 September 1917
• Docket Number: 250.
• Citation: 93 S.E. 482,74 N.C. 141
• Parties: COMMISSIONERS OF JOHNSTON COUNTY v. LACY, STATE TREASURER.
• Court: North Carolina Supreme Court

93 S.E. 482

74 N.C. 141

COMMISSIONERS OF JOHNSTON COUNTY v. LACY, STATE TREASURER.

No. 250.

Supreme Court of North Carolina

September 26, 1917

Appeal from Superior Court, Wake County; Devin, Judge.

Submission of agreed case by the Commissioners of Johnston County against B. R. Lacy, Treasurer of the State of North Carolina.From a judgment for plaintiffs, defendant appeals.Reversed for error.

Clark C.J., dissenting.

State or county may lend aid or expend money in building or maintenance of public road anywhere within its borders, when it is being done for public benefit or as part of state or county system, but cannot tax one community for the exclusive benefit of another.

From the facts as presented, it appears that O'Neal township in Johnston county, having decided by popular vote to apply to the state for a loan of $40,000 to establish and maintain a system of public roads in said township, pursuant to the provisions of chapter 6,Laws 1917, entitled "An act to encourage road building in North Carolina by state aid," and the result having been duly certified to the board of commissioners of said county, that body passed a resolution to levy a special tax in said township at the approaching August meeting in 1917 to meet the obligations imposed by the statute, duly applied for said loan and prepared and tendered to defendant, the state treasurer, the bond of the county in the sum of $40,000, promising to repay said loan and interest thereon at 5 per cent. for 41 years, payable semiannually and to be computed at said rate on each installment of said loan from the date same should be advanced.Said bond contained provision also:

"That, in default of prompt payment of said interest as it accrues, the said county of Johnston promises to pay the penalties prescribed by section 12, said chapter 6, and to observe and be bound by other provisions of the act."

Accompanying the offer of the bond was a request from the board of commissioners that the treasurer presently advance on said loan an installment of $15,000, etc.The same facts are applicable in case of Selma township, in said county, except the amount voted and total loan applied for was $50,000.The defendant, the state treasurer, declined to accept the bond and advance the money, contending:

"(1) That the act was invalid.(2) That the bond tendered was not in proper form.(3) That the proposed tax levy was invalid," etc.

The court, being of opinion with the plaintiff, so entered its judgment and directed that the state treasurer pay the commissioners the amounts asked for in accordance with the provisions of the law.Defendant thereupon excepted and appealed.

The Attorney General and R. H. Sykes, Asst. Atty. Gen., for appellant.

F. H. Brooks, of Smithfield, for appellee.

HOKE J.

Chapter 6,Laws 1917, is a statute designed to enable the state to lend its aid to road building and maintenance in the counties, townships, and road districts properly applying therefor under its provisions.In general terms, the scheme and purpose is that the state shall procure the money by issuing its coupon bonds, payable 41 years from date, bearing interest at 4 per cent., and advance the money so obtained to localities applying for the same on receiving the bond of the respective counties promising to pay interest on the amount loaned at 5 per cent. for said period of 41 years; this 1 per cent. difference in the amount of interest to constitute a road fund to be invested by the state treasurer, the purpose and estimate being that, if continuously and favorably invested for that period, there should be realized an amount sufficient to relieve both the state, counties, and townships from ultimate liability.The loans are to be advanced by the state treasurer in amounts as required, not to exceed the sum of $400,000 semiannually, and this is to continue for the period of 41 years, involving, if carried out to its full intent and meaning, the incurring of a state indebtedness approximating $32,000,000.Provision is also made that if, at any time, there is any default in payment of the 5 per cent. interest, as stipulated, the bond shall be put in suit for the amounts due and penalties attached, and if, at the end of 41 years, the treasurer has not been enabled to realize the full amount then due, according to the scheme of loans and investment, the respective counties shall make good the deficit in proportion to the amount of the proceeds which such counties may have received.After thus providing for obtaining the money in case of counties, the statute, in section 19, establishes a limit on the amount a county may borrow, the same not to exceed, in connection with other county indebtedness, 6 per cent. of the assessed valuation of the property in the county and in section 20 it is enacted as follows:

