Summary
holding that original section 27 is self-executing
Summary of this case from Stopaquila.org v. City of PeculiarOpinion
No. 39843.
April 30, 1946.
1. MUNICIPAL CORPORATIONS: Bonds: Constitutional Law: Elections: Revenue Bonds: Constitutional Provision Self-Executing: Applicable Election Statutes. Sec. 27, Art. VI, of the 1945 Constitution, providing for the issuance of revenue bonds for municipally owned utilities, is self-executing. The election was properly held under the general statutes governing elections to authorize the contracting of debts in excess of the annual income and revenue of a municipality, although there are many provisions of said statutes which are not applicable.
2. MUNICIPAL CORPORATIONS: Bonds: Constitutional Law: Revenue Bonds of City of Fulton: Subordination Clause Valid. The City of Fulton had the implied power under Sec. 27, Art. VI, of the 1945 Constitution to issue revenue bonds containing a provision that any subsequent issue of such bonds should be junior and subordinate.
3. MUNICIPAL CORPORATIONS: Bonds: Revenue Bonds Not Eligible for Registration by State Auditor: Validation by Pro Forma Decree. Revenue bonds are not eligible for registration by the State Auditor under the provisions of Secs. 3301-3307 R.S. 1939. Such bonds may apparently be validated by a pro forma decree of the circuit court under Sec. 3312 R.S. 1939. [State ex rel. City of Hannibal v. Smith, 335 Mo. 825, State ex rel. City of Excelsior Springs v. Smith, 336 Mo. 1104, and State ex rel. St. Charles Co. v. Smith, 348 Mo. 7, are overruled.]
4. MANDAMUS: Writ Denied. The writ of mandamus against the State Auditor is denied.
WRIT DENIED.
T.A. Faucett for relator.
(1) Article VI, Section 27 is a self-executing grant of power to cities to issue negotiable interest bearing revenue bonds for the purpose of paying the cost of purchasing, constructing, extending and improving certain utilities, payable solely from the revenues of such utilities. No ancillary legislation is needed to give it full force and effect. 11 Am. Jur., sec. 72, p. 689; State ex inf. McKittrick v. Wymore, 343 Mo. 98, 119 S.W.2d 941; State ex inf. Norman v. Ellis, 325 Mo. 154, 28 S.W.2d 363; Woodmansee v. Kansas City, 346 Mo. 919, 144 S.W.2d 137; City of Springfield v. Monday, 353 Mo. 981, 185 S.W.2d 788; State ex rel. Kersey v. Pemiscot Land Cooperage Co., 317 Mo. 41, 295 S.W. 78; State ex rel. Edwards v. Miller, 21 Okla. 448, 96 P. 747; Adams v. City of Hobart, 166 Okla. 267, 27 P.2d 595; Welch v. City of Nicholasville, 225 Ky. 312, 8 S.W.2d 400; Johnson v. Middleton, 243 Ky. 251, 47 S.W.2d 1030; Harrison v. Roberts, 264 Ky. 62, 94 S.W.2d 296. City of Middleton v. City Commission of Middleton, 138 Ohio St. 596, 37 N.E.2d 609; Pfau v. City of Cincinnati, 142 Ohio St. 101, 50 N.E.2d 172. (2) A constitutional requirement that a power may be exercised only upon a favorable vote of electors at an election constitutes a grant of power to call and hold an election in accordance with statutes governing elections on similar questions. State ex rel. Clark County v. Hackmann, 280 Mo. 686, 218 S.W. 318; State ex rel. v. M., K. T. Ry. Co., 164 Mo. 208, 64 S.W. 187. (3) The fact that the General Assembly may appropriately enact legislation regulating the exercise of a constitutionally granted power does not affect the self-executing character of the constitutional grant. McGrew v. Missouri Pac. Ry. Co., 230 Mo. 496, 132 S.W. 1076; Tremayne v. St. Louis, 320 Mo. 120, 6 S.W.2d 935. (4) Article VI, Section 27 of the Missouri Constitution grants power to cities to issue revenue bonds for the extension or improvement of utilities already owned and operated by the city and to pay such bonds from the revenues of the entire plant as extended or improved or both. Woodmansee v. Kansas City, 346 Mo. 919, 144 S.W.2d 137; Grossman v. Public Water Supply District, 339 Mo. 344, 96 S.W.2d 701; Simpson v. City of Highwood, 372 Ill. 212, 23 N.E.2d 62; City of Middleton v. City Commission of Middleton, 138 Ohio St. 596, 37 N.E.2d 609. (5) The power to issue bonds payable solely from the revenues of a utility, granted to cities by Article VI, Section 27 of the Missouri Constitution necessarily includes power to make reasonable agreements and covenants looking to the security of the revenue bonds and to the creation and maintenance of the revenues required for their payment. State ex rel. City of Blue Springs v. McWilliams, 335 Mo. 816, 74 S.W.2d 363; City of Springfield v. Monday, 353 Mo. 981, 185 S.W.2d 788. (6) The payment of a premium to the holder of a bond which is called for payment prior to its maturity is merely a condition upon the exercise of the power to call, is a common practice, and is valid. (7) The ballot used at the election in the City of Fulton at which the bonds were authorized was valid. State ex rel. City of Memphis v. Hackmann, 273 Mo. 670, 202 S.W. 7.
