Gillis v. Anderson

• Decision Date: 23 November 1934
• Citation: 76 S.W.2d 279,256 Ky. 472
• Parties: GILLIS et al. v. ANDERSON et al.
• Court: Kentucky Court of Appeals

76 S.W.2d 279

256 Ky. 472

GILLIS et al. v. ANDERSON et al.

Court of Appeals of Kentucky

November 23, 1934

Appeal from Circuit Court, McCreary County.

Suit under the Declaratory Judgment Act by H. C. Gillis and others against George P. Anderson and others, in which the defendants Bankers' Reserve Life Company of Omaha Nebraska, and the Royal Neighbors of America filed counterclaims. From an adverse judgment, the plaintiffs appeal.

Modified and affirmed.

Tye Siler, Gillis & Siler, of Williamsburg, and Geo. W. Hatfield of Whitley City, for appellants.

H. M. Cline, of Whitley City, and Peck, Shaffer & Williams, of Cincinnati, Ohio, for appellees.

DIETZMAN Justice.

This action is a suit under the Declaratory Judgment Act, originally instituted by the plaintiffs, H. C. Gillis, J. E. Terry, F. J. Le Moyne, and William B. McIlvaine, trustees, as taxpayers in McCreary county, against the defendant George P. Anderson, as sheriff of McCreary county. The action at its inception had for its object the single purpose of enjoining the collection of an alleged illegal annual road tax of 20 cents on the $100 of taxable property in McCreary county. It was alleged in the petition and admitted in the answer of the sheriff that McCreary county was, at the time of the institution of this action, and for many years prior thereto had been, levying and collecting annually two 20-cent road taxes, under the authority of section 157a of the Constitution of Kentucky. It had been collecting one annual 20-cent road tax under section 4307b-1 of the Kentucky Statutes, and another 20-cent road tax to fund a $200,000 bond issue under section 4307 of those Statutes.

The case was submitted to the circuit court for judgment without proof as the facts were admitted by the pleadings. The circuit court adjudged that one of the 20-cent road taxes was invalid and enjoined the sheriff from collecting more than one such tax, but did not determine which of the two taxes was invalid.

An appeal was prosecuted to this court by the county attorney on behalf of the sheriff, on the ground that the circuit court should have determined which of the two taxes was invalid. On that appeal the judgment was reversed. Anderson, Sheriff, v. Gillis et al., 242 Ky. 404, 46 S.W.2d 508. In the opinion we did not undertake to determine which of the two 20-cent road taxes was illegal, but held that one of them was necessarily void. The case was sent back to the circuit court with directions that the plaintiffs be required to bring into the case McCreary county and a representative or representatives of the bondholders to defend for all the bondholders and for further proceedings not inconsistent with the opinion. Upon the return of the case to the circuit court, an amended petition was filed, in which McCreary county joined as a plaintiff. The Bankers' Reserve Life Company of Omaha, Neb., and the unknown owners of the bonds of McCreary county, dated October 1, 1922, were made defendants. Lee Douglas and Rutledge Smith, receivers of Caldwell & Co., were also made defendants. A warning order was entered against all of the nonresident and unknown owners of the bonds of McCreary county. Later still another amended petition was filed, making Mrs. Marguerite H. Doermann a defendant. She is a resident of Kenton county, Ky. and the owner of some of the bonds. Mrs. Doermann was summoned in Kentucky. The Bankers' Reserve Life Company of Omaha, Neb., filed an answer and counterclaim, in which it admitted that it was the owner of $15,000 of the bonds of McCreary county. The Royal Neighbors of America also filed an answer and counterclaim, in which this fraternal beneficiary society admitted that it had purchased $151,000 of the bonds of McCreary county and still owned $143,000 of such bonds, the remainder having been paid. The circuit court entered an order directing that the Royal Neighbors of America and the Bankers' Reserve Life Company, which had filed answers and counterclaims in this action, be designated and appointed by the court to represent and defend this action for all of the holders of the $200,000 of bonds, the validity of which is questioned in the action. Elaborate pleadings were filed. Proof was taken by depositions. The case was submitted for judgment, and on December 20, 1933, the circuit court entered a judgment upholding the validity of the bonds, and adjudging that the levy of 20 cents on each $100 of taxable property be annually made until all the bonds are paid is valid, and commanding George P. Anderson as sheriff of McCreary county, and his successors in office, to collect said tax for each and every year up to and including 1952, and if necessary thereafter, until the payment of principal and interest of said bonds has been made in full. It was further adjudged that the annual road tax of 20 cents on the $100 voted in 1927 for ten years is invalid and void. The sheriff and his successors were perpetually enjoined from collecting same. From that judgment, this appeal is prosecuted.

