Summary
In State ex rel. City of Jefferson v. Smith, 348 Mo. 554, 154 S.W.2d 101 (banc 1941), we held the issuance of municipal bonds to finance the construction of an office building to be occupied by both public and private concerns to be unconstitutional, despite the beneficial impact the construction would have had on Jefferson City and on the state.
Summary of this case from Curchin v. Missouri Indus. Development Bd.Opinion
September 25, 1941.
MUNICIPAL CORPORATIONS: Taxation: Bonds: Unauthorized Purpose. The primary purpose of a bond issue and taxes voted by the City of Jefferson was to provide an office building for the Unemployment Compensation Commission. Submitting to the voters the question of issuing bonds and levying taxes for the purpose of providing funds "for the erection of a municipal office building" was a subterfuge. The bonds are not being issued for a public municipal purpose, and are illegal, being in violation of Section 3, Article X of the Missouri Constitution.
PEREMPTORY WRIT DENIED.
Frank E. Atwood, James A. Potter and John O. Bond for relator.
(1) The city's ordinance direction that the building shall include and provide office space and facilities for the Unemployment Compensation Commission of Missouri does not affect the validity of the bonds previously voted. (a) The validity of bonds duly authorized by separate proceedings and at a separate election for an entirely valid purpose is not affected by the invalidity of a contract as to disposition of proceeds of the bonds. Green v. Rock Hill, 147 N.E. 346, 146 S.C. 234; Doody v. State ex rel. Mobile County, 171 So. 504, 233 Ala. 287; Paine v. Port of Seattle, 70 Wn. 294, 127 P. 580; 5 McQuillin on Municipal Corps. (2 Ed.), sec. 2325, p. 939; Halbruegger v. St. Louis, 302 Mo. 573, 262 S.W. 379. (b) The primary purpose to erect a municipal office building must be regarded in determining the validity of the bond issue. Wheelock v. Lowell, 196 Mass. 220, 81 N.E. 977; Bates v. Barrett, 60 Vt. 531, 1 L.R.A. 166; Railroad Co. v. Smith, 62 Ill. 273. (2) The bonds are valid notwithstanding the provisions of sections 1 and 3 of Article X of the Constitution of Missouri. Secs. 1, 3, Art. X, Mo. Const. (a) The provision of office space and facilities for the Unemployment Compensation Commission is a public purpose. Secs. 9422, 9425, R.S. 1929. (b) According to the modern weight of authority such provision is also a public municipal purpose. Halbruegger v. St. Louis, 262 S.W. 379, 302 Mo. 573; Egan v. San Francisco, 165 Cal. 581, 133 P. 295, Ann. Cas. 1915A, 754; State ex rel. City of Excelsior Springs v. Smith, 82 S.W.2d 37, 336 Mo. 1104; People ex rel. v. Township Board of Salem, 20 Mich. 452, 4 Am. Rep. 400. (c) In determining what is a municipal purpose great weight is properly given to the necessity for and the benefits to be derived from the proposed building by the municipality. McQuillin on Mun. Corps. (2 Ed.), sec. 2323; Callam v. Saginaw, 50 Mich. 7, 14 N.W. 677; Hackett v. Ottawa, 25 U.S. (L. Ed.) 363; Sacramento Chamber of Commerce v. Stephens, 212 Cal. 607, 299 P. 728; Turner v. Hattiesburg, 53 So. 681; McNulty v. Owens, 188 S.C. 377, 199 S.E. 425; Stewart Machine Co. v. Davis, 81 U.S. (L. Ed.) 1279, 109 A.L.R. 129; Duke Power Co. v. Greenwood County, 91 F.2d 665; State ex rel. City of Excelsior Springs v. Smith, 82 S.W.2d 37, 336 Mo. 1104; 6 McQuillin on Mun. Corps., sec. 2439, p. 160. (d) When public purposes are germane to objects of the creation of the municipality they are public municipal purposes. Taylor v. Thompson, 42 Ill. 9; Laws 1921, chap. 351; Laws 1922, Chaps. 