Oklahoma Utilities Co. v. City of Hominy

• Decision Date: 03 April 1934
• Docket Number: 24238,24571.
• Citation: 31 P.2d 932,168 Okla. 130,1934 OK 217
• Parties: OKLAHOMA UTILITIES CO. et al. v. CITY OF HOMINY et al. CITY OF HOMINY et al. v. OKLAHOMA UTILITIES CO. et al.
• Court: Oklahoma Supreme Court

31 P.2d 932

168 Okla. 130, 1934 OK 217

OKLAHOMA UTILITIES CO. et al. v. CITY OF HOMINY et al.

CITY OF HOMINY et al. v. OKLAHOMA UTILITIES CO. et al.

Nos. 24238, 24571.

Supreme Court of Oklahoma

April 3, 1934

Rehearing Denied April 24, 1934.

Syllabus by the Court.

1. Where an election is held by a municipal corporation to determine whether or not the said municipal corporation shall become indebted by issuing bonds for the purpose of constructing or acquiring a light and power plant, it is not necessary that the ordinance or election proclamation contain the date of the maturities of the bonds sought to be issued.

2. Under the provisions of section 5929, O. S. 1931 (chapter 22, Sess. Laws 1927), it is not necessary to submit to the voters the question as to whether interest shall be paid annually or semiannually, and where said question is not submitted to the voters it lies within the discretion of the governing body of the municipality to determine when interest shall be paid but where said question is submitted to the people and by their affirmative vote it is determined to pay said interest annually, then the governing body of the municipality is without authority to issue bonds which provide for the payment of interest semiannually at the maximum rate.

Appeal from District Court, Osage County; Jesse J. Worten, Judge.

Action by the Oklahoma Utilities Company and another against the City of Hominy and another. From the judgment, both parties appeal, the appeals being consolidated.

Affirmed.

Leander Hall, of Hominy, for City of Hominy and C. Edgar Honnold.

N. E McNeill, of Tulsa, and Miles & O'Brien, for Oklahoma Utilities Co. and Earl Burton.

OSBORN Justice.

The Oklahoma Utilities Company and Earl Burton, hereinafter referred to as plaintiffs, filed this action in the district court of Osage county against the city of Hominy and C. Edgar Honnold, hereinafter referred to as defendants, wherein it was sought to enjoin the issuance of certain bonds voted by the city for the purchase of a municipal light plant. The court enjoined the issuance and sale of the bonds upon one of the grounds urged by plaintiff, but found against plaintiff on the other grounds. Both parties have appealed to this court and the appeals have been consolidated by appropriate order.

The contentions of plaintiffs are as follows:

"(1). The ordinance and proclamation for the election are not in accordance with sec. 5929, O. S. 1931, requiring bonds to mature in equal annual installments within not less than three, nor more than five, years from the date of said bonds, and said ordinance and proclamation are, therefore illegal and void.

(2). The advertisement for sale of the bonds was so misleading, the same did not constitute a legal advertisement for sale of bonds.

(3). The City has not provided for the revenue necessary for payment of the initial interest payment nor for the creating of a sinking fund as required by law, and the delivery of the bonds should be enjoined, and,

(4). The bonds provide for the payment of interest semi-annually and not annually, and at a greater rate of interest than 6 per cent. and are therefore illegal and void, as not complying with the ordinance and proclamation of election."

The trial court found against plaintiff on the first three propositions, but found against defendant on the fourth.

Considering the first contention, section 5929, O. S. 1931, provides:

"Whenever any municipal corporation, or political subdivision, of the State of Oklahoma, shall vote any bonds or issue any funding or refunding bonds, such bonds shall be made to mature in annual installments, beginning not less than three or more than five years after their date. Such installments shall be in equal amounts of One Hundred ($100.00) Dollars, Five Hundred ($500.00) Dollars, or One Thousand ($1,000.00) Dollars, except that the last maturing installment may be for such sum less than two installments, as will complete the full issue of such bonds, notwithstanding the necessity of varying the amount thereof to complete the same."

