Case Name: BOSWELL v. STATE et al.
Court: Oklahoma Supreme Court
Jurisdiction: Oklahoma
Decision Date: 1937-12-21
Citations: 181 Okla. 435
Docket Number: No. 27935
Parties: BOSWELL v. STATE et al.
Judges: BATLESS, Y. C. J., and CORN, GIBSON, and HURST, JJ„ concur. PHELPS, J., concurs in part and dissents in part. RILEY and WELCH, JJ., and HOLT, Special Justice, dissent.
Reporter: Oklahoma Reports
Volume: 181
Pages: 435–459

Head Matter:
BOSWELL v. STATE et al.
No. 27935.
Dec. 21, 1937.
L. Y. Orton, C. E. Mitchell, and Robert Burns, for plaintiff, A. Y. Boswell.
Hugh M. Bland, for intervener, Dick Crookham.
C. C. Hatchett, pro se, intervener.
Mac' Q. Williamson, Atty. Gen., Randell S. Cobb, Ass’t Atty. Gen., John H. Miley, Special Atty., Tilos. H. Owen, Allen G. Nichols, Wm. O. Coe, Don Welch, Peyton Ford, and William H. Miley, for defendants.

Opinion:
OSBORN. C. J.
The Sixteenth Oklahoma Legislature enacted Senate Bill No. 205, article 10, chapter 50, Session Laws 1937, which by its terms and provisions authorized the State Highway Commission to issue and sell highway revenue anticipation notes in an amount not to exceed $35,000,-000 to procure funds for "constructing and reconstructing roads and bridges upon the state highway system of the state." Forty per centum of the three cents per gallon excise tax levied by section 2, chap. 126, Session Laws 1933, and conditionally a portion of the motor vehicle registration and license tax revenue, was diverted into a special fund and "irrevocably" pledged to the payment of said notes. The act was not submitted to the people for approval.
Plaintiff, A. V. Boswell, and interveners, Dick Crookham and C. C. Hatchett, have, in this original action, attacked the constitutionality of the act. The defendants are the State Highway Commissioners, State Auditor, and Stare Treasurer. The prayer of the petition is for an injunction to enjoin the issuance and sale of the notes.
'The principal ground of attack is that the act is violative of the provisions of the Constitution which fix the "debt limit" of the state.
Various constitutional provisions are referred to in the briefs, but we will mention only those provisions which we deem to be controlling of the controversy. Section 23, article 10, of the Constitution provides:
"The state may, to meet casual deficits or failures in revenues, or for expenses not provided for, contract debts; but such debts, direct and contingent, singly or in the aggregate, shall not, at any time, exceed four hundred thousand dollars, and the moneys arising from the loans creating such debts shall be applied to the purpose for which they were obtained or to repay the debts so contracted, and to no other purpose whatever." ,
Section 24, article 10, of the Constitution provides:
"In addition to the above limited power to contract debts, the state nfay contract debts to repel invasion, suppress insurrection or to defend the state in war; but the moneys arising from the contracting of such debts shall be applied to the purpose for which it was raised, or to repay such debts, and to no other purpose whatsoever."
Section 25, article 10, of the Constitution provides:
"Except the debts specified in sections twenty-three and twenty-four of this article, no debts shall be hereafter contracted by or on behalf of this state, unless such debt shall be authorized by law for some work or object, to be distinctly specified therein; and such law shall impose and provide for the collection of a direct annual tax to pay, and sufficient to pay, the interest on such debt 'as it falls due, and also to pay and discharge the principal of such debt within twenty-five years from the time of the contracting thereof. No such law shall take effect until it shall, at a general election, have been submitted to th$ people and have received a majority of all the votes cast for and against it at such election. On the final passage of such bill in either House of the Legislature, the question shall be taken by yeas and nays, to be duly entered on the journals thereof, and shall be: 'Shall this bill pass, and ought the same to receive the sanction of the people?' "
It is conceded that the control of the fiscal 'affairs of the state is a legislative function and that the power of the Legislature in the exercise of such control is plenary, subject only to constitutional restrictions and the power of the people to legislate by means of the initiative and referendum. This court 'is not concerned with the wisdom or expediency of the act. It is our sole function to determine whether or not the act contravenes the provisions of the Constitution.
