State ex rel. City of Fulton v. Smith

• Citation: 194 S.W.2d 302,355 Mo. 27
• Decision Date: 30 April 1946
• Docket Number: 39843
• Parties: State ex rel. City of Fulton, a Municipal Corporation, Relator, v. Forrest Smith, State Auditor
• Court: United States State Supreme Court of Missouri

194 S.W.2d 302

355 Mo. 27

State ex rel. City of Fulton, a Municipal Corporation, Relator, v. Forrest Smith, State Auditor

No. 39843

Supreme Court of Missouri

April 30, 1946

Original Proceeding in Mandamus.

Writ denied.

T A. Faucett for relator.

(1) Article VI, Section 27 is a self-executing grant of power to cities to issue negotiable interest bearing revenue bonds for the purpose of paying the cost of purchasing, constructing extending and improving certain utilities, payable solely from the revenues of such utilities. No ancillary legislation is needed to give it full force and effect. 11 Am. Jur., sec 72, p. 689; State ex inf. McKittrick v. Wymore, 343 Mo. 98, 119 S.W.2d 941; State ex inf. Norman v. Ellis, 325 Mo. 154, 28 S.W.2d 363; Woodmansee v. Kansas City, 346 Mo. 919, 144 S.W.2d 137; City of Springfield v. Monday, 353 Mo. 981, 185 S.W.2d 788; State ex rel. Kersey v. pemiscot Land & Cooperage Co., 317 Mo. 41, 295 S.W. 78; State ex rel. Edwards v. Miller, 21 Okla. 448, 96 P. 747; Adams v. City of Hobart, 166 Okla. 267, 27 P.2d 595; Welch v. City of Nicholasville, 225 Ky. 312, 8 S.W.2d 400; Johnson v. Middleton, 243 Ky. 251, 47 S.W.2d 1030; Harrison v. Roberts, 264 Ky. 62, 94 S.W.2d 296. City of Middleton v. City Commission of Middleton, 138 Ohio St. 596, 37 N.E.2d 609; Pfau v. City of Cincinnati, 142 Ohio St. 101, 50 N.E.2d 172. (2) A constitutional requirement that a power may be exercised only upon a favorable vote of electors at an election constitutes a grant of power to call and hold an election in accordance with statutes governing elections on similar questions. State ex rel. Clark County v. Hackmann, 280 Mo. 686, 218 S.W. 318; State ex rel. v. M., K. & T. Ry. Co., 164 Mo. 208, 64 S.W. 187. (3) The fact that the General Assembly may appropriately enact legislation regulating the exercise of a constitutionally granted power does not affect the self-executing character of the constitutional grant. McGrew v. Missouri Pac. Ry. Co., 230 Mo. 496, 132 S.W. 1076; Tremayne v. St. Louis, 320 Mo. 120, 6 S.W.2d 935. (4) Article VI, Section 27 of the Missouri Constitution grants power to cities to issue revenue bonds for the extension or improvement of utilities already owned and operated by the city and to pay such bonds from the revenues of the entire plant as extended or improved or both. Woodmansee v. Kansas City, 346 Mo. 919, 144 S.W.2d 137; Grossman v. Public Water Supply District, 339 Mo. 344, 96 S.W.2d 701; Simpson v. City of Highwood, 372 Ill. 212, 23 N.E.2d 62; City of Middleton v. City Commission of Middleton, 138 Ohio St. 596, 37 N.E.2d 609. (5) The power to issue bonds payable solely from the revenues of a utility, granted to cities by Article VI, Section 27 of the Missouri Constitution necessarily includes power to make reasonable agreements and covenants looking to the security of the revenue bonds and to the creation and maintenance of the revenues required for their payment. State ex rel. City of Blue Springs v. McWilliams, 335 Mo. 816, 74 S.W.2d 363; City of Springfield v. Monday, 353 Mo. 981, 185 S.W.2d 788. (6) The payment of a premium to the holder of a bond which is called for payment prior to its maturity is merely a condition upon the exercise of the power to call, is a common practice, and is valid. (7) The ballot used at the election in the City of Fulton at which the bonds were authorized was valid. State ex rel. City of Memphis v. Hackmann, 273 Mo. 670, 202 S.W. 7.

