Title: Book v. INDIANAPOLIS-MARION BLDG. AUTH.

State: indiana

Issuer: Indiana Supreme Court

Document:

234 Ind. 250 (1955)
126 N.E.2d 5
BOOK
v.
INDIANAPOLIS-MARION BLDG. AUTHORITY ET AL.
No. 29,228.

Supreme Court of Indiana.
Filed April 20, 1955.
*252 Thomas E. Garvin and David M. Lewis, of Indianapolis, for appellant.
John A. Alexander, Donald A. Schabel, and Buschmann, Krieg, DeVault & Alexander, all of Indianapolis, of counsel, for appellees.
HENLEY, C.J.
The sole question involved in this appeal is whether the appellant's amended complaint contained facts sufficient to constitute a cause of action against appellees as against the demurrer for want of such facts which was addressed to it.
In view of the importance of the subject matter we set out the amended complaint in its entirety, except for formal parts, as follows:
The demurrer and memorandum addressed to the amended complaint, omitting formal parts, reads as follows:
After argument of counsel the court sustained the demurrer and the appellant, refusing to amend or plead further, judgment was entered on said demurrer.
The sole error assigned is the sustaining of the demurrer.
To reach its finding and decision the trial court was called upon to pass upon the constitutionality of Acts 1953, Ch. 54, § 26-2501  26-2523, inclusive, Burns' 1948 Repl. (1953 Cum. Supp.). The trial court held the statute involved constitutional and not violative of Art. 13, § 1, or Art. 11, § 13, of the Constitution of the State of Indiana.
By the appeal this court is called upon to pass finally upon the two constitutional questions involved, i.e., (1) whether the Act created a corporation with power to issue revenue bonds creating an indebtedness in excess of the limitation of two per cent of taxables, and an indebtedness in excess of the limitation to be incurred by the municipality by way of rent obligation extending to a possible forty year term, all as a subterfuge to evade Art. 13; and (2) whether the Act constitutes "a special act of the General Assembly" other than a *257 banking corporation, allegedly in violation of Art. 11, of the Constitution of the State of Indiana.
The Act itself, encompassing ten pages of the official statute, should be read in its entirety for a complete understanding of its intent and import. Space unfortunately does not permit copying here. §§ 26-2501 to 26-2523 inclusive, Burns' 1948 Repl. (1953 Cum. Supp.).
We will consider the two questions raised by the decision in the order in which they appear in the memorandum of the demurrer.
Appellant, in his brief, first urges seriously that the Act involved sets up a new corporation which, in effect, is designed to circumvent the wisdom of the 1881 Constitution makers in limiting the size of the debt of the state and its political subdivision. This would be accomplished by reason of provisions permitting the corporation to borrow money, create, issue and sell revenue bonds, which might cover a financing period of forty years. By the terms of the Act the bonds would be amortized and paid as to principal retirements and interest from the rental income derived by a long term lease on a building, with annual rentals sufficient for the complete servicing of the bonds. Appellant further urges that the permission of the Act to include in the lease an option to purchase, is further indication of the subterfuge and that the overall rental for the whole term might, and probably would, far exceed the two per cent limit of the political subdivision lessee-optionee.
It is observed that appellant's contention under Art. 13, of the Constitution of the State of Indiana, is that (a) the corporation is authorized to borrow money, and (b) that the long term lease with option to purchase, is in legal reality a contract of purchase, the amount of which could, and probably *258 would, far exceed the two per cent constitutional limitation. Appellant takes the position that the entire aggregate rental to be collected over the whole term of the lease should be the basis of determining the amount of the alleged debt. In this appellant is in error. It must be conceded that an essential function of counties and cities is the housing of offices, storage of property, and, in general, the conducting of their public business. Whether this is accomplished by purchase or construction of buildings, including the underlying real estate, or whether the same be occupied under short or long term rental leases, are all matters for the sound discretion of the governing bodies of such counties and cities. In the absence of fraud, or the violation of the constitutional debt limitation, such purchases or leases are lawful, regular and orthodox practice for many years. Should a county or city, or both, seeking the acquisition of a building for their lawful governmental functions, choose to lease such a building, say for forty years at a hypothetical rental of $10,000 per year, can it be logically claimed that such governmental unit would thereby incur an indebtedness of $400,000 at the time of execution of the lease, within the meaning of the constitutional limitation? We think not. Rather, it would thereby incur an indebtedness of $10,000, within the meaning of such limitation, assuming the annual rental was to be paid in advance. It is to this smaller amount that the constitutional debt limitation test applies, since the future annual installments of rent do not become debts until earned.