365, 446; Sec. 56, Art. IV, and Sec. 1 of Art. V, Mo. Const. 1875. (e) Even if some of the purposes of a city bond issue be not strictly public municipal purposes yet such bond issue is not necessarily violative of these constitutional provisions. 5 McQuillin on Mun. Corps. (2 Ed.), secs. 2325, 2329; Page v. Gallup, 26 N.M. 239, 191 P. 460; City of Mission v. Richards, 274 S.W. 269; Le Coutenlx v. Buffalo, 33 N.Y. 333; Harris v. St. Louis, 111 S.W.2d 995; Clarey v. Philadelphia, 311 Pa. 11, 166 A. 237; McQuillin on Mun. Corps. (2 Ed.), sec. 1247; Jones v. Sandford, 66 Me. 685; Stone v. Oconomowac, 71 Wis. 155, 36 N.W. 829; Bates v. Bassett, 60 Vt. 530; Biddeford v. Yates, 104 Me. 506; Gottleib-Knabe Co. v. Macklin, 109 Md. 429, 71 A. 949; Worden v. New Bedford, 131 Mass. 23. (f) The courts are inclined to construe these constitutional restrictions with great liberality in the interest of the public welfare and modern progress. Dysart v. St. Louis, 321 Mo. 514, 11 S.W.2d 1045; Jennings v. St. Louis, 332 Mo. 173, 58 S.W.2d 979, 87 A.L.R. 365; State ex rel. City of Hannibal v. Smith, 335 Mo. 825, 74 S.W.2d 367; Krause v. Peoria Housing Authority, 370 Ill. 356, 19 N.E.2d 193; Edwards v. Housing Authority of City of Muncie, 215 Ind. 330, 19 N.E.2d 741; Marvin v. Housing Authority of Jacksonville, 133 Fla. 590, 183 So. 145; Rutherford v. City of Great Falls, 107 Mont. 512, 86 P.2d 656; State ex rel. Helena Housing Authority v. City Council, 108 Mont. 347, 90 P.2d 514; Furlong v. South Park Commissioner, 340 Ill. 363, 172 N.E. 757; Briggs v. Raleigh, 195 N.C. 223, 141 S.E. 597, 600; Oakland v. Williams, 206 Cal. 315, 274 P. 328; Lott v. Orlando, 142 Fla. 338, 196 So. 313. (3) These bonds are not invalid under Section 47 of Article IV or Section 6 of Article IX of the Constitution of Missouri. Sec. 47, Art. IV, and Sec. 6 of Art. IX, Mo. Const.; State v. Curators State University, 57 Mo. 178; State ex rel. v. St. Louis, 216 Mo. 47; Unemployment Compensation Law, Art. 2, R.S. 1939; State ex inf. McKittrick v. Murphy, 148 S.W.2d 527; Vrooman v. St. Louis, 337 Mo. 933, 99 S.W.2d 189; Haeussler v. St. Louis, 205 Mo. 656; Sun Ptg. Pub. Assn. v. New York, 40 N.Y.S. 607, 8 A.D. 230, 75 N.Y. St. Rep. 1, affirmed 152 N.Y. 257, 46 N.E. 499, 37 L.R.A. 788; State ex rel. City of Boonville v. Hackmann, 293 Mo. 313, 240 S.W. 135; State ex rel. Zoological Board of Control v. St. Louis, 318 Mo. 910, 1 S.W.2d 1021; Dysart v. St. Louis, 11 S.W.2d 1045; State ex rel. Polerie v. Housing Authority of New Orleans, 190 La. 710, 182 So. 725. (4) Relator has ample constitutional and statutory authority to issue these bonds, and they should be duly registered. Secs. 6719, 6865, 6980, R.S. 1939; Fletcher v. Peck, 6 Cranch, 128.
Roy McKittrick, Attorney General, and Tyre Burton, Assistant Attorney General, for respondent; John L. Graves of counsel.
