McNichols v. City and County of Denver

• Decision Date: 11 December 1950
• Docket Number: No. 16544,16544
• Parties: McNICHOLS v. CITY & COUNTY OF DENVER et al.
• Court: Colorado Supreme Court

Page 591

230 P.2d 591

123 Colo. 132

McNICHOLS v. CITY & COUNTY OF DENVER et al.

No. 16544.

Supreme Court of Colorado, en Banc.

Dec. 11, 1950.

Rehearing Denied April 30, 1951.

Ivor O. Wingren, Albert T. Frantz, Denver, for plaintiff in error.

J. Glenn Donaldson, Abe L. Hoffman, Malcolm Lindsey, Pershing, Bosworth, Dick & Dawson, Denver, for defendants in error.

JACKSON, Justice.

July 27, 1948, the council of the City and County of Denver passed an ordinance (No. 106) providing for submitting to the qualified voters of Denver the question of acquiring and improving real estate in Denver and erecting improvements for use as offstreet parking. Section 11 contained a recital that '* * * this ordinance is necessary for the immediate protection and preservation of the public health, safety, convenience and general welfare.'

Section 3 of the ordinance posed the question to be submitted to the voters, as follows:

'Shall the City Council of the City and County of Denver by virtue of the authority vested in it by the Constitution of the State of Colorado and the Charter of the City and County of Denver authorize the issuance of the bonds of the City and County of Denver in the principal sum of $4,500,000.00 or so much thereof as may be necessary to be used for the purpose of providing funds for the acquisition and improvement of municipal parking facilities, including the acquisition of land and the improvements thereon, such bonds to bear interest at a rate not exceeding four per centum per annum, to be subject to prior redemption at the option of the City and County of Denver on and after a date not later than ten years from the date thereof, to mature serially over a period not exceeding thirty years and to be payable from the revenues to be derived from the operation of said municipal parking facilities and secured by a conveyance in trust of the title to said facilities, said bonds to be issued in series, one series for each parking area to be designated by the City Council, and to be additionally secured, if in the judgment of the City Council it is necessary to make said bonds salable, by one or both of the following:

'(1) A pledge of revenues to be derived from street parking meters within the respective parking areas, or

'(2) Special assessments levied against benefited property within the respective parking areas.'

At an election held September 14, 1948, 38,767 taxpaying electors voted in favor of the issuance of the bonds with 25,511 voting negatively. Subsequently, the manager of improvements and parks published a notice that Denver would consider proposals for the purchase of $3,700,000 Denver Parking Reveneue Bonds. It was stated in the notice that, 'Preference will be given to proposals for revenue bonds payable solely from the net operating earnings of the proposed Parking Facilities and additionally secured by a conveyance in trust of the title to said facilities.'

The form of notice, period of publication, and the letters asking for proposals were not submitted for previous approval by the city council. Seven proposals were subsequently received, of which five were rejected, and the two most promising were given further study, from which it appeared that the proposal of A. C. Allyn and Company would be more favorable if the bonds were not called prior to maturity, whereas the bid of Otis and Company would be more favorable if the later maturing bonds were called on their option date, April 1, 1960 instead of being allowed to run to their serial maturities covering the years 1961 to 1979, inclusive. The city council, by subsequent preliminary ordinance No. 86, accepted the Otis and Company bid; and May 16, 1950, after further negotiation with that company enacted ordinance No. 110 authorizing the issuance of 'Offstreet Parking Revenue Bonds' in an amount not to exceed $4,000,000.

Section 5 of the ordinance provided that the later maturing bonds are subject 'to redemption in inverse numerical order, at the option of the City and County of Denver, on the first day of April, 1960, or on any interest paying date thereafter prior to maturity, at a price equal to the principal amount thereof, with accrued interest to the redemption date, together with a premium of two per centum of the principal amount thereof.'

