Nichols v. Williams, 282

• Decision Date: 22 January 1954
• Docket Number: No. 282,282
• Parties: NICHOLS v. WILLIAMS et al. Motion
• Court: Michigan Supreme Court

Page 103

62 N.W.2d 103

338 Mich. 617

NICHOLS v. WILLIAMS et al.

Motion No. 282.

Supreme Court of Michigan.

Jan. 22, 1954.

Haskell L. Nichols, in pro. per.

Frank G. Millard, Atty. Gen., Edmund E. Shepherd, Sol. Gen., for defendant Members of State Administrative Board.

Frank G. Millard, Atty. Gen., and Edmund E. Shepherd, Sol. Gen., for defendant Members of Mackinac Bridge Authority.

Before the Entire Bench.

BUTZEL, Chief Justice.

Haskell L. Nichols, as petitioner, seeks a writ of prohibition and a stay of all proceedings to prevent the consummation of the sale and delivery of bonds issued by the Mackinac Bridge Authority to pay for the cost of a bridge to span the Straits of Mackinac and connect the highway system of the southern and the northern peninsulas of the State of Michigan. Such cost is to include the bridge approaches, paving, toll house, and all other incidentals. Petitioner attacks the validity of the issuance and sale of revenue bonds amounting to $99,800,000 and consisting of two series: Series A in the principal sum of $79,800,000, with a priority of lien of payment over Series B in the principal amount of $20,000,000. Petitioner claims that under Art. X, § 10, of the 1908 Constitution of the State of Michigan, the State could not, without a vote by the people, contract a debt in excess of $50,000,000 for improvement of highways and pledge its credit and issue bonds therefor. However, the issuance and sale of the revenue bonds by the Mackinac Bridge Authority and the building of the bridge are provided for by P.A.1952, No. 214, as amended by P.A.1953, No. 141, C.L.1948, § 254.311 et seq.; Stat.Ann. § 9.1361(1) et seq., which clearly and unequivocally states that the bonds are revenue bonds which, with interest, are to be paid solely from the revenues of the bridge authority, or from refunding bonds, if any are thereafter issued, and that such revenue bonds do not constitute an indebtedness of the State of Michigan. It is again so stated, as required by the act, on the face of the bonds that have been issued and are about to be delivered. The bonds have been sold prior to December 31, 1953. The delivery of the bonds would have been completed and the purchase price would have been paid had this suit not been instituted. It has been definitely settled that revenue bonds issued by a State agency for a public improvement do not constitute an indebtedness of the State within the meaning of the constitutional provision. Attorney General ex rel. Eaves v. State Bridge Commission, 277 Mich. 373, 269 N.W. 388, 270 N.W. 308, and cases therein cited.

Petitioner further claims that inasmuch as the Mackinac Bridge Authority is an entity and State agency the bonds become general obligation bonds, possibly on the theory that the principal is liable for the acts of its agent. Petitioner overlooks the fact that the statute and the bonds issued thereunder distinctly state that these are revenue bonds and not general obligation bonds of the State.

Petitioner further calls attention to the provision in P.A.1953, No. 141, supra, amending P.A.1952, No. 214, supra, providing that if the bonds are sold prior to December 31, 1953, there shall be appropriated out of the funds of the State highway department, derived from taxes imposed on gasoline and motor fuels and motor vehicles registered in the State, a sum in each fiscal year sufficient to pay for the operation, repair and maintenance of the bridge but not in excess of $417,000 during any fiscal year. It is admitted that the bridge will be part of the highway system of the State of Michigan, the same as the ferries now operating across the Straits of Mackinac have been considered. The annual loss from the operation of the ferries across the Straits of Mackinac has averaged over $500,000 a year during the past five years, according to the printed reports on file in the office of the auditor general. Act No. 141, supra, further provides that when the bonds have been paid off, the tolls for the use of the bridge shall continue until the highway department has been repaid all sums that it has expended for the maintenance, operation and repairs of the bridge.

Petitioner claims that the obligation to appropriate an amount not in excess of $417,000 a year is a legislative act and that future legislatures cannot be bound thereby, but he overlooks the fact that in accordance with P.A.1953, No. 141, the payment of a maximum of $417,000 for a fiscal year is made part of a contract with the bondholders.

In State Highway Commissioner v. Detroit City Controller, 331 Mich. 337, 49 N.W.2d 318, we held valid an irrevocable pledge of ear-marked funds of the State highway department to be used to pay the principal and interest on bonds. That case applied the 'special fund' doctrine and held that the pledge of such special funds did not constitute...