Hallyburton v. Board of Education of Burke County

• Court: North Carolina Supreme Court
• Writing for the Court: BARNHILL, Justice.
• Citation: Hallyburton v. Board of Education of Burke County, 195 S.E. 21, 213 N.C. 9 (N.C. 1938)
• Decision Date: 02 February 1938
• Docket Number: 323.
• Parties: HALLYBURTON et al. v. BOARD OF EDUCATION OF BURKE COUNTY et al.

195 S.E. 21

213 N.C. 9

HALLYBURTON et al. v. BOARD OF EDUCATION OF BURKE COUNTY et al.

No. 323.

Supreme Court of North Carolina

February 2, 1938

Appeal from Superior Court, Burke County; Wilson Warlick, Judge.

Action by W. S. Hallyburton, and such other persons in interest as may choose to make themselves parties, against the Board of Education of Burke County and another for an injunction. From a judgment granting an injunction, defendants appeal.

Affirmed.

This is a civil action instituted by the plaintiff against the defendants to restrain the defendants from borrowing certain money from the State Literary Loan Fund, or from any other source, and from the issuance of bonds by said county for the purpose of constructing a high school building in Burke county, without a vote of the people. The hearing on the motion to show cause was had in Charlotte, N. C., by consent. At said hearing the court entered a judgment permanently restraining the commissioners of Burke county from contracting the proposed debt until the question of the increase of the public debt of the county had been submitted to the people of Burke county qualified to vote thereon, or until such time as the issuance thereof, in some subsequent fiscal year, became permissible under the terms of article 5 § 4, of the Constitution. The defendants excepted and appealed.

Ervin & Butler, of Morganton, for appellants.

C. E Cowan, of Morganton, for appellee.

BARNHILL Justice.

The facts upon which the judgment of the court below was based were found by consent, and are in substance as follows:

The plaintiff is a citizen and taxpayer of Burke county, and he instituted this action in good faith to test the validity of the proposed bonds. Burke county, through its Board of County Commissioners and at the request of the Board of Education is negotiating a loan from the State Literary Fund in the sum of $37,000 for the purpose of erecting and equipping certain school buildings in Burke county. Burke county, during the fiscal year ending June 30, 1937, failed to decrease its outstanding indebtedness, but on the contrary increased said indebtedness in the sum of more than $27,000. The Board of Commissioners of said county is in good faith undertaking to contract the loan from the State Literary Fund in the sum of $37,000, with the aim, desire, and intent to comply with the mandatory provisions of the fundamental law of the state with respect to education. The improvements contemplated, and for which the fund is to be borrowed, are to take care of the necessary school buildings of the county. The question of borrowing money and increasing the public debt has not been submitted to a vote of the people and by them refused or ratified. The proposed issuance of bonds in the sum of $37,000 to the State Literary Fund would be and constitute a debt as against Burke county.

The question presented to us on this appeal involves the interpretation of article 5, § 4, of the Constitution of North Carolina, as amended at the General Election in 1936; the question of such amendment being submitted to the people by authority of Pub.Laws 1935, c. 248, § 3. If the proposed bonds under the admitted facts in this case are prohibited by said section, the judgment below must be affirmed, otherwise the bonds are for a necessary expense and are authorized by the Legislature.

Article 5, § 4, as contained in the Constitution as originally adopted, provided a restriction upon the increase of the public debt of the state, except that no limitation was placed upon the power of the Legislature to contract any new debt to supply (1) a casual deficit, or (2) for suppressing invasion or insurrection. For any other purpose, no new debt could be contracted until the bonds of the state should be at par.

The financial condition of the state at the time of the adoption of the Constitution was such that the provisions of this section as then written provided an ample safeguard against any undue increase of the public debt. However, the financial condition of the state in its gradual growth became so improved that the cited provisions of this section became for all practical purposes obsolete and no longer provided the safeguard the people of the state seemingly have at all times desired to place upon the governing authorities of the state. So, at the general election of 1924, under authority of Pub.Laws 1923, c. 145, section 4 of article 5 as originally adopted was stricken out and a new section substituted as follows: "Sec. 4. Restrictions upon the increase of the public debt except in certain contingencies. Except for refunding of valid bonded debt, and except to supply a causal deficit, or for suppressing invasions or insurrections, the General Assembly shall have no power to contract any new debt or pecuniary obligation in behalf of the State to an amount exceeding in the aggregate, including the then existing debt recognized by the State, and deducting sinking funds then on hand, and the par value of the stock in the Carolina Railroad Company and the Atlantic and North Carolina Railroad Company owned by the State, seven and one-half per cent of the assessed valuation of taxable property within the State as last fixed for taxation. And the General Assembly shall have no power to give or lend the credit of the State in aid of any person, association, or corporation, except to aid in the completion of such railroads as may be unfinished at the time of the adoption of this Constitution, or in which the State has a direct pecuniary interest, unless the subject be submitted to a direct vote of the people of the State, and be approved by a majority of those who shall vote thereon."

It will be noted that this section is in substantially the same language as the original section, except that the basis of the limitation was changed. Under the original section, with certain exceptions, no bonds could be issued and no debt contracted "until the bonds of the state shall be at par." Under the original section so long as, or whenever, the bonds of the state could be sold at par, the sky was the limit. Under the 1924 amendment, the General Assembly had no power to contract any new debt or pecuniary obligation in behalf of the state (with certain exceptions) to an amount exceeding in the aggregate 7 1/2 per cent. of the assessed valuation of taxable property within the state as last fixed for taxation. Under this section the power of the state to issue bonds fluctuated as the assessed valuation of taxable property within the state increased or decreased, and the power of the Legislature to issue bonds could be increased by an arbitrary increase in the valuation of taxable property.

It is well now to note that neither the section as originally incorporated in the Constitution nor the section as substituted in 1924 undertook in any manner to limit the right of the governing authorities of local governmental units in their right to increase local debts, nor did they seek to impose any limitation on the right of the Legislature to grant authority to local units to increase their debts.

Just prior to and during the period immediately succeeding the amendment of 1924, both the state and all of its subdivisions engaged in an extensive expansion, which necessitated a large increase in the debt of the state and of the municipalities of the state. In 1920 the state debt was less than $11,000,000. In 1935, it had grown to...