Gentzler v. Smith

• Decision Date: 05 April 1948
• Docket Number: Motion No. 476.
• Citation: 31 N.W.2d 668,320 Mich. 394
• Parties: GENTZLER et al. v. SMITH.
• Court: Michigan Supreme Court

320 Mich. 394

31 N.W.2d 668

GENTZLER et al.

v.SMITH.

Motion No. 476.

Supreme Court of Michigan.

April 5, 1948.

Mandamus action by Fred W. Gentzler, president of the Village of Constantine, Michigan, and others, trustees and members of the Council of the village, against Harold E. Smith, village clerk of the Village of Constantine, Michigan, to compel defendant to execute an issue of bonds.

Application denied.

Before the Entire Bench.

Berry, Stevens, Barbier & Evely, of Detroit (Claude H. Stevens, of Detroit, of counsel), for plaintiffs.

Franklin P. Bush, of Constantine, for defendant.

Raymond J. Kelly, Corp. Counsel, Paul T. Dwyer, Chief Asst. Corp. Counsel, and John G. Dunn, Asst. Corp. Counsel, all of Detroit, for City of Detroit, a Municipal Corporation.

Miller, Canfield, Paddock & Stone, of Detroit, amici curiae.

NORTH, Justice.

This is a mandamus proceeding in which plaintiffs seek to have defendant Smith, as clerk of the village of Constantine, directed to execute, as required by statute (Comp.Laws 1929, § 1756, Stat.Ann. § 5.1493), an issue of $216,000 electric light and power system mortgage bonds which had been authorized by passage of a village ordinance. The clerk's refusal to execute these bonds is based in part upon the following contentions.

(1) That $98,000 of the issue is to refund that amount of electric light and power mortgage bonds issued in 1937 and 1939 which bonds are void because they were issued without lawful authority, and therefore the proposed issue for refunding the 1937 and 1939 bonds would be void, or at least not lawfully authorized.

(2) That the proposed issue of bonds purports to mortgage not only the contemplated improvements, enlargements and extensions to the village electric light and power system and the additional revenues derived therefrom, but also to mortgage its present electric system and the revenues derived from it. Defendant asserts that the village is without power to so encumber its present plant and the revenues therefrom.

Plaintiffs are the president and members of the council of the village of Constantine which was organized under the 1895 General Village Act. Comp.Laws 1929, § 1465 et seq., Stat.Ann. § 5.1201 et seq. As noted later herein, the village charter was amended in September 1947, effective October 6, 1947. In 1937 the village acquired an electric utility through the issuance of mortgage bonds in the amount of $107,000, dated June 1, 1937. In 1939 the village issued $38,000 additional mortgage bonds dated April 1, 1939, for the purpose of extending and expanding this municipal utility. At the time of the issuance of the 1937 and 1939 bonds there was no statutory or charter provision which authorized the village of Constantine to issue the above bonds. However, the village assumed it had power to issue the bonds under section 24, article 8 of the Constitution, which this Court in 1926 had held was self-executing. See Michigan United Light & Power Co. v. Village of Hart, 235 Mich. 682, 209 N.W. 937.

The first question presented is this: Are the bonds issued in 1937 and 1939 valid obligations? Under the authorities about to be noted the answer must be in the affirmative. At the time these bonds were issued by our holding in Michigan United Light & Power Co. v. Village of Hart, supra, section 24, article 8 of the Constitution, was judicially determined to be self-executing as to a village organized as is the village of Constantine. Even if it be assumed, as counsel herein seem to agree, that our later decision in Sault Ste. Marie City Commission v. Sault Ste. Marie City Attorney, 1946, 313 Mich. 644, 21 N.W.2d 906, we overruled our earlier (1926) holding in the Hart case, supra, none-the-less the validity of the Constantine village mortgage bonds issued in 1937 and 1939 must be determined in the light of the applicable law as judicially announced in the 1926 Hart decision. In other words, since those bonds were issued during a period in which section 24, article 8 of the Constitution, was judicially held to be self-executing, their validity must be determined under that construction of the law.

