State ex rel. State Road Commission v. O'Brien

• Decision Date: 27 July 1954
• Docket Number: No. 10683,10683
• Citation: 140 W.Va. 114,82 S.E.2d 903
• Parties: STATE ex rel. STATE ROAD COMMISSION, v. O'BRIEN, Secretary of State.
• Court: West Virginia Supreme Court

Page 903

82 S.E.2d 903

140 W.Va. 114

STATE ex rel. STATE ROAD COMMISSION, v. O'BRIEN, Secretary of State.

No. 10683.

Supreme Court of Appeals of West Virginia.

Submitted June 8, 1954.

Decided June 15, 1954.

Dissenting Opinion July 27, 1954.

Syllabus by the Court.

Chapter 17, Article 17, of the official Code of 1931, as amended by Chapter 44, Acts of the Legislature, 1931, as amended by Chapter 113, Acts of the Legislature, 1939, as amended by Chapter 117, Acts of the Legislature, 1949, permitting the allocation and pledging of moneys in the State Road Fund, created by constitutional amendment, Article VI, Section 52, as additional security for bridge revenue bonds, does not constitute a debt of this State within the prohibition of Article X, Section 4, of the Constitution of West Virginia.

Donald L. Schaffer, Charleston, for relator.

John G. Fox, Atty. Gen., Robert E. Magnuson, Asst. Atty. Gen., for respondent.

BROWNING, Judge.

The State Road Commission of West Virginia invoked the original jurisdiction of this Court by filing herein its petition for a writ of mandamus seeking to require the respondent, D. Pitt O'Brien, Secretary of State of West Virginia, to attest and affix the great seal of the State of West Virginia to a bridge revenue bond issued by the petitioner, pursuant to the provisions of Code, 17-17, as amended. A rule was issued returnable on June 8, 1954, at which time the respondent appeared and demurred to the petition on the ground that the statutory provision authorizing and directing the State Road Commission to allocate from the State Road Fund sufficient funds to pay the principal and interest on Bridge Revenue Bonds, if there are insufficient funds in the State Sinking Fund to pay the principal and interest on such bonds, is violative of Article X, Section 4 of the West Virginia Constitution.

Pursuant to the provisions of Chapter 8, Acts of the Legislature, Regular Session, 1929, the State Road Commission adopted a resolution authorizing the issuance and sale of $1,800,000 of toll bridge revenue bonds. The bond in question, being one of that issue, is for the purpose of paying this State's proportionate share of the cost of a bridge to be constructed across the Kanawha River at Winfield, West Virginia, the Federal Government having provided a like sum for that purpose. The resolution, after first stating that the bonds shall not be an indebtedness of the State of West Virginia or any political subdivision thereof, provided for the payment of principal and interest out of the revenues to be derived from the operation of the bridge, but further states: '* * * the Commission covenants that, as additional security for the payment of principal and interest on the Bonds, it will allocate and transfer to the State Sinkling Fund Commission from the moneys in the State Road Fund, any sums needed for the payment of principal or interest on said bonds * * * to the full extent that the moneys on deposit in the Sinking Fund [from the bridge revenues] * * * are insufficient for the payment of the principal and interest * * *.'

The pertinent statutory provisions are: 'Any bridge or bridges constructed under the provisions hereof and forming a connecting link between two or more state highways, or providing a river crossing for a state highway, are hereby adopted as a part of the state road system, but no such bridge or bridges shall be constructed without the approval in writing of the state road commissioner and the governor. If there be in the funds of the state sinking fund commission an amount insufficient to pay the interest and sinking fund on any bonds issued for the purpose of constructing such bridge or bridges the state road commission is authorized and directed to allocate to said commission, from the state road fund, an amount sufficient to pay the interest on said bonds and/or the principal thereof, as either may become due and payable.'

The constitutional provision with which it is alleged by the demurrer that this legislation is in conflict, Article X, Section 4, follows: 'No debt shall be contracted by this State, except to meet causal deficits in the revenue, to redeem a previous liability of the State, to suppress insurrection, repel invasion or defend the State in time of war; but the payment of any liability other than that for the ordinary expenses of the State, shall be equally distributed over a period of at least twenty years.'

