Kirk v. Clark

• Decision Date: 18 July 1939
• Docket Number: 14919.
• Citation: 4 S.E.2d 13,191 S.C. 205
• Parties: KIRK v. CLARK et al.
• Court: South Carolina Supreme Court

4 S.E.2d 13

191 S.C. 205

KIRK v. CLARK et al.

No. 14919.

Supreme Court of South Carolina

July 18, 1939

Samuel Want, Sam Rogol, and James Verner, all of Darlington, for appellant.

George K. Laney, J. E. Leppard, and C. L. Hunley, all of Chesterfield, for respondents.

FISHBURNE Justice.

Appellant the holder of certain refunding bonds of the County of Chesterfield, suing on behalf of himself and other bondholders of the same issue of bonds, brought this suit in equity against the County Board of Commissioners and the Treasurer of Chesterfield County, seeking the injunctive aid of the Court to restrain the respondents from misapplying and diverting tax funds levied and collected for the payment of the interest on his bonds; and to require that such funds be devoted to the purpose for which they were collected. The Court below in a formal order sustained a demurrer to the complaint. This appeal challenges the correctness of that order.

The crucial question in this case is whether a bondholder of a county whose bonds are not presently in default has the right to maintain a suit in equity to enjoin the unlawful diversion of public funds pledged to and collected for the payment of his bonds.

Respondents contend that the complaint does not state facts sufficient to constitute a cause of action, in that no facts are alleged which would justify equitable relief. It is said that the complaint fails to show that appellant is threatened with any injury or damage because of the alleged unlawful practices of the respondents, and fails to show that any of appellant's rights have been invaded.

The duty devolves upon us to review the facts alleged in the complaint, and to determine therefrom: (a) Whether the plaintiff has a right to maintain the suit, and (b) whether the allegations are sufficient to constitute a cause of action in favor of appellant against the County Board of Commissioners and the County Treasurer.

The essential facts of the case alleged in the complaint and admitted by the demurrer are as follows: Appellant is the owner and holder of $6,000 of an issue of Chesterfield County bonds dated April 1, 1936, known as refunding bonds. The total amount of this issue of bonds is $520,000. The bonds carry an interest rate of 5%; the coupons are payable October 1st and April 1st of each year, and the principal of appellant's bonds is due in 1945 and in 1946. The interest due on this issue of bonds, including those of the appellant, on April 1, 1938, was not paid on the due date because of lack of funds, but the default was subsequently corrected by a delayed payment, without any compensation being made for such delay. It is alleged that this default was due to the unlawful financial practices of the respondents, more particularly referred to hereafter, and that by reason of the threatened continuance of such unlawful practices the interest to become due October 1, 1938, will not be in the hands of the County.

The bonds are general obligations of Chesterfield County, and to their payment the faith and credit and the full taxing power of the county are pledged. It was specifically represented and covenanted by the county that sufficient taxes would be levied each year to pay the interest on the bonds as it matured; and the purchasers of the bonds relied upon compliance by the county officials with the provisions of the law of the state respecting the levy, assessment and collection of taxes, and the disbursement of the proceeds of tax collections.

The supply bills of the County of Chesterfield for the years 1937 and 1938 made specific appropriations, funds for which would be derived from delinquent tax collections, to be applied on the payment of the principal and interest of the bonds in question; and also required the levying of a certain number of mills therefor. It is alleged that the proceeds of the tax levies and other funds appropriated for such debt service are not kept separate and apart from other funds of the county that the respondents, with the approval of the legislative delegation of the county, frequently incur other obligations for county purposes not authorized by the annual supply bill for the fiscal year during which such liabilities are contracted, and for which no provision is made in the tax levy; that the respondents pay these obligations without authority of law out of tax collections which should be applied to the payment of appellant's bonds; that by reason of these unlawful diversions, the annual tax levy, and the amount derived from delinquent tax collections for debt service of the bonds are rendered inadequate to meet the interest accruing thereon; that as the result of the constant diversion and misapplication of these funds, and by reason of the unlawful financial practices of the respondents in that respect, the funds specifically appropriated for debt service are left depleted and insufficient, resulting in defaults on the bonds, and that such defaults will continue.

It is charged that the acts complained of are systematic continuous and illegal, and the complaint quotes Section 7337 of the Code of 1932, which makes it a criminal offense for any member of any board to vote for the diversion of money raised by taxation for the payment of principal or interest on municipal bonds, for any other purpose until all of such obligations shall have been paid. It is likewise made a criminal offense in said section for any disbursing officer to pay out any of such money otherwise than to the payment of such obligations, until the obligations have been paid.

The complaint further alleges that the attention of the respondents has been called to this section of the Code and demand...