Schureman v. State Highway Commission

Citation141 N.W.2d 62,377 Mich. 609
Decision Date01 January 1966
Docket NumberNo. 2,2
PartiesJeptha W. SCHUREMAN, Plaintiff and Appellant, v. STATE HIGHWAY COMMISSION, a Michigan public body, Ardale W. Ferguson, Charles H. Hewitt, Wallace D. Nunn and Richard F. Vanderveen, jointly, and severally, Defendants and Appellees. ,
CourtSupreme Court of Michigan

Matheny, Schureman & Frakes, by John C. Frakes, Detroit, for plaintiff and appellant.

Frank J. Kelley, Atty. Gen., Robert A. Derengoski, Sol. Gen., Louis J. Caruso, Asst. Atty. Gen., Lansing, for State Highway Commission.

Before the Entire Bench.

O'HARA, Justice.

The precise question presented by this case is whether Art. 9, § 15, of the Michigan Constitution of 1963 applies only to general obligation bonds of this State or to its revenue bonds and special obligation bonds as well.

The involved section provides:

'Sec. 15. The state may borrow money for specific purposes in amounts as may be provided by acts of the legislature adopted by a vote of two-thirds of the members elected to and serving in each house, and approved by a majority of the electors voting thereon at any general election. The question submitted to the electors shall state the amount to be borrowed, the specific purpose to which the funds shall be devoted, and the method of repayment.'

The bonds here involved are designated 'State of Michigan, Detroit Expressway Bonds, Series IV.' The bonds, by their terms, are to be paid from the Motor Vehicle Highway Fund, the source of which is the proceeds of taxes imposed by State law upon gasoline and other motor fuels and upon motor vehicles registered in the State of Michigan.

Under the settled law of this State, while the Constitution of 1908 was in effect, revenue bonds were not subject to the constitutional borrowing limitations imposed upon general obligation bonds. See State Highway Commissioner v. Detroit City Controller, 331 Mich. 337, pp. 348--349, 49 N.W.2d 318, p. 325:

'At the outset, it has long been settled that revenue bonds issued by the state do not fall within the scope of sections 10 and 11, * * * (of the Constitution of 1908).'

Revenue bonds and special obligation bonds share an essential distinction from general obligation bonds. The credit of the State is pledged for the payment of general obligation bonds. It is not for revenue bonds and special obligation bonds. Special obligation bonds are retired from special tax revenues earmarked for that purpose. Revenue bonds are retired from the proceeds of the operation of the public structure or enterprise supporting their issuance.

The bonds here involved are special obligation bonds. Appellant contends that the quoted constitutional provision applies to them. If so, they are unconstitutionally issued since no prior legislative approval thereof was obtained, nor was their issuance submitted to the electorate for approval.

Appellees contend the constitutional limitation applies only to general obligation bonds pledging the credit of the State.

We hold Art. 9, § 15, does not apply to the special obligation bonds here involved. We hold that the quoted article is limited in its application to general obligation bonds pledging the full faith and credit of the State.

To construe the article in the manner contended for by appellant would require us to disregard the unmistakable intention of the constitutional convention expressed in its official record. When the adoption of the involved article was being debated, the following remarks by the chairman of the committee on finance and taxation were made: 1

"Bear in mind as you consider this that we are talking here only about general obligation indebtedness. This does not apply and is not intended to apply to the various forms of borrowing used in connection with state government but not actually by state government.

"The state highway department is borrowing, and the amount is somewhere about $300 million, on tax anticipation bonds. The dormitories at our universities and colleges, with the figure of somewhere about $120 million, are borrowing on revenue bonds." (Emphasis supplied.)

Were there any doubt as to whether this were not the clear intention of the convention at the time of adoption, it was dispelled by the confirmatory excerpt repeated in the Address to the People: 2

'This proposed section deals with long term borrowing such as we used when we paid bonuses to the veterans of 3 wars, when we borrowed for hospital construction, and in the decade of the '20s, Borrowed on full faith and credit for highway construction.' (Emphasis supplied.)

As suggested by the attorney general in his brief, the converse of this construction would create the anomalous situation in which revenue bonds issued by the State would require legislative...

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10 cases
  • City of Gaylord v. Beckett
    • United States
    • Supreme Court of Michigan
    • August 24, 1966
    ...the bonds have been regularly held not to be pledges of the State's credit. See the recent case of Schureman v. State Highway Commissioner, 377 Mich. 609, 611, 141 N.W.2d 62; Pinsky, State Constitutional Limitations on Public Industrial Financing: An Historical and Economic Approach, 111 Pe......
  • American Nat. Bank and Trust Co. v. Indiana Dept. of Highways
    • United States
    • Supreme Court of Indiana
    • September 17, 1982
    ...N.W.2d 533; Meagher v. Commonwealth ex rel. Unemployment Comp. Comm., (1947) 305 Ky. 289, 203 S.W.2d 35; Schureman v. State Highway Commission, (1966) 377 Mich. 609, 141 N.W.2d 62; Naftalin v. King, (1960) 257 Minn. 498, 102 N.W.2d 301; State ex rel. Dragstedt v. State Board of Education, (......
  • Request for Advisory Opinion on Constitutionality of 1986 PA 281, In re
    • United States
    • Supreme Court of Michigan
    • March 22, 1988
    ...from the proceeds of the operation of the public structure or enterprise supporting their issuance." Schureman v. State Hwy. Comm., 377 Mich. 609, 611-612, 141 N.W.2d 62 (1966). The question, then, is whether tax increment bonds, as described in Sec. 14 of the act, are more like general obl......
  • Advisory Opinion on Constitutionality of 1982 PA 47
    • United States
    • Supreme Court of Michigan
    • November 23, 1983
    ...the specific purpose to which the funds shall be devoted, and the method of repayment."The Court held in Schureman v. State Highway Comm., 377 Mich. 609, 141 N.W.2d 62 (1966), that art. 9, Sec. 15 applied only to general obligation bonds of the state.3 For the text of Const.1963, art. 9, Se......
  • Request a trial to view additional results

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