Keeter v. Town of Lake Lure, 41

• Decision Date: 28 April 1965
• Docket Number: No. 41,41
• Citation: 264 N.C. 252,141 S.E.2d 634
• Parties: Clyde W. KEETER v. TOWN OF LAKE LURE, a Municipal Corporation.
• Court: North Carolina Supreme Court

Page 634

141 S.E.2d 634

264 N.C. 252

Clyde W. KEETER v. TOWN OF LAKE LURE, a Municipal Corporation.

No. 41.

Supreme Court of North Carolina.

April 28, 1965.

J. S. Dockery, Rutherfordton, for plaintiff appellant.

Hollis M. Owens, Jr., Rutherfordton, for defendant appellee.

PARKER, Justice.

Plaintiff has no exception to the judge's findings of fact. Consequently, the judge's findings of fact are presumed to be supported by competent evidence, and are binding on appeal. Milwaukee Insurance Co. v. McLean Trucking Co., 256 N.C. 721, 125 S.E.2d 25.

Plaintiff has four assignments of error. He first assigns as error the denial of his written request by Judge Froneberger to make conclusions of law based upon his findings of fact to the following effect: (1) The proposed issuance of $390,000 of revenue producing bonds by the town of Lake Lure to purchase the properties of Carolina Mountain Power Corporation, and the sale by the town, pursuant to a longterm contract, of all power produced by the electric power generating plant to Duke Power Company, are not for public purposes and are not proper municipal purposes of the town, but are primarily for the benefit of private interests in violation of sections 1 and 17 of Article I of the North Carolina Constitution. (2) Since the resolution by the governing body of the town of Lake Lure to issue revenue producing bonds to acquire this property contains no provisions for reserves for extraordinary maintenance or repairs, the resolution exceeds the legislative grant of power to municipal corporations, 'to the extent that tax revenues shall be expended or pledged for the operation and maintenance of the lake and sewerage facilities violates Article VII, section 6, of the State Constitution, in the absence of approval by the voters.'

His second assignment of error is broadside: 'The court erred in its conclusions of law and signing of the judgment.' His third and last assignments of error are: (1) The court erred in denying his 'motion to set the judgment aside for errors of law,' and (2) the court erred in denying his 'motion for a new trial.'

Defendant is proceeding under the provisions of the Revenue Bond Act of 1938, as amended, codified as G.S. Ch. 160, Art. 34 (G.S. § 160-413 through G.S. § 160-424), and under the provisions of Ch. 437, 1963 Session Laws of North Carolina.

England and Scotland used revenue producing bonds much earlier than did the United States. Municipal ownership of gas plants, street tramways, electric lighting systems, etc., was accomplished by means of revenue bond financing. The first municipal gas works in England was established at Salford in 1817. Its original cost was paid by taxation, but subsequent authority was granted to incur indebtedness secured by the gas works and its rates and profits. 12 Indiana Law Journal 266, 'Indiana Municipal Revenue Bond Financing' (April 1937). A comprehensive discussion of revenue bond financing is found in 35 Michigan Law Review pp. 1-43.

Perhaps the first decision upon the validity of revenue obligations in the United States by a Court of last resort was by the Supreme Court of Washington in the case of Winston v. City of Spokane, 12 Wash. 524, 41 P. 888 (1895). The bonds were to be paid out of 60% of the receipts of the waterworks system, and the Court held the obligations were not debts of the municipality.

In 15 McQuillin, Municipal Corporations, 3d ed., § 43.34, it is said: 'As has been seen, municipal utilities frequently are self-supporting undertakings, which are financed by bonds payable from the plant's revenue only. Inasmuch as it is a legitimate delegation of legislative power to permit municipalities to issue bonds for self-liquidating municipal projects, the constitutionality of laws providing for revenue bonds generally is sustained, and such instruments are enforceable if they conform to applicable laws. An essential prerequisite to the practical validity or enforceability of revenue bonds secured by an encumbrance of the revenue of a 'system' is the ownership of the system by the municipal authority issuing the bonds.' See also 43 Am.Jur., Public Securities and Obligations, § 285.

'The very purpose of the Revenue Bond Act, General Statutes Ch. 160, Art. 33 [now codified as Art. 34], is to permit municipalities to engage in nongovernmental activities of a public nature by pledging the revenue derived from such undertakings to the payment of bonds issued in connection therewith. Thus it avoids pledging the credit of the municipality to the payment of a debt, for by such arrangements no debt is incurred within the meaning of the Constitution.' Britt v. City of Wilmington, 236 N.C. 446, 450, 73 S.E.2d 289, 292.

