Stanley v. Townsend

• Decision Date: 16 June 1916
• Citation: 170 Ky. 833,186 S.W. 941
• Parties: STANLEY ET AL. v. TOWNSEND.
• Court: Kentucky Court of Appeals

186 S.W. 941

170 Ky. 833

STANLEY ET AL. v. TOWNSEND.

Court of Appeals of Kentucky.

June 16, 1916

Appeal from Circuit Court, Franklin County.

Action by W. H. Townsend against A. O. Stanley and others. Judgment for plaintiff, and defendants appeal. Affirmed.

M. M Logan, Atty. Gen., and R. C. Stoll, of Lexington, for appellants.

Miller & Miller, of Lexington, for appellee.

THOMAS J.

The purpose of this action, filed by appellee as a citizen and taxpayer of the state in the court below against the Board of Sinking Fund Commissioners of the state of Kentucky and the officers composing it, is to test the constitutionality of an act passed by the Legislature at its 1916 session, known as Senate Bill No. 318, and being chapter 50 of the 1916 Acts and is found on page 500 of the official publication of the Acts enacted during that session. The trial court decided that the act was in violation of sections 49 and 50 of the Constitution of this state, and granted the prayer of the petition by permanently enjoining the Board of Sinking Fund Commissioners from exercising any of the powers or doing any of the things provided for by the act in question, and to reverse that judgment the appellants prosecute this appeal.

The two sections of the act which it is claimed contain the vice complained of are sections 3 and 6, they being as follows:

"Sec. 3. The Board of Sinking Fund Commissioners of the State of Kentucky may borrow money in anticipation of the revenues of the commonwealth for any fiscal year in order to make payment of current obligations for which the Auditor of Public Accounts shall have issued warrants in conformity with law. The Sinking Fund Commissioners shall sign and issue certificates of indebtedness for money borrowed, as herein authorized, which said certificates shall be under the seal of the commonwealth, attested by the Secretary of State. Such certificates shall in no event be made to exceed in the aggregate the amount estimated to be received from taxes and revenues of the commonwealth within any current fiscal year, after deducting all advances and fixed charges. Such certificates of indebtedness shall not run for a longer period than one year, and shall not bear a greater rate of interest than five per centum per annum, and shall not be sold for less than par and accrued interest.

The Board of Sinking Fund Commissioners is empowered to make contracts for the sale of such certificates of indebtedness as in its judgment, may be considered for the best interests of the commonwealth, with or without public advertisement as, in its discretion, may be deemed expedient.

In the event of the failure at any time of the Board of Sinking Fund Commissioners to provide for cash payment of warrants for current purposes as authorized in the preceding paragraphs, whenever any warrant hereafter issued by the Auditor of Public Accounts shall be presented to the Treasurer for redemption, and the funds appropriated for the purpose for which said warrant was issued are exhausted, the Treasurer shall indorse thereon the date of its presentation with the words, 'no funds with which to pay this warrant, and it bears five per cent. interest from this date until called in.' with his official signature thereto, and such warrant shall thereafter bear interest at the rate of five per cent. per annum, payable semiannually; provided, however, that the Board of Sinking Fund Commissioners may subsequently make contracts for the sale of certificates of indebtedness, the amount of which shall include a sum sufficient to cover the outstanding warrants of the Auditor issued for current purposes, as herein authorized, and thereupon the Treasurer in the manner hereafter provided, shall call such warrants for redemption and the same shall be redeemed out of the proceeds of sale of certificates of indebtedness so issued and sold.

For the payment of any and all certificates of indebtedness so issued and sold by the Board of Sinking Fund Commissioners, the taxes and revenues of the commonwealth for any current fiscal year are hereby appropriated and definitely set aside, and said taxes and revenues shall, when received, be first applied to the payment of said certificates of indebtedness and interest thereon, and any surplus taxes and revenues after the payment of said certificates of indebtedness may be applied to the extinguishment of warrants or other indebtedness of the commonwealth, as provided by law."

