McDonald v. City of Lexington

• Decision Date: 13 April 1934
• Parties: McDONALD v. CITY OF LEXINGTON.
• Court: Kentucky Court of Appeals

70 S.W.2d 534

253 Ky. 770

McDONALD v. CITY OF LEXINGTON.

Court of Appeals of Kentucky

April 13, 1934

Appeal from Circuit Court, Fayette County.

Action by the City of Lexington against E. L. McDonald, on behalf of himself and all other citizens and taxpayers of the City of Lexington. From the judgment, defendant appeals.

Affirmed.

S. S Yantis, of Lexington, for appellant.

J Pelham Johnston, of Lexington, S. S. Willis, of Ashland, and Chester D. Adams, of Lexington, for appellee.

DIETZMAN Justice.

This is the second appeal of this case. The opinion on the former appeal may be found in ___ Ky. ___, 69 S.W.2d 1065. On the return of this case to the circuit court, an ordinance was passed in conformity with the suggestions made in the former opinion as to what would have to be done with reference to the sinking fund. Thereupon an amended and supplemental petition was filed setting out the steps which had been taken to conform with the opinion of this court on the former appeal, and this case was then again submitted to the circuit court for judgment. The circuit court having again adjudged the proposed bond issue valid, this appeal is prosecuted from that judgment.

The point is now made for the first time on this second appeal that the ordinance of September 11, 1933, to which reference was made in the former opinion, did not in the light of the former opinion in this case comply with section 3069 of the Kentucky Statutes, which provides in part that an ordinance calling an election for the purpose of incurring an indebtedness shall "specify the amount of indebtedness proposed to be incurred, the purpose or purposes of the same and the amount of money necessary to be raised annually by taxation for an interest and sinking fund." Appellee argues that since this point was not raised on the former appeal the appellant is now, under the familiar doctrine of the law of the case, precluded from urging that consideration on this appeal. It is suggested on the other hand that although as between the taxpayers and the city, the judgment in the former appeal is binding and conclusive, yet as no bondholder was a party to this suit that judgment could not be binding on a bondholder, and since the principle of res judicata is mutual, then if the judgment would not be binding on the bondholder in a controversy between him and the city, neither would it be binding on the city. In this connection it may be observed that section 186c-6, Kentucky Statutes Supplement 1933, now requires a municipality, before issuing its bonds, to obtain a judgment of a court of competent jurisdiction concerning the validity of the proposed bond issue. In the very nature of things, there can be no bondholder to be made a party to such a suit for there can be no bondholder until after the bonds are issued. The statute requiring the city to obtain a judgment of a court of competent jurisdiction as to the validity of the bond issue before its issuance, it would certainly be anomalous to say that after the city had obtained such a judgment it could thereafter and after having sold the bonds on the faith of such a judgment question the binding force and effect of such judgment even as against a bondholder not a party to the suit either actually or by representation. But be that as it may, we are of opinion that the ordinance of September 11, 1933, substantially complied with the quoted requirement of section 3069 of the Statutes. True it is that section 2 of the ordinance, in setting out how the money was to be raised to pay off the bond issue, principal, and interest, failed to provide for the raising of any money for principal for the first five years of the bond issue period. But section 1 of the ordinance, which prescribed the form of the question to be submitted to the voters, correctly provided that "both principal and interest" of the proposed bond issue were "all to be paid *** out of taxes to be levied by the city annually during the period of 30 years beginning with the year 1934 and ending with the year 1963," this being the entire bond issue period. This same section 1 of the ordinance also provided that "an election *** is hereby ordered to be held *** to determine whether the city shall incur an indebtedness of $1,312,500 *** and whether the city shall issue therefor its bonds in the total sum of $1,312,500, bearing interest at the rate of 4% per annum, payable semiannually, from date of issue and maturing at the rate of $52,500 each year for 25 years beginning in the year 1939 and ending in the year 1963; and shall provide for the levy and collection of an annual tax *** sufficient to pay the interest *** as it falls due, and provide for the creation of a sinking fund for the payment of the principal thereof in installments as it matures." Thus it is clear, as held on the first appeal of this case, that section 1 of the ordinance was drawn in strict conformity with the Constitution and correctly provided how the debt, principal, and interest was to be paid.

Whatever conflict there was between section 1 and section 2 of the ordinance would have to be resolved in favor of section 1 as against section 2,...