J. E. Taylor, Attorney-General, and Drake Watson, Assistant Attorney General, for respondent.

(1) Respondent is not directed or authorized by any law to register the revenue bonds of the relator. Even if Section 27, Article VI of the 1945 Constitution is applicable, no provision of said section requires the State Auditor to register such bonds. Sec. 27, Art. VI, 1945 Constitution. (2) The registration of bonds article, Article 6. Chapter 16, Revised Statutes, 1939, clearly relates to registration of bonds payable from taxation and not to revenue bonds. Art. 6, Chap. 16, R.S. 1939; Secs. 3301, 3303, R.S. 1939. (3) If the registration of bonds article be held, contrary to its clear language and expressed intent, to authorize the registration of revenue bonds, then it would follow by virtue of the provisions of Section 3307, part of the same article, that such revenue bonds must become lawful security for investment of the reserves of insurance companies, as security for the deposit of any and all state funds, county or city funds, and fiduciary funds, without liability upon the issuer of the taker of such security except for "inexcusable negligence." Sec. 3307, R.S. 1939. (4) Section 6985, R.S. 1939, cannot be held to authorize registration of revenue bonds because such Section, by its express terms, relates exclusively to taxation bonds. Sec. 6985, R.S. 1939. (5) The right to have bonds registered with and certified by the State Auditor is a privilege giving the special advantage of qualification for security for public and fiduciary funds to the bond issuer and it should not be extended by application of statutes of particular purpose to other and different purposes. All sections of a statute must be construed together and harmonized if possible. In re Rossing's Estate, 85 S.W.2d 495, 337 Mo. 544; City of Springfield v. Monday, 185 S.W.2d 788; Nordberg v. Montgomery, 173 S.W.2d 387, 351 Mo. 180. (6) Section 27, Article VI, 1945 Constitution (a) authorizes the general principle of creation of debt and issuance of revenue bonds therefor by municipalities but (b) restricts and prohibits such issues unless approved by 4/7's vote, unless the constructed or acquired plants are owned exclusively by the municipality, and unless cost of operation and maintenance and the principal and interest are payable solely from revenues derived from operations. Provisions of a State Constitution which merely lay down as a general principle that municipal corporations may do certain things and which do not prescribe the necessary means for the enjoyment of the right are not self-executing and legislation is necessary to make them effective. 16 C.J.S., p. 106; Lyon Lumber Co. v. Livingston Parish School Board, 286 F. 114; City of Detroit v. Oakland Circuit Judge, 212 N.W. 207; Zachary v. City of Wagoner, 292 P. 345, 146 Okla. 268; Bone v. Bowen, 185 P. 133, 20 Ariz. 592; Ivie v. Bailey, 5 S.W.2d 50, 319 Mo. 474, 57 A.L.R. 881. (7) Provisions of a State Constitution which are restrictions or prohibitions are self-executing unless it appears from the language used and the circumstances surrounding the adoption of the provisions that legislation is contemplated. 12 C.J.S., p. 101. (8) Where the matter with which a given section of a Constitution deals is divisible, one clause thereof may be self-executing and the other clause or clauses may not be self-executing. 16 C.J.S., p. 98; State ex rel. Miller v. O'Malley, 117 S.W.2d 319; State v. Duncan, 175 S.W. 940, 265 Mo. 26; State v. Rogers, 247 P. 828; State v. Kellaher, 177 P. 944, 90 Ore. 588.

D. C. Chastain and A. Z. Patterson amici curiae.

(1) Respondent is not directed nor authorized to register the revenue bonds of the relator. Sec. 27, Art. VI, 1945 Mo. Constitution; Art. 6, Chap. 16, R.S. 1939. (2) Sec. 27, Article VI of the new Constitution is not self-enacting. St. Joseph School Board v. Patton, 62 Mo. 444; State ex rel. v. Gibson, 195 Mo. 251; State ex rel. Sedalia v. Weisnich, 236 S.W. 872; Fahey v. Hackmann, 237 S.W. 252; 12 C.J.S., sec. 107, p. 730; Lyon Lumber Co. v. Livingston Parish School Board, 286 F. 114. (3) The bonds in question were payable only from a special fund, and therefore are non-negotiable instruments. On their face, they purport to be negotiable and for that reason they should not be registered by the State Auditor. McQuillin, Mun. Corporations, (2d Ed. Rev.), sec. 2428; Northern Trust Co. v. Welmette, 220 Ill. 417, 77 N.E. 169; National Bank of LaCrosse v. Petterson, 200 Ill. 215, 65 N.E. 687; Cleveland, C.C. & St. L. Ry. Co. v. Edward C. Jones Co., 20 Ind.App. 87, 50 N.E. 319; Mauker v. Am. Savs. & Trust Co., 131 Wash. 430, 230 P. 406. (4) A bond made payable out of a special fund is non-negotiable. Lorimer v. McGreevy, 84 S.W.2d 667; 11 C.J.S. 434; 9 C.J. 48, note 73. (5) A municipal debt evidenced by revenue bonds payable solely from earnings of a municipal utility is a contingent liability. Woodmansee v. Kansas City, 44 S.W.2d 108, 329 Mo. 184; City of Lebanon v. Schneider, 163 S.W.2d 588.

Leedy, J. All concur, except Gantt, J., absent.

OPINION

LEEDY

By this original proceeding in mandamus the City of Fulton seeks to compel the State Auditor to register Bond No. 1 of a series of 1 1/4% revenue bonds of said city issued for the purpose of paying a part of the cost of extending and improving its municipally owned combined water and electric light works, and thus test the validity of said bond issue. The questions presented are issues of law, the facts having been admitted.

The city determined the necessity of extending and improving the plant or works in question at an estimated cost of $ 426,000.00, of which the sum of $ 226,000.00 (derived from the revenues of said plant) is on hand. The balance of the estimated cost, to-wit, $ 200,000.00 the city proposes to finance by the issuance and sale of the revenue bonds in question which are payable, as to both principal and interest, solely from revenues derived from the operation of said plant.

The bonds were voted at a special election held December 11, 1945, pursuant to Ordinance No. 1091 (duly passed and approved November 13, 1945), which provided for the submission to the qualified voters of the city of the single proposition following:

"Shall the City of Fulton, Missouri, issue and sell its negotiable interest bearing...