O'Grady v. City of Hoover

Citation519 So.2d 1292
PartiesJoe M. O'GRADY, et al. v. CITY OF HOOVER, Alabama. 86-1243.
Decision Date31 December 1987
CourtSupreme Court of Alabama

William L. McElroy, Birmingham, for appellants.

Jack H. Harrison of Gordon, Harrison & Latham and Charles Hayes of Cabaniss, Johnston, Gardner, Dumas & O'Neal, Birmingham, for appellee.

John P. Adams, of Bradley, Arant, Rose & White, Birmingham, for amicus curiae Alabama League of Municipalities.

William M. Slaughter, Mark E. Ezell, and James L. Richey of Haskell, Slaughter & Young Professional Ass'n, Birmingham, and Robert E. Steiner III of Steiner, Crum & Baker, Montgomery, for amici curiae Alabama Bankers Ass'n and Alabama Security Dealers Ass'n.

Joseph H. Johnson, Jr., and David W. Spurlock of Johnson & Thorington and J. Hobson Presley, Jr., of Maynard, Cooper, Frierson & Gale, Birmingham, for amicus curiae Ass'n of County Commissions of Alabama.

SHORES, Justice.

This is an appeal from a judgment entered in a statutory validation proceeding initiated by the City of Hoover, Alabama (the "City"), pursuant to the provisions of Ala.Code (1975), §§ 6-6-750 et seq., to validate general obligation warrants in the principal amount of $12,150,000. The petition was filed against the taxpayers and citizens of the City, and an answer was filed by the district attorney. Joe M. O'Grady and Daniel R. Farnell also responded by filing an answer entitled "Showing of Cause." Pursuant to an order of the trial court, O'Grady and Farnell were named intervenors and parties defendant in the validation proceeding.

The validation hearing was held before the Honorable Marvin Cherner in the Circuit Court of Jefferson County on May 7 and 8, 1987. After receiving briefs from attorneys for both sides, the trial court rendered its "Findings of Fact, Conclusions of Law and Final Judgment," in which it validated and confirmed the warrants and all agreements and proceedings initiated by the City. The district attorney participated in the proceedings below, but did not join the appellants in this appeal.

The underlying facts are undisputed. On April 6, 1987, the elected officials of the City of Hoover adopted Ordinance No. 87-602 authorizing the issuance of general obligation warrants in the principal amount of $12,150,000. These funds were to be donated to the Public Park and Recreation Board of the City of Hoover (the "Park Board") and were to be used by the Park Board for the acquisition and construction of a public park, athletic field and stadium, and related improvements. The Park Board is a public corporation, and, as the owner of the stadium, it entered into a lease agreement permitting the Birmingham Baseball Club, Inc. (the "Barons"), to use the stadium for playing baseball during the minor league baseball season for ten years with an option to renew the lease for an additional five-year period.

Additionally, the Park Board and the Barons have entered into a management agreement for the stadium to be utilized for other recreational, charitable, and civic events. Under this agreement, the Barons will have sole use of the stadium for the management and conducting of events other than the playing of professional baseball. The lease and the management agreement were executed contemporaneously, and when read together provide for a year-round lease with a duration of ten years with an option to renew for an additional five-year period.

The trial court made the following pertinent findings of fact:

"11. The Warrants will be issued to provide funds for the acquisition and construction of public park and recreational facilities, specifically a public park, athletic field and stadium and related improvements (the 'Project') to be owned by The Public Park and Recreation Board of the City of Hoover.... The Board will acquire and construct the Project in the City with the funds provided by the City.

"...

"13. The Board will own the Project and will lease the same to Birmingham Baseball Club ... to play baseball during baseball season pursuant to a lease agreement ... between the Board and the Baseball Club.

"14. The Board will own the Project and will operate the same for other public events pursuant to a management agreement ... between the Board and the Baseball Club ...

"...

"17. There is sufficient evidence to support the findings and determinations of the Governing Body contained in the Authorizing Ordinance. There is no evidence of fraud, collusion or unfair dealing in connection with any of the aforesaid documents or proceedings. Neither the size of the stadium nor any other evidence offered establishes any abuse of discretion by the elected officials in carrying out their duties."