‘The general principle is that a decision of a court of supreme jurisdiction overruling a former decision is retrospective in its operation, and the effect is not that the former decision is bad law, but that it never was the law. To this the courts have established the exception that where a constitutional or statute law has received a given construction by the courts of last resort and contracts have been made and rights acquired under and in accordance with such construction, such contracts may not be invalidated, nor vested rights acquired under them impaired, by a change of construction made by a subsequent decision.’ 14 Am.Jur. p. 345.

The law as just above stated has been approved in this jurisdiction in the following cases. Metzen v. Department of Revenue, 310 Mich. 622, 17 N.W.2d 860;Donohue v. Russell, 264 Mich. 217, 249 N.W. 830, 831. In the latter case we quoted with approval the following: ‘The effect of overruling a decision and refusing to abide by the precedent there laid down is retrospective and makes the law at the time of the overruled decision as it is declared to be in the last decision, except in so far as the construction last given would impair the obligations of contracts entered into or injuriously affect vested rights acquired in reliance on the earlier decisions. 15 C.J. p. 960, § 358.’

We are mindful that as to $38,000 of these bonds issued in 1939, the issuance thereof was not submitted to the electors for their approval. None-the-less as section 24, article 8 of the Constitution, was at that time judicially construed, it was self-executing, and for that reason approval of the bond issue by the electors was not required. While perchance it is not essential to decision of the issue now under consideration, it may be noted in connection therewith that in 1947 the village charter was amended, and the amendment included the following: ‘The previous acquirement, improvement, enlargement and extension of such a utility in the village and the issuance of mortgage bonds therefor, are hereby ratified and confirmed. The village may issue mortgage refunding bonds for the purpose of refunding mortgage bonds issued either before or after the effective date of this section, and such mortgage refunding bonds shall be valid obligations, notwithstanding the fact that the original bonds may have been issued without first adopting a charter amendment authorizing such issuance.’

As indicated above, the bonds issued by the village of Constantine in 1937 and 1939 are valid subsisting obligations in accordance with the terms thereof.

The second issue presented in the instant case may be stated as follows: Can the payment of mortgage bonds issued for the improvement, enlargement or extension of an existing municipal utility be secured by a pledge of or lien upon not only such improvement, enlargement and extension and the revenues therefrom, but also by a pledge of or lien upon the existing utility and the revenues therefrom? Plaintiffs say ‘yes'; defendant says ‘no’.

We are of the opinion that by necessary inference from the context of section 24, article 8 of the Constitution, a municipality which has appropriate charter provisions is vested with the power to secure payment of the mortgage bonds on a given utility by making such obligation a lien not only upon the improvement, enlargement or extension and the revenues thereof for which the proceeds of the bond issue are to be used, but the municipality may also for that purpose give a mortgage lien upon the already existing utility and revenues to be derived therefrom. Touching mortgage bond issues of the type herein involved section 24, article 8, provides they ‘shall be secured only upon the property and revenues of such public utility, including a franchise stating the terms upon which, in case of foreclosure, the purchaser may operate the same * * *’ in the event of foreclosure. Were it possible to market bonds the payment of which were secured only by the improvement and extension of the utility, this perplexing question would at once arise: In case of foreclosure how would it be possible for the future owners to exercise a franchise which pertained only to the utility's improvements or extensions covered by the mortgage which secured payment of the bonds? Ordinarily such a security would be quite valueless. This cannot be answered by saying that section 24 contemplated only the issuing of mortgage bonds on the utility for its original cost, and contemplated no provision for subsequent improvements, modifications or extensions. In the light of everyday experience, such a narrow construction of section 24 would obviously be altogether too restrictive.

In construing a very similar provision, the court in City of Middletown v. City Commission, 138 Ohio St. 596, 37 N.E.2d 609,...