Millsaps v. City of Terrell

• Decision Date: 13 February 1894
• Docket Number: 190.
• Citation: 60 F. 193
• Parties: MILLSAPS v. CITY OF TERRELL.
• Court: U.S. Court of Appeals — Fifth Circuit

60 F. 193

MILLSAPS v. CITY OF TERRELL.

No. 190.

United States Court of Appeals, Fifth Circuit.

February 13, 1894

The defendant, the city of Terrell, is a municipal corporation in the state of Texas, existing under and by virtue of chapters 1 to 10 of title 17 of the Revised Statutes. In the month of July, 1884, defendant created a debt for waterworks purposes by issuing bonds to the amount of $28,000, bearing interest at the rate of 7 per cent. per annum. In the month of October of the same year, for the purpose of erecting a city hall defendant issued other bonds to the amount of $25,000 bearing interest at the rate of 8 per cent. per annum; and on the 1st day of January, 1885, for the purpose of completing this building, defendant made yet another issue to the amount of $2,000, bearing interest at the rate of 8 per cent. per annum. The taxable values of all the real and personal property in the city for the year 1884, as shown by the assessment rolls for that year, were $908,976. At the time of issuing the waterworks bonds, the city, by ordinance provided for the levy of an annual tax of one-fourth of 1 per cent. to pay the interest and create a sinking fund for said bonds. Plaintiff's bonds of the first ($25,000) series were issued under an ordinance passed September 23, 1884, the third section of which is as follows: 'Sec. 3. For the purpose of meeting the interest upon said bonds, and providing an annual sinking fund sufficient to discharge the principal at maturity, an annual ad valorem tax of twenty-five cents on the $100 on all property, real and personal, in said city subject to taxation, is hereby levied and there shall be, and is hereby set apart out of the general revenue of the city constituted by one-fourth of one per cent. ad valorem tax heretofore levied, as well as all occupation taxes levied and collected, an amount sufficient to make up all deficiency that may exist from the appropriation hereinbefore made in paying said interest and sinking fund.' Plaintiff's bonds of the second series ($2,000) were issued under an ordinance passed November 25, 1884, the third section of which is as follows: 'Sec. 3. Said bonds shall be known as bonds of the second series, city hall bonds, and the interest and sinking fund shall be paid out of the funds heretofore levied and set apart for the payment of interest and sinking fund of the first series.' The present action is upon coupons of the 27 bonds constituting the last two issues above described. The defense is that the city exhausted its power to create debt when it issued the waterworks bonds, and that the present bonds are therefore void. The court found as facts that, from the year 1882 down to the trial, the city had annually levied and collected a tax of one-fourth of 1 per cent. to defray its current expenses, and had also collected occupation taxes to the extent allowed by law. The amount of these latter was shown by the defendant's evidence to be about $4,000 per annum. The court also found that plaintiff is a holder for value, and before maturity, without actual notice of any objection to the bonds. Upon this state of facts the court found for the defendant, and entered judgment accordingly. Plaintiff thereupon sued out this writ of error, and filed an assignment of errors, complaining that the court erred in holding that prior to the issuance of the bonds sued on herein the defendant had, by the issuance of its waterworks bonds, exhausted its authority to create debts, and the plaintiff's bonds and coupons were therefore void.

T. K. Skinker, for plaintiff in error.

B. F. Word and M. L. Crawford, for defendant in error.

Before PARDEE and McCORMICK, Circuit Judges.

PARDEE Circuit Judge (after stating the facts).

The plaintiff in error does not dispute that the tax of one-fourth of 1 per cent., authorized by the ordinance of July, 1884, does not provide a fund sufficient to pay the interest on the waterworks bonds and create a sinking fund of 2 per cent., but he insists that the bonds under the ordinances of September 23 and November 25, 1884, involved in this suit are, nevertheless, valid, because, he says, the city did not by the issue of the waterworks bonds exhaust its power to create debts, and the provisions made by the ordinances of September 23 and November 25, 1884, for the payment of interest and to create a sinking fund are sufficient. The bonds in question bear interest at the rate of 8 per cent. per annum which, with 2 per cent. additional for sinking fund, must be raised annually, requiring an aggregate amount annually of about $2,700. The provisions made by the ordinances consist of (1) a special tax of 25 cents on the $100 which, it is conceded, is already fully mortgaged; (2) a general revenue tax of 25 cents on the 100; (3) the occupation taxes,--the two latter constituting, as we understand it, the alimony of the city. The question presented by the plaintiff in error, and argued by his counsel, is whether the alimony of the city, made up, under the constitution and laws of the state, of the general revenue tax and occupation taxes, can be used as a basis for creating a debt for permanent improvement and issuing therefor time-running bonds; the provision for the...