Property Owners, Inc. v. City of Anderson

• Decision Date: 23 July 1952
• Docket Number: No. 28767,28767
• Citation: 107 N.E.2d 3,231 Ind. 78
• Parties: PROPERTY OWNERS, Inc. et al. v. CITY OF ANDERSON et al.
• Court: Indiana Supreme Court

Page 3

107 N.E.2d 3

231 Ind. 78

PROPERTY OWNERS, Inc. et al. v. CITY OF ANDERSON et al.

No. 28767.

Supreme Court of Indiana.

July 23, 1952.

George R. Jeffrey, George B. Jeffrey, Indianapolis, Grace B. DeArmond, Anderson, for appellants.

P. B. O.'Neill, Anderson (Philip Welsh, Clyde H. Jones, Deputies Atty. Gen., of counsel), for appellees.

JASPER, Chief Justice.

This is an appeal from a judgment denying a permanent injunction. Appellants filed their complaint in five paragraphs to enjoin appellees from issuing and selling Electric Revenue Bonds authorized by ordinance. Appellees filed a demurrer to the fourth and fifth paragraphs of complaint, which demurrer was sustained. An answer under our Rule 1-3 was filed to the first two paragraphs, and the parties in the trial court proceeded to trial on those paragraphs and the third paragraph on the theory that all allegations of the latter had been denied. Special findings of fact and conclusions of law were requested. Judgment was entered by the trial court upon the conclusions of law, denying appellants' prayer for a permanent injunction.

Appellee, City of Anderson, has been operating a municipal light plant for the manufacture and distribution of electric light and power since the year 1896 up to and including the present time. From time to time, the City of Anderson has increased the size of its electric plant by the erection of additional buildings, the last of which was in the year 1943. Electricity is sold to both private and commercial users. The present plant is obsolete, and Ordinance No. 1825 of the City of Anderson was enacted, authorizing the issuance of Electric Revenue Bonds of the City of Anderson in the amount of $6,500,000, for the purpose of constructing extensions and additions to the municipal electric system. On March 31, 1949, a special session of the City Council was called and held in the Mayor's office. All members of the City Council were present, and Ordinance No. 1825 was introduced and given its first reading. Upon unanimous vote, the rules were suspended and the ordinance was advanced to second reading, and was read by title only. By unanimous vote, a special meeting was set for April 5, 1949, at 7:30 p. m., for final action on the ordinance. On April 5, 1949, the Council met in the Council Chambers, in the City Hall of Anderson, and the ordinance was read for the third time and unanimously adopted. On April 5, 1949, some of the citizens protested the passage of the ordinance, requesting additional time. On June 9, 1949, appellee, City of Anderson, filed with the Public Service Commission its petition to fix additional rates and for authority to issue revenue bonds. Notice of a public hearing on the petition was given, a hearing was held, and the Public Service Commission authorized the issuance of Electric Revenue Bonds in the sum of $6,500,000, and further authorized an increase of rates to be charged the users of electricity. The order of the Public Service Commission was not appealed. On October 15, 1949, appellant, Property Owners, Inc., along with another, filed a complaint in the Superior Court of Madison County to enjoin the enforcement of the order of the Public Service Commission. A plea in abatement was filed, to which plaintiffs filed a demurrer. The demurrer was overruled, and judgment was entered for the defendant, Public Service Commission. This judgment was not appealed. Appellants then filed the case at bar.

Appellants assign as their first two grounds of error the sustaining of appellees' demurrer to their paragraphs four and five of complaint. Their third assignment of error alleges that the trial court erred in each of the third, fourth, fifth, sixth, seventh, and eighth conclusions of law. An assignment of error to a conclusion of law admits the correctness of the special findings of fact, and that they are full, complete, and true. Edmundson v. Friedell, 1928, 199 Ind. 582, 159 N.E. 428. Their fourth assignment alleges error of the trial court in overruling their motion for a new trial.

Appellees contend that the third assignment of error is a joint assignment and does not comply with Rule 2-6 of this court, which provides that each assignment shall be separately stated and numbered. Appellants' third assignment of error is as follows:

'The trial court erred in each of the third, fourth, fifth, sixth, seventh and eighth conclusions of law.'

