Davis v. Dixon

• Decision Date: 25 June 1929
• Citation: 98 Fla. 87,123 So. 536
• Parties: DAVIS v. DIXON et al.
• Court: Florida Supreme Court

123 So. 536

98 Fla. 87

DAVIS v. DIXON et al.

Florida Supreme Court

June 25, 1929

Bill by Robert J. Davis against Glenn Dixon and others, as members of the Board of Public Instruction of Broward County. From an order dismissing the bil, plaintiff appeals.

Reversed and remanded, with directions.

Syllabus by the Court

SYLLABUS

Statutory requirement that maturities on tax school district bonds shall be submitted to freeholders may be modified by statute (Comp. Gen. Laws 1927, § 721 et seq.; Const. art. 12, § 17 as amended in 1924). Requirement of Comp. Gen. Laws 1927, § 721 et seq., that question of maturities on special tax school district bonds provided for by Const. art. 12, § 17 as amended in 1924, shall be submitted to freeholders, may be modified by statute.

Maturities required by Constitution for discharging school district bonds must conform to constitutional limitations, though statute might modify maturities by issuance of refunding bonds without election (Const. art. 12,§ 17, as amended in 1924). Serial maturities of special tax school district bonds required by Const. art. 12, § 17, as amended in 1924, to discharge bond issue within fixed time, must conform to constitutional limitations, though it be competent for statute to authorize modification of maturities by issuance of refunding bonds without resubmitting matter to electorate.

Constitutional requirement for paying school district bonds in annual installments within 30 years provides mandatory and exclusive plan of maturity (Const. art. 12, § 17, as amended in 1924). Requirement of Const. art. 12, § 17, as amended in 1924, that special tax school district bonds shall become payable within 30 years from date of issuance in annual installlments commencing not more than three years after date of issuance and providing that each installment shall be not less than 3 per cent. of total amount of issue, is mandatory and exclusive plan of maturity.

Refunding bonds intended to defer payment of interest on school district bonds over three years after issuance of original bonds held invalid (Const. art. 12, § 17, as amended in 1924; Comp. Gen. Laws 1927, § 720 et seq.; Rev. Gen. St. 1920, § 579 et seq., as amended; Acts 1927, c. 11855). Under Const. art. 12, § 17, as amended in 1924, providing for payment of special tax school districk bonds wthin 30 years in annual installments commencing not more than three years after date of issuance, payment of interest which is provided for in face of bonds issued under Comp. Gen. Laws 1927, § 720 et seq., and Rev. Gen. St. 1920, § 579 et seq., as amended, and is an integral part of indebtedness, cannot be deferred so as to commence more than three years after date of issuance, and hence issuance of refunding bonds under Acts 1927, c. 11855, to defer payment of interest so that payment would not commence until more than three years after issuance of bonds would enable district to accomplish indirectly what Constitution prohibits directly, and was unauthorized.

Appeal from Circuit Court, Broward County; Vincent C. Giblin, judge.

COUNSEL

Everette H. Hunt, of Ft. Lauderdale, for appellant.

Giles J. Patterson, of Jacksonville, for appellees.

OPINION

STRUM J.

By authority of section 17 of article 12 of the Constitution, as amended in 1924, and pursuant to an election of the freeholders of the district, as required by that section of the Constitution, special tax school district No. 3 of Broward county, acting through the board of public instruction of said county, issued bonds for the exclusive use of public free schools in said district in the principal sum of $500,000, dated October 1, 1926, bearing interest at the rate of 6 per cent. per annum, and maturing annually in amounts not less than 3 per cent. of the total amount of said issue, from October 1, 1929, to October 1, 1955, both inclusive. See section 720 et seq. Comp. G. L. 1927; section 579 et seq., Rev. Gen. Stats. 1920, as amended.