"Sec. 6. The Board of Sinking Fund Commissioners of the State of Kentucky may, at any time and from time to time, call in for payment all warrants which may now or which may hereafter be outstanding and upon which no date of maturity is now fixed, and the Board of Sinking Fund Commissioners may direct the Auditor of the State of Kentucky to issue in lieu thereof warrants in such denomination of not less than one hundred dollars as the Board of Sinking Fund Commissioners may determine upon, which said warrants shall be due and payable to bearer or as the Board of Sinking Fund Commissioners may provide at a time to be fixed by the Board of Sinking Fund Commissioners, not exceeding, however, five years from the date of issue, and such warrants shall bear such a rate of interest, not exceeding five per cent. as the Sinking Fund Commissioners may determine upon, and the date of maturity of each of said warrants and the rate of interest shall be indorsed thereon by the Treasurer. When any such warrants are issued as herein directed the Board of Sinking Fund Commissioners shall advertise in two or more newspapers in the State of general circulation that such warrants are for sale, and shall ask for bids for the amount thereof, and any person desiring to submit a bid shall make out same stating the rate of interest at which said warrants will be accepted and the par value in cash paid therefor, and file same with the said board on or before the date fixed in such advertisement, and upon the date fixed therefor by said board such bids shall be opened and the warrants sold to the bidder that offers to purchase them at the lowest rate of interest. When said warrants in which the maturity has been fixed as herein provided shall become due and payable, if there be no money in the treasury to pay said warrants other warrants may in like manner be issued in lieu thereof, with the date of maturity to be fixed by the Board of Sinking Fund Commissioners not exceeding five years from the date of issue of such warrants, and such warrants shall bear such rate of interest as the Board of Sinking Fund Commissioners may determine upon, not exceeding five per cent. and shall in like manner be indorsed by the Treasurer and sold by said board, and in like manner new warrants may be issued from time to time when and as warrants whose maturity has been fixed shall become due and payable, until there be money enough in the treasury to pay said outstanding warrants. The Board of Sinking Fund Commissioners shall have power to direct the Treasurer to pay off any part of said warrants the maturity of which has been fixed, as in this section provided, whenever there is money enough in the treasury for the purpose of paying said warrants when such warrants shall mature."

As stated, it is claimed that these sections provide for the creation of a debt by the Legislature contrary to the provisions of the two sections of the Constitution, supra, and, that we may fully understand the contentions made and be the more able to discuss the points raised, we insert herein the said sections; they being:

"Sec. 49. The General Assembly may contract debts to meet casual deficits or failures in the revenues; but such debts, direct or contingent, singly or in the aggregate, shall not at any time exceed five hundred thousand dollars, and the moneys arising from loans creating such debts shall be applied only to the purpose or purposes for which they were obtained, or to repay such debts: Provided, the General Assembly may contract debts to repel invasion, suppress insurrection, or, if hostilities are threatened, provide for the public defense.

Sec. 50. No act of the General Assembly shall authorize any debt to be contracted on behalf of the commonwealth except for the purposes mentioned in section forty-nine, unless provision be made therein to levy and collect an annual tax sufficient to pay the interest stipulated, and to discharge the debt within thirty years; nor shall such act take effect until it shall have been submitted to the people at a general election, and shall have received a majority of all the votes cast for and against it: Provided, the General Assembly may contract debts by borrowing money to pay any part of the debt of the state, without submission to the people, and without making provision in the act authorizing the same for a tax to discharge the debt so contracted, or the interest thereon."

It will be seen that a proper determination of the question presented involves, not only the construction of the sections of the statute quoted, but likewise a construction of the sections of the Constitution referred to in so far at least as to ascertain the sense in which the framers of the Constitution used the words "debts" and "debt" when limiting the power of the General Assembly to borrow money or contract debts as therein referred to. By section 49 the General Assembly is authorized to contract debts which in the aggregate shall not exceed $500,000, and such debts shall be "to meet casual deficits or failures in the revenue." This limitation on its power, however, does not apply if the debts are contracted to repel invasion, or for other purposes therein mentioned in the proviso, but which have no application to the question before us. If it should become...