Williams v. Town of Dunnellon

• Decision Date: 03 August 1936
• Citation: 169 So. 631,125 Fla. 114
• Court: Florida Supreme Court
• Parties: WILLIAMS v. TOWN OF DUNNELLON et al.

169 So. 631

125 Fla. 114

WILLIAMS v. TOWN OF DUNNELLON et al.

Florida Supreme Court

August 3, 1936

En Banc.

Suit by E. L. Williams against the Town of Dunnellon and others. From a decree dismissing the bill of complaint, E. L. Williams appeals.

Affirmed. Appeal from Circuit Court, Marion County; J. C B. Koonce, judge.

COUNSEL

D. Niel Ferguson, of Ocala, for appellant.

W. E Smith, of Ocala, for appellees.

OPINION

WHITFIELD Chief Justice.

This appeal is from a decree dismissing the bill of complaint herein which seeks to enjoin the issue of water revenue certificates by the town of Dunnellon. It is in effect alleged, among other matters not necessary to be here stated in view of the decree of validation, that $14,000 of water revenue certificates to be issued by the town of Dunnellon Fla., for the purpose of making stated proposed improvements and extensions to an existing waterworks system owned and operated by the town of Dunnellon in its proprietary capacity since the year 1909, have been validated by the circuit court; but that such water revenue certificates are in legal effect bonds of the town of Dunnellon, and as they have not been approved by the freeholder electors of the town, the issue of such certificates would violate section 6 of article 9 of the Florida Constitution as amended in 1930, notwithstanding the decree of the circuit court validating the water revenue certificates. See Weinberger v. Board, of Public Instruction, 93 Fla. 470, 112 So. 253; Boykin v. Town of River Junction (Fla.) 169 So. 492, filed June 17, 1936.

The certificates state upon their face that they are payable 'solely from the bond fund provided therefor'; and that the ordinance under which the certificates were issued 'provides that the Town shall fix and maintain rates and collect charges for the facilities and services afforded by the water supply system, which will provide revenues sufficient at all times, to pay the cost of operation, maintenance, and repairs of said system, and to pay into the Bond Fund created and designed by said ordinance as 'Water Revenue Certificate Sinking Fund,' a sufficient amount of Revenue over and above such cost of operation, maintenance, and repairs, to pay the interest on, and the principal of said certificates as the same respectively become due.'

The ordinance contains the following:

'Section 5. The water supply system of the Town shall be operated on a fiscal year basis, commencing on the first day of each year and ending on the December 31, following:

'From and after the effective date of this Ordinance, all of the revenue derived from the operation of said water supply system shall be deposited as received into an account designated 'Water Revenue Account' (hereinafter called the 'Revenue Account') and the monies in said Revenue Account shall be set aside into separate and special funds, as follows:

'(a) Operation, Maintenance, and Repair Fund: There is hereby created and established the fund designated 'Water Operation, Maintenance and Repair Account' (hereinafter called the 'Operation Account') into which there shall be paid out of the Revenue Account a sufficient amount during each month to provide for the reasonable current expenses of operation, maintenance, and repairs of the water supply system.

'(b) Water Revenue Certificates Sinking Fund: There is hereby created and established a 'Water Revenue Certificates Sinking Fund' (hereinafter called the 'Bond Fund') into which shall be paid in approximately equal monthly installments during each fiscal year after making the above required payments into the Operation Account, an amount equal to one hundred per cent (100%) of the amount required to pay:

'1. The next maturing installment of principal of any of said certificates.

'2. The interest payments to fall due on all outstanding certificates up to and including the date of the next maturing installments of principal of any of said Certificates and,

3. An amount at least equal to twenty per centum (20%) of the sum of the amount required by (1) and the amount required by (2) in order to provide a reasonable reserve in such bond Fund. The payments required by (3) shall be continued until there is in said Bond Fund an amount sufficient to meet the next maturing installment of principal of any of said Certificates and the interest payments due on all outstanding Certificates up to and including the date of the next maturing installment of principal of any of said Certificates * * * and the principal and interest payments to fall due during the next two fiscal years thereafter. No payment need be made into the Bond Fund if, and when, the amount in such Bond Fund is at least equal to the aggregate principal amount of interest then due or thereafter to become due on said Certificates.

