Dodds v. Kansas City

• Citation: 152 S.W.2d 128,347 Mo. 1193
• Decision Date: 10 June 1941
• Docket Number: 37584
• Parties: Eugene M. Dodds, Intervener-Appellant, v. Kansas City
• Court: United States State Supreme Court of Missouri

152 S.W.2d 128

347 Mo. 1193

Eugene M. Dodds, Intervener-Appellant, v. Kansas City

No. 37584

Supreme Court of Missouri

June 10, 1941

Appeal from Jackson Circuit Court; Hon. A. A. Ridge, Judge.

Affirmed.

Borders Wimmell, McCreight & Brous and James B. McDonough Jr., for intervener.

(1) Ordinance No. 6349 attempts to create a lien or charge upon the revenues of the waterworks in favor of the proposed Water Revenue Bonds for the payment of the interest and principal thereof, prior and paramount to the lien or charge upon such revenues of all other bonds issued for waterworks purposes. These provisions of Ordinance 6349 and any bonds issued thereunder are and will be void, because: (a) The Water Works Bonds, Fourth Issue, are entitled to an equal lien or charge upon such revenues, for interest and sinking fund purposes and so long as any of such bonds remain outstanding and unpaid, the provisions of Ordinance No. 6349 will impair the obligation of the contract under and pursuant to which such bonds were issued and will deprive the holders thereof of their property without due process of law in violation of the applicable provisions of the Constitution of Missouri and the Constitution of the United States, including the Fourteenth Amendment thereto. (b) The Water Works Bonds, Fifth Issue, and the Refunding Water Works Bonds, dated January 1, 1939, are entitled to an equal lien or charge upon such revenues, for interest and sinking fund purposes, and so long as any of such bonds remain outstanding and unpaid, the provisions of Ordinance No. 6349 will impair the obligation of the contract under and pursuant to which such bonds were issued and will deprive the holders thereof of their property without due process of law, in violation of the applicable provisions of the Constitution of Missouri and the Constitution of the United States, including the Fourteenth Amendment thereto. (c) Under the provisions of the charter of Kansas City, in particular Sections 48 and 49 thereof, and the Revised Ordinances of 1928, in particular Sections 1038, 1039 and 1040, Kansas City is without authority or power to segregate any part of the revenues of the waterworks for the prior or exclusive benefit of any bonds issued for waterworks purposes, but all such revenues must be received, held and applied, when available, for the equal benefit of all bonds issued for such purposes. Ordinance No. 6349, sec. 6; K. C. Charter, 1908, Secs. 9, 10, Art. XI, and Sec. 31, Art. XVIII; Revised Ordinances, Kansas City, 1909, Sec. 890; K. C. Charter (1928), Secs. 48, 49, Art. III; Revised Ordinances, Kansas City 1928, Secs. 1038, 1039, 1040, Ch. 14, Art. I; Mo. Const., Secs. 15, 30; Art. II; U.S. Const., Sec. 10, Art. I, and the Fourteenth Amendment thereof; State ex rel. Kansas City v. Smith, 302 Mo. 594, 259 S.W. 1060; George v. Ashville, 80 F.2d 50; Fazende v. Houston, 34 F. 95, appeal dismissed 140 U.S. 689; Hesse v. Watertown, 57 S.W. 325, 232 N.W. 53; Grossman v. Public Water Supply Dist. No. 1, 339 Mo. 344, 96 S.W.2d 701; Woodmansee v. Kansas City, 339 Mo. 344, 144 S.W.2d 137; Worthen Co. v. Kavanaugh, 295 U.S. 56, 55 S.Ct. 555; Hubell v. Leonard, 6 F.Supp. 145; Coombes v. Getz, 285 U.S. 434, 52 S.Ct. 435. (2) The covenants and agreements contained in Ordinance No. 6349 will have the effect of making the bonds issued thereunder constitute indebtedness of Kansas City within the meaning of Section 12, Article X of the Constitution of Missouri. Such indebtedness, when added to other indebtedness of the city, will exceed the city's income and revenue provided for the current year (whether such year be the calendar year 1940, or the calendar year 1941, or the city's fiscal year which began May 1, 1940), and the same has not been submitted to or authorized by the qualified voters of Kansas City and approved by them by either a two-thirds or a four-sevenths vote, as required by said Section 12, Article X of the Constitution of Missouri. Mo. Const., Sec. 12, Art. X; Ordinance No. 6349, Sec. 6; Hight v. Harrisonville, 328 Mo. 549, 41 S.W.2d 155; Hagler v. Salem, 333 Mo. 330, 62 S.W.2d 751; Hesse v. Watertown, 57 S.D. 325, 232 N.W. 53; Grossman v. Public Water Supply Dist. No. 1, 339 Mo. 344, 96 S.W.2d 701; Bell v. Fayette, 325 Mo. 75, 28 S.W.2d 356; Woodmansee v. Kansas City, 339 Mo. 344, 144 S.W.2d 137; State ex rel. Smith v. Neosho, 203 Mo. 40, 101 S.W. 99; State ex rel. City of Hannibal v. Smith, 335 Mo. 825, 74 S.W.2d 367. (3) There is no authority to be found in the statutes of Missouri or the charter of Kansas City for the following provisions, covenants and agreements contained in Ordinance No. 6349, absent which the same are unauthorized, illegal and void, to-wit: (a) Kansas City has no power to issue the proposed Water Revenue Bonds for the purpose of providing funds to pay and retire an equal principal amount of Water Works Bonds, Fourth Issue, as the latter bonds were duly authorized by a two-thirds vote and constitute general obligations of said city, and can only be refunded in the manner provided by law. (b) Kansas City has no power to issue the proposed Water Works Revenue Bonds for the purpose of providing funds to pay and retire an equal principle amount of Water Works Bonds, Fourth Issue, as the latter are not subject to call and redemption prior to their maturity date, of July 1, 1942. (c) Kansas City has no power to make the proposed Water Revenue Bonds negotiable, to cause them to mature serially over a period of twenty-five years from their date and to provide that certain of such bonds shall be redeemable prior to maturity at a premium of three per cent of their par value, at the option of the city. Mo. Const., Sec. 12, Art. X; Ordinance No. 6349, Secs. 1, 2; State ex rel. City of Republic v. Smith, 345 Mo. 1158, 139 S.W.2d 929; State ex rel. City of Blue Springs v. McWilliams, 335 Mo. 816, 74 S.W.2d 363.

