State ex rel. Edwards v. Osborne

• Citation: 7 S.E.2d 526,193 S.C. 158
• Decision Date: 27 February 1940
• Docket Number: 15028.
• Parties: STATE ex rel. EDWARDS et al. v. OSBORNE et al.
• Court: United States State Supreme Court of South Carolina

7 S.E.2d 526

193 S.C. 158

STATE ex rel. EDWARDS et al. v. OSBORNE et al.

No. 15028.

Supreme Court of South Carolina

February 27, 1940

Samuel Want, James S. Verner, Sam Rogol, and E. C. Dennis, Jr., all of Darlington, for petitioners.

John M. Daniel, Atty. Gen., J. Ivey Humphrey and M. J. Hough Asst. Attys. Gen., and C. T. Graydon, of Columbia, for respondents.

FISHBURNE Justice.

This is an application to the Supreme Court in its original jurisdiction by G. B. Edwards, a citizen and taxpayer of Darlington County, and F. L. Muldrow, a citizen of the same county and the owner of a state highway certificate of indebtedness,-- who was allowed to intervene in the proceeding,--to restrain the respondents from issuing and selling $1,546,000 of state highway certificates of indebtedness, the proceeds from which sale, it is alleged are to be turned over to the State Treasurer to be used for the current expenses of the State; and to enjoin the Highway Commission from paying over to the State Treasurer $454,000 out of funds in the hands of the Commission, to be used for the current expenses of the State. This is a representative suit, and petitioners seek to have certain statutes, hereinafter more particularly referred to authorizing the sale of the certificates and the transfer of the fund mentioned, declared unconstitutional. These proposed steps the petitioners alleged are in violation of their constitutional rights, and derogatory to the interest of the State.

The respondents are the South Carolina Highway Commission, the Chief Highway Commissioner, the Governor, and the State Treasurer.

It is charged in the petition that these officials, purporting to act under the provisions of Sections 99 and 100 of Act No. 346, 41 St. at Large, pp. 568, 649, approved July 1, 1939 (the general State Appropriation Bill for the fiscal year beginning July 1, 1939), have taken steps looking toward the sale of the certificates of indebtedness, and the transfer of the funds above mentioned, with the purpose of having the money derived from the sale, and the $454,000 in the hands of the Commission, paid into the general treasury of the State and used in the payment of the State's current expenses. Injunctive relief is prayed.

A rule was issued by a Justice of this Court, directed to the respondents, requiring them to show cause why the prayer of the petition should not be granted. The respondents have made a joint return, in which they admit the factual allegations of the petition, but deny the factual and legal conclusions therein expressed. They also join in the demurrer to each petition challenging the conclusions of law upon which the petitioners rely, and contesting the claim of petitioners that they have an interest sufficient to enable them to maintain the action. It is specifically alleged in the petition that the governor and the state treasurer have undertaken to advertise for bids for the sale of the certificates of indebtedness, and that the State Highway Commission has been called upon for the transfer of the $454,000 to the State Treasurer. The proposed certificates would be payable over a period of thirteen years, extending to 1952.

The petitioners, upon various grounds, challenge the legality of the aforesaid acts and purposes and the constitutionality of the enactments upon which the same are based. The legislation which is assailed is embraced in Sections 99 and 100 found in the general State Appropriation Bill. These sections read as follows:

"§ 99. From the proceeds of the sale of State Highway Certificates of Indebtedness to be issued and sold during the fiscal year July 1, 1939-June 30, 1940, pursuant to authority contained in Chapter 127 of the Code of Laws of 1932, the State Highway Department is hereby authorized and directed to pay to the State Treasurer the sum of $1,546,000.00 which amount shall be credited to the general fund of the State and used for the current expenses of the State for the fiscal year commencing on the first day of July, 1939.

"§ 100. The State Highway Department is hereby authorized and directed to pay from its current revenues derived from the five cents gasoline tax and the motor vehicle license tax the sum of $454,000.00 to the State Treasurer, which amount shall be credited to the general fund of the State and used for the general expenses of the State for the fiscal year commencing on the first day of July, 1939, the said payment to be made at such time as may be agreed upon by and between the State Highway Department and the State Treasurer."

