Case Title: Brown v. Longiotti

Citation: 420 So. 2d 71

Docket Number: 

State: alabama

Court: Alabama Supreme Court

Date: 1982-10-01T00:00:00Z

Document:
420 So. 2d 71 (1982)
Carley A. BROWN, et al.
v.
Samuel M. LONGIOTTI, et al.
81-7.

Supreme Court of Alabama.
October 1, 1982.
Bill Fite and Jackie O. Isom, Hamilton, for appellants.
William H. Atkinson and James K. Davis of Fite, Davis & Atkinson, Hamilton, for appellees.
MADDOX, Justice.
The central issue in this appeal is whether the issuance of revenue bonds to finance the construction of a retail commercial establishment is authorized by amendment # 84 of the Alabama Constitution. We hold that amendment # 84 does not authorize the issuance of bonds to finance the construction of retail commercial establishments and, therefore, reverse the decision of the circuit court.
Appellants, a group of retail business owners in Marion County, brought suit against certain named parties and the city of Hamilton to challenge the city's plan to construct a retail shopping center and to issue industrial revenue bonds to finance its acquisition and construction. Under the terms of the plan, the land would be developed by the city and then leased to Samuel Longiotti who would in turn lease the property *72 to K-Mart. The bonds that the city proposes to issue are tax-exempt. From the circuit court's granting appellees' motion to dismiss and overruling of appellants' motion for new trial, the appellants pursue this appeal.
Appellants argue that amendment # 84 violates the due process and the equal protection clauses of the United States Constitution because it "fails to limit bond issues to projects furthering public purposes." Appellants contend further that "[e]ven if it could be assumed that amendment # 84 impliedly authorizes the issuance of revenue bonds only for public purposes, the evidence indicates that the instant project benefits only private parties." The constitutional argument which the appellants offer derives from a decision rendered by the Georgia Supreme Court concerning an amendment similar to amendment # 84. See Smith v. State, 222 Ga. 552, 150 S.E.2d 868 (1966). The decision of the Georgia court reads, in part:
150 S.E.2d  at 871.
The Georgia Supreme Court concluded in Smith by ruling:
150 S.E.2d  at 872.[1]
The limitation that public money and credit can only be used for "public purposes" is a matter of due process and implicit in the Alabama Constitution. Board of Revenue and Comm'rs. v. Puckett, 227 Ala. 374, 377, 149 So. 850 (1933); Stone v. State, 251 Ala. 240, 243, 37 So. 2d 111 (1948). Indeed, the premise that all appropriations or expenditures of public money by municipalities and indebtedness created by them must be for a public purpose as opposed to a private purpose is a widely recognized one. 15 McQuillin, Mun.Corp. § 39.19 (3d Ed.)
While there is no specific standard or test a court may use for distinguishing public purposes from private purposes, Note, Determining Permissible Municipal Expenditures: The Public Purpose Doctrine Revived, 7 U.Mich.J.L.Ref. 225, 226 (1973), the trend among modern courts is to give the term "public purpose" a broad expansive definition. Opinion of the Justices, 384 So. 2d 1051, 1053 (Ala.1980). This is especially true of judicial review of industrial development bonding. Note, Industrial Development Bonds: A Proposal for Reform, 65 Minn.L.Rev. 961, 967 (1981); See generally, Note, The "Public Purpose" of Municipal Financing For Industrial Development, 70 Yale L.J. 789 (1961). Although industrial *73 development bonds were originally conceived as a way to stimulate manufacturing investment, some of the "less traditional" uses of these instruments now include:
Congressional Budget Office, Preliminary Draft of Small Industrial Development Bonds 23-24 (October 1980); See generally, Pinsky, State Constitutional Limitations on Public Industrial Financing: An Historical and Economic Approach, 111 U.Pa.L.Rev. 265 (1963).
In reviewing amendment # 84, the entire amendment reads as follows:
When construing the Constitution of Alabama, the leading purpose of the Court is to ascertain and effectuate the intent and object originally intended to be accomplished. Alexander v. State, 274 Ala. 441, 446, 150 So. 2d 204 (1963); State v. Birmingham So. Ry. Co., 182 Ala. 475, 491, 62 So. 77 (1913). In Eliasberg Bros. Mercantile Co. v. Grimes, 204 Ala. 492, 495, 86 So. 56 (1920), the Court, quoting from Western Union Telegraph Co. v. State Board of Assessment, 80 Ala. 273 (1885), repeated:
Eliasberg Bros. Mercantile Co. v. Grimes, 204 Ala. at 495, 86 So. 56. It is our duty, as a Court, to construe the meaning of words in constitutional amendments. Thus, having reviewed the facts of this case and construed the terms of this amendment, the Court is convinced that the bond offering for locating a retail store in the municipality of Hamilton is inconsistent with the intent and object of amendment # 84.
In McDonald's Corp. v. DeVenney, 415 So. 2d 1075 (Ala.1982), this Court held that retail establishments such as McDonald's and K-Mart were not the type of *75 commercial enterprises that the legislature sought to bring to Alabama under the various acts designed to promote industry and trade. In that case, we stated:
415 So. 2d  at 1079. We hold that the reasoning employed in McDonald's Corp. v. DeVenney is applicable to amendment # 84. Moreover, the sale of these tax-free bonds by the city of Hamilton would not serve a significant "public purpose," but, instead would primarily benefit the individual lessee through lower rentals.
Therefore, this Court reverses the order of the circuit court and remands this case for action consistent with this holding.
REVERSED AND REMANDED.
TORBERT, C. J., and FAULKNER, SHORES, EMBRY, BEATTY and ADAMS, JJ., concur.
JONES, J., concurs in the result.
JONES, Justice (concurring in the result).
I concur in the result reached by the majority opinion to reverse and remand. I would follow the rationale of the Georgia Supreme Court in Smith v. State, 222 Ga. 552, 150 S.E.2d 868 (1966), which is set forth in the majority opinion.
[1]  State ex rel. McLeod v. Riley, 278 S.E.2d 612 (S.C.1981), held a provision of the South Carolina Constitution authorizing industrial revenue bonds to finance commercial shopping centers to be unconstitutional. The benefits to the public in this instance were held to be remote and indirect, preventing the undertakings authorized by the constitutional amendment from coming "within the ambit of `public purpose.'" This case was cited by appellants in oral argument before the Court.