From these findings, the trial court reached the following conclusions of law:

"1. All actions and things required under the provisions of the Validation Act to be had and done in this proceeding preliminary to the making of the findings of fact, conclusions of law and judgment of this Court herein contained, have been had and done in the manner provided by the Validation Act. The City and the Governing Body have power to institute and conduct this proceeding and have duly authorized the same.

"...

"8. Although the answers filed raise the question as to whether the proceedings authorizing the issuance of the Warrants were properly adopted, at the hearing the District Attorney and, with less enthusiasm, counsel for the named intervenors, conceded their proper adoption, but argued that the Warrants should not be validated because (a) their issuance would be in violation of Section 222 of the Alabama Constitution as no election had been held authorizing their issuance and (b) the proposed use of the proceeds of the Warrants would be in violation of Section 94 of the Alabama Constitution as amended by Amendment No. 112. The Court has carefully reviewed the cases cited by counsel for the named intervenors and notes that no case was cited in which debt instruments designated 'warrants' and bearing the indices thereof have been held to be in fact 'bonds' within the meaning of Section 222 of the Constitution. On the contrary, in Parsons v. City of Birmingham, 223 Ala. 610, 137 So. 665 (1931), the Alabama Supreme Court found that the debt obligation in question (a promissory note under seal) would be a bond 'as legally defined' but held that no election was required to authorize its issuance. In Parsons, the Court stated:

" 'It certainly cannot be affirmed that the purpose of the Constitution was to prohibit the creation of city indebtedness without an election. There is nothing in the Constitution to prohibit the creation of debts to the limit which it fixes, without the sanction of such election. The Constitution, § 222, only checks the issuance of a certain form of security for that debt, but not the creation of the debt. It has been held not to prohibit the issuance of warrants, under seal, though interest bearing and due over a period of years.' Citing Littlejohn v. Littlejohn, 195 Ala. 614, 71 So. 448.

"The Warrants are similar to those discussed in the leading decision in this area, Littlejohn v. Littlejohn, supra. Here, as in Littlejohn, the debt obligations are warrants and do create an indebtedness chargeable against the applicable constitutional debt limit, but they may be issued without an election.

"Counsel for the named intervenors has cited several cases in which instruments which were bonds were held by the Alabama Supreme Court not to create a debt under the applicable constitutional provisions because they were payable solely from the revenues of a specified municipal enterprise, such as a water system. The Alabama Supreme Court further held that such bonds were not 'bonds' within the meaning of Section 222 requiring an election prior to their issuance. For example, see Opinion of the Justices, 252 Ala. 583, 42 So.2d 348 (1949). However, it does not follow that under Alabama case law and statutes all debt instruments which are not limited in payment to revenues from a specific municipal enterprise, but are payable from general taxes and revenues of the municipality, thereby become 'bonds' and subject to an election prior to their issuance. The statement of the Alabama Supreme Court in Parsons noted above clearly negates this argument and sets forth applicable Alabama law on the point. It is consistent with, and a continuation of, the principles applied by the Court to 'warrants' in Littlejohn.

"As the Court further noted in Parsons, 'In ascertaining the meaning of constitutional and statutory terms, we should construe them in light of accepted and well known trade customs.' As early as Littlejohn, the Court was able to state that the distinction between warrants and bonds was well established. That distinction does not turn upon whether debt is created or whether the source of payment is limited to the revenue from a specified enterprise or tax. As evidenced by the action of the Alabama Legislature in 1986 permitting warrants and other non-bond evidences of indebtedness to be payable over a period of up to thirty years, the distinction continues settled in Alabama law. See Act No. 86-712, Acts of Alabama, 1986 Extraordinary Session of the Alabama Legislature.

"9. The Warrants and the provisions thereof and the Authorizing Ordinance proposed to be validated do not violate the provisions of Section 93 or Section 94 of the Constitution....

"The Alabama Supreme Court has repeatedly held Section 93 is applicable only to the State ... and that there can be no violation of Section 93 or Section 94 by the donation of state or municipal funds or properties to a public corporation as is proposed to be done with the proceeds of the Warrants. [Citations omitted.] The subsequent exercise by such public corporation of its statutory powers with respect to the leasing and management of properties so acquired, as here proposed, [does] not change the foregoing conclusion.

"...

"12. The...

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    • Alabama Supreme Court
    • January 18, 2002
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