It is contended by petitioners that the legislation here under attack, which authorizes a diversion of highway funds to general State purposes, is an attempt to subvert the whole foundation upon which this Court considered it proper to sanction the issuance of highway certificates for highway construction, payable from a special fund, --that is, the gasoline tax and the automobile license fees, without requiring compliance with the constitutional direction that the public debt shall not be increased without a vote of the people. It is said that if the Legislature can at this time divert,-- directly by the appropriation of $454,000 of highway funds, and indirectly by the sale of $1,546,000 of highway certificates,--the $2,000,000 of funds now involved, it can repeat the practice from year to year, with both lesser and larger diversions, and can thereby completely nullify in effect the judicial declaration as announced in many decided cases that state highway certificates of indebtedness are not debts of the State in a constitutional sense, because primarily they can be expected to be paid out of the special funds created and allocated for their payment.

We have been furnished with exceptionally able briefs by counsel for the petitioners and the respondents, commensurate with the importance of the case, which exhaustively review the history of highway legislation in this State, culminating in the passage of the State Highway Bond Act (Act 1929, XXXVI St. at Large, page 670), providing for a State Highway System of roads. And our attention is directed to the many cases decided by this Court in which these statutes have been construed and their constitutionality passed upon. Because of the comprehensive and enlightening character of the written arguments submitted, our task has been made much lighter in passing upon the issues presented in this proceeding, and in the preparation of this opinion.

A resume of previous legislation dealing with our State Highway System of roads, while perhaps not necessary, will serve as a useful introduction to our discussion of the questions now before us.

Under the law in force at the time of the passage of the Pay-As-You-Go Act of March 21, 1924 (XXXIII St. At Large, Page 1193), the State Highway Commission, with the consent and cooperation of the local road authorities of the several counties, had created a more or less loosely connected system of highways. By the Act of 1924 these highways were incorporated, along with other highways authorized and directed to be maintained, into a closely knit highway system created by the Act, and the State Highway Department was charged with the construction and maintenance of these roads. It was provided by the Act, as amended, that such construction and maintenance should be by means of a fund consisting of Federal Aid money, the motor vehicle license tax, and three-fifths of the five cents gasoline tax. The Commission estimated that these revenues would be sufficient to complete the entire system within eighteen years from and after the year 1924, and made numerous agreements for reimbursements within that period. Owing to the fact that many miles of highway were added to the system by subsequent legislation, the Commission found it necessary to make a new estimate of the time required for the completion of the work.

Under Acts passed in 1926 and 1927, county and district bonds were issued on the faith of these highway revenues. These Acts created a State obligation to collect the gasoline and license taxes, and to pay over to each county or road district the proportionate share of such taxes pledged to the retirement of the respective county or district bonds, and the Court recognized the legality of legislative action to create State obligations of this kind. Evans v. Beattie, 137 S.C. 496, 135 S.E. 538; Briggs v. Greenville County, 137 S.C. 288, 135 S.E. 153. Advances of large sums of money were made to the State which called for repayment by the State out of those yearly revenues, of which a continuing appropriation was made by the Legislature. The county bond plan, with its extension to a few isolated districts, while materially aiding construction in different sections of the State, was not adapted to any early completion of the statewide connected system of improved highways.

The inability of many counties to pay the interest on highway bonds issued by them, from the two cents gasoline tax distributed to them, was due to the fact that such distribution was made on the basis of motor vehicle license tax collections, rather than on the basis of mileage or cost of construction of state highways, in the several counties. Owing to this inability, many counties could not issue bonds under the reimbursement plan, and many of the most important highways in the State Highway System were left to be constructed in the remote future under the so-called Pay-As-You-Go plan of financing. The Legislature in 1929 succeeded in remedying this situation, through the passage that year of the Act which provided for a comprehensive system of highways under a state unit plan, to be financed by the issuance of state highway certificates of indebtedness. This Act was declared valid...