Hillard v. City of Mobile, 1 Div. 420

• Decision Date: 15 June 1950
• Docket Number: 1 Div. 420
• Parties: HILLARD v. CITY OF MOBILE et al.
• Court: Alabama Supreme Court

Page 162

47 So.2d 162

253 Ala. 676

HILLARD v. CITY OF MOBILE et al.

1 Div. 420.

Supreme Court of Alabama.

June 15, 1950.

Groves C. Hillard, of Mobile, pro se.

Harry Seale, of Mobile, for appellees.

LIVINGSTON, Justice.

This suit was instituted in the Circuit Court, in Equity, of Mobile County, Alabama, by Groves C. Hillard. He alleges that he is a resident of the City of Mobile, a home owner, owner of real and personal property subject to taxation in said city, a taxpayer, a water user from the water-works system of Mobile, and the owner and holder of one of the general refunding bonds of the City of Mobile due on January 1, 1956; and that he brings this suit in his own behalf and on the behalf of every other holder or holders of any of the general refunding bonds or other outstanding bonds of the City of Mobile.

Respondents are the City of Mobile, a municipal corporation, Charles A. Baumhauer, J. R. Mitternight and E. M. Megginson, as members of the Board of Commissioners of the City of Mobile, the Water Works Board of the City of Mobile, a public corporation, B. S. Butler, Armistead Leake and H. C. Slaton, as directors of the Water Works Board of the City of Mobile.

The pleadings are rather voluminous, but the real purpose of the litigation is to test the validity of the actions and proceedings of the respondents in their efforts to secure and maintain an adequate water supply for the City of Mobile, its inhabitants, business enterprises and industries. Specifically, the bill of complaint seeks to enjoin the Water Works Board of the City of Mobile and the City of Mobile from entering into a proposed contract between the board and the city in respect to a water supply; to test the Water Works Board's authority or power to acquire property by eminent domain; to test the authority or power of the board to issue securities which are exempt from all taxation under the laws of the State of Alabama; and to determine whether the property acquired by the board is exempt from ad valorem taxation under the laws of Alabama. The bill prays for general relief.

The cause was submitted to the court below under an agreement of the parties as to the time and place of submission, and the manner or method of the examination of witnesses. The trial court made and entered a special finding of facts and law in the cause and denied the prayer for an injunction.

For a clear understanding of this opinion we think the following undisputed facts should be here noted.

The Water Works Board of the City of Mobile is a public corporation organized under and by virtue of the provisions of Chapter 7, Article 5, sections 394-402, Title 37, Code of 1940. And in the case of Water Works Board of City of Mobile v. City of Mobile, Ala.Sup., 43 So.2d 409, we held that said board was validly organized.

For brevity we will hereinafter refer to the Water Works Board of the City of Mobile as the Board, and the City of Mobile as the City.

On account of its growth and expansion within the last decade, Mobile has outgrown its presently existing water works system and source of supply. Although the City is still below or within its constitutional debt limits, the amount necessary to acquire or construct a water works system to adequately meet the present and future needs of the City would create debts over or beyond said constitutional debt limits.

On February 27, 1950, the Board adopted a resolution authorizing the issuance of revenue bonds for the purpose of acquiring lands and to do all things necessary for the construction of an adequate system for supplying water to the City of Mobile, including the execution of a deed of trust or mortgage as additional security for the payment of said revenue bonds. On the same day the Board adopted a resolution authorizing the execution of a contract with the City for water supply. On March 1, 1950, the Board, under the provisions of section 169 et seq., Title 7, Code of 1940, instituted validation proceedings in the Circuit Court, in Equity, of Mobile County, for the purpose of validating said revenue bonds and all proceedings had or taken in connection therewith including all covenants and provisions contained in the resolutions above referred to. On March 22, 1950, the court rendered its decree validating the revenue bonds, covenants, contracts, etc.