William E. Kemp, Benjamin M. Powers and Bowersock, Fizzell & Rhodes for respondent.

(1) The provisions of Ordinance No. 6349 relating to the application and use of the net revenues of the water works plant of Kansas City are valid under the charter of the city and such provisions do not violate or impair any of the constitutional rights of the holders of the outstanding general obligation water works bonds of the city. Subsec. (7), Sec. 1, Article I, K. C. Charter; Woodmansee v. Kansas City, 144 S.W.2d 137; Taylor v. Dimmitt, 336 Mo. 330, 78 S.W.2d 841; State ex rel. City of Columbia v. Allen, 183 Mo. 283, 82 S.W. 103; Graves v. Little Tarkio Drain. Dist., 345 Mo. 557; Davis Const. Co., Inc., v. State Highway Comm., 141 S.W.2d 214; 59 C. J. 995. (2) The water revenue bonds of Kansas City sought to be issued will not constitute "indebtedness" of the city within the meaning of that term as used in Section 12, Article X, of the Constitution of Missouri. Kansas City may sell and deliver such revenue bonds without such bonds being authorized by the voters and without requiring the surrender and cancellation of an equal principal amount of the outstanding bonds being refunded. Bell v. Fayette, 325 Mo. 75, 28 S.W.2d 356; State ex rel. City of Hannibal v. Smith, 335 Mo. 825, 74 S.W.2d 367; State ex rel. Excelsior Springs v. Smith, 336 Mo. 1104, 82 S.W.2d 37; Grossman v. Public Water Supply Dist., 339 Mo. 344, 96 S.W.2d 701; Woodmansee v. Kansas City, 144 S.W.2d 137. (3) Kansas City has power to issue its water revenue bonds for the purpose of refunding an equal principal amount of outstanding general obligation water works bonds and such revenue bonds may be negotiable, may mature serially over a period of twenty-five years and may be redeemable at 103, at the option of the city, as provided in Ordinance No. 6349. Subsecs. 7, 61, 63, Sec. 1, Art. I, K. C. Charter; State ex rel. City of Memphis v. Hackman, 273 Mo. 670, 202 S.W. 7; 1 McQuillin on Municipal Corps. (2 Ed.), sec. 387, p. 960.

OPINION

Tipton, J.

Pursuant to the provisions of Sections 3312 to 3317, R. S. Mo. 1939, the respondent filed a petition in the Circuit Court of Jackson County, Missouri, for the purpose of procuring a pro forma decree adjudicating the validity of $ 1,000,000 of Kansas City Water Revenue Bonds, Series A. The appellant intervened in this action. The trial court entered a decree upholding the validity of these bonds. From that decree the appellant has duly appealed.

On July 1, 1922, Kansas City issued $ 11,000,000 of water works bonds, Fourth Issue, which are general obligation bonds duly authorized by a two-thirds vote of the qualified voters at a bond election held April 4, 1922. The bonds are payable July 1, 1942, but the respondent has not the money, nor will it have the money, to meet its obligation on these bonds. To take advantage of the prevailing low rate of interest, the respondent on December 2, 1940, passed Ordinance No. 6351, providing for the issuance of $ 10,000,000 Water Works Refunding Bonds, Series B. These bonds are issued pursuant to Section 3279, R. S. Mo. 1939, and are general obligation bonds of respondent. At the same date, the respondent enacted Ordinance Number 6349, which authorized the issuance of $ 1,000,000 Water Revenue Bonds, Series A, so that the $ 11,000,000 water works bonds due July 1, 1942, could be paid. This ordinance provided, among other things, that both principal and interest of these Series A bonds would be payable only out of the net revenue of the respondent's waterworks. It also provided that the interest on all waterworks bonds would be paid out of the net revenue of the waterworks, but, in event the net revenue of the water works was insufficient to do so, then the interest and the sinking fund due each year on the Series A or the revenue bonds would have a prior lien on the net revenue of waterworks for that year.

Subsecti...