J.E. Taylor, Attorney-General, and Drake Watson, Assistant Attorney General, for respondent.
(1) Respondent is not directed or authorized by any law to register the revenue bonds of the relator. Even if Section 27, Article VI of the 1945 Constitution is applicable, no provision of said section requires the State Auditor to register such bonds. Sec. 27, Art. VI, 1945 Constitution. (2) The registration of bonds article, Article 6. Chapter 16, Revised Statutes, 1939, clearly relates to registration of bonds payable from taxation and not to revenue bonds. Art. 6, Chap. 16, R.S. 1939; Secs. 3301, 3303, R.S. 1939. (3) If the registration of bonds article be held, contrary to its clear language and expressed intent, to authorize the registration of revenue bonds, then it would follow by virtue of the provisions of Section 3307, part of the same article, that such revenue bonds must become lawful security for investment of the reserves of insurance companies, as security for the deposit of any and all state funds, county or city funds, and fiduciary funds, without liability upon the issuer of the taker of such security except for "inexcusable negligence." Sec. 3307, R.S. 1939. (4) Section 6985, R.S. 1939, cannot be held to authorize registration of revenue bonds because such Section, by its express terms, relates exclusively to taxation bonds. Sec. 6985, R.S. 1939. (5) The right to have bonds registered with and certified by the State Auditor is a privilege giving the special advantage of qualification for security for public and fiduciary funds to the bond issuer and it should not be extended by application of statutes of particular purpose to other and different purposes. All sections of a statute must be construed together and harmonized if possible. In re Rossing's Estate, 85 S.W.2d 495, 337 Mo. 544; City of Springfield v. Monday, 185 S.W.2d 788; Nordberg v. Montgomery, 173 S.W.2d 387, 351 Mo. 180. (6) Section 27, Article VI, 1945 Constitution (a) authorizes the general principle of creation of debt and issuance of revenue bonds therefor by municipalities but (b) restricts and prohibits such issues unless approved by 4/7's vote, unless the constructed or acquired plants are owned exclusively by the municipality, and unless cost of operation and maintenance and the principal and interest are payable solely from revenues derived from operations. Provisions of a State Constitution which merely lay down as a general principle that municipal corporations may do certain things and which do not prescribe the necessary means for the enjoyment of the right are not self-executing and legislation is necessary to make them effective. 16 C.J.S., p. 106; Lyon Lumber Co. v. Livingston Parish School Board, 286 F. 114; City of Detroit v. Oakland Circuit Judge, 212 N.W. 207; Zachary v. City of Wagoner, 292 P. 345, 146 Okla. 268; Bone v. Bowen, 185 P. 133, 20 Ariz. 592; Ivie v. Bailey, 5 S.W.2d 50, 319 Mo. 474, 57 A.L.R. 881. (7) Provisions of a State Constitution which are restrictions or prohibitions are self-executing unless it appears from the language used and the circumstances surrounding the adoption of the provisions that legislation is contemplated. 12 C.J.S., p. 101. (8) Where the matter with which a given section of a Constitution deals is divisible, one clause thereof may be self-executing and the other clause or clauses may not be self-executing. 16 C.J.S., p. 98; State ex rel. Miller v. O'Malley, 117 S.W.2d 319; State v. Duncan, 175 S.W. 940, 265 Mo. 26; State v. Rogers, 247 P. 828; State v. Kellaher, 177 P. 944, 90 Or. 588.
