State v. City of Lakeland
| Decision Date | 28 October 1943 |
| Parties | STATE et al. v. CITY OF LAKELAND et al. |
| Court | Florida Supreme Court |
On Rehearing March 7, 1944.
Appeal from Circuit Court, Polk County; D. O. Rogers, Judge.
E. E Callaway, Raymond C. Smith, and John S. Edwards, all of Lakeland, and L. Grady Burton, of Wauchula, for appellants.
H. N Casebier, Thos. W. Bryant, and E. Snow Martin, all of Lakeland, and Walton, Lantaff, Atkins & Carson, of Miami for appellees.
This appeal is from a final decree validating City of Lakeland 'Refunding Bonds, Series 1943', in the amount of $5,350,000, to be issued for the purpose of refunding a like amount of outstanding bonds of the city designated, respectively 'General Refunding Bonds, Issue of July 1, 1936' and 'General Refunding Bonds, Issue of July 1, 1939.' The underlying debt extended by the 1936 and 1939 refunding issues was evidenced, originally, by bonds validly issued in 1912, 1915, 1924 and 1926, all of which pledged, either the 'full faith, funds, property, credit and resources' or the 'full faith, credit, and resources', of the city for the retirement of the principal and interest thereof. The final decree validating the General Refunding Bonds of 1936, and of 1939, recognized the pledges theretofore made, by authorizing the refunding issues to be payable in the same manner and from the same funds and resources and to carry the same security and contract rights as the original bonds thereby refunded.
In the present refunding program the city seeks, in terms, to pledge not only ad valorem tax revenues to the payment of the bonds but also 'surplus net revenues' derived by the city from the operation of its light and water system, to the extent that ad valorem tax collections shall prove insufficient to fully service the bond obligation.
It is first contended by the respondents that such pledge may not be made without the approval of the freeholders of the municipality, for that an express pledge of future unappropriated revenues from these utitities materially enlarges the original contract between taxpayer and bondholder, and increases the security for the payment of the indebtedness; which may not be done unless authorized by the vote of a majority of the freeholders of the city who are qualified electors. See Section 6, Article IX, Constitution of Florida; City of Ft. Myers v. State, 129 Fla. 166, 176 So. 483; State v. City of Sanford, 128 Fla. 171, 174 So. 339.
The city's argument in reply to this contention is that under the pledge of the 'full faith, funds, property, credit, and resources' of the municipal corporation, contained in the original bonds, the 'surplus net revenues' of the light and water system were pledged to the payment of the original funded debt and constituted a part of the security for its payment; and that the provision expressly pledging 'surplus net revenues', now sought to be incorporated in the 1943 Refunding Bonds, does no more than preserve the pledge originally made, to the end that such revenues shall be and remain a part of the security for the payment of the original debt, as now extended.
We cannot agree that 'surplus net revenues' of the light and water system of the municipality have ever been 'pledged' to the payment of the debt, in the sense that the city now uses the word. In our view the pledge contained in the original obligations no more constitutes an express pledge of surplus light and water revenues, in the legal sense of the term, than it does of surplus funds derived from other municipal functions, either proprietary or governmental. In fact, such pledge does not create a specific lien on any particular property. It does no more, in legal effect, than express an undertaking by the city to be irrevocably obligated, in good faith, to use such of its resources and taxing power as may be authorized or required by law for the full and prompt payment of the principal and interest of the obligation as it becomes due under its terms. Such was the construction placed by the court on a pledge of similar wording in the case of State ex rel. Babson v. City of Sebring, 115 Fla. 176, 155 So. 669. And, although it has been argued in briefs that what was said there on the point was dicta and not necessary to the decision at hand, the fact remains that, whether dicta or not, the statement made is, nevertheless, a clear expression of the correct rule of law on the subject, which we adopt here as being appropriate to the facts of the present case. See State et al. v. County of Citrus et al., 116 Fla. 676, 157 So. 4, 97 A.L.R. 431; Bonds and Bond Securities, Jones, Vol. 1, Sec. 415.
It takes but a moment's reflection to understand that an express pledge of revenues to be derived from a particular source does something different than this. Such pledge creates a lien or charge upon the specific revenues designated, whether then or thereafter collected, to the extent, and for the life, of the pledge; and until the underlying obligation is satisfied, precludes the lawful appropriation of such revenues to any other governmental function or municipal purpose that will be prejudicial to the payment of the debt for which the pledge was given.
No illustration can make this clearer, we think, than the provisions of the pledge here sought to be incorporated in the present refunding bonds. By the terms of the refunding resolution 'surplus net revenues' are considered to mean all sums remaining from gross revenues from the water and light system, after there shall have been first deducted only reasonably necessary expenses of maintaining said system, and a sufficient sum to retire principal and interest of a prior indebtedness incurred for an extension of the water and light facilities. To insure the application of such surplus net revenues to the uses pledged, the city covenants that it will not use such revenues for purposes other than that contemplated by the resolution, in an amount which might render the money in the fund set up for that purpose insufficient to meet the obligations imposed on it by the resolution. The city likewise agrees that it will not dispose of or encumber the plant, or any substantial part thereof; that it will maintain insurance thereon for the benefit of the bondholders; and that it will not issue obligations payable from such revenues having priority over the bonds in question. Obligations may be issued on an equality with the bonds sought to be validated, provided that the same are issued only for the purpose of improving, extending, or repairing the present system; that none of the present bonds are then in default as to principal and interest; and that approval from nationally recognized utility engineers can be secured showing that revenues from the improved, extended, or repaired system will pay the expenses of maintaining and operating the same, will pay off and discharge principal and interest of the outstanding indebtedness including the 1943 Refunding Issue, and will pay principal and interest on the new obligations so proposed to be issued for such extended facilities.
There can be no doubt but that such a...
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