Newton v. City of Tuscaloosa

• Citation: 251 Ala. 209,36 So.2d 487
• Decision Date: 30 June 1948
• Docket Number: 6 Div. 733.
• Parties: NEWTON v. CITY OF TUSCALOOSA.
• Court: Supreme Court of Alabama

36 So.2d 487

251 Ala. 209

NEWTON v. CITY OF TUSCALOOSA.

6 Div. 733.

Supreme Court of Alabama

June 30, 1948

Rehearing Granted July 31, 1948. [Copyrighted Material Omitted] [Copyrighted Material Omitted]

Gordon Madison, of Tuscaloosa, for appellant.

Wm. Alfred Rose, Ellene Winn, and White, Bradley, Arant & All, all of Birmingham, for appellees.

Statement of the Case.

This appeal brings up for review Act No. 424 of Local Acts of Alabama 1947, p. 281 et seq. By said act the legislature levied in Tuscaloosa County license and excise taxes paralleling such taxes now imposed by the general law of the State, with the rate of taxation of 50% of the amount of such State taxes, for the purpose of establishing a public hospital in Tuscaloosa County. Section 8 of the act consecrates the revenue accruing from the taxes exclusively for the establishment, maintenance and operation of such public hospital to be owned and operated jointly by the two municipalities and authorizes the city and county to issue and sell interest-bearing warrants to be paid solely from these tax revenues. The act further provides that the proceeds of the sale of these warrants shall be utilized for this exclusive purpose and gives authority to pledge for the payment of the principal and interest to be due by said warrants of a per centum of this tax levy, but stipulates that the obligation of these warrants shall not be a general obligation of either the city or the county and shall not be charged to the constitutional debt limit of either municipality.

Act No 540, Local Acts of Alabama 1947, p. 364 et seq., approved soon after Act No. 424 at the same regular session of the legislature, created the Druid City Hospital Board, 'an agency of Tuscaloosa County and the City of Tuscaloosa,' for the purpose of acquiring a site for the constructing, equipping, maintaining and operating of a public general hospital to be owned jointly by the city and county, to be known as the Druid City Hospital, and which board was to receive the revenues from the tax levy under Act No. 424 and charitable gifts from all sources.

When Act No. 424 was passed, there was a public hospital known as Druid City Hospital being then operated jointly by the city and the county, and after the enactment of Act No. 540 the Druid City Hospital Board, created by this latter act, was organized and thereupon began to operate and is now operating the hospital.

The original bill also shows that the two municipalities, the City of Tuscaloosa and Tuscaloosa County, through their respective governing bodies, propose (a) to issue and sell interest-bearing warrants as provided in the act in the aggregate amount of $1,500,000 as joint obligations of the city and county and payable solely from the revenues to be derived from the tax levied as authorized by the act; (b) to pledge for payment of said warrants so much of the per

centum of the revenues derived from said tax, as permitted by the act, as will be necessary for said purpose; (c) to make said payment a first charge on that per centum of the revenues; and (d) to use the proceeds from the sale of said warrants for the purpose of acquiring a site and constructing and equipping the said hospital.

SIMPSON, Justice (after stating the case).

The appeal is from a decree in a proceeding of declaratory judgment brought in by answer and cross bill to an original bill in equity seeking a permanent injunction against the appellees from (1) collecting or receiving the taxes proposed to be levied by Act No. 424, described in the foregoing statement of the case; (2) issuing and selling the interest-bearing warrants authorized by the act; and (3) pledging any portion of the revenue derived from the accrual of said taxes for the payment of the warrants.

From a decree sustaining the validity of the whole act this appeal has proceeded.

The equity of the original bill is rested on the asserted invalidity of Act No. 424 on various constitutional grounds.

Section 104, Constitution.

Section 104, subsec. (17), is made the basis of an objection. This section of our Constitution inhibits the passage of a local law authorizing a county, city, or other political subdivision of a county to issue bonds or other securities unless the issuance thereof shall first, before its enactment, have been authorized by a vote of the duly qualified electors of such political subdivision.

This constitutional proviso operates to prevent the legislature from passing a local law authorizing a county or city to issue the character of securities such as are here contemplated without first being authorized by the electorate of that county.

