Simonton v. City of Pontiac

• Decision Date: 19 June 1934
• Docket Number: Motion No. 363.
• Citation: 255 N.W. 608,268 Mich. 11
• Parties: SIMONTON et al. v. CITY OF PONTIAC et al.
• Court: Michigan Supreme Court

268 Mich. 11

255 N.W. 608

SIMONTON et al.

v.CITY OF PONTIAC et al.

Motion No. 363.

Supreme Court of Michigan.

June 19, 1934.

Mandamus proceeding by William A. Simonton and others against the City of Pontiac, the Commission of the City of Pontiac, and others.

Order in accordance with opinion.

Argued before the Entire Bench.

Claude H. Stevens, of Detroit (Berry & Stevens, of Detroit, of counsel), for plaintiffs.

William A. Ewart, City Atty., of Pontiac (Andrew L. Moore, of Pontiac, of counsel), for defendants.

Carlos J. Jolly, Detroit, Walter D. Kline, of Jackson, and James V. Oxtoby, of Detroit, amici curiae.

BUTZEL, Justice.

On July 12, 1920, the electors of the city of Pontiac, Mich., adopted a home rule charter in conformity with the provisions of article 8, §§ 20 and 21, of the Constitution of the state of Michigan, and Act No. 279 of the Public Acts of 1909, as amended (sections 2228 to 2274, C. L. 1929). On November 28, 1933, the city manager submitted to the city commission, which governs the city, a proposed budget for the fiscal year beginning January 1, 1934. In accordance with the provisions of section 5 of Act No. 273, Public Acts 1925 (section 2694, C. L. 1929), he included the sum of $562,966.41 for payments of the principal and interest on the general bonded obligations that would become due for the twelve months' period from August 1, 1934. This sum included general city and water obligations, but no special assessment obligations. It is expected that $68,306.39 will be realized during the year from the revenues from the water department, and, on application of this amount toward payment of interest on the water bonds, the additional sum of $494,660.02, would be required to pay principal and interest on the city obligations exclusive of the special assessment debts during the year. Notwithstanding this action of the city manager, the city commission, on or about January 1, 1934, enacted an annual appropriation ordinance that only included $75,204.86 for debt service in a budget in the amount of $861,112.74, which was to cover the expenditures of the city for the year. The sum thus included for debt service is $419,455.16 short of the $494,660.02 required for principal and interest on the city's obligations exclusive of special assessment debts maturing during the twelve months' period. The total assessed valuation on real and personal property for the year 1933 was $53,168.555. It was estimated that the assessed valuation for the year 1934 will be a similar amount, and, if a tax of 2 per cent. were levied, it would, if paid, bring in the sum of $1,063,371. The commission, however, by its ordinance intends to levy a tax on the assessed valuation so as to only realize the sum of $861,112.74, the amount of the budget as set forth in the ordinance. This sum is wholly inadequate to take care of the debt service and the other expenses of the city for the year. If the city undertook to raise a sufficient amount so as to include the debt service for the year, it would be necessary to levy a tax of 2.4 per cent. provided the assessed valuation for 1934 is neither larger nor smaller than that for the year 1933.

Plaintiffs are the members of a bondholders' protective committee for the city of Pontiac by virtue of an express trust contained in a written instrument vesting in them the legal title, with all rights and powers of ownership, in the bonds deposited thereunder. In this capacity they hold over 60 per cent. of the aggregate amount of the bonds and interest maturing during the year beginning August 1, 1934. On February 8, 1934, they sent a written communication to the mayor and the commissioners of the city of Pontiac, demanding that they levy upon the 1934 tax roll a sufficient sum so as to pay the full amount of principal and interest payments maturing during the year for debt obligations, and further that the ordinance previously adopted by the commission for the budget be amended so as to comply with this demand. After futile efforts to agree upon a mutually satisfactory refunding plan, plaintiffs brought satisfactory mandamus proceedings in this court, to compel the commission of the city of Pontiac to convene and amend its budget covering the items for bond principal and interest maturing during the twelve months' period beginning August 1, 1934, so as to provide the sum of $152,045 for the payment of principal and interest maturing during said period upon its water bonds, the sum of $246,250 for the payment of principal maturing during said period upon its other general obligation bonds, and the sum of $160,362.41 for the payment of interest maturing during said period upon its other general obligation bonds, and that said commission meet and amend its annual appropriation ordinance for 1934 so as to provide for a tax levy upon the 1934 city tax roll of the sum of $83,747.61 for the payment of principal and interest maturingduring the twelve months' period beginning August 1, 1934, upon its water bonds, the sum of $246,250 for the payment of principal maturing during said period upon its other general obligation bonds, and the sum of $160,362.41 for the payment of interest maturing during said period upon its other general obligation bonds, and that said annual appropriation ordinance be otherwise amended to conform with the foregoing, and that the city commission cause said taxe to be certified to the board of assessors of said city; that said writ of mandamus further require William R. Hansom and Leo J. Heenan, who constitute the board of assessors of said city, to spread said taxes upon the 1934 city tax roll, and that said writ of mandamus further require the performance by the officials of the city of Pontiac of all duties required by law for the levy and collection of taxes. The case is presented on duly verified petition, answer, reply to answer, and answer to reply.