'If in any month for any reason there shall not be paid into said Bond Fund the amounts required by this Section, then an amount equal to such deficiency in the amount required to be paid into said Bond Fund in such month shall be added to the amount otherwise required to be paid into said Bond Fund during the next succeeding month.

'The monies in said Bond Fund shall be used solely for the purpose of paying the principal of, and the interest on, the Certificates and for no other purpose. All monies in said Bond Fund shall be deposited in a bank, or banks, which are members of the Federal Reserve System and shall be continually secured by direct obligations of the United States of America which obligations shall be at all times at least equal to the amount of monies in said Bond Fund in Market Value.

'Section 7. The Town hereby covenants and agrees with the holders of such certificates that while any of the certificates or coupons issued hereunder are outstanding and unpaid:

'(a) The Town will maintain the water supply system in good condition, and operate the same in an effecient manner and at a reasonable rate.

'(b) The Town shall fix and maintain rates and collect charges for the facilities and service afforded by the water supply system which will provide revenue sufficient at all times to pay the cost of operation, maintenance, and repairs of said system and to maintain the Bond Fund as hereinbefore provided by Section 6(b) hereof.

'(c) The Town will not issue any additional obligations payable from the revenues of said system unless the lien of such obligations on the revenues of said system is made junior and subordinate in all respects to the lien of the Certificates issued hereunder, and that it will not sell, mortgage, lease or otherwise dispose of or encumber any property essential to the proper operation of the water supply system.

'(d) The Town will maintain insurance on the water supply system of the kind and in an amount which usually would be maintained by private corporations owning and operating a similar undertaking.

'(e) The Town will keep proper books of record and account, separate from all other records and accounts, in which complete and correct entries shall be made in accordance with standard principles of accounting, of all transactions relating to the system. The Town shall furnish to any holder of any of the Certificates at the time outstanding, at the written request of such holder, not more than thirty days after the close of each six months fiscal period, complete operating and income statements of the system in reasonable detail, covering such six months period, and not more than sixty days after the close of each fiscal year complete financial statements of the system in reasonable detail covering such fiscal year and certified by independent auditors if so requested.

'(f) Any holder of any certificate issued hereunder shall have the right at all reasonable times to inspect the system and all records and accounts thereof.

'None of the foregoing covenants shall be construed as requiring the Town to expend any funds other than the revenues derived from the operation of the water supply system.

'Section 8. No taxes shall ever be levied and no monies shall ever be taken or diverted from any funds of the Town for the payment of the principal or interest on the Certificates issued hereunder. * * *

'The net revenue of such water supply system during the last five fiscal years has amounted to the following sums:

'For fiscal year ending Dec. 31, 1931, Net Revenue, $1,617.93

'For fiscal year ending Dec. 31, 1932, Net Revenue, $1,397.74

'For fiscal year ending Dec. 31, 1933, Net Revenue, $2,317.10

'For fiscal year ending Dec. 31, 1934, Net Revenue, $2,643.04

'For fiscal year ending Dec. 31, 1935, Net Revenue, $3,253.24

'And the revenue of said Town has not been pledged either in whole or in part to the payment of any outstanding bonds or other obligations of the Town. The estimated net revenue of said system in each fiscal year after the construction of the additions and extensions to said system hereinafter referred to, is in excess of the amount to become due in each fiscal year for principal and interest on the Certificates hereinafter provided for.'

The question presented is whether the issue of the stated water revenue certificates by the town of Dunnellon would violate section 6, article 9 of the Constitution as amended in 1930:

'The Legislature shall have power to provide for issuing State bonds only for the purpose of repelling invasion or suppressing insurrection, and the counties, districts or municipalities of the State of Florida shall have power to issue bonds only after the same shall have been approved by a majority of the votes cast in an election in which a majority of the freeholders who are qualified electors residing in such counties, districts, or municipalities shall participate, to be held...