It is cogently argued by skillful counsel that this provision of the Constitution only contemplated bonds or securities which were debts within the meaning of constitutional debt limitation and that the warrants proposed to be issued under § 8 of the act will not be debts of the city or county within the meaning of constitutional debt limitation because they are payable solely out of the special fund to be created by the tax levy. This argument is rested on dictum appearing in the Opinion of the Justices, 230 Ala. 673, 163 So. 105, where it was intimated that securities which do not represent general obligations of the county are not bonds within the contemplation of subsec. (17).

Whatever the intendmant of this statement, it was purely obiter, since the act there under consideration was a general act and a consideration of subsec. (17) was not germane to matters there involved.

So regardless of the character of the debt which might be incurred under the provisions of the act or of the intended meaning of the reported statement in that Opinion of the Justices, we are unwilling to accord the dictum any authoritative effect in the light of the historical background and clear meaning of this provision of our Constitution.

The section was new to the Constitution of 1901. A review of the proceedings of that Constitutional Convention, foreshadowing the adoption of subsec. (17), clearly evidences a purpose on the part of the framers of the Constitution to prevent the counties and cities of the state from loading themselves, by local legislation, with bond or security issues and thereby placing undue burdens on the local taxpayers and citizens without their having a voice in the matter. In none of the proceedings of this convention do we find any such strict construction as now sought to be placed on the words 'bonds or other securities,' nor can we find any warrant for making the distinction pressed on us in the argument. In addressing the convention for the inclusion of such a provision, it was asserted by Governor O'Neal:

'Now I say if you strike out this provision [later adopted as subsec. 17] you leave it in the power of the Legislature to authorize the issuance of bonds, in any town, city or county in the State, absolutely without restriction or limitation. You allow the local member to come to Montgomery and without consulting his constituents, without seeking to know their wishes in regard to the issuance of bonds, he secures the issuance of bonds in any amount that may suit his pleasure and the people are without remedy.' (Emphasis supplied)--Official Proceedings, Constitutional Convention (Alabama), 1901, p. 1857.

The term 'bonds or other securities' of course comprehends warrants, too, and the intention is plain that the purpose of this constitutional proscription was to inhibit such local legislation as is intended by the act now under consideration without the matter first being authorized by a majority vote of the duly qualified electors of the county.

One further observation seems necessary. The phraseology of this section is that 'the legislature shall not pass a * * * local law * * * Authorizing any county, city, town, village, district, or other political subdivision of a county, to issue bonds or other securities' etc. (Emphasis ours.) It is to be noted that the Legislature by the act in question levied the taxes, rather than the act authorizing such a levy. We can make no distinction here. The insistence is made by the appellees, in order to sustain the validity of the act, that the two statuses are identical and we are in agreement on this point. The difference, to our minds, is the same as between tweedledum and tweedledee.

Except in so far as constitutionally proscribed, there is no limit to legislative authority over taxation. The great reserve of power over the subject rests in the State, acting through its legislature, and, out of this plenitude of power, unless restricted by organic law, its authority is absolute. It is 'the depository of all authority on the subject,' except as so limited.

Counties have no inherent power of taxation. They are agencies or subdivisions of the State, created by law for the more efficient administration of government, and the authority of the county to tax is one derived from the legislature, and may be withheld, withdrawn, or modified (no contractual rights of third persons intervening to compel action). Edwards v. Williamson, 70 Ala. 145; Hare v. Kennerly, 83 Ala. 608, 3 So. 683; State v. Street, 117 Ala. 203, 23 So. 807; Kimmons v. Jefferson County Board of Education, 204 Ala. 384, 388, 85 So. 774; Jefferson County v. City of Birmingham, 248 Ala. 319, 27 So.2d 584, 611; Standard Oil Co. of Kentucky v. Limestone County, 220 Ala. 231, 124 So. 523; State v. Butler, 225 Ala. 191, 142 So. 531; Mills v. Court of Com'rs, 204 Ala. 40, 85 So. 564; State ex rel. Lott v. Brewer, 64 Ala. 287.

In line with this premise, our court has given sanction to legislative action empowering and requiring the levy and appropriation of a city or county tax for a special purpose. Slaughter...