The ordinance in question provides:

"Shall the City of Hominy, State of Oklahoma, incur an indebtedness by issuing its negotiable coupon bonds in the sum of $150,000.00 Dollars, to provide funds for the purpose of purchasing a site, constructing or acquiring an Electric Light and Power Plant and Distributing System, to be owned exclusively by said City, and levy and collect an annual tax, in addition to all other taxes, upon all of the taxable property in said City sufficient to pay the interest on said bonds as it falls due, and also constitute a sinking fund for the payment of the principal thereof when due, said bonds to bear interest at not to exceed the rate of 6 per centum per annum payable annually, and to become due serially within fifteen years from their date."

The precise issue presented is whether or not the ordinance and proclamation must contain the dates of the maturities of the bonds. Defendant contends that the law in force when a contract is made becomes a part of the contract and under the terms of section 5929, supra, the bonds must mature serially in equal annual installments, and that neither the Constitution nor the statutes require a determination by the people of the dates of maturity of the bonds, but said bond maturities must be fixed by the city officials. Defendant relies upon the rule announced in the case of Mayberry v. Gaddis, 88 Okl. 286, 213 P. 316, which is as follows:

"A ballot providing, 'Shall the board of county commissioners issue negotiable coupon bonds of Washington county, Oklahoma, in the sum of six hundred seventy-five thousand dollars, to mature within twenty-five years from date thereof, bearing interest at the rate of not to exceed six per centum per annum, payable semiannually for the purpose of building and constructing a permanent state road,' is in substantial compliance with the provision of section 1, c. 95, Laws 1921, and section 7622, Rev. Laws 1910, as to the length of time the bonds are to run and the rate of interest they shall bear."

Plaintiffs argue that the above case is not controlling since it was decided February 6, 1923, and section 5929, supra (being section 1, c. 22, Sess. Laws 1927), did not become effective until March 29, 1927, so that the provisions of section 5929, supra, were not considered in said decision. There would be some merit in plaintiffs' contention, if any of the provisions of section 5929, supra, either directly or by necessary implication required that the dates of maturities of the bonds be submitted to the people. Since there is no such provision, we find no cause or reason for overturning the established rule, which has been relied upon by the various municipalities of the state in dealing with many bond issues in the past. In the case of Clark v. City of Los Angeles, 160 Cal. 30, 116 P. 722, 723, it is said:

"A proposition to issue bonds to establish municipal electric works need not state when the bonds will mature."

The reasoning of the court in that case is appropriate herein since the court found that there was nothing in the Constitution nor in the statutes of California which required the time of maturity of the bonds to be decided by the vote of the people, and we find nothing in our Constitution or statutes making such requirement. See, also, Schooley v. City of Chehalis, 84 Wash. 667, 147 P. 410. The above case distinguishes the rule previously announced by said court in the case of Hansard v. Green, 54 Wash. 165, 103 P. 40, 24 L. R. A. (N. S.) 1273, 132 Am. St. Rep. 1107, and which is relied upon by plaintiffs.

In line with the above authorities it is apparent that there was no error on the part of the trial court in holding that the ordinance and proclamation sufficiently complied with the law in that respect.

In plaintiffs' second proposition the sufficiency of the notice of the sale of the bonds is attacked.

It is noted that the notice failed to set forth the date of maturity of the first installment of bonds. No detriment or damage is shown either to the city or to the bond buyers by this irregularity. It is pointed out by defendant that at a previous attempted sale of the bonds, which had been properly advertised, there were two bidders and at the subsequent sale had on the notice herein there were three bidders for the bonds. Plaintiffs' position in this regard is purely technical, and without merit.

Plaintiffs' third proposition relates to the necessity for a tax levy for the creation of revenue necessary for payment of the initial interest payment and the creation of a sinking fund for the payment of said bonds. Defendants take the position that since the bonds have not been sold and delivered, they should not be included with the bonded indebtedness of the...