Hively v. School City of Nappanee

• Decision Date: 05 December 1929
• Docket Number: 25,732
• Citation: 169 N.E. 51,202 Ind. 28
• Parties: Hively v. School City of Nappanee et al. [*]
• Court: Indiana Supreme Court

169 N.E. 51

202 Ind. 28

Hively v. School City of Nappanee et al. ^[*]

No. 25,732

Supreme Court of Indiana

December 5, 1929

Rehearing Denied May 22, 1930, Reported at: 202 Ind. 28 at 36.

From Kosciusko Circuit Court; Lemuel W. Royse, Judge.

Suit by Samuel Hively to enjoin the School City of Nappanee, its trustees and others from entering into a contract to lease a schoolhouse from a private corporation, pursuant to Acts 1927, ch. 223, p. 645. From a judgment for defendants on demurrer to the complaint, the plaintiff appealed.

Reversed.

Church & Chester, for appellant.

Parker Crabill, Crumpacker & May and Woodson S. Carlisle, for appellees.

Matson Carter, Ross & McCord, Amici Curiae.

Frederick E. Matson and Austin V. Clifford, of counsel.

OPINION

Martin, J.

The appellant, as a resident taxpayer, brought this action to enjoin the school city of Nappanee, its trustees, and the Nappanee Building Company from entering into a lease contract made under the provisions of Acts 1927, ch. 223, for the construction of a school building. Appellees' demurrer to appellant's amended complaint was sustained, and, upon appellant's refusal to plead further, judgment was rendered against him. The ruling on the demurrer is assigned as error.

The amended complaint alleges: That the building company is an Indiana corporation organized for the purpose of acquiring a site, erecting a school building thereon, and leasing the same pursuant to the act above cited, which is entitled:

"An Act concerning the leasing and acquisition of school buildings and sites therefor by certain school corporations; authorizing such school corporations to issue bonds and levy taxes for the purpose of procuring such sites, purchasing such school buildings and paying the lease rental thereon; declaring such school property, the bonds issued on account thereof by such school corporations and the securities issued by the corporation owning such school property to be tax exempt; and declaring an emergency."

That, on July 15, 1927 the school city of Nappanee executed a written contract (which is set out as an exhibit) leasing certain real estate for a period of 25 years at a rental of $ 1 per year to the holding company, upon which real estate, the company proposed to erect a schoolhouse; that, on the same date, the building company executed a written contract (which is also set out as an exhibit) leasing the same property for a like term of years to the school city at a rental of $ 9,500 for the first year, $ 11,300 per year for the next eight years, and $ 13,800 per year for the remaining 16 years, rentals to be paid in semi-annual installments; that the lessee, the school city, further agreed to pay as rental, all taxes, special assessments, and levies of every kind, including water rentals charged against the premises or upon the leasehold estate, and, at its own expense, to keep the buildings and improvements insured in an amount equal to the par value of all outstanding bonds that might be issued by the building company; that the school city should have the right and option to renew such lease for "a further term and upon the same conditions," and, before the expiration of the lease, should have the option of purchasing the leased property at a price equal to the amount necessary to enable the building company to pay all of its outstanding indebtedness at par and accrued interest and to redeem all of its outstanding bonds and securities plus accrued interest, said purchase price not to exceed the amount actually invested in the property by the building company; that the lessor, building company, would, at its own cost, complete the buildings to be erected on the premises in accordance with the plans and specifications which have been approved by the lessee; that, in case such buildings should be destroyed by fire, that fact should in no wise affect the rental to be paid by the school city.

The complaint further alleges: (a) That the annual rentals provided for in the lease are in excess of a fair and reasonable rental for the school building, and that said payments so reserved are, in truth and in fact, payment of a part of the purchase price for said school building (and that, unless the bonds of the building company are paid off, the school city will lose all of said rental paid in excess of a reasonable rental); (b) that there is included in the amounts that the school city will have to pay under the contract, $ 9,000, which is "for financing charges and carrying charges," for which the school city will receive nothing of value; (c) that the school corporation availing itself of the provisions of Acts 1927, ch. 223, is required by § 4 thereof to levy a tax each year sufficient to produce the necessary funds with which to pay the lease rental, and (in the event the school city exercises its option to purchase) the interest and principal of any bonds issued (by the school city) pursuant thereto; (d) that said lease was entered into by and between the school city and the building company for the purpose of evading the Constitution and thereby causing the school city to become indebted in an amount in excess of its constitutional limit.

Article 13, Constitution, § 227 Burns 1926, provides, in part, that:

"No political or municipal corporation in this state shall ever become indebted in any manner or for any purpose, to an amount, in the aggregate, exceeding two per centum on the value of the taxable property within such corporation."

The complaint alleges that, by the execution of the lease-contracts, "the city of Nappanee became indebted to the Nappanee building company in the total sum of $ 180,300, which, together with the present indebtedness of said school city of Nappanee, is in excess of the two per cent limit of indebtedness permitted the said defendant school city of Nappanee and makes said contract void because same is in conflict with and contrary to Article 13 of the Constitution of Indiana."

The complaint does not allege, as it should, the value of the taxable property within the corporation, but the conclusion (of fact) alleged, viz., that $ 180,300, plus the present indebtedness, is in excess of two per...