On April 11, 1950, the City adopted a resolution authorizing the execution of the contract with the Board for a water supply as contained in the Board's resolution of February 27, 1950, but with certain specified changes therein. By resolution of April 12, 1950, the Board approved said changes. Thereafter still other changes were made in the contract, which changes were approved on May 10, 1950 by resolution of both the City and the Board. On May 10, 1950, the validation decree of March 22, 1950 was, on motion of the Board, amended to reflect these changes.

It seems to be assumed by appellant in argument that if the validation decree of March 22, 1950 could not be amended in material aspects on May 10, 1950, because more than thirty days had elapsed from its rendition and the court had thereby lost jurisdiction, then the amended bonds, deed of trust, contracts, etc., were themselves invalid. The assumption is fallacious. In the first place, a validation proceeding under section 169 et seq., supra, is purely discretionary, and does nothing more than foreclose further inquiry into the questions decided, except by an appeal perfected within the time provided by the statute. In other words, such proceeding sets up a statutory estoppel 'as to the validity of such obligations against the unit issuing them, and against all taxpayers and citizens thereof, and the validity of such obligations or of the tax or other means provided for their payment.' MacMahon v. Baumhauer, 234 Ala. 482, 175 So. 299, 304. Such a proceeding does not foreclose changes as such. The changed bonds, contracts, etc., may not have the protection of the validation decree, but they are not invalid because of the lack of such protection. We lay to one side then the effect of the amendment of the validation decree and proceed to a determination of the validity of the bonds, indentures, contracts, etc., as amended.

This appeal presents for review only such questions as were raised by assignments of error and insisted upon in brief. 2 Ala.Dig., Appeal and Error, k1075, 1079. Assignments not argued in brief are considered waived and are not here considered.

It is argued that the proposed contract, as last amended, between the City and the Board for a supply of raw water is violative of sections 22, 222 and 225 of the Constitution of Alabama of 1901. The alleged prohibited provisions are contained in sections 4, 11 and 12 of the contract as last amended, and read as follows:

'4. For the period commencing on the first day of the month following completion of the Industrial Water System in accordance with said plans and specifications, such date to be not later than March 1, 1952, and ending on the date of the final payment in full of the Industrial Water Revenue Bonds issued by the Board in connection with the construction of said Water System, the Board agrees to meet the City's requirements for raw water to the extent of 25,000,000 gallons per day and for such water the City agrees to pay at the rate of $288,000 per year, payable in monthly installments of $19,000 on or before the 15th day of each month, subject to the provisions of Paragraph 6 hereof.

'The Board warrants that it has entered into two contracts one with Lock Joint Pipe Company, a corporation, for manufacturing the pipe, and one with Carruth Pipe Corporation, for laying pipe, each of said contracts requiring completion of the work prior to July 1, 1951, and each of said contracts providing for liquidated damages of $200.00 for each day of delay over the time fixed in the contract, and the Board covenants that in any contracts to be let in the future for building the power and pumping station, and in the contract for constructing the dam, spillways, etc., it will require payment of liquidated damages, and will fix such damages at $200.00 per day until December 31, 1951, and thereafter the liquidated damages will be fixed at $400.00 per day.

'The Board is advised by the Consulting Engineers that water should be ready for delivery to contract customers during the month of September, 1951, and in no event later than January 1, 1952.

'The Board covenants and agrees that it will begin delivery of water to the City on or before February 28, 1952, and agrees to exercise diligence in completing the project.

'The Board covenants that any sums paid to it under any of the construction contracts as liquidated damages, and referred to above, will be paid by the Board into the Revenue Fund created under section 502 of the Indenture.'

'11. In consideration of the services to be rendered by the Board to the City under the provisions of this contract, including the maintenance at all times of an adequate supply of water for the City's fire hydrants and the maintenance of a reserve supply of ten million gallons as provided in paragraph 5 hereof, and also in consideration of the credits to be received by the City under the provisions of paragraph 12 of this contract, the City agrees that, if on any June 1st or December 1st the total amount on deposit to the credit of the Bond Service Account and the Reserve Account (Special accounts created under the provisions of section 506 of the Indenture) shall be less than the principal and interest requirements, as defined in the Indenture, for the ensuing twelve (12) months, the City will advance to the Board on or before the 20th day of such...