"Townships and road districts created by special act of the General Assembly may avail themselves of the benefits of this act upon compliance with the requirements herein set out: Provided, that the bond or undertaking filed with the state treasurer shall be executed by the board or boards of county commissioners of the county or counties in which such township or road district is situated.It shall be the duty of such commissioners to levy and the duty of the sheriff to collect such special taxes and make payment thereof in the manner and under the penalty set out in section 18 of this act."

The application for a loan in this case, being in behalf of two of the townships of Johnston county, comes more directly within the meaning of this section 20, and, considering the same in reference to the terms employed and the other provisions of the statute and the general meaning and purpose of the law, it is clear, we think, that, whether the loan be applied for by county, township, or road district, the bond that is tendered shall be that of the county.No other than a county bond is anywhere mentioned in the statute, and, in section 11, the statute itself says:

"Said bond shall obligate said county to pay to the state treasurer the 5 per cent. interest per annum on the amount thus loaned."

And when the provisions of the statute were extended to townships and road districts, and the provision formally required that the "bond tendered should be executed by the board of county commissioners," it plainly meant the bond that had been previously referred to, and which the board of county commissioners would naturally give--the bond of their county.This is evidently the interpretation put upon it by the advocates of the measure, as well as the actors in the present suit, for in this transaction, said to be brought as a test case, though the election and application are by two of its townships, the bonds are obligations of Johnston county.To hold otherwise would not only be a departure from the plain meaning of the language used, but would leave the proviso without substantial significance.And there is too controlling reason for such a requirement.A perusal of the statute will disclose that, while the bonds of the state are to be positive obligations so far as the creditor or holder is concerned, it was clearly contemplated that the state should be ultimately reimbursed for its outlay, and, to this end proper security should be furnished.A county bond, in all probability, would do this; whereas, the bond of a township or road district, without regard to its size or ability to pay, and on which no limit in its indebtedness had been placed by the statute, except that it could only have its proportionate part in case the aggregate amount applied for should exceed semiannual loan of $400,000, might and often would fall far short of affording adequate security.It was for this reason, no doubt, that the proviso was inserted, and both its language and the facts and circumstances show that the framers of the statute intended that, in all cases, a county bond should be required.

This being the correct, and, to our minds, the only permissible, construction of this section 20, we are of opinion that the Legislature is without power to require a county to give its binding obligation to pay the interest on a loan at 5 per cent. for 41 years on the application and vote of a township or road district for the construction and maintenance of the roads of the township or district.On the facts here presented, an obligation of this kind imports a liability to taxation, and, in case of a subordinate municipal corporation, it means that payment can be coerced, and that all the taxable values therein may be made available on the claim.As said in People v. Township of Salem,20 Mich. 452, 4 Am. Rep. 400:

"The exercise by a municipal corporation of the power to pledge its credit is an incipient step in the exercise of the power of taxation; and unless the object to be promoted be such as may be provided for by taxation, the power to make the pledge does not exist and the Legislature cannot confer it."

And a decision in this court at the last term in Bennett v. Commissioners of Rockingham,92 S.E. 603, is in full recognition of the principle.True, both the levy and apportionment of taxation is very largely in the legislative discretion, and, when the power exists, it is very rarely, if ever, that courts are allowed to interfere.

It is true, also, that a state or county may, as a rule, lend its aid or expend its money in the building and maintenance of public roads anywhere within its borders, when it is being done for the public benefit, or as a part of a state or county system, but, in this instance, the improvement is entirely localized.The roads of the different townships or districts are set apart, and a scheme is entered upon by which they can be planned, constructed, and...