McConnell v. City of Lebanon

• Decision Date: 02 May 1958
• Citation: 7 McCanless 498,314 S.W.2d 12,203 Tenn. 498
• Parties: , 203 Tenn. 498 R. B. McCONNELL, Appellant, v. CITY OF LEBANON, Tennessee, Appellees.
• Court: Tennessee Supreme Court

Page 12

314 S.W.2d 12

7 McCanless 498, 203 Tenn. 498

R. B. McCONNELL, Appellant, v. CITY OF LEBANON, Tennessee, Appellees.

Supreme Court of Tennessee.

May 2, 1958.

Willard Hagan, Lebanon, for appellant.

E. R. Woolard and William D. Baird, Lebanon, for appellee City of Lebanon.

Bass, Berry & Sims, Nashville, for Hartmann Luggage Company.

George F. McCanless, Atty. Gen., Allison B. Humphreys, Sol. Gen., Nashville, for the State.

SWEPSTON, Justice.

The question involved in this appeal is the constitutionality of Ch. 209, of the Public Acts of 1955, known as 'The Industrial Building Bond Act of 1955'. That is, whether or not said Act and the actions which are sought to be taken thereunder violate Art. II, Section 29 of our State Constitution.

Said Act need not be copied in this opinion in full but is attached hereto as Appendix A [See post, p. 20] and only the substance of such parts of said Act will be stated as deemed advisable.

Art. II, Section 29 of the State Constitution provides in part as follows:

'Sec. 29. Counties and towns--Power to tax--Credit.--The General Assembly shall have power to authorize the several counties and incorporated towns in this State, to impose taxes for County and Corporation purposes respectively, in such manner as shall be prescribed by law; and all property shall be taxed according to its value, upon the principles established in regard to State taxation. But the credit of no County, City or Town shall be given or loaned to or in aid of any person, company, association or corporation, except upon an election to be first held by the qualified voters of such county, city or town, and the assent of three-fourths of the votes cast at said election. Nor shall any county, city or town become a stockholder with others in any company, association or corporation except upon a like election, and the assent of a like majority. * * *'

Pursuant to this Act, the town of Lebanon has made a contract with Hartmann Luggage Company, a Wisconsin corporation, for the lease for a period of 25 years, with renewal privileges, of a factory building to be constructed by said municipality with the proceeds of the bonds authorized by the Tennessee Industrial & Agricultural Development Commission and the Building Committee which after a full hearing, has made all necessary findings required by the terms of said Act and has authorized the issuance and sale of $350,000 of bonds in accordance with said statute.

All other necessary legal steps have been taken by the City of Lebanon including an election by which much more than three-fourths of the qualified voters, as required by the statute, have voted in favor of the execution of the purposes permitted by said statute by the City of Lebanon.

The complainant, R. B. McConnell, being the elected and qualified Commissioner of Finance & Revenue of said City of Lebanon, by reason of certain published opinions of this Court, entertains a doubt as to his authority to execute and attest the bonds intended to be issued under said proceedings. Hence, he has filed this bill seeking a declaratory judgment as to the validity of same. All of the foregoing facts are averred in the original bill and the fact that said Commissioner of Finance & Revenue of said City deems said proceedings to be unconstitutional. The answer of the City of Lebanon admits all of these averments of the original bill except the allegation of the unconstitutionality of these Acts, which the answer asserts to be in all respects constitutional. The answer further avers that for the period from 1900 to 1950, according to the Federal Census, the County of Wilson has lost 760 citizens and from 1950 to 1955, said County has lost 147 citizens. That said loss has not been due to lack of birth of children because in the City of Lebanon and Wilson County the school rooms are crowded and overflowing; that 10 and 20 years ago whereas they had 40 to 60 children in one of the grades in elementary school with two classes and two teachers, they now have 250 to 300 children in the same classes in the elementary schools with 8 and 9 teachers.

That there is only one reason for this loss of population, which is a lack of job opportunities for the citizens of Lebanon and Wilson County, which forces their citizens to migrate to other states which are more industrialized and provide employment for them. Further that the State of Tennessee, in 1950, lost one Congressional seat because it did not keep pace with the increased population generally over the preceding ten-year period, and that if the same rate of migration of the people of said City and County continue at the same rate, the State will lose another Congressional seat in the next decade.