The question presented to this court is, Does Senate Bill No. 205 authorize the creation of a debt 'against the state within the meaning- of that term as used in the constitutional provisions?
The object of construction, applied to a Constitution, is to give effect to the intent of its framers, and of the people in adopting it. The intent is to be found in the instrument itself; and when the text of a constitutional provision is not ambiguous, the courts, in construing it, are not at liberty to search for its meaning beyond the instrument. Words must be given their ordinary and natural meaning.
Mr. Cooley, in his work on Constitutional Limitations, page 89, says:
"The object tif construction, as applied to a written Constitution, is to give effect to the intent of the people in adopting it. In interpreting clauses we must presume that words have -been employed in their natural and ordinary meaning. As Marshall, C. J.,. s'ays: 'The framers of the Constitution, and the people who adopted it, must be understood to have employed words in their natural sense, and to have intended what they have said.' This is but saying that no forced or unnatural construction is to be put upon their language, -and it seems so obvious a truism that one expects to see it universally accepted without question; but the attempt is made so often by interested subtlety and ingenious refinement to induce the courts to force from these instruments a meaning their framers never held that it frequently becomes necessary to redeclare this fundamental maxim. Narrow and technical reasoning is misplaced when it is brought to bear upon an .instrument framed by the people themselves, for themselves, and designed as a chart upon which every man, learned and unle'arned, may be able to trace the leading principles of government."
If we are to give the words used their natural and ordinary meaning, we refer to Webster's New International Dictionary, where "debt" is defined as:
"That which is due from one person to another, whether money, goods, or services; that which one person is bound to pay to another, or to perform for his benefit; thing owed; obligation; liability."
Therefore, if we give the word "debt" its plain and ordinary meaning, we believe no one can doubt that the act in question authorizes the creation of a state debt. The bill provides for the issuance of notes, and it is common knowledge that a note is the evidence of a debt. As ordin'arily understood, it is given for no other purpose. The notes bear interest. They mature at definite dates. They are promises to pay money. These are the attributes of debt.
We must, therefore, inevitably conclude that a "debt," within the prohibition of the above-quoted constitutional provisions, will be incurred under this act unless for some well-defined reason said constitutional provisions 'are otherwise inapplicable.
It is insisted by defendants that these constitutional provisions apply only to a debt where a direct property tax is levied for its payment, and that they do not apply where the full faith and credit of the state is not pledged, and that in said' act it is provided that only a portion of the excise tax on gasoline and certain license taxes are pledged and paid into a special liquidating fund, and therefore the debt limitation provisions of the Constitution are not violated.
By section 12 of the act under consideration, it is provided that, in order to obtain funds to pay the principal and interest of the notes issued under authority of said act, 40 per centum of the three cents of the gasoline excise tax referred to in section 2, chapter 126, Session Laws 1933, shall be apportioned and credited to a special fund in the office of the State Treasurer, to be known as "State Highway Commission Note Fund of 1937", and that the principal and interest of said notes shall be payable solely from said fund and from the revenue deposited therein as therein provided, and said portion of said excise tax on gasoline is irrevocably pledged to the payment of the principal and interest of said notes. Conditionally, a portion of the motor vehicle registration and license tax revenue was pledged. Other provisions not deemed material to a determination of the question involved herein are contained in said section. By section 4 of the act under consideration, it is expressly provided that "such Highway Revenue Anticipation Notes are not and shall never become a general obligation oí the State of Oklahoma, but shall be payable solely out oí the revenues and. funds herein provided and pledged." And by section 5 of said act it is provided that:
'Said notes and coupons attached thereto shall show upon their face that they are issued by the State Highway Commission and that they are not debts or general obligations of the State of Oklahoma, but are payable solely out of a special fund created for the purpose and from the revenues pledged thereto."