Our Rule 2-6 reads as follows:

'There shall be attached to the front of the transcript * * * a specific assignment of the errors relied upon by the appellant in which each specification of error shall be complete and separately numbered. * * *'

Under our rule, if errors are not separately assigned, we will consider them as being jointly assigned. In the case at bar, appellants, by assigning error to each of the conclusions of law, thereby made a separate assignment to each conclusion. State ex rel. Johnson v. Boyd (v. Viets, v. Krack), 1940, 217 Ind. 348, 362, 28 N.E.2d 256. The third assignment of error was sufficient to comply with our Rule 2-6.

Appellants' assignment of errors numbered one and two raise identical questions and will be grouped together.

Appellants contend that the Municipal Electric Revenue Bonds are invalid, as being in violation of Section 1, Article 13, of the Constitution of Indiana, which provides, in part, as follows:

'No political or municipal corporation in this State shall ever become indebted in any manner or for any purpose to an amount in the aggregate exceeding two per centum on the value of the taxable property within such corporation, to be ascertained by the last assessment for State and county taxes, previous to the incurring of such indebtedness; and all bonds or obligations, in excess of such amount, given by such corporations, shall be void * * *.'

Section 54-611, Burns' 1951 Replacement, provides, in part, as follows:

'(a) To provide for the payment of any utility purchased, acquired or constructed under this act, or the extension, replacement, in whole or in part or the repair thereof, the said municipal council shall be, and is hereby authorized to issue and sell bonds, as herein defined, bearing interest at a rate not exceeding six per cent per annum, executed in such manner and payable at such times not exceeding forty years from the date thereof, and at such places as the municipal council shall determine, which bonds shall be payable only out of the special fund heretofore provided. * * * Any such bonds so issued and the interest thereon shall be a valid claim only against the said special fund, and said bonds shall not constitute an indebtedness of such municipality within the meaning of the constitutional provisions and limitations. * * *

'(b) Said municipal council shall have full power to adopt all ordinances and to take such other steps as may be necessary to carry into effect the provisions of this act, which ordinances may contain such provisions and stipulations for the administration and protection of such special funds as such municipal council shall deem necessary, and to include such ordinances as may be necessary to provide for the operation and management of the utility owned by such municipality.'

It is well settled that Municipal Electric Revenue Bonds are not a general debt or obligation of a city, but a debt of the city payable only out of a special fund, and in no sense is such debt payable out of funds to be raised by taxation or out of the general fund, which would bring the bonds within the prohibition of Section 1, Article 13, of the Constitution of Indiana. Letz Mfg. Co. v. Public Service Commission of Ind., 1936, 210 Ind. 467, 4 N.E.2d 194; Underwood v. Fairbanks, Morse & Co., 1933, 205 Ind. 316, 185 N.E. 118; CITY OF LAPORTE V. GAMEWELL FIRE ALARM TELEGRAPH CO., 1896, 146 IND. 466, 45 N.E. 588,¹ 35 L.R.A. 686; Fox v. City of Bicknell, 1923, 193 Ind. 537, 141 N.E. 222.

Appellants further contend that the ordinance is invalid and unconstitutional because it created a debt of the City of Anderson in excess of its constitutional debt limit, and the bonds are, in substance, secured by a mortgage on the property of the City of Anderson.

Appellants contend that Section 8 of the Ordinance, which provides, in part, as follows:

'* * * and the city hereby irrevocably covenants, binds and obligates itself not to sell, lease, mortgage or in any manner dispose of said system, including any and all extensions and additions that may be made thereto, until all the bonds herein authorized to be issued shall have been paid in full, both principal and interest, or unless and until legal and sufficient provision for such payment shall have been made * * *,'

amounts to placing a mortgage upon the existing electric utility. With this we cannot agree. The last-cited section of the ordinance in no manner created a lien against the municipal utility property, and the property was not, under the ordinance, pledged to secure the debt. The last-cited section of the ordinance, in substance, provides that ownership of the municipal light plant would remain in the City of Anderson. The property was not pledged or mortgaged to secure the bonds.

Appellants further contend, under their assignment of errors one and two, that section 9 of the ordinance creates a general debt of the City of Anderson. This section provides:

'That for the further protection of the holders of the bonds herein authorized to be issued and the coupons thereto attached, any holder of said bonds or any of the coupons, may either at law or in equity, by suit, action, mandamus or other proceeding, enforce and compel performance of all duties imposed by law and this ordinance, including the making and collecting of sufficient rates and segregation of the income and revenues and the application thereof.

'If there be any default in the payment of the principal of or interest on any of said bonds, then upon the filing of suit by any...