Defendants in their answer claim that plaintiffs are not actually the owners of the bonds, and therefore not the proper parties in interest, and have no right to bring the proceedings. The bondholders' protective committee agreement dated October 27, 1932, and attached to the plaintiffs' petition vests in plaintiffs' title to the bonds with full power of ownership. They can give full acquittances and surrender the bonds and coupons on payment which they also have the right to enforce. The fact that they are named as trustees in the instrument does not preclude them from suing in their individual names. See Barak v. Detroit Apartments Corp., 232 Mich. 59, 204 N. W. 745;Curry v. Raich, 245 Mich. 146, 222 N. W. 160; also section 14010, C. L. 1929. Mandamus is the proper method of enforcing plaintiffs' rights. Burke v. City of River Rouge, 240 Mich. 12, 215 N. W. 18;Chemical Bank & Trust Co. v. Oakland County, 264 Mich. 673, 251 N. W. 395.

Defendants claim that the constitutional provision and legislative enactments herein set forth limit the rights of taxation for city purposes to a maximum of 2 per cent. for any fiscal year. They refer to the following provisions of the Constitution:

‘Article 8.

‘ Incorporation. Sec. 20. The legislature shall provide by a general law for the incorporation of cities, and by a general law for the incorporation of villages; such general laws shall limit their rate of taxation for municipal purposes, and restrict their powers of borrowing money and contracting debts.

‘ Charters; laws; ordinances. Sec. 21. Under such general laws, the electors of each city and village shall have power and authority to frame, adopt and amend its charter and to amend an existing charter of the city or village heretofore granted or passed by the legislature for the government of the city or village and, through its regularly constituted authority, to pass all laws and ordinances relating to its municipal concerns, subject to the Constitution and general laws of this state.’

Defendants also refer to the following two sections to the Home Rule Act, No. 279, Public Acts of 1909, found in section 2230 and 2241, C. L. 1929:

‘Sec. 2230 * * * Taxation. (f) That the subjects of taxation for municipal purposes shall be the same as for state, county and school purposes under the general law;

‘ Same. (g) For annually laying and collecting taxes in a sum not to exceed two (2) per centum of the assessed value of all real and personal property in the city. * * *

‘Sec. 2241 Restrictions. Sec. 5. No city shall have power:

‘ Rate of taxation. (a) To increase the rate of taxation now fixed by law, unless the authority to do so shall be given by a majority of the electors of said city voting at the election at which said proposition shall be submitted, but the increase in any case shall not be such as to cause such rate to exceed two (2) per centum of the assessed value of the real and personal property in such city.’

‘Section 13, Chapter 9. The aggregate amount which the commission may raise by a general tax upon the taxable real and personal property of the city, for the purpose of defraying the general expenses and liabilities of the corporation, shall not exceed in any one year, two per cent of the assessed value of all real and personal property in the city, as fixed by the assessment roll of the year preceding the year in which the tax is levied.’ Charter of City of Pontiac.

Plaintiffs, however, claim that the entire question is ruled by section 5 of Act No. 273 of the Public Acts of 1925, as amended (Comp. Laws 1929, § 2694), which in part provides as follows: ‘Sec. 5. Whenever any money shall be borrowed by any municipality it shall be the duty of every officer or official body charged with any duty in connection with the determination of the amount of taxes to be raised or with the levying of such taxes, to include in the amount of taxes levied each year an amount sufficient to pay the annual interest on all such loans, any installments of the principal thereof falling due before the time of the...