D.C. Chastain and A.Z. Patterson amici curiae.
(1) Respondent is not directed nor authorized to register the revenue bonds of the relator. Sec. 27, Art. VI, 1945 Mo. Constitution; Art. 6, Chap. 16, R.S. 1939. (2) Sec. 27, Article VI of the new Constitution is not self-enacting. St. Joseph School Board v. Patton, 62 Mo. 444; State ex rel. v. Gibson, 195 Mo. 251; State ex rel. Sedalia v. Weisnich, 236 S.W. 872; Fahey v. Hackman, 237 S.W. 252; 12 C.J.S., sec. 107, p. 730; Lyon Lumber Co. v. Livingston Parish School Board, 286 F. 114. (3) The bonds in question were payable only from a special fund, and therefore are non-negotiable instruments. On their face, they purport to be negotiable and for that reason they should not be registered by the State Auditor. McQuillin, Mun. Corporations, (2d Ed. Rev.), sec. 2428; Northern Trust Co. v. Welmette, 220 Ill. 417, 77 N.E. 169; National Bank of LaCrosse v. Petterson, 200 Ill. 215, 65 N.E. 687; Cleveland, C.C. St. L. Ry. Co. v. Edward C. Jones Co., 20 Ind. App. 87, 50 N.E. 319; Mauker v. Am. Savs. Trust Co., 131 Wn. 430, 230 P. 406. (4) A bond made payable out of a special fund is non-negotiable. Lorimer v. McGreevy, 84 S.W.2d 667; 11 C.J.S. 434; 9 C.J. 48, note 73. (5) A municipal debt evidenced by revenue bonds payable solely from earnings of a municipal utility is a contingent liability. Woodmansee v. Kansas City, 44 S.W.2d 108, 329 Mo. 184; City of Lebanon v. Schneider, 163 S.W.2d 588.
By this original proceeding in mandamus the City of Fulton seeks to compel the State Auditor to register Bond No. 1 of a series of 1¼% revenue bonds of said city issued for the purpose of paying a part of the cost of extending and improving its municipally owned combined water and [303] electric light works, and thus test the validity of said bond issue. The questions presented are issues of law, the facts having been admitted.
The city determined the necessity of extending and improving the plant or works in question at an estimated cost of $426,000.00, of which the sum of $226,000.00 (derived from the revenues of said plant) is on hand. The balance of the estimated cost, to-wit, $200,000.00 the city proposes to finance by the issuance and sale of the revenue bonds in question which are payable, as to both principal and interest, solely from revenues derived from the operation of said plant.
The bonds were voted at a special election held December 11, 1945, pursuant to Ordinance No. 1091 (duly passed and approved November 13, 1945), which provided for the submission to the qualified voters of the city of the single proposition following:
"Shall the City of Fulton, Missouri, issue and sell its negotiable interest bearing revenue bonds in the principal amount of Two Hundred Thousand Dollars ($200,000) for the purpose of paying part of the cost of extending and improving the revenue producing water and electric light works, owned exclusively by said City, the cost of operation and maintenance of said water and electric light works and the principal of and the interest on said revenue bonds to be payable solely from the revenues derived by the City of Fulton from the operation of said water and electric light works?"
The proceedings had in connection with the calling of the election, in the giving of the notice thereof, in the holding of said election, in the certification of the returns thereof and the declaration of the returns thereof were in accordance with the provisions of Secs. 7368-7372, both inclusive, except as to the form of ballot used, which will be hereinafter noticed.
This and all other references are to R.S. '39, and to the same section numbers in Mo. R.S.A., unless otherwise expressly noted.