On September 25, 1928, the board of public instruction of Broward county, acting for the district, passed a resolution reciting, amongst other things, that '$15,000 interest coupons on said issue (the issue above described) will become due within three months of the passage of this resolution and cannot be paid at maturity from authorized revenue, and that it is necessary that said amount of interest on bonds of said issue be refunded.' It was thereupon resolved by said board of public instruction 'that bonds of said District be issued in the amount of $15,000 for the purpose of refunding said interest on bonds to become due as aforesaid.' The proposed refunding bonds were to consist of thirty bonds, each in the principal sum of $500, dated October 1, 1928, bearing interest at the rate of 6 per cent. per annum, payable semiannually, and maturing, one bond each year from October 1, 1931, to October 1, 1940, and two bonds each year from October 1, 1941, to October 1, 1950, inclusive. In proposing to issue said refunding bonds, the board purported to act by authority of chapter 11855, Acts of 1927, purporting to authorize the issuance of refunding bonds by counties, cities, towns, and other municipal corporations and taxing districts, which act does not require an election of the freeholders, or otherwise, as a prerequisite to the issuance of such refunding bonds. It is proposed by the board of public instruction to issue the refunding bonds in question without submitting the matter to an election of the freeholders of the school district involved.

As a taxpayer upon real property located in said district, appellant exhibited his bill of complaint prior to the issuance of the proposed refunding bonds for the purpose of restraining their issue. A demurrer was sustained, and the bill of complaint dismissed, from which order this appeal is taken.

The sole question presented for decision is whether or not a board of public instruction, acting for a special tax school district pursuant to chapter 11855, supra, may issue bonds to be exchanged or sold for the purpose of refunding outstanding bonds of a special tax school districk originally issued by authority of section 17 of article 12 of the Constitution and pursuant to an election of the freeholders of the district as therein required, without submitting the question of the issuance of the refunding bonds to an election of the freeholders of such special tax school district.

Section 17 of article 12 of the Constitution, as amended in 1924, provides as follows:

'Section 17. The Legislature may provide for special tax school districts to issue bonds for the exclusive use of public free schools within any such special tax school district, whenever a majority of the qualified electors thereof who are freeholders shall vote in favor of the issuance of such bonds, but no bonds shall be issued hereunder which shall exceed, together with the existing indebtedness of such special tax school district 20 per cent of the assessed value of the taxable property of such district according to the last assessment for State and County purposes prior to the issuing of such bonds. Any bonds issued hereunder shall become payable within thirty years from the date of issuance in annual instalments which shall commence not more than three years after the date of issue. Each annual instalment shall be not less than three per cent of the total amount of the issue. * * *'

The remainder of the section provides for the levy of a special tax on the taxable property within the district for the payment of such bonds, and further provides that such tax shall not be applied to any other purpose.

We are aware of the well-nigh universal general rule that, even where a constitutional provision requires a vote of the electors to originally authorize the incurring of an indebtedness, or the original issuance of bonds, no such election is necessary to the issuance of refunding bonds pursuant to statute for the purpose of discharging outstanding bonds originally issued in accordance with the constitutional requirement, so long as the refunding bonds create no additional or increased liability on the part of the obligor, unless, of course, the statutory or other authority under which the refunding bonds are issued requires a resubmission to the electorate. The theory of the cases so holding is that, since the bonds are not the debt itself, but the legal evidence of the existence of the debt, the issuance of refunding bonds for the purpose of discharging an existing legal indebtedness, originally incurred in accordance with the constitutional requirement, does not create a new debt or impose any new liability against the taxpayers or their property within the meaning of such constitutional provision, but merely renews and continues in a changed form the original existing indebtedness which was originally created in conformity with the Constitution, and that such constitutional provision therefore does not prohibit the renewal, without a vote, of the previously existing valid debt, so long as no additional or increased liability is created. The fact that interest must be paid upon the refunding bonds during the additional renewal period would not impose an additional or increased liability as contemplated by that rule, because, if the original bonds were allowed to rest in default, they would continue to draw interest. The result, therefore, would be the same in dollars and cents, except in cases where the legal rate is higher than the contract rate on the bonds and in certain states where the rule prevails that bonds in default shall draw interest during the period of default at the legal rate and not the contract rate. Under those circumstances it would be more expensive to permit the bonds to rest in...