San Antonio I. Sch. Dist. v. Water Works Bd. of Trustees, 3179.

• Decision Date: 16 June 1938
• Docket Number: No. 3179.,3179.
• Citation: 120 S.W.2d 861
• Parties: SAN ANTONIO INDEPENDENT SCHOOL DIST. v. WATER WORKS BOARD OF TRUSTEES et al.
• Court: Texas Court of Appeals

120 S.W.2d 861

SAN ANTONIO INDEPENDENT SCHOOL DIST. v. WATER WORKS BOARD OF TRUSTEES et al.

No. 3179.

Court of Civil Appeals of Texas. Beaumont.

June 16, 1938.

Rehearing Denied October 26, 1938.

Appeal from District Court, Bexar County; S. G. Tayloe, Judge.

Suit by the San Antonio Independent School District against the Water Works Board of Trustees and others, to collect school taxes. From a judgment for defendants, plaintiff appeals. Transferred by the Supreme Court from the San Antonio Court of Civil Appeals.

Affirmed.

Hicks, Dickson & Lange, of San Antonio, for appellant.

Wm. Aubrey and Templeton, Brooks Napier & Brown, all of San Antonio, and Chauncey H. Clarke, of St. Louis, Mo., for appellees.

COMBS, Justice.

This case is before us on transfer by the Supreme Court from the San Antonio Court of Civil Appeals.

By this suit San Antonio Independent School District seeks to collect school taxes on the water works system of the City of San Antonio for the years 1925 to 1935, inclusive, amounting to $533,258.98. The sole question is whether the water works system is owned and held by the City of San Antonio, so as to be exempt from taxation under the Constitution and laws of this state. The controlling facts are free from conflict, and so far as necessary to the decision of the case may be summarized as follows:

For many years prior to June 1, 1925, the San Antonio Water Supply Company, a private corporation, owned the water works system in the city of San Antonio. On March 5, 1925, the 39th legislature enacted a statute effective as of that date, and entitled "An Act to empower cities having more than one hundred sixty thousand (160,000) inhabitants to purchase or otherwise acquire water systems, and additions, extensions and enlargements thereto, and additional water powers, riparian rights, and repairs of such systems; * * * prescribing the powers and limiting the manner of their exercise; providing for a board of trustees to carry out any contract or encumbrance, providing for the election of a trustee and his successor to make sale on default in payment; * * * prohibiting the sale of such systems unless authorized by a majority vote of the qualified property taxpayers, or under the terms of such encumbrance; and prohibiting the encumbrance of such systems for purchase money or original cost, unless authorized in like manner; providing for approval by the Attorney General," etc. Acts 1925, pp. 154-157, c. 33, Vernon's Ann.Civ.St. art. 1109a. This statute was re-enacted by the 43d Legislature in 1933, and there was added to the original Act provisions applicable to cities having more than 290,000 inhabitants, and also providing: "Sec. 7. All proceedings heretofore had by cities having more than one hundred sixty thousand (160,000) inhabitants, in the acquisition of any water systems, and the encumbrance of same, within the authority given by this Act, be and the same are hereby approved and ratified." Acts 1933, 43d Legislature, 1st C.S., page 113, Ch. 36, Vernon's Ann.Civ. St. art. 1109a, § 7. Both Acts (Vernon's Ann.Civ.St. art. 1109a, § 1 et seq.) authorized all cities having more than 160,000 inhabitants to purchase or otherwise acquire water systems, and additions or extensions to, or enlargements of, any such water systems; and to issue bonds or notes therefor; and to secure the payment thereof, to mortgage and encumber any such water systems; and providing for the fixing of rates; and providing that there shall be charged and collected for the services a sufficient rate to pay all operating, maintenance, depreciation, replacement, betterment and interest charges, and for interest and sinking fund sufficient to pay any bonds or notes issued to purchase, construct or improve any such systems, or of any outstanding indebtedness against same, and that no part of the incomes of any such systems shall ever be used to pay any other debt, expense or obligation of such city, until the indebtedness so secured shall have been finally paid. Both Acts (Vernon's Ann.Civ.St. art. 1109a, § 4) provided further that the management and control of such systems during the time same are encumbered may, by the terms of such encumbrance, be placed in the hands of the city council of such city, but, if deemed advisable, may be placed in the hands of a Board of Trustees to be named in such encumbrance, consisting of not more than five members, one of whom shall always be the Mayor of such city; and further that the terms of office of such Board of Trustees, their powers and duties, the manner of exercising same, the election of their successors, and all matters pertaining to their organization and duties may be specified in such contract of encumbrance; and providing further that, in all matters where such contract is silent, the laws and rules governing the council of such city shall govern said Board of Trustees so far as applicable. The Act also empowered the city council or Board of Trustees, having such management and control, to make rules and regulations governing the furnishing of service to patrons. The Act (Vernon's Ann.Civ.St. art. 1109a, § 5) also provided that the contract of encumbrance may name or provide for the selection of a trustee to make sale of the properties upon default, etc. And by the express terms of the Act (Vernon's Ann.Civ.St. art. 1109a, § 6), it provided that such water systems may not be encumbered for purchase money, or original cost, until such encumbrance shall have been authorized by a majority vote of the qualified property taxpayers of such city. The Charter of the City of San Antonio also authorized the city to acquire such water systems and issue bonds in payment thereof, the bonds to be liquidated out of the revenue of the plants.

Pursuant to the Act of March 5, 1925, and on June 1, 1925, the water works system was sold to the city of San Antonio by the following transactions. The owner, the San Antonio Water Supply Company, by deed conveyed the property to Natt T. Wagner, of St. Louis, Mo. Wagner in turn conveyed the property to the City of San Antonio in consideration of the city executing and delivering Wagner $7,000,000 in revenue bonds, payable serially over a period of forty years, with interest at the rate of 5½ per cent. A vendor's lien was retained to secure payment of the purchase price. As part of the transaction, the City of San Antonio and the St. Louis Union Trust Company entered into a trust agreement, by the terms of which the Water Works Board of Trustees was created and the City of San Antonio conveyed the water works system to St. Louis Union Trust Company, trustee, to secure payment of the bonds and interest. The deed of trust covers 50 pages of the statement of facts, and is far too lengthy even to summarize in this opinion. However, certain pertinent provisions may be stated as follows: "* * * the City of San Antonio covenants and agrees that so long as any of the bonds above mentioned shall remain outstanding and unpaid, the possession, management and control of said property, and all of its income and profits, shall be and is hereby placed in the hands of a Board of Trust to be known as the Water Works Board of Trustees, consisting of five members who are hereby appointed as follows: A. W. Seelingson, John W. Tobin (Mayor), and his successor in office, Conrad A. Goeth, S. B. Weller and Otto Wahrmund; * * * to continue in office until death, or until the last one of the bonds have been paid on May 1, 1965 * * * it being provided that said Board shall have to operate said property in accordance with the terms of said deed of trust and trust agreement, and such rules and regulations as may be adopted by said Board."

It was further provided that vacancies on the Board shall be filled by the surviving members of the Board, and that in filling vacancies on said Board the Mayor cannot vote. By the terms of the trust agreement, the trustee was given the right among other remedies to rescind the sale and to retake the property and hold the same as trustee for all the holders of outstanding bonds, with power to resell and distribute the proceeds among the bond holders, the city waiving all rights of redemption or appraisement. It was provided by the bonds and by the trust agreement that said bonds should never become a charge against the City, but payment is...