In conformity with the terms of Ordinance No. 1093, adopted December 21, 1945, under which the bonds were issued, said bonds are of the denomination of $1,000.00 each, numbered from 1 to 200, dated January 1, 1946, payable, both as to principal and interest, in lawful money of the United States at the office of the Mercantile-Commerce Bank in the City of St. Louis, and bear interest at the rate of 1¼% per annum, payable semi-annually on surrender of the interest coupons. Twenty of the bonds mature annually on January 1 from 1948 to 1957, and the right is reserved to call in and redeem certain of them prior to maturity, at par and accrued interest, plus a premium of 1/8th of 1% for each year of the unexpired term of those so called for redemption. Said ordinance further provides, and the bonds on their face recite, that they are to be paid "solely from the revenues to be derived from the City from the operation of the water and electric light works owned exclusively by said City," and that they "do not constitute an indebtedness of said City within the meaning of any constitutional or statutory limitation or provision, and the taxing power of said City is not pledged to the payment hereof, either as to principal or interest." The bonds contain certain other provisions specified by the ordinance which are challenged by the return. They will not be set forth as the respondent does not brief his grounds of attack on them, and we will treat such grounds as abandoned, except the one briefed, i.e., clause (d) of section 5 of the ordinance.
"That so long as any of said bonds or interest coupons shall remain outstanding and unpaid, the City of Fulton shall not issue any additional bonds payable from the revenues of said works unless such additional bonds be made junior and subordinate in all respects to the bonds authorized to be issued by this ordinance."
Turning first to the point which involves a question of constitutional interpretation, and on which respondent has, in part, denied registration, it is his contention that that portion of Sec. 27, Art. VI, Constitution of Missouri, 1945, relied on by relator as authorizing the issuance and sale of municipal bonds, for the purposes herein involved, is the statement or laying down of a general principle or policy, and [304] is, therefore, not self-executing, and legislation is necessary to make the same effective, and this notwithstanding restrictions and prohibitions of such section may be self-enforcing. We will treat in this connection the further contention that the special election at which the bonds were voted is void "because conducted in direct conflict with the provisions of Sec. 27, Art. VI" Constitution of Missouri, 1945, and because the statutes under which said special election was held are in no wise applicable to the issuance of revenue bonds, and for the further reason said election was a mere "volunteer" election.
We are of the opinion that the mooted constitutional provision, the text of which is set forth in the margin, is not subject to the foregoing construction. "One of the recognized rules is that a constitutional provision is not self-executing when it merely lays down general principles, but that it is self-executing if it supplies a sufficient rule by means of which the right which it grants may be enjoyed and protected, or the duty which it imposes may be enforced, without the aid of a legislative enactment. . . . Another way of stating this general, governing principle is that a constitutional provision is self-executing if there is nothing to be done by the legislature to put it in operation. In other words, it must be regarded as self-executing if the nature and extent of the right conferred and the liability imposed are fixed by the Constitution itself, so that they can be determined by an examination and construction of its terms, and there is no language indicating that the subject is referred to the legislature for action." 11 Am. Jur., Constitutional Law Sec. 74, pp. 691-692. See, also, 16 C.J.S., Constitutional Law Sec. 48, pp. 98-101. If the constitutional provision had said that cities "may be" authorized to issue and sell, etc., we would have no hesitancy in saying that such language is addressed to the legislature, and not to the courts; but it does not so provide. On the contrary its very terms are that any city, upon a prescribed vote, " may issue and sell," etc. We think the language so plain, and its intent so evident that it must be held to directly confer upon the city the authority to issue and sell such revenue bonds as are here under scrutiny "by vote of four-sevenths of the qualified electors thereof voting thereon." It is true that there is no statute expressly providing the manner of conducting an election to determine whether or not a municipality shall issue such revenue bonds, so the question is reduced to whether this circumstance is an insurmountable barrier. It will be recalled that it is conceded that said proposition was approved by a vote of more than four-sevenths of the electors voting at the special election, which election complied in every way with the general statutes in relation to elections to authorize the contracting of debts in excess of a municipality's annual income and revenue (Secs. 7368-72). We have reached the conclusion that, in view of our holdings under closely analogous situations, the utilization of the general statutes just referred to was authorized and efficacious.