(1) The ordinance directing the issuance of these bonds shows on the face thereof that the proceeds of said bonds are not to be used solely or primarily for a municipal purpose, but are to be used for the erection of a building which "shall include and provide office space and facilities for the Unemployment Compensation Commission of Missouri and office space and facilities for said City of Jefferson," contrary to and in excess of the authority granted to the municipality. (2) The true purpose, as disclosed by all the proceedings of the city, should be subject to the test of whether or not such purpose is a lawful municipal purpose. Bates v. Barrett, 60 Vt. 531, 1 L.R.A. 166; Wheelock v. Lowell, 196 Mass. 220, 81 N.E. 977; Brooks v. Incorporated Town of Brooklyn, 146 Iowa 136, 124 N.W. 868; Myers v. Jeffersonville, 145 Ind. 431, 44 N.E. 452. (3) The municipal taxing power may be granted by the General Assembly and may be exercised by the municipality only for municipal "corporate purposes." Sec. 1, Art. X, Mo. Const. (4) Municipal taxes are authorized only for municipal purposes. State v. Curators of State University, 57 Mo. 178; St. Louis v. Telephone Co., 96 Mo. 623, 10 S.W. 197; State ex rel. v. Orear, 210 S.W. 392, 277 Mo. 303; St. Louis v. Dreisoerner, 243 Mo. 217, 147 S.W. 998; L.R.A. 1917E, p. 845; Dysart v. St. Louis, 11 S.W.2d 1045, 321 Mo. 514; 26 R.C.L. 46; 1 McQuillin, Mun. Corps., sec. 374. (5) The tax to be levied for the payment of such bonds would not be levied for a municipal purpose. Sec. 3, Art. X, Mo. Const.; State ex rel. v. Orear, 277 Mo. 303, 210 S.W. 392. (6) A municipal corporation can only exercise the following powers: (a) Those granted in express words. (b) Those necessarily or fairly implied in, or incident to, the powers expressly granted. (c) Those essential to the declared objects and purposes of the corporation — not simply convenient, but indispensable. Any fair, reasonable doubt concerning the existence of power is resolved by the courts against the corporation and the power is denied. 1 Dillon Mun. Corps. (3 Ed.), sec. 89; State ex rel. Blue Springs v. McWilliams, 335 Mo. 816; State ex rel. v. Orear, 210 S.W. 396; St. Louis v. Telephone Co., 96 Mo. 628; Kansas City to use of Frear Stone Pipe Mfg. Co. v. Swope, 79 Mo. 446; State ex rel. Hannibal v. Smith, 335 Mo. 837. (7) Missouri third class cities are authorized to erect buildings for their own municipal use, but such authority does not fairly or necessarily imply the further authority to erect buildings for other than municipal uses. Sec. 6980, R.S. 1939. (8) The power vested in a municipality to purchase and hold real estate does not imply a power to do so for other than municipal purposes. Sec. 6865, R.S. 1939; Kennedy v. Nevada, 281 S.W. 56. (9) The General Assembly may not authorize a municipality to borrow money in aid of any individual, association or corporation. Sec. 47, Art. IV, Mo. Const.; State v. Curators of State University, 57 Mo. 178; State ex rel. v. St. Louis, 115 S.W. 534, 216 Mo. 47. (10) No municipality may lend its credit to or in aid of any institution "whether created for or to be controlled by the State or others." Sec. 6, Art. IX, Mo. Const.; State v. Curators of State University, 57 Mo. 178; State ex rel. v. St. Louis, 115 S.W. 534, 216 Mo. 47. (11) The Unemployment Compensation Commission of Missouri is an institution "created for or to be controlled by the State." Sec. 9424, R.S. 1939.
Original action in mandamus. The City of Jefferson seeks to compel the State Auditor to register certain bonds. The case is submitted on the pleadings. The Auditor contends that the bonds are invalid under Sec. 3, Art. X of the Constitution, which provides that "taxes may be levied and collected for (municipal) public purposes only." The rule is stated as follows:
"If the dominating motive for the erection of the hall is a strictly public use, then the expenditure for it is legal, although incidentally it may be devoted occasionally to uses that are not public. If, however, the project of the defendant city is merely colorable, masking under the pretext of a public purpose, a general design to enter into the private business of maintaining a public hall for gain, or devoting it mainly to any other than its public use as a gathering place for citizens generally, such an attempt would be a perversion of power and a nullity, and no public funds could be appropriated for it." [Wheelock v. City of Lowell, 196 Mass. 220, 81 N.E. 977, 978.]
"The true distinction drawn in the authorities is this: If the primary object of a public expenditure is to subserve a public municipal purpose, the expenditure is legal, notwithstanding it also involves as an incident an expense which standing alone, would not be lawful. But if the primary object is not to subserve a public municipal purpose, but to promote some private end, the expenditure is illegal, even though it may incidentally serve some public purpose. . . . If a public purpose is set up as a mere pretext to conceal a private purpose, of course the expenditure is illegal and fraudulent." [Bates v. Bassett, 60 Vt. 531, 1 L.R.A. 166.]
[103] In this connection we quoted with approval from 26 R.C.L. 46, as follows:
"It may . . . be conceded that that is a public purpose from the attainment of which will flow some benefit or convenience to the public. In this latter case, however, the benefit or convenience must be direct and immediate from the purpose and not collateral, remote or consequential. It must be a benefit or convenience which each citizen of the community affected may lay his own hand to in his own right, and take into his own use at his own option, upon the same reasonable terms and conditions as any other citizen thereof." [Dysart v. St. Louis, 321 Mo. 514, 11 S.W.2d 1045, l.c. 1047.]