G.S. § 160-419 provides (1) 'Revenue bonds issued under this article shall not be payable from or charged upon any funds other than the revenue pledged to the payment thereof, nor shall the municipality issuing the same be subject to any pecuniary liability thereon'; and (2) that 'No holder or holders of any such bonds shall ever have the right to compel any exercise of the taxing power of the municipality to pay any such bonds or the interest thereon; nor to enforce payment thereof against any property of the municipality; nor shall any such bonds constitute a charge, lien, or encumbrance, legal or equitable, upon any property of the municipality'; and (3) 'Every bond issued under this article shall contain a statement on its face that 'this bond is not a debt of .........., but is payable solely from the revenues of the undertaking for which it is issued, as provided by law and the proceedings in accordance therewith, and the holder hereof has no right to compel the levy of any tax for the payment of this bond or the interest to accrue hereon and has no charge, lien or encumbrance legal or equitable upon any property of said ...........''

G.S. § 160-415 grants to a municipality additional powers to that it now has in respect to revenue producing undertakings, and provides in subsection (5) that by an issuance and sale by it of revenue producing bonds 'no encumbrance, mortgage, or other pledge of property of the municipality is created thereby,' and that 'no property of the municipality is liable to be forfeited or taken in payment of said bonds'; and that 'no debt in the credit of the municipality is thereby incurred in any manner for any purpose.'

G.S. § 160-422 provides 'The General Assembly hereby declares its intention that the limitations of the amount or percentage of, and the restrictions relating to indebtedness of a municipality and the incurring thereof contained in the Constitution of the State and in any general, special or local law shall not apply to bonds or interim receipts and the issuance thereof under this article.'

Ch. 437, 1963 Session Laws of North Carolina, is entitled:

'AN ACT TO AUTHORIZE THE TOWN OF LAKE LURE TO ISSUE REVENUE BONDS UNDER THE REVENUE BOND ACT OF ONE THOUSAND NINE HUNDRED AND THIRTY-EIGHT TO ACQUIRE THE LAKE, TRUNK SEWERAGE LINE, DAM AND ELECTRIC POWER GENERATING PLANT AND ANCILLARY FACILITIES LOCATED NEAR SAID TOWN, DECLARING SUCH FACILITIES TO BE UNDERTAKINGS WITHIN SAID ACT, GRANTING THE TOWN ALL OF THE POWERS UNDER SAID ACT WITH RESPECT TO SUCH UNDERTAKINGS AND DECLARING ANY SUCH ACQUISITION AND BOND ISSUANCE TO BE FOR PROPER PUBLIC AND MUNICIPAL PURPOSES.'

Section 1 of this Act is: 'It is hereby determined and declared:

'(a) That the Town of Lake Lure, a municipal corporation in Rutherford County, is centered around the privately owned lake known as Lake Lure and that the town and surrounding area are primarily resort and recreational in nature.

'(b) That the very existence of the town depends upon the continued availability of the lake and its advantages to the residents of the town and to those who come to the town as temporary residents for recreational purposes.

'(c) That many homes are located on the shores of the lake and have docks and boathouses but the deeds to such homes convey no right to use Lake Lure and the docks and boathouses are subject to removal upon the request of the private owner of the lake.

'(d) That the owner of the lake also owns a trunk sewerage line, dam and electric power generating plant and ancillary facilities, all of the power produced by said plant being sold under a long-term contract to a single utility.

'(e) That as a practical matter the ownership of the lake, trunk sewerage line, dam and electric power generating plant and ancillary facilities must remain in the same party since the spilling of the lake waters over the dam supplies the power to operate the generating plant.

'(f) That for many years the private owner of the lake has leased it to the town on a year to year basis but has now indicated a desire to sell the lake, trunk sewerage line, dam and electric power generating plant and ancillary facilities.

'(g) That the ownership of Lake Lure by any private party having the right to regulate the level of the lake in order to increase the energy output of the generating plant or to operate the lake as a private resort area to the exclusion of the present home owners in the town poses a threat to the continued existence of the town and its orderly growth as a resort area.'

Section 2 of this Act authorizes the town of Lake Lure to issue revenue bonds under and pursuant to the provisions of the Revenue Bond Act of 1938 to acquire the property above specifically enumerated, or any one or more thereof.

Section 3 of this Act states these specifically enumerated properties are hereby declared to be, jointly and severally, undertakings within the meaning of the Revenue Bond Act of 1938, and 'as to any such undertaking, the Town of Lake Lure shall have all of the powers provided for in said Revenue Bond Act including but without limitation the power to operate said electric power generating plant and sell all of the power produced thereby to a single utility, to lease said...