"Any city or incorporated town or village in this state, by vote of four-sevenths of the qualified electors thereof voting thereon, may issue and sell its negotiable interest bearing revenue bonds for the purpose of paying all or part of the cost of purchasing, constructing, extending or improving any revenue producing water, gas or electric light works, heating or power plants, or airports, to be owned exclusively by the municipality, the cost of operation and maintenance and the principal and interest of the bonds to be payable solely from the revenues derived by the municipality from the operation of such utility." [Sec. 27, Art. VI, Const. of Mo. 1945.]
State ex rel. Clark Co. v. Hackmann, 280 Mo. 686, 218 S.W. 318, is directly in point. There a constitutional provision was held to be self-executing which granted power to counties to create debts for county public purposes by elections (by a prescribed majority) held for the purpose, but no machinery was provided for such election. A special election was called upon a petition signed by more than 300 voters and taxpayers at which the proposition to issue the bonds was submitted, and approved by the requisite majority. After that election, and before the case was determined on appeal, the Legislature passed an act specifically providing a method of [305] holding such elections. And this court held it sufficient if there is used the ordinary and usual machinery provided for obtaining the expression of the voters upon the question. The following from State ex rel. Miller v. M.K. T. Ry. Co., 164 Mo. l.c. 213, 64 S.W. l.c. 188, was cited approvingly: "The power being conferred to hold an election, and no means provided therefor, carries with it, as an inevitable and indubitable incident, the usual and customary means to put into effect the power thus conferred." The court further held that despite the later enacted specific act, there was authority for the election. The Clark County case was followed in the later case of State ex rel. Gilpin v. Smith, 339 Mo. 194, 96 S.W.2d 40.
The statutes under which the special election was held do contain numerous provisions that are inapplicable to revenue bonds authorized by the new constitution; such, for example, as the limitation of 5% of the assessed valuation, the provision for an annual tax, the form of ballot, and perhaps others. The ballot used at the special election contained the text of the proposition, as hereinabove quoted, followed by boxes or squares, opposite one of which was the word "Yes", and opposite the other the word "No." The directions to the voters reads as follows: "To cast a ballot in favor of the proposition place a cross (X) mark in the square opposite the word `Yes'. To vote against the proposition place a cross (X) mark in the square opposite the word `No.'" No exception is taken to the form or due publication of the notice, nor to any step in connection with the holding of the election, if the procedure prescribed by the sections mentioned is applicable. All of the safeguards attending an election for incurring a debt and issuing bonds to be retired through the taxing power of the city were preserved by the method actually employed, which we think, under the circumstances, was appropriate as being "the ordinary and usual machinery provided for obtaining the expression of the voters on the proposition," and thus within the holding of the Clark County and Gilpin cases, supra. On the authority of those cases, and for the reasons hereinabove pointed out, we must disallow the contention that legislation is imperative to give effect to the constitutional provision in question.
The issue made by the pleadings with respect to the validity of clause (d) of section 5 of the ordinance (see footnote 2) is that it "illegally attempts to control the discretion of the city authorities in the future exercise of their official duties, illegally surrenders essential powers vested by the Constitution or laws of the State of Missouri in the relator City, and is void." No authorities are cited in support of this proposition. Just as there is no statute providing the machinery to test the sense of the voters on the question of the issuance of revenue bonds, neither is there any statute expressly applicable to the issuance and sale of such bonds when authorized by the voters. These are subjects which undoubtedly may be dealt with by the legislature. "Minor details may be left for the legislature without impairing the self-executing nature of constitutional provisions." 11 Am. Jur. Constitutional Law Sec. 73, p. 691. But, as pointed out in Cooley's Constitutional Limitations, 7th Ed., 122: "Perhaps even in such cases [certain self-executing provisions] legislation may be desirable . . .; but all such legislation must be subordinate to the constitutional provision, and in furtherance of its purposes, and must not in any particular attempt to narrow or embarrass it." The constitutional grant to issue and sell revenue bonds carries with it by implication such other necessary powers as are needed to carry the granted authority into effect. The constitution being silent on the subject of the provisions to be recited in such bonds, and there being no statutory limitation applicable to the challenged provision, we think the city had the implied authority to prescribe, as one of the inducements to [306] prospective holders, and thus favorably affect the value and marketability of the bonds, that any subsequent issue of like bonds should be junior and subordinate to the issue in question.