Further, that from 1950 to 1956 the State of Tennessee lost 80,000 citizens through migration and that said condition has been the subject of articles appearing in some of the leading newspapers of the State. The result of all of the above, it is averred, is that the cities, counties and the State of Tennessee are suffering a great financial loss by reason of the cost incurred in educating its children, which upon finishing school or college, are forced to emigrate to other states where job opportunities and the quantity of pay is more attractive and available. It is further averred that the average family income throughout the United States is $3,400 as compared to the average family income of $2,400 in the City of Nashville.

Further, that the State of Tennessee and its component parts consisting of the counties and towns throughout the State, have in a number of instances lost industries to other states, especially in the south, because this State heretofore has had no financial plan or program effective through the instrumentality of the arms of the State Government, that is, the counties and cities.

The Chancellor heard the cause on bill and answer. He filed a full memorandum opinion in which he held first, that the said statute and the proceedings taken thereunder by the City of Lebanon were for a public purpose. Secondly, that even though for the sole private purpose to aid private industry, yet since the bonds were issued pursuant to the terms of the statute and were ratified by a three-fourths vote in the referendum election, that they would be valid.

Counsel for appellees make the same insistence in their reply brief on appeal. That is, that the bonds are issued for a public purpose, but that, even if they were for the purpose purely private of aiding private industry, they would nevertheless be valid under the second paragraph of said above quoted constitutional provision.

We are not prepared to agree with this insistence by counsel for appellees that, even though these bonds are not issued for a corporate or public purpose, that they would nevertheless be valid because they were approved by a vote of three-fourths of the qualified voters. Counsel cites Azbill v. Lexington Mfg. Co., 188 Tenn. 477, 221 S.W.2d 522; Ferrell v. Doak, 152 Tenn. 88, 275 S.W. 29, 46 A.L.R. 590; and Berry v. Shelby County, 139 Tenn. 532, 201 S.W. 748.

So far as we have been able to find there are only two cases in Tennessee that even intimate that the second paragraph, supra, of said constitutional provision authorizes the lending of aid or credit for a private purpose of a private individual or corporation on a mere vote of the qualified number of voters. Both of these cases are in 188 Tenn. The first is Carter v. Beeler, 188 Tenn. 328, 335, 219 S.W.2d 195, 198, in which there is an inadvertent statement referring to the second paragraph, supra, of the constitutional provision relating to the lending of credit, and it is clearly erroneous. It is there stated:

'This provision of the Constitution applies to situations where the credit of a county or city is to a private corporation or individual and for purposes that are not county purposes. Berry v. Shelby County, 139 Tenn. 532, 201 S.W. 748; Patterson v. Washington County, 136 Tenn. 60, 188 S.W. 613.' (Emphasis ours.)

The latter part of the above quotation is not supported by either case cited. In the Patterson case [136 Tenn. 60, 188 S.W. 615], the purpose was public, that is, the building of county roads and the Court simply held that that did come under the first clause of said constitutional provision and not under the clause we have described herein as the second paragraph. It merely stated:

'The clause last referred to inhibits the lending of credit to a private enterprise except upon an election to be held under its provisions.'

That, however, is a far cry from stating that such private enterprise need not be the means of effectuating a corporate purpose. For example, a city subscribing to stock in a gas light corporation, a private enterprise, to be constructed for the principal purpose of supplying gas to the city and its inhabitants, as in the case of City of Memphis v. Memphis Gayoso Gas Co. (before 1870) 56 Tenn. 531.

Moreover, in Berry v. Shelby County, supra, after referring on page 540 of 139 Tenn., on page 750 of 201 S.W. to said second paragraph, which originated in the Constitution of 1870, Mr. Chief Justice M. M. Neil stated unequivocally on page 541 of 139 Tenn., on page 750 of 201 S.W.:

'Furthermore, such lending of aid or subscription of stock must be for a county or corporation purpose, under the express terms of the constitutional provision quoted; and Mr. Justice Turley, in Nichol v. [Mayor, etc., of Town of] Nashville, supra , suggested that this would be true even without a formal requirement of the Constitution. However, such is the positive requirement.'

In further analysis and exposition of said Art. II, Sec. 29, after defining direct and indirect purpose, it is made clear in the Berry case, supra, that the requirement that the purpose be corporate pervades the entire provision. On page 543 of 139 Tenn. on page 750 of 201 S.W., it is pointed out that:

If the purpose be direct,...