Whitley County v. Hermann

• Decision Date: 24 March 1936
• Citation: 92 S.W.2d 797,263 Ky. 440
• Parties: WHITLEY COUNTY et al. v. HERMANN et al.
• Court: Kentucky Court of Appeals

92 S.W.2d 797

263 Ky. 440

WHITLEY COUNTY et al. v. HERMANN et al.

Court of Appeals of Kentucky

March 24, 1936

Appeal from Circuit Court, Whitley County.

Suit by Whitley County and others against Dr. Edward Hermann and others. From an adverse judgment, plaintiffs appeal.

Affirmed.

Tye Siler, Gillis & Siler, of Williamsburg, for appellants.

W. B Early, of Williamsburg, H. H. Owens, of Barbourville, Martin M. Hugg, of Indianapolis, Ind., Peter, Heyburn, Marshall &amp Wyatt, of Louisville, and S. S. Willis, of Ashland, for appellees.

RICHARDSON Justice.

The decisive question presented is whether $190,000 of road and bridge bonds issued and sold by Whitley county are invalid. The county claiming they are invalid, by this action sought their cancellation. Issues were formed by appropriate pleadings, and there is no question of practice or pleadings presented, except as to Dr. C. B. Rice, to which we shall hereafter advert.

The county's bonds aggregating $440,000 were issued by the fiscal court; $250,000 of them, under the authority of an election held on April 24, 1914; $150,000, under an election held November 6, 1923; and 45 funding bonds, January 22, 1917.

It is conceded that the county was authorized by the voters to issue the $250,000, of which, on July 15, 1915, $150,000, 5 per cent. bonds; on January 15, 1917, $55,000, 4 1/2 per cent. bonds; on July 15, 1918, $45,000, 4 1/2 per cent. bonds were issued and sold by the fiscal court; $150,000, under an election held on the 6th day of November, 1923, were issued and sold January 1, 1924.

On the 22d day of January, 1917, the county was indebted $45,000, "theretofore incurred and contracted in the construction and repair of turnpikes and bridges of the county which indebtedness was evidenced by warrants of the county then in the hands of various persons bearing interest at the rate of 6% per annum, and it was believed by the fiscal court to be to the best interests of the county to refund this indebtedness at a low rate of interest and to issue bonds for the purpose of taking up and canceling warrants," which was accordingly done under appropriate orders of the fiscal court.

Thus the county has two issues of road and bridge bonds aggregating $400,000, and $45,000 funding bonds. The insistence that the $190,000 of them are void, fails to distinguish those issued on the authority of the voters and the $45,000 funding bonds.

The fiscal court, in its order relating to the issuance of the $250,000 bonds, first provides that "the sum of money hereafter to be paid by the Commonwealth of Kentucky to Whitley County for reimbursing said county for one-half of the said $250,000.00 spent by Whitley County for the construction of the roads, etc., be, and they are now appropriated to be used for the purpose of paying said bonds, etc." This order also provides that a levy of 20 cents on each $100 of taxable property, subject to taxation for county purposes, be "levied and appropriated to pay said bonds and to create a sinking fund, etc." It contains this provision: "There shall be and there is levied and appropriated in the year 1915, and for each subsequent year thereafter until the interest and principal of said bonds shall have been duly paid, an annual tax of 20-cents as provided by the constitution and amendments thereto, particularly Section 174." It contains a further provision that if the aforementioned appropriations shall not be sufficient to pay interest and provide a sinking fund, there is levied not exceeding 10 cents out of the general fund of 50 cents, be set aside for that purpose, "and said taxes shall be annually levied so long as any of said bonds are outstanding." It authorized loaning the interest on the fund thus accumulated, to go to the sinking fund. The bonds were issued of a denomination to mature annually with interest within a definite period. The bonds and interest which matured between the dates of the issuance of the first $150,000 and the issuance of the $55,000 and the $45,000 were paid as they matured, and seemingly they have been paid as they matured to the bringing of this action, in March, 1933. The state aid received in the interim by the county has been applied to the payment of the principal and interest of the matured bonds.

We shall consider the bonds issued on the authority of the voters separately from the funding bonds, for the simple reason they are in a different category. We may say in the outset the burden was upon the county and the complaining taxpayers to establish the invalidity of the bonds or any portion thereof.

The parties seem to agree on the following controlling principles: A fiscal court cannot issue bonds under section 157a of the Constitution which cannot be fully paid within the time fixed for their maturity with the 20-cent tax authorized by this section. It can only issue bonds under this section to the extent of 5 per cent. of the assessed value of its taxable property, that it can pay with the 20-cent tax authorized by it. Otherwise, it cannot do so, but must confine the issue to a sum that can be paid by this tax without reference to other taxes or funds. It is immaterial how many different issues of bonds, authorized by voters of the people, are outstanding at the...