State ex rel. Nat. City Bank v. Board of Ed. of Cleveland City School Dist.

• Decision Date: 16 November 1977
• Docket Number: No. 77-1248,77-1248
• Citation: 6 O.O.3d 288,52 Ohio St.2d 81,369 N.E.2d 1200
• Parties: , 6 O.O.3d 288 The STATE ex rel. NATIONAL CITY BANK et al. v. BOARD OF EDUCATION OF the CLEVELAND CITY SCHOOL DISTRICT et al.
• Court: Ohio Supreme Court

Page 81

52 Ohio St.2d 81

369 N.E.2d 1200, 6 O.O.3d 288

The STATE ex rel. NATIONAL CITY BANK et al. v. BOARD OF EDUCATION OF the CLEVELAND CITY SCHOOL DISTRICT et al.

No. 77-1248.

Supreme Court of Ohio.

Nov. 16, 1977.

On November 2, 1977, oral arguments concerning relators' complaint were heard before this court. That same day, this court issued an alternative writ of mandamus directing respondents to show cause, by the filing of an answer or other pleading, on or before 12:00 noon, Friday, November 4, 1977, why a permanent writ of mandamus should not issue.

Both relators and respondents were directed to file briefs with this court on the question of jurisdiction of the District Court and this court.

On November 4, 1977, the Chief Judge of the District Court issued an order directing:

(1) that relators herein be joined as defendants in the District Court, with authority to file such pleadings and seek such relief as they deem necessary to protect their interests; and

(2) that relators be temporarily restrained and enjoined from further prosecuting or seeking to enforce any orders or claims arising from the mandamus proceedings in this court.

On November 10, 1977, the United States Court of Appeals for the Sixth Circuit issued an order staying the November 4, 1977, order of the District Court.

Victor E. DeMarco, Dennis M. Kelly, Jones, Day, Reavis & Pogue, Marc L. Swartzbaugh, John W. Edwards II, David W. Hart, Thomas F. Harvey and Roland E. Remley III, Cleveland, for relators.

Squire, Sanders & Dempsey, George I. Meisel, Charles F. Clarke, Bustamante, Donahoe, Palmisano & Co., L.P.A., and John H. Bustamante, Cleveland, for respondents Board of Education et al.

John T. Corrigan, Pros. Atty., and Thomas P. Gill, Cleveland, for respondents County Auditor and County Treasurer.

PER CURIAM.

There are two questions presented by this action. First, whether relators are entitled to a writ of mandamus under state law; and second, whether the allowance of the writ would improperly encroach upon the jurisdiction of the District Court in the pending desegregation action in which respondent board is a defendant.

I.

In order to be entitled to a writ of mandamus, relators must show (1) that they have a clear legal right to the relief prayed for, (2) that respondents are under a clear legal duty to perform the acts, and (3) that relators have no plain and adequate remedy in the ordinary course of the law. See State, ex rel. Long, v. Bettman (1970), 24 Ohio St.2d 16, 17, 262 N.E.2d 859; State, ex rel. Pressley, v. Indus. Comm. (1967), 11 Ohio St.2d 141, 228 N.E.2d 631.

R.C. 133.301 provides in part:

"(I)n anticipation of the collection of current tax revenues in and for any fiscal year, the board of education of any school district may borrow money and issue notes therefor * * *. The sums so anticipated shall be deemed appropriated for the payment of such notes at maturity." (Emphasis added.)

By resolution, the board issued the tax anticipation notes to relators pursuant to R.C. 133.301. The resolution stated that the board had levied taxes sufficient to "discharge such notes at maturity" and further provided that:

"Such tax shall be placed before and in preference to all other items and for the full amount thereof. The funds derived from such tax levy are irrevocably pledged for the payment of the interest and principal of such notes when and as the same fall due." (Emphasis added.)

To insure that a sufficient amount of appropriated funds will be available for payment of such notes at maturity, the General Assembly has established a procedure which must be followed by taxing authorities, including boards of education.

R.C. 5705.03 provides that every taxing authority shall "levy such taxes annually as are necessary to pay the interest and sinking fund on and retire at maturity the * * * notes * * * of such subdivision and taxing unit, including levies in anticipation of which the subdivision or taxing unit has incurred indebtedness."

R.C. 5705.09(C) requires every taxing authority to establish a bond retirement fund into which it must pay sufficient revenues to retire serial bonds, notes, and certificates of indebtedness at maturity.

R.C. 5705.10, which governs the distributions of revenue derived from tax levies, provides in relevant part:

"All revenue derived from general or special levies for debt charges * * * which is levied for the debt charges on serial bonds, notes, or certificates of indebtedness having a life of less than five years, shall be paid into the bond retirement fund ; and all such revenue which is levied for the debt charges on all other bonds, notes, or certificates of indebtedness shall be paid into the sinking fund." (Emphasis added.)

R.C. 321.34 requires the county auditor to allocate separately sufficient advance tax revenue for the payment of the board's outstanding indebtedness and to issue warrants for use in retiring the debt at maturity.

The above statutes establish a clear legal duty upon respondents. An absolute priority exists to retire the tax anticipation notes in preference to general operating expenses of the board. This priority comports with Section 11 of Article XII of the Constitution of Ohio which provides:

"No bonded indebtedness of the state, or any political subdivisions thereof, shall be incurred or renewed, unless, in the legislation under which such indebtedness is incurred or renewed, provision is made for levying and collecting annually by taxation an amount sufficient to pay the interest on said bonds, and to provide a sinking fund for their final redemption at maturity."

Section 11 of Article XII of the Constitution of Ohio imposes a mandatory duty upon the state and its political subdivisions to pay the interest and principal of their indebtedness before provisions are to be made for current operating expenses. See, e.g., State, ex rel. Bruml, v. Brooklyn (1933), 126 Ohio St. 459, 185 N.E. 841; State, ex rel. Alden Corp., v. Solon (1937), 132 Ohio St. 362, 7 N.E.2d 550. It bespeaks the will of the people of this state regarding fiscal policy, and contributes to the excellent credit standing enjoyed by our governmental entities prior to the situation which precipitated the action at bar.

Further strengthening relators' claims for immediate relief is Davis v. State, ex rel. Pecsok (1936), 130 Ohio St. 411, 200 N.E. 181, which held that tax anticipation notes can be paid only from the tax revenues in anticipation of which they were issued. Since, in that case, the anticipated tax revenues were expended for other purposes and thus were unavailable for payments of the notes at maturity, the holder of the notes was held to have no remedies available to recover the monies which it advanced.

The Davis case has not been overruled.

Relators understandably assert that, under Davis, if the tax revenues are expended for current operating expenses, relators will be unable to secure payments for the notes at maturity or at any future date.

Relators are entitled to a writ of mandamus directing respondents to perform their clear statutory duties; respondents' continued refusal to do so represents an affront to the Constitution of this state, which they have taken an oath to uphold.

The sole question remaining is whether this court has the jurisdiction to issue and enforce a writ of mandamus, in view of the action pending in the District Court.

II.

Original jurisdiction is conferred on this court in mandamus actions by Section 2(B)(1)(b) of Article IV of the Constitution of Ohio. Section 2(B)(3) of Article IV states that no law shall be passed or rule made whereby any person shall be prevented from invoking the original jurisdiction of this court. See State, ex rel. Pressley, v. Indus. Comm., supra.

Res...