The record presents for determination the question whether the bonds issued by McCreary county in 1922 are valid or invalid and if valid whether they are valid to the full extent of the $200,000 issued or some amount less than that. From the record, it appears that in 1918 an election was held pursuant to section 4307b-1 of the Kentucky Statutes, at which the voters of McCreary county voted that an annual road tax of 20 cents on the $100 should be levied for ten years. Thereafter and until 1922 the fiscal court levied this tax for each year and continued to do so even after the year 1922. On the 9th day of September, 1922, pursuant to an order theretofore entered by the McCreary county court, there was submitted to the voters of McCreary county the question whether or not the county should issue $200,000 of bonds for the purpose of building roads and bridges in McCreary county. A majority of the voters was in favor of the issuance of such bonds. Later, by order, the bonds were issued and a 20-cent tax pursuant to the authority conferred by section 157a of the Constitution was levied by the court to run during the life of the bonds. The order levying this 20-cent tax provided that should this levy be at any time insufficient for the purpose of paying the interest on the bonds and to create a sinking fund there should be appropriated out of the 50-cent tax levy for general purposes an annual tax of a sufficient amount to make up any such deficit. It is first contended by the appellants that McCreary county having in 1918 voted the annual tax authorized by section 4307b-1 for a period of ten years, the power of the county had been exhausted and it could not in 1922 revoke the action taken in 1918 and provide that the tax authorized by section 157a of the Constitution should be used for bond purposes. It is argued, first, that the fiscal court called the 1918 election and the county court the 1922 election, and that the county court cannot undo what the fiscal court has done. The answer to this is, of course, that it is the voters who determine what shall be done, and if their action in 1922 was otherwise valid, it is the people and not the county court or fiscal court which is revoking the action of 1918 which itself is the act of the people. We regard the legality of the diversion of this 20-cent levy authorized by the Constitution from the pay-as-you-go method provided by section 4307b-1 to the bond method provided by section 4307 as concluded by the opinion of this court in Smith v. Livingston County, 195 Ky. 382, 242 S.W. 612, 617. In that case the fiscal court in 1918 was authorized by an election then held to levy a 20-cent tax under section 4307b-1 for a period of ten years. In 1920 the county, pursuant to section 4307 of the Statutes, voted to issue $200,000 of road bonds, and the question arose as to the validity of these bonds in the light of the fact that the 20-cent tax authorized by section 157a had theretofore been voted on the ten-year plan provided for by section 4307b-1. Holding that so much of the 20-cent tax as was needed to pay the interest and principal of the bonds would have to be devoted to that purpose and to that extent the 1920 election superseded the 1918 election, this court said: "Section 157a of the Constitution provides that an election held under that section, with the result favorable to incurring the indebtedness, carries with it the power on the part of the fiscal court to levy and collect an annual tax of not exceeding 20 cents upon each $100 of the assessed valuation of the county, for the purpose of paying the interest and creating a sinking fund to pay the indebtedness. This levy may be made in addition to the tax of 50 cents for general purposes, provided for by section 157, supra, and section 4308, Ky. Stats., provides that, when bonds of the county are sold for road and bridge purposes, the fiscal court shall levy a tax to provide for the interest and create a sinking fund to pay the principal. Sections 4307b-1 to 4307b-6, Ky. Stats., inclusive, were enacted by the authority of section 157a, supra, to regulate the manner of authorizing the 20-cent additional tax for the construction of roads and bridges, when it was desired to levy same without a bond issue, but when bonds are issued representing an indebtedness created under section 157a, supra, the 20-cent tax, or a sufficiency of it, levied under section 4307b-1 to 4307b-6, inclusive, must be appropriated to pay the interest on the bonds, and to create a sinking fund for their redemption, regardless of when the tax was authorized. Bird v. Asher [170 Ky. 726, 186 S.W. 663], supra; Collier v. Bourbon County Fiscal Court, 188 Ky. 491, 223 S.W. 149. *** It is now insisted that the bonds authorized...