The remaining question is whether the bonds in question are eligible to registration by the state auditor under the provisions of Article 6, Chapter 16, R.S. '39, consisting of Secs. 3301-3307, both inclusive. The respondent contends that these statutes relate exclusively to, and govern the registration of bonds payable through taxation, and are inapplicable to revenue bonds. Sec. 3306 provides for the registration by the state auditor of "any bond, hereafter issued by any . . . city . . . for any purpose whatever" before the same "shall obtain validity or be negotiated." Among other things, the manner of registration, the authentication (by certificate) and the effect thereof are prescribed. Standing alone, the sweeping terms of this section would seem to include revenue bonds as well as bonds payable through taxation. But does this result follow when, in applying a cardinal rule of construction, other sections of the statute in relation to registration are construed with it? Turning to Sec. 3303 we find it provides, in part, as follows: "The state auditor shall, annually, on or about the first day of July, certify to the several . . . city councils . . . the amount required during the next fiscal year to pay maturing interest coupons . . . which amount shall thereupon be levied as a special tax upon all property in such . . . city . . . having issued such outstanding registered bonds." The section further provides how such special tax shall be collected, and paid over to the city treasurer and deposited by him to the credit of his city. The next succeeding section, Sec. 3304, says "Nothing herein contained shall prevent any . . . city council . . . from levying a larger tax for the payment of maturing bonds, or from applying other means to such purpose. . . ."
It is perfectly clear that Secs. 3303-3304 can have no reference to revenue bonds. They relate solely to bonds payable through the collection of taxes. It is, therefore, impossible to harmonize them with Sec. 3306, if the latter be applied to revenue bonds. They not only create irreconcilable conflict with Sec. 3306, but they are also in conflict with the constitutional mandate as to the source of payment of revenue bonds of the kind in question, to-wit, "solely from the revenues derived by the municipality from the operation of such utility." But all of said sections may be harmonized, and caused to make a consistent whole if construed as applying only to tax bonds, and this we think would effectuate the legislative intent. We are further fortified in this view upon a consideration of Sec. 3307 of said article. By it "Any and all bonds registered by the state auditor under the provisions of the laws of this state . . . whereon there is no default in payment of principal or interest" are rendered eligible as investments for the capital stock, surplus and reserve funds of certain insurance or fraternal benefit societies, and trust companies. It also authorizes the superintendent of insurance to accept such bonds as security or pledge in all cases where such security or pledge is required by law. It grants authority to the state treasurer to accept such bonds as security for the deposit of any and all state funds, and like authority to county and city treasurers with respect to all county and city funds. Finally it makes such bonds "eligible for the investment of any funds in the possession of any administrator, executor, guardian, curator, trustee and all other persons sustaining fiduciary relations," and this "without an order of court first had and obtained, and without incurring liability for loss, except in case of inexcusable neglect." The preferred position thus accorded to bonds validated through registration by the state auditor, payable in the exercise of the taxing power, the holders thereof being possessed of well understood and long defined remedies, is not to be extended, in the absence of a manifest legislative intent so to do, to another and different type of security not constituting a debt or liability within the ordinary meaning of those terms, and to the payment of which the taxing power may not be pledged, and the issuing body does not agree to pay except out of revenues, [307] and thus made wholly dependent upon the successful operation of the utility improved with the proceeds.
We have, in three cases compelled, the auditor, by mandamus, to register revenue bonds authorized by particular statutes. [State ex rel. City of Hannibal v. Smith, 335 Mo. 825, 74 S.W.2d 367; State ex rel. City of Excelsior Springs v. Smith, 336 Mo. 1104, 82 S.W.2d 37; and State ex rel. St. Charles Co. v. Smith, 348 Mo. 7, 152 S.W.2d 1.] But, as relator frankly admits, in none of those cases was any question raised concerning the construction or applicability of the registration act to revenue bonds. Applicability thereof was merely assumed, and hence there was no conclusive determination of the question now directly raised for the first time. We observe that even though validation of these bonds may not be accomplished under the act in question, there appears to be an appropriate method under Sec. 3312 by pro forma decree of the circuit court.
It follows that our peremptory writ of mandamus should be, and it is, denied.
All concur, except Gantt, J., absent.