Stateex rel Freeling v. Howard

• Court: Oklahoma Supreme Court
• Writing for the Court: HARDY, J.
• Citation: Stateex rel Freeling v. Howard, 171 P. 41, 67 Okla. 296, 1918 OK 93 (Okla. 1918)
• Decision Date: 12 February 1918
• Docket Number: 9613.
• Parties: STATE ex rel. FREELING, Atty. Gen., v. HOWARD, State Auditor (ALEXANDER, State Treasurer, Intervener).

171 P. 41

67 Okla. 296, 1918 OK 93

STATE ex rel. FREELING, Atty. Gen., v. HOWARD, State Auditor (ALEXANDER, State Treasurer, Intervener).

No. 9613.

Supreme Court of Oklahoma

February 12, 1918

Syllabus by the Court.

Chapter 89, Laws 1910-11, created the public building fund, to be composed of the proceeds of the sale and rentals of section 33, and lands granted to the state in lieu thereof for charitable and penal institutions and public buildings, and authorized the issuance and sale of $3,000,000 bonds, which should be payable out of said fund, and pledged the faith of the state to safely keep and preserve the proceeds of such sale and rentals, and apply same to the payment of the bonds authorized by that act, and to no other purpose or purposes. Bonds were issued and sold to the amount of $2,451,000, of which there have since matured and been paid bonds in the amount of $447,500. In 1917 the Legislature made certain appropriations for public buildings payable out of surplus moneys in the public building fund. Held, that so long as the appropriations did not exceed the amount that would be due on the amount of bonds authorized but not issued, with the interest that would accrue thereon, the conditions of the contract of the state with the holders of outstanding bonds would not be impaired.

Subsequent legislative enactment may be resorted to as an aid in the interpretation of prior legislation upon the same subject.

The state, as trustee for the bondholders, has the same powers as any other trustee would have under similar circumstances, and is under the obligation to exercise its powers for the conservation of the trust fund and the accomplishment of the trust purposes as a prudent man would exercise in the management of his own affairs.

Mandamus by the State of Oklahoma, on relation of S. P. Freeling Attorney General, against E. B. Howard, State Auditor, W. L Alexander, State Treasurer, intervener. Case submitted by agreement pursuant to statute as an original proceeding after leave of court obtained, and judgment for relator.

Thacker J., dissenting.

S. P. Freeling, Atty. Gen., and Hunter L. Johnson, Asst. Atty. Gen., for plaintiff.

Chas. F. Barnett, of Oklahoma City, for defendant and intervener.

HARDY J.

This is an agreed case submitted pursuant to the provisions of sections 5303 and 5305, Rev. Laws 1910, filed in this court as an original proceeding after leave of court first had and obtained.

The state, upon the relation of the Attorney General, prays a writ of mandamus directed to the state auditor, commanding him to open accounts against the public building fund of the state for the payment therefrom of appropriations made in 1917, and to issue a warrant against said fund in favor of W. T. Emerich, and also to compel said auditor to sign certain unsold public building bonds. W. L. Alexander, who, as state treasurer, holds a large part of the public building bonds of the state which have been deposited with him by various persons, intervened, and with defendant questions the right of the state to the relief prayed, and the controversy is submitted to the court to determine whether warrants may be lawfully issued against said public building fund to meet the appropriations made in 1917, and whether the receipts from the proceeds of the sale and rentals of lands known as section 33, and other lands granted in lieu thereof in excess of that required to pay maturing installments of bonds and accrued interest may be used to pay said appropriations, and whether certain unsold public building bonds, which have been signed by a former auditor, approved by a former Attorney General and registered by a former state treasurer, should be signed, approved, and registered by the respective persons now occupying those positions. The public building fund was created by chapter 89, Laws 1910-11, § 1, of which declares that all moneys received from the sale or rentals of section 33, and lands granted, in lieu thereof, should constitute and be known as the public building fund. Section 2 authorized the issuance and sale of $3,000,000 in bonds, payable out of the proceeds of said lands, and section 9 of said act is as follows:

"All bonds and interest thereon, when issued as provided for in this act, shall become payable out of the public building fund arising from the sale or rental of section 33, and lands granted to the state of section 33, and lands granted to the state in lieu thereof, until all of said bonds and interest thereon are fully paid. And the good faith of the state is solemnly pledged to administer the trust created by the terms of the Enabling Act and the Constitution of Oklahoma, to apportion and dispose of all lands granted to the state for charitable and penal institutions and public buildings, as the Legislature may prescribe, and safely keep and preserve the proceeds of the rental and sale thereof, and apply same to the payment of the bonds authorized by this act, and the interest thereon, as the same falls due, and to use such funds, constituting the public building fund, for no other purpose or purposes. All bonds shall be paid in the order in which they are issued. The state treasurer, commissioner of school land department and county treasurers are authorized to receive public building bonds as collateral security for the deposit of public funds in the various banks of the state."

Pursuant to this chapter bonds were issued and sold in the amount of $2,451,000, of which amount there has since matured and been paid bonds in the sum of $447,500, leaving outstanding bonds in the sum of $2,004,000 with coupons thereto attached for interest yet to accrue at the rate of 5 per cent. per annum.

It is conceded that the provisions of said chapter 89 constitute a contract between the state and the holders of the bonds now outstanding, and that the terms of said contract cannot be impaired by any subsequent legislation. The general rule is that, where a special fund has been pledged for use in the payment of bonds or other obligations, such fund may not be diverted to any purpose other than that to which it is pledged. Diggs v. Lobsitz, 4 Okl. 232, 43 P. 1069; Wabash & Erie Canal Co. v. Beers, 67 U.S. (2 Black) 448, 17 L.Ed. 327; Louisiana v. Jumel, 107 U.S. 711, 2 S.Ct. 128, 27 L.Ed. 448; Graham v. Horton, 6 Kan. 343; People v. Pachico, 29 Cal. 210; McCauley v. Brooks, 16 Cal. 11; Edemiller v. City of Tacoma, 14 Wash. 376, 44 P. 877; State v. Cardozo, 8 S. C. 71, 28 Am. Rep. 275; Park v. Candler, 113 Ga. 647, 39 S.E. 89; Western Savings Fund Society v. Philadelphia, 31 Pa. 175; Fazende et al. v. City of Houston (C. C.) 34 F. 95.

The Attorney General contends that the trust provisions of chapter 89 do not prevent the use of moneys received to the credit of the public building fund in excess of the amount required to pay installments of bonds and interest as they mature for the purpose of paying appropriations made, and, further, that the pledge made by section 9 of said chapter extends, not alone to the bonds actually sold, but to the full amount of bonds authorized, and that moneys accruing to said fund in excess of the amount necessary to pay current maturing bonds and interest may lawfully be used to meet appropriations made without impairing any contract obligation contained within chapter 89, so long as the amount used does not exceed the amount of unsold bonds and interest that would accrue thereon.

Previous to the sale of the bonds provision had been made for the sale of said lands on 40 years' time, the purchase price to be paid in installments and to bear interest. Rev. Laws 1910, art. 1, c. 69. And according to this plan there was provided an annual income sufficient to pay installments of bonds maturing and interest and leave an annual surplus of from $90,000 to $100,000. It certainly was not the intention of the Legislature that the total receipts to the credit of said fund should be paid to the bondholders, for all that they could demand would be the principal amount...