In 1942, the people of this State amended their Constitution by adding Section 52 to to Article VI, which section reads as follows: 'Revenue from gasoline and other motor fuel excise and license taxation, motor vehicle registration and license taxes, and all other revenue derived from motor vehicles or motor fuels shall, after deduction of statutory refunds and cost of administration and collection authorized by legislative appropriation, be appropriated and used solely for construction, reconstruction, repair and maintenance of public highways, and also the payment of the interest and principal on all road bonds heretofore issued or which may be hereafter issued for the construction, reconstruction, or improvement of public highways, and the payment of obligations incurred in the construction, reconstruction, repair and maintenance of public highways.'

The framers of our Constitution, being acutely aware of the experience of the Commonwealth of Virginia with debts contracted by it, and with the numerous suits resulting in heavy judgments and costs against her, in 1872 adopted the provisions of Article X, Section 4, providing that this State should not contract indebtedness except in specified instances.

This Court held in Bates v. State Bridge Commission, 109 W. Va. 186, 153 S.E. 305, that bridge revenue bonds did not constitute debts of the State of West Virginia when payment of such bonds was to be made exclusively from the revenues derived from the project, and respondent makes no contention to the contrary. Neither is it contended that under the broad powers with which it is invested that the State Road Commission could not construct, as a part of the State Road system, if it desired and funds were available therefor, a free bridge at Winfield, with moneys from the State Road Fund, inasmuch as such bridge will form a connecting link between two state highways, and provide a river crossing for a State highway. The issue thus presented, as to whether toll bridge revenue bonds, the primary security for the payment of which is the income from the project, may be further secured by pledging the resources of the State Road Fund upon condition that the income from the primary source becomes inadequate, is one of first impression in this State. If such procedure constitutes the contraction of a debt by the State, it is prohibited by Article X, Section 4, of the Constitution. Although novel to this jurisdiction, an examination of the authorities shows that the question has arisen and been decided in many others.

In 49 Am.Jur. 280, States, Territories, and Dependencies, § 67, under the subheading 'Obligations payable from Special Funds', this statement appears:

'Although the cases are not entirely in accord and dissenting opinions have been frequent, it has generally been held that an obligation payable from a special fund created by the imposition of fees, penalties, or excise taxes, and for the payment of which the general credit of the state is not pledged and resort may not be had to property taxation, is not a debt within the meaning of constitution debt limitations. Such a limitation applies solely to that arising from a general levy and not excise taxes.'

Many states have followed the so-called 'Special Fund Doctrine', even where such funds were created and segregated solely by statutory authority, without the benefit of a constitutional provision. In Willett v. State Board of Examiners, 112 Mont. 317, 115 P.2d 287, 289, the issuance of bonds was proposed for the construction of a state building, the bonds being payable out of two funds, a Veteran's Mentional Fund, and income from the Capitol Building land grant. The court, in holding that the issuance of such bonds did not create a debt in violation of the constitutional provisions of that state, said: 'The next point raised is that the Act authorized the creation of a debt contrary to section 2, Article XIII of the Constitution. That section prohibits the creation of a debt in excess of $100,000 unless the law authorizing it shall have been submitted to the people. However, it should be noted that the bonds authorized by Chapter 79 are not an obligation payable from the general fund of the State of Montana. The bonds are expressly made payable from the two funds named in the Act, and the Act does not contemplate the levy of any taxes for the purpose of discharging the bonds. When bonds are made payable from a fund in being, and where they will not involve the levy or collection of any additional tax, there is no debt created within the meaning of section 2 of Article XIII. * * *' To the same effect is State ex rel. Capitol Addition Bldg. Comm, v. Connelly, 39 N.M. 312, 46 P.2d 1097, 1101, 100 A.L.R. 878, where the issuance of bonds had been authorized for the construction of an addition to the State Capitol Building, and provision was made that the bonds were to be paid from a specified amount levied upon every civil action filed in the state courts. The court, holding that no debt was created in the constitutional sense, said:

'With these obvious implications that the framers of the Constitution were writing and thinking of a debt repayable from the proceeds of a property tax levy against the general assessment rolls, it is easy to believe that the debt whose creation is thus prohibited, or whose amount is so limited, is one pledging the general faith and credit of the state or other subdivision, with a consequent right in the holders of such indebtedness to look to the...