San Antonio Independent Sch. Dist. v. Board of Trustees

• Decision Date: 03 April 1947
• Docket Number: No. 4500.,4500.
• Citation: San Antonio Independent Sch. Dist. v. Board of Trustees, 204 S.W.2d 22 (Tex. App. 1947)
• Parties: SAN ANTONIO INDEPENDENT SCHOOL DIST. v. BOARD OF TRUSTEES OF THE SAN ANTONIO ELECTRIC & GAS SYSTEM, et al.
• Court: Texas Court of Appeals

204 S.W.2d 22

SAN ANTONIO INDEPENDENT SCHOOL DIST. v. BOARD OF TRUSTEES OF THE SAN ANTONIO ELECTRIC & GAS SYSTEM, et al.

No. 4500.

Court of Civil Appeals of Texas. El Paso.

April 3, 1947.

Rehearing Denied April 24, 1947.

Appeal from District Court, Bexar County; Roy C. Archer, Judge.

Action by the San Antonio Independent School District against the Board of Trustees of the San Antonio Electric & Gas System, and others to recover an amount alleged to be due under a certain indenture, or in the alternative for declaratory judgment establishing the rights of plaintiff to such sum of money. Judgment for defendants and plaintiff appeals.

Affirmed.

Davis, Hall, Clemens & Knight and A. V. Knight, all of San Antonio, for appellant.

T. D. Cobbs, Jr., and W. L. Matthews and Truehart, McMillan & Russell, all of San Antonio (Brewer, Matthews, Nowlin & Macfarlane, of San Antonio, and Perry M. Chadwick, of Chicago, Ill., of counsel), for appellees.

PRICE, Chief Justice.

This is an appeal by San Antonio Independent School District from the judgment of the District Court of Bexar County, 57th Judicial District. Appellant sued the City of San Antonio, the Board of Trustees of San Antonio Electric & Gas System, and Harold Eckhart and Harris Trust & Savings Bank, Trustees for the bondholders under a trust indenture. Sought was a judgment in a large sum. Alternatively, a declaratory judgment establishing the rights to a large sum of money arising from the operation on behalf of the city of San Antonio of a certain Electric and Gas System owned by the said city but operated for same by a Board of Trustees. The cause of action asserted was alleged to have arisen by virtue of certain provisions in an indenture by which title was conveyed for the benefit of the city to a certain Gas and Electric System, and which, subject to certain priorities, provided there should be paid out of the funds arising from the operation of said utilities to said appellant, San Antonio Independent School District, the sum of $113,750 per annum for a period of 30 years. This indenture likewise secured the payment of $33,950,000 of revenue bonds issued by the city of San Antonio to finance the purchase of the gas and electric systems.

The trial was to the court; judgment that plaintiff take nothing and denying the declaratory judgment as sought by plaintiff. For convenience the plaintiff below will be hereinafter referred to as District, defendant City of San Antonio as the City, defendant Board of Trustees of San Antonio Electric & Gas System as Board, and the trustees for the bondholders Harold Eckhart and Harris Trust & Savings Bank, as Trustees.

The facts in this case are undisputed. There is in reality but one question presented, and that is, did the court in rendering judgment for defendants, correctly apply the law to the undisputed facts.

It is deemed necessary to state the facts in some detail. This controversy arose out of the purchase by the city from the San Antonio Public Service Company, a private corporation, of the light and power plant system, and a gas distribution system. The purchase price was $33,950,000. The city financed the purchase by the issuance of revenue bonds in the sum of the purchase price.

The city and district were at all relevant times separate and distinct municipal corporations. The district is an independent school district and has been such for over 30 years. When the transaction took place giving rise to the litigation, the territories of the two municipal corporations were coincidental. There has been some slight change in the boundaries thereafter, but this fact is not deemed material to the disposition of this appeal.

When the city became interested in the acquisition of the property of the San Antonio Public Service Company it was without funds to pay for the legal and engineering services incidental to intelligent negotiation for the purchase of said systems. On June 15, 1942, the city entered into a contract with certain investment bankers whereby the bankers agreed to furnish legal, engineering and negotiating services and to bid on the bonds it was contemplated should be issued by the city to finance the purchase. These investment banks will be hereinafter referred to as Bankers. In this financing contract it was provided that an appropriate part of the revenue arising from the operation of the utilities by the city should be utilized as reimbursement for such losses as may be suffered by the city and the city schools by reason of transferring the properties from private to municipal ownership.

On July 10, 1942, as required by the bond and warrant law, the city by ordinance gave notice of its intention to acquire the aforesaid utilities, financing same by the issuance of revenue bonds. No election was demanded as to whether or not these bonds be issued. On July 25, 1942, the city enacted an ordinance for the issuance of revenue bonds and containing a trust indenture, one of the provisions of which was as follows: "Section 5. From the next available money in the Revenue Fund after all payments contemplated by Sections 3 and 4 of this article have been made, there shall be paid to the bank which is at the time acting as depositary of general city funds, to be used for general city purposes as may from time to time be approved by the Commissioners of the City of San Antonio, the annual sum of $210,300, and there shall also be paid to the treasurer of the Independent School District of the City of San Antonio, subject to approval as to allocation by the Commissioners of the City of San Antonio, the annual sum of $113,750, both sums to be paid as reimbursement to the City of San Antonio and Independent School District for the loss of taxes which would have been imposed on the properties of the system had the system remained under private ownership. To the extent that such remaining revenues are sufficient such payments shall be made in equal monthly installments. The obligation to pay such annual sums to the city and to the Independent School District shall be cumulative and if in any year the money in the Revenue Fund after making the payments required by Sections 3 and 4 of this article shall be insufficient to pay in full the sums so due for such year, so much thereof as possible shall be so paid and the deficiency shall be paid from the first revenues available in the succeeding year or years after the payments required by Sections 3 and 4 of this article shall have been made in such year or years."

On August 24, 1942, the bonds were purchased by the investment bankers aforesaid for $33,950,000 and a premium of $3,157. It was stated in the consummation of the purchase that same was in accordance with and subject to the terms of "our agreement entered into with the city of San Antonio under date of June 15, 1942."

On October 9, 1942, a trust indenture, the exact or substantial provision the same as the indenture set forth in the aforesaid ordinance of July 25, 1942, was executed by the officials of the city, and on October 13, 1942, by the trustees for the bondholders. On October 23, 1942, the city by ordinance duly passed, confirmed, ratified and approved the transaction and directed delivery of the bonds. The entire transaction was closed on October 24, 1942.

The City and the board, on the advice of the ...