The leading earlier case supporting our opinion is that of City of South Bend v. Reynolds (1900), 155 Ind. 70, 57 N.E. 706. There, a private citizen contracted to build a city hall on land belonging to the City of South Bend and to lease the building to it for 12 years *259 at an annual rental of $7,200, which was admittedly reasonable, and an option was granted to the city to purchase the building at the end of the lease for the original cost with interest, but giving credit for all rents paid. This court in that case said:
To the same effect is the case of Jefferson School Twp. v. Jefferson Twp. S. Bldg. Co. (1937), 212 Ind. 542, 10 N.E.2d 608, wherein the building corporation organized under Chapter 223, Acts 1927, erected a school for the township from the sale of revenue bonds and leased it for 26 years at an annual rental which was not charged with being excessive, as was found to be the fact in the earlier case of Hively v. School City of Nappanee (1929), 202 Ind. 28, 169 N.E. 51, 171 N.E. 381, cited by appellants, which is thus distinguished from the South Bend and similar cases where no finding of excessive rentals exist.
The latest decision of this court on the subject is Protsman v. Jefferson-Craig Consolidated School Corporation (1953), 231 Ind. 527, 109 N.E.2d 889. This court followed its decision made in the Jefferson School Township case wherein the Hively case was again distinguished, using the following language:
An interesting note on the subject of debt limitation is to be found in Indiana Law Journal, Vol. 25, p. 325.
Appellant cites two cases in which acts were held to violate the debt limitation provision of the Constitution. They are distinguishable from the case at bar. In Cerajewski v. McVey (1947), 225 Ind. 67, 72 N.E.2d 650, Acts 1945, Ch. 138 was involved. It provided a new and separate taxing district in cities between 65,000 and 86,000 population for the building of technical-vocational high schools but with the complete control, operation and management in the school trustees of the school city. Apparently in part, because it had the effect of multiplying taxing units in the same city, the court held that it was an unlawful evasion of the constitutional debt limitation. Rappaport v. Department of Public Health (1949), 227 Ind. 508, *262 87 N.E.2d 77, grew out of Chapter 200, Acts 1945, as amended by Chapter 323, Acts 1947, and attempted to create a new and independent taxing power for hospital and health purposes in the city of Indianapolis, functions already vested in the city itself for many years. Bonds were to be issued in the name of the city itself to be signed by the Mayor and attested by the city controller. The distinction between the facts of that case and the case at bar are obvious. Also see extended dissenting opinion of Emmert, J. While the latter opinion is a dissent the language correctly recites the controlling policy and decided cases of this court.[1]
The second item of appellant's memorandum charging that the Act of 1953 is a special act in violation of said Art. 11 of the Constitution of the State of Indiana is not well taken. The case of Rosencranz v. City of Evansville (1924), 194 Ind. 499, 143 N.E. 593, cited by appellant, held the act there involved provided for a city port in cities of population between 85,000 and 86,000, obviously applicable only to the city of Evansville and, being an unreasonable classification, the act was properly held a special act, and, therefore, violating Art. 11 of the Constitution of the State of Indiana. The case of Jordan v. Logansport (1912), 178 Ind. 629, 99 N.E. 1061, related to sewer construction in cities between 16,000 and 20,000 population. There again this *263 court failed to hold the classification unreasonable and arbitrary, but divided evenly in opinion with one not participating, thus permitting the trial court's judgment holding the classification reasonable to stand. These cases do not constitute authority for the charge of special act with reference to the act involved in the case at bar where the classification is as broad as the state itself and applicable to "each county of the state." Art. II, § 13 of the Constitution of the State of Indiana should not be contorted into a meaning not applicable to the facts in this case. Appellant's contention as to the act being a special one is without compelling merit. See Johnson v. Board of Park Commissioners of Fort Wayne et al. (1930), 202 Ind. 282, 174 N.E. 91, and cases cited therein.
The decision of the Marion Circuit Court in sustaining the demurrer to the amended complaint was correct.
Judgment affirmed.
Achor, Bobbitt, Emmert and Levine, JJ., concur.
NOTE.  Reported in 126 N.E.2d 5.
[1]  "Nor is there any reasonable ground for denying that a hospital may be a local public improvement ... Art. 13 does not... purport to say that only public improvements existing at the time of its adoption could be considered public improvements for all time, `for, while the meaning of constitutional guaranties never varies, the scope of their application must expand or contract to meet the new and different conditions which are constantly coming within the field of their operation. In a changing world it is impossible that it should be otherwise' ..." Emmert, J. dissenting in Rappaport v. Department of Public Health (1949), 227 Ind. 524, 534, 535, 88 N.E.2d 150, 156.