Kentucky Utilities Co. v. City of Paris

• Decision Date: 10 March 1933
• Citation: 58 S.W.2d 361,248 Ky. 252
• Parties: KENTUCKY UTILITIES CO. v. CITY OF PARIS et al.
• Court: Kentucky Court of Appeals

58 S.W.2d 361

248 Ky. 252

KENTUCKY UTILITIES CO. v. CITY OF PARIS et al.

Court of Appeals of Kentucky

March 10, 1933

Rehearing Denied April 14, 1933.

Appeal from Circuit Court, Bourbon County.

Suit between the Kentucky Utilities Company and the City of Paris and others to test the validity of bonds to be issued by the city. From the judgment, the Kentucky Utilities Company appeals.

Affirmed.

Gordon Laurent & Ogden, of Louisville, and Dickson, Bradley &amp Blanton, of Paris, for appellant.

Raymond Connell, of Paris, for appellees.

REES Justice.

This is a suit to test the validity of $150,000 of bonds known as electric light plant bonds proposed to be issued by the city of Paris and which were authorized by a vote of the people at the November election, 1930.

It is conceded that the ordinance and other proceedings of the board of commissioners of the city creating the issue and authorizing the sale of the bonds were regular in form, and the sole ground upon which the validity of the bonds is assailed in that the city has exceeded the constitutional limit of its indebtedness. The limit of indebtedness of the city under section 158 of the Constitution is $353,768.45. There are now outstanding in bonds $168,500 which are admittedly the direct obligation of the city. In addition to the outstanding bonds which are conceded to be a direct obligation of the city, there is outstanding an issue of waterworks bonds in the principal sum of $400,000 which appellant claims is also an enforceable indebtedness of the city. If its contention is correct, then the city has exceeded the limit of indebtedness permitted by the Constitution and the proposed issue of electric light plant bonds is invalid. On the other hand, if the waterworks bonds are not direct obligations of the city, the bonds here in question are well within the city's debt limitation and are valid.

In April, 1931, and before any action had been taken by the board of commissioners of the city relative to the issuance of electric light plant bonds pursuant to the authority conferred upon it by a vote of the people, the board adopted an ordinance authorizing the issuance of $400,000 of bonds under the provisions of chapter 133 of the acts of the General Assembly of 1926 as amended by chapter 92 of the Acts of 1930, for the purpose of purchasing for the city the privately owned waterworks and constructing extensions and improvements thereto. After fixing the amount of the bond issue, the denominations of the bonds, the rate of interest and maturity dates, section 2 of the ordinance provides "All of said bonds, together with the interest thereon, shall be payable only out of the Water Works Bond and Interest Redemption Account hereinafter created, and shall be a valid claim of the holder thereof only against said fund and the fixed portion or amount of the revenues of the water plant of said City of Paris pledged to said fund." Section 3 of the ordinance prescribes the form of the bonds and interest coupons. Section 4 provides that the income and revenues of the waterworks plant shall be set aside into a separate and special fund to be used in maintaining the plant and in payment of the bonds. It apportions the revenues as follows: (1) A sum is set aside sufficient to pay the interest and principal of the bonds; (2) it is provided that 90 per cent. of the balance of the revenues shall be set aside and used for the proper operation and maintenance of the plant; and (3) 10 per cent. of such balance of the revenues shall be set aside to the depreciation fund. Section 5 of the ordinance provides: "While the bonds authorized hereunder or any of them remain outstanding and unpaid, the rates for all services rendered by the said water works plant of the City of Paris, or to its citizens, corporations or other consumers, shall be reasonable and just, taking into account and consideration the cost and value of said water works and the cost of maintaining and operating the same and the proper and necessary allowances for depreciation thereof and the amounts necessary for the retirement of all bonds and the accruing interest on all such bonds as may be sold and are unpaid under the provisions of this ordinance, and there shall be charged against all users of said water, including the City of Paris, such rates and amounts for water service as shall be adequate to meet the requirements of this and the preceding sections hereof. Compensation for services rendered to said city shall in like manner be charged against the city, and payment for same from the corporate funds shall be made monthly into the special fund created by this ordinance as other income and revenues of said plant, and shall be apportioned to operation and maintenance, depreciation and bond interest redemption accounts as such other income and revenues." By section 6 of the ordinance the city covenanted with the holders of the bonds to maintain in good condition and to operate the waterworks plant continuously and to charge and collect all such rates and charges for the services rendered by the plant as would produce gross revenues sufficient at all times to provide for the costs of operation and maintenance and maintain the depreciation fund and the bond and interest redemption account.

In other sections of the ordinance it was provided that the lien upon the waterworks plant for the security of the bonds created by chapter 133 of the Acts of 1926, as amended by chapter 92 of the Acts of 1930, was recognized as valid and binding upon the city, and it was further provided that if there should be any default in the payment of principal and interest of any of the bonds, any court having jurisdiction might, on the application of the bondholder, appoint a receiver to operate the waterworks with power to charge and collect rates sufficient to provide for the payment of any outstanding bonds or obligations and for the payment of operating expenses.

Four hundred bonds, each for the sum of...