Section 6 provides that payment of each bond and the interest thereon shall be made solely from the revenues derived from the operation of the offstreet parking facilities in the parking area No. 1 (described in the ordinance), and further recites that: '* * * the City and County of Denver, as security for such payment, has pledged certain funds created by said Ordinance into which said revenues, after provision for all necessary and reasonable expenses of operating and maintaining said facilities, will be paid, all as set forth in said Ordinance and in the Trust Indenture, to which reference is hereinafter made. This bond and the series of which it is one are issued or are to be issued, pursuant to said ordinance and under and pursuant to the Trust Indenture of even date herewith by and between the City and County of Denver and The Colorado National Bank of Denver, as Trustee, an executed counterpart of which is on file at the office of the Trustee in the City and County of Denver, State of Colorado. Reference is hereby made to the Trust Indenture for the provisions, among others, with respect to the conveyance in trust of the title to the offstreet parking facilities in Parking Area No. 1, with respect to the custody and application of the proceeds of bonds issued under the Indenture, the collection and disposition of revenues, the funds charged with and pledged to the payment of the interest on and the principal of the series of bonds of which this is one, the nature and extent of the security, the terms and conditions on which bonds are or may be issued, the rights, duties and obligations of the City and County of Denver and of the Trustee, and the rights of the holders of the bonds, and, by the acceptance of this bond the holder hereof assents to all provisions of the Trust Indenture.'

When the auditor was requested to affix his signature to the bonds and the trust indenture, without which neither would be effective, he refused, basing his refusal upon various grounds some of which are herein later discussed. Thereupon the city, its mayor, and its manager of improvements and parks brought suit to compel the auditor to sign the bonds and trust indenture.

After a trial to the court, the latter held that the auditor's duty in countersigning the bonds and trust indenture was a ministerial act, and that he had no discretion in the matter; that the bonds and trust indenture were legal; and that the ordinances which he challenged were valid exercises of the legislative power. The auditor was ordered to countersign the various instruments. He seeks reversal here, filing eleven specifications of error. In none of them, it should be noted, does the auditor contend that Denver has not the power to acquire property for offstreet public parking facilities as a proper exercise of the police power. City and County of Denver v. Henry, 95 Colo. 582, 585, 38 P.2d 895; McSorley v. Fitzgerald, 359 Pa. 264, 59 A.2d 142; Miller v. City of Georgetown, 301 Ky. 241, 191 S.W.2d 403. The area of his argument is that the ordinances and proceedings in the instant case are void and ultra vires. We discuss the specifications which we believe support the auditor's contention.

(1) One of the specifications which we believe has merit and warrants reversal of the trial court's judgment is that the title to the offstreet parking facilities is covered by a mortgage or trust indenture running to a private trustee. It will be noted that the bonds are described as 'revenue bonds' and their validity is urged on the theory that both principal and interest of the bonds are to be paid 'solely from the net operating earnings of the Proposed Parking Facilities.' When, however, the offstreet parking properties, after being acquired by the city, are mortgaged under a trust indenture to secure payment of the bonds then the bonds by that very act become more than revenue bonds--they become mortgage bonds; and when the city mortgages its property to secure a bonded indebtedness, it follows that a debt has been created within the meaning of a constitutional provision limiting the amount of municipal indebtedness.

In Florida a similar result seems to have been reached in Brash v. State Tuberculosis Board, 124 Fla. 167, 167 So. 827, 830, involving a proposed loan by the state board from the federal government. It was proposed that the state should issue interest bearing certificates to the federal government, not enforceable against the state of Florida other than the income and revenue pledged. The certificates were further secured by mortgage upon the property purchased, without there being a direct pledge of the credit of the state of Florida to repay. The Florida court's disposition of this situation was as follows: 'If, as proposed by gift and loan from the federal government, land is acquired by the State Tuberculosis Board, upon which to erect a State Tuberculosis Sanatorium, such land will become the property of the state; and if a mortgage is executed upon the land and the improvements and betterments thereon, and upon all fixtures, furniture, and equipment affixed to or located on the mortgaged property as contemplated by the resolution of the State Tuberculosis Board, such mortgage will be an express contract lien and charge upon the corpus of the property of the state, with an express agreement by the board that such mortgage shall be subject to foreclosure and other remedies to enforce the payment of the loan. It would, in effect, be an attempt to create a binding...