Lawson v. South Bend Public Transp. Corp., 171S8

• Decision Date: 22 June 1971
• Docket Number: No. 171S8,171S8
• Parties: William J. LAWSON and Beverly J. Lawson, Appellants, v. SOUTH BEND PUBLIC TRANSPORTATION CORPORATION, Appellee.
• Court: Indiana Supreme Court

Page 746

270 N.E.2d 746

256 Ind. 552

William J. LAWSON and Beverly J. Lawson, Appellants, v. SOUTH BEND PUBLIC TRANSPORTATION CORPORATION, Appellee.

No. 171S8.

Supreme Court of Indiana.

June 22, 1971.

Warren A. Deahl and Franklin A. Morse, II, South Bend, for appellants.

Robert J. DuComb, Sr., DuComb, Nimtz, DuComb, South Bend, George B. Gavit, Ice, Miller, Donadio & Ryan, Indianapolis, Harry W. Scott, Adair, Perry, Beers, McAlister & Mallers, Fort Wayne, for appellee.

HUNTER, Judge.

This suit originated in the St. Joseph Superior Court where appellants sought to enjoin appellee, South Bend Public Transportation Corporation, from issuing and selling bonds pursuant to an ordinance duly enacted on the grounds that the enabling statute, the Urban Mass Transportation Act of 1965, Section twenty-six (being Ind.Ann.Stat. § 48--8826 (1970 Supp.)), I.C.1971, 19--5--2--26 was unconstitutional under the provisions of the Indiana Constitution, Art. 13, § 1 which purports to limit municipal debt incurrence to two-percent of the assessed valuation of taxable property therein situated. The trial court denied the injunction and this appeal follows.

It appears from the record that South Bend's privately owned mass transportation system was acquired, due to its financial difficulties, by the South Bend Public Transportation Corporation, a municipal corporation organized pursuant to the provisions of the Urban Mass Transportation Act of 1965 (Ind.Ann.Stat. § 48--8801 et seq. (1970 Supp.)), I.C.1971, 19--5--2--1 et seq. The boundaries of the municipal corporation thus created were co-terminous and identical with those of the civil city of South Bend. On October 14, 1968, the Board of Directors of the newly formed corporation determined to issue bonds to a total of two million dollars ($2,000,000.00) in order to acquire the assets of the privately held transportation system and if necessary to acquire additional assets for the operation of its transportation system.

Required notices were published and a public hearing conducted on the proposed bond issuance. An ordinance was subsequently passed authorizing the sale of the bonds, there being an insufficient number of remonstrators seeking to defeat it. The parties to this suit agreed by stipulation that the proposed bond issue would not exceed two-percent of the assessed valuation of taxable property within the boundaries of the Public Transportation Corporation, but would, however, exceed the two-percent limitation if added to the outstanding general obligation bonds of the civil city of South Bend.

The sole question, then, for our consideration is whether section twenty-six of the Urban Mass Transportation Act of 1965 is an unconstitutional attempt to circumvent the two-percent municipal debt limitation imposed by Art. 13, § 1 of the Indiana Constitution. That section, as here pertinent, provides:

'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, to be ascertained by the last assessment for State and county taxes, previous to the incurring of such indebtedness; and all bonds or obligations, in excess of such amount, given by such corporations, shall be void: * * *' Ind.Const.Art. 13, § 1.

This court has had several opportunities to interpret the above quoted provisions and several maxims have evolved in respect to the debts of municipal corporations. See Datisman v. Gary Public Library (1960), 241 Ind. 83, 170 N.E.2d 55; Bailey v. Evansville-Vanderburgh Airport Authority District (1960), 240 Ind. 401, 166 N.E.2d 520; City of Indianapolis v. Buckner (1954), 233 Ind. 32, 116 N.E.2d 507; Cerajewski v. McVey (1947), 225 Ind. 67, 72 N.E.2d 650; Campbell v. City of Indianapolis (1900), 155 Ind. 186, 57 N.E. 920. The principles stated in these cases are well settled and we need not enter into a lengthy discourse concerning them. The constitutional limitation above quoted clearly prohibits debt incurrence in excess of two-percent, but as we said in the Buckner case:

'* * * this limit applies to each corporation individually, not in the aggregate to all properly created municipal corporations which may cover the same area or include the same taxpayers. The creation of additional municipal corporations for proper purposes is within the wisdom of the Legislature.' 233 Ind. at 35, 116 N.E.2d at 509. (our emphasis)

However, the Legislature's prerogative in this regard does not go unchecked. Although there are no hard and fast rules under which to determine whether a particular legislative act is a legitimate exercise of the Legislature's...