We also quoted with approval from People v. Salem, 20 Mich. 452, as follows:
"The term public purpose as employed to denote the objects for which taxes may be levied, has no relation to the urgency of the public need, or to the extent of the public benefit which is to follow. It is, on the other hand, a term of classification to distinguish the objects for which, according to settled usage, the government is to provide, from those which by the like usage are left to private inclination, interest or liberality." [State ex rel. v. Switzler, 143 Mo. 287, l.c. 317, 45 S.W. 245.]
From the statute, the pleadings and common knowledge within the jurisdiction of this court (20 Am. Jur., pp. 48, 49, 54), we now state the facts as follows:
The Unemployment Compensation Law became effective June 17, 1937. It provided for an Unemployment Compensation Commission. Under the law the Commission employs many persons. The location of the central offices of the Commission was not mentioned in the act. In this situation the Commission assumed authority to select a location. Certain cities, including Sedalia and the City of Jefferson, through chambers of commerce or similar organizations, acquiesced in this assumption of authority by negotiating from time to time with the Commission for the location of said offices in the city represented by the negotiating chamber of commerce.
In the meantime the Unemployment Compensation Law was amended (Laws of 1939, p. 926) by adding Sec. 4(a) which follows:
"The office of the Unemployment Compensation Commission shall be maintained in the City of Jefferson, provided, that within a reasonable time after the passage of this Act there shall be satisfactory arrangements made for the housing of the Commission at a location in said City and in a modern fireproof building appropriate for that purpose, and at a rental to be paid by the Commission, all satisfactory to the Commission and the Federal Social Security Board."
After the enactment of said amendment, negotiations with reference to the matter continued until Sedalia and the City of Jefferson were the only cities competing for the central offices of the commission. Both of said cities submitted to qualified voters the question of incurring an indebtedness to construct a building. In the City of Jefferson, and on February 27, 1940, the question was submitted in words and figures as follows:
"To increase the indebtedness of the City of Jefferson, Missouri, to the amount and sum of Two Hundred Thousand ($200,000.00) Dollars and to issue the negotiable coupon bonds of said City of Jefferson thereof, for the purpose of providing funds for the erection of a municipal office building, and to acquire by purchase, gift or otherwise, a site or land necessary therefor, and to authorize the levy and collection of an annual tax in addition to the other taxes provided by law, sufficient to pay the interest on said bonds as the same becomes due, and to constitute a sinking fund for the payment of the principal therefor, within twenty (20) years from the date thereof, said bonds to bear interest at not to exceed six per cent (6%) per annum." (Italics ours.)
The election authorized the indebtedness. Thereafter the Commission rejected the City of Jefferson as a location for said offices and selected Sedalia as a suitable location. We ruled that the Commission was without authority to do so. [State ex inf. v. Murphy et al., 347 Mo. 484, 148 S.W.2d 527.]
Thereafter and on April 15, 1941, an ordinance of the City of Jefferson provided as follows:
"That the Mayor and the City Clerk are hereby authorized and directed to cause the bonds herein described to be prepared and to execute same as herein directed, to cause the same to be registered in the office of the State Auditor, and to deliver said bonds to the purchaser thereof. The proceeds received from the sale of said bonds shall be credited to a fund hereby created and designated the `MUNICIPAL [104] BUILDING FUND,' and said fund shall be used exclusively for the erection of a municipal office building in said City and to acquire by purchase, gift or otherwise, a site or land necessary therefor; said building shall include and provide office space and facilities for the Unemployment Compensation Commission of Missouri, and office space and facilities for the said City of Jefferson." (Italics ours.)
From the above stated facts, we find as follows: If there had been no Unemployment Compensation Law, there would have been no election submitting the question of indebtedness to construct a "Municipal Office Building." If so, the submission of the question of indebtedness to construct such a building must have been a subterfuge to obtain money to construct a building for the Unemployment Compensation Commission. Furthermore, the subterfuge is an admission that the construction of an office building for the Commission would not be for a municipal public purpose. Furthermore, the provision in the above mentioned ordinance for city offices in the building also is a subterfuge. In furtherance of the effort to evade the Constitution, a few city offices most likely would have been located in the building. Even so, the primary purpose of the indebtedness was the construction of a building for the Commission. If so, the proposed indebtedness would be in violation of the above mentioned provision of the Constitution.
The bonds under consideration are invalid, and the peremptory writ of mandamus should be denied. It is so ordered. All concur.