Although the bill recites that the notes 'are not debts or general obligations of the State of Oklahoma," this is in no respect conclusive of the matter. The question of whether the bill authorizes a debt of the state contrary to the constitutional provisions is a judicial and not a legislative question. Newell v. People, 7 N. Y. 9; State v. Candland (Utah) 104 P. 285; Wilder v. Murphy (N. D.) 218 N. W. 156; 59 C. J. 223. n. 35. See, also, Campbell v. State, 23 Okla. 109, 99 P. 778.
Article 10 of the Constitution deals with the subject of Revenue and Taxation in so far as the state, its subdivisions, and its municipalities are concerned. In determining the intent of the framers of the Constitution and of the people in adopting it, we must consider every section in the article, in relation to every other section contained therein, in so far as they are applicable to the issue. A study of the various provisions of the article discloses that the framers of the Constitution intended to deal fully with the levy and expenditure of both general ad valorem property taxes and specific taxes. The first 10 sections of the article refer generally to ad valorem taxes, while section 12 provides:
"The Legislature shall have power to provide for the levy and collection of license, franchise, gross revenue, excise, income, collateral and direct inheritance, legacy, and succession taxes; also graduated income taxes, graduated collateral and direct inheritance taxes, graduated legacy and succession taxes; also stamp, registration, production or other specific taxes."
Both general property taxes and specific taxes are referred to in these sections, and no distinction is m'ade between them in sections 23 and 25. article 10, supra, which prohibits incurring of debts against the state. These sections do not provide that a debt payable in a certain manner may not exceed $400,000, but that no debt shall exceed that sum. No distinction is made between the two forms of taxation in so far as limiting the amount of indebtedness which may be incurred by the state is concerned.
The debt limitation provisions of the Constitution are a vital part of that document. The purpose of the people to reserve to themselves control over the creation of debts is shown not only by the provisions of section 25, but also by the provisions of section 26, of article 10, which deals with municipal debts. Section 9, article 10, of the Constitution, as enacted, authorized a levy of ad valorem taxes for state purposes not to exceed 3% mills, but an amendment to said section - was adopted by the people of this state on August 15, 1933 (State Question No. 185, Referendum Petition No. 61), which provided that;
"No ad valorem tax shall be levied for state purposes, nor shall any part of the proceeds of any ad valorem tax levy upon any kind of property in this state be used for state purposes."
While the Constitution must be interpreted in the light of its meaning at the time of its adoption by the people, the state is now wholly dependent upon funds derived from levies of specific taxes for the operation of the affairs of government. To sustain the position of the defendants in this case, that the "debt limit" provisions of the Constitution have application only to general ad valorem property taxation would be to hold that there is no constitutional debt limit in this state. Such a conclusion would thus nullify the provisions of sections 23 and 25, article 10, of the Constitution.
The revenues which are "irrevocably pledged" for the payment of the notes are authorized by section 12, article 10, of the Constitution, and are a part of the general revenries of the state, which revenues may be devoted to any public purpose designated by the Legislature. In fact, the gasoline tax, since first levied in 1923, has been used not only for state and county highway purposes, but also a portion has been used for relief of the destitute (article 10, ch. 66, Session Laws 1931), and to pay outstanding state warrants issued for general governmental purposes (section 2, ch. 126, S. L. 1933). At first a portion of the motor registration tax was placed in the general revenue fund (section 11, art. 4, ch. 173, Session Laws H915). The money raised by the issuance of the notes is to be used for the maintenance and construction of state property, that is to say, highways. The ownership is in the state by virtue of the sovereignty which it exercises over every part of its domain. No oilier legal entity exists which can claim ownership. In common parlance, it is entirely immaterial whether one or another part of the state revenue is drawn upon so long as that revenue could be available for any public purpose which the Legislature may designate.
It is clear that in this state the word "revenues," as used in the Constitution, does not mean simply those arising from ad valorem taxation. Kirk v. School District, 108 Okla. 81, 234 P. 590. So when it is provided in section 23, article 10, that debts may be created to meet casual deficits in revenues, it must have been understood that the same revenues could be pledged to the payment of the debt as those whose failures caused the deficit. These revenues include all taxes that may be levied for general purposes. There is nothing in this section that limits the debts as a charge against property. Nor is there such a limitation in section 24. In Milburn v. Childers, 178 Okla. 84, 61 P. (2d) 1047, this court, in effect, held that the tax provided for by section 4 of article 10 of the Constitution for the purpose of paying the state debt did not necessarily require an ad valorem or property tax.
The tax levy of an excise tax on gasoline is authorized by the provisions of section 12, article 10, supra, together with the levy of other specific taxes. If the Legislature had the power to authorize the creation of a debt for a purpose deemed to be beneficent, and to provide for the pledging of revenues derivable from the gasoline tax to the payment of such an obligation, then future Legislatures, for other purposes which they deem to be beneficent, may authorize the creation of indebtedness and irrevocably pledge the revenues to be derived from other specific taxes to the payment of said obligations, which might result in impoverishing the general revenue fund of the state to the extent that the orderly functions of government could not be carried on, or, in the alternative, in onerous and burdensome levies of other specific taxes in sums sufficient to meet the ever-expanding expenses of state government.
In the case of State v. State Highway Commission (Mont.) 296 P. 1033, at page 1035, the court said:
"The fact that a special fund is created by the imposition of the license or excise tax on motor fuels with which to pay the debentures is of no importance.
"Under this contention the Legislature, or the debt contracting authority, could divide the public revenue into numerous subdivisions, tíalling one the 'road fund,' another the 'school fund,' another the 'agricultural fund,' another the 'public health fund,' and others almost without limit. Debts could then be contracted in unlimited amounts and payable in the far distant future, and still be immune from attack 'as violating constitutional provisions limiting indebtedness, provided each debt was made payable out of some one of the specially designated funds into which all of the revenue collected by taxation from the people had been divide^ A mere statement of the proposition carries with it, it seems to us, its own refutation. Crick v. Rash, 190 Ky. 820, 229 S. W. 63.
"The fund raised from the motor fuels excise tax' results from one of the constitutional methods of raising the public revenues. They are state funds, and the state has the right to devote the proceeds of this tax to any public purpose it sees fit."
But, it is said those are "chambers of horrors" out of place here, because we must assume that the Legislature will not abuse the power and that such statements as are made in the Montana case do not rise to the dignity of ' argument. The question, however, is not "Will the Legislature abuse the power and create all such special funds?" but "Did the people intend to give the power which might be so abused?" It is difficult to reach the conclusion that the people so intended, if they were attempting to guard against abuses of the past. We may not contemplate that future legislative assemblies will become reckless, extravagant, or improvident in dealing with the revenues of the state, but it is our solemn duty to determine the intent of the framers of the Constitution and of the people in adopting it with respect to the authority of the Legislature to incur debts which the people must pay. What we have said . clearly demonstrates that the interpretation and construction sought to be placed upon these consii-tution'al provisions by the defendants could not have been contemplated by the framers of that document, but that the people intended that the government should be oper-ated__on a cash, or pay-as-you-go, plan. It is significant to note that in the adoption of the Constitution the people reserved to themselves all power to determine whether or not debts should_.be incurred, excepting only those debts which might be incurred under the specific provisions of sections 23 and 24, article 10, of the Constitution, and also fixed upon themselves the responsibility for providing the revenue for the payment of such debts. We cannot approve the contention of defendants that the limita tions contained in said constitutional provisions relate only to ad valorem taxes on property and have no application to specific taxes.
The contentions here made, that the state is not liable because this is a pledge of special funds only, that it has declared in the act and notes that it does not create a debt or liability against the state, and that tho state will not pay the revenues arising from these excise taxes into its public treasury but will be merely a trustee, are by no meaus new. They arose in New York 85 years ago and under constitutional provisions so nearly identical with those under consideration that the discussion thereon must be of persuasive force here. The constitutional provisions under consideration therein are identical with our constitutional provisons above quoted except as to one word which is clearly and patently immaterial. Certain canal certificates were under consideration therein which had been made payable only from a special fund— canal revenues. There also the Legislature attempted to provide that the certificates should in no event be construed to create a debt or liability against the state. The Legislature provided that the state should in no event be liable to make up any deficiency in the canal revenues nor to redeem the certificates from any other source than the canal revenues. The court said that this provision did not relieve the contract from being a debt. Speaking on this point, in the case of Rodman v. Munson (N. Y.) 13 Barb. 63, affirmed 13 Barb. 188, and further 'af-flrmed 13 Barb. 205, note, that court said:
"To constitute a debt there must be a contract, either express or implied, but it is not indispensable that the liability created by the contract should extend so far as to subject the person of the debtor or all of his property to be seized. A debt payable only out of the proceeds of a trust estate is none the less a debt because there is no personal obligation resting upon any one for its payment further than the obligation of executing the trust with fidelity, and no source from whence it can be paid but the trust property. If these positions be sound, then it must necessarily follow that money advanced to a state at its own request, and applied to its own use, upon a written contract that it is to be repaid, with the interest, from the proceeds of the sales of its public domain, or from the proceeds of any other specific branch of its revenue, and from no other source whatever, must create a debt within the legal as well as the universal sense of the term."
See Newell v. People, 7 N. Y. 9.
A problem identical with that presented here was before the Supreme Court of Colorado in the case of In re Senate Resolution No. 2, 31 P. (2d) 325. In that case there was involved the constitutionality of a legislative act which provided for the issuance and sale to the United States Government of highway debentures for the purpose of providing funds for the construction, repair, and improvement of highways. The act was styled an "Emergency Relief Measure to Provide Employment Quickly and to Defend the State." A portion of the state excise tax on gasoline was pledged to the payment of said debentures as they became due. The Constitution of Colorado provided that the Legislature should not "contract any debt by loan in any form" (art. 11, sec 3). It was pointed out that the court had previously approved the "special fund" doctrine, but that it was not applicable, since the Constitution prohibited the pledging of revenues of future years, which funds would be otherwise available for general purposes. It was held that the 'act was unconstitutional. Eollowing the promulgation of this opinion, the people of Colorado amended the Constitution to provide that "the proceeds from the imposition of any license, registration fee or other charge with respect to the operation of any motor vehicle upon any public highway in this state and the proceeds from the imposition of any excise tax on gasoline or other liquid motor fuel shall, except costs of administration, be used exclusively for the construction, Maintenance, and supervision of the public highways of this state" (art. 10, sec. 18, as added in 1934). Thereafter, in the case of Johnson v. McDonald (Colo.) 49 P. (2d) 1017, the court sustained the constitutionality of an act which provided that the state might borrow money from the Eederal Government to the extent of $25,000,000 by issuing anticipation revenue warrants against the highway fund and further providing for payment of such anticipation revenue warrants out of revenues subsequently accruing to the highway fund. The court was cautious to point out that the subsequent .arrangement did not create a debt against the state within the meaning of the constitutional inhibition, because the funds pledged to pay the debt would not be available for general purposes.
When applied to the fiscal setup of our own state, the logic of these opinions is unanswerable. The revenues derivable from an excise tax on gasoline 'are not, and may not be construed to be, "special funds" within the meaning of that term as employed by the authorities dealing with the "special fund doctrine" hereinafter noticed. These funds have been used in the past to defray a portion of the expenses of general government and to liquidate indebtedness incurred as general governmental expense. Defendants have not been able to point to any constitutional or statutory inhibition against so using said funds in the future.
The effect of the act with which we are dealing is to pledge irrevocably the funds arising from gasoline taxes to the payment of the revenue anticipation notes, and thus to lay a mortgage upon a source of revenue of the state. The act is for the creation of an indebtedness in excess of $400,000. The power to create it is circumscribed by the limitations of the Constitution, which prohibits the creation of an indebtedness in excess of said amount (section 23, 'art. 10, supra), except to repel invasion, suppress insurrection, or to defend the state in war (section 24, art. 10, supra), unless such debt is authorized by a vote of the people and a direct annual tax is provided and so authorized by the people sufficient to pay the principal debt and interest thereon (section 25, art. 10, supra).
Section 1, article 5, of the Constitution vests the legislative authority of this state in the Legislature, but by virtue of the same section the people reserved to themselves the power to propose laws and amendments to the Constitution and to enact or reject the same at the polls independent of the Legislature, and also power at their own option to approve or reject at the polls any act of the Legislature. To sustain the validity of the act involved herein would be • to hold that the Legislature is empowered to enact irrevocable and unrepealable legislation, thereby not only depriving a future legislative body of its right to repeal the law levying the tax pledged to the payment of the outstanding notes, but likewise denying the people of this state the right to repeal the levy of the tax or to provide for the distribution of the revenues arising therefrom to another or different purpose. As we conceive it, the constitutional provisions dealing with the "debt limit" of the state were adopted for the purpose of fixing the power and responsibility of legislation relating to the fiscal affairs of the state upon the existing legislative assembly, and to prevent one legislative assembly from laying if^ mandate upon a future one. The effect of these provisions is that one legislative assembly cannot guarantee the sp'an of life of its legislation relating to the fiscal affairs of the state beyond the period of its biennium. These provisions of the Constitution guarantee that the power of a subsequent legislative body either to acquiesce or repeal shall always be existent.
The defendant contends that, in any event, the bill ought to be sustained upon the "special fund doctrine," as now invoked in this and other jurisdictions. That doctrine is simply an exception to the debt limitation provisions and is based on the theory that the obligation, payable out of a special fund, is not a debt against the state. The most common application of the special fund doctrine is in the group of eases dealing with obligations payable out of the income from municipally owned utilities. There are apparently two views with respect to the application of the doctrine in these cases. The first, or the one sometimes called the "restricted" special fund doctrine, is limited to cases where the thing creating the obligation is self-liquidating, and where no charge is made against a pre-existing fund owned by the city and available for general purposes. Garrett v. Swanton (Cal.) 13 P. (2d) 725, 'and authorities therein cited. The other view, or the "expanded" special fund doctrine, is applied to obligations created by an extension and improvement of a utility, payable out of the net income of the whole plant, even though it may have been first created with proceeds from general tax levies 'and the income therefrom is already being used for general governmental purposes. State v. City of Miami (Fla.) 152 So. 6, and cases therein cited.
As applied to states, the special fund doctrine is invoked in a group. of cases involving toll bridges where the debt contracted to build the bridge is payable solely out of the tolls collected therefrom. These are instances of the self-liquidating or "restricted" special fund theory. Attorney General v. State Bridge Comm., 277 Mich. 373; Estes v. State Highway Commission (Ky.) 29 S. W. (2d) 583; Bates v. State Bridge Commission (W. Va.) 153 S. E. 305.
Another instance of the application of the self-liquidating special fund doctrine, as applied to states, is the dormitory cases. The doctrine is there invoked where the bonds are pay'able solely from the rent of the dormitory which was constructed with the proceeds of the bonds. McClain v. Regents of University of Oregon (Ore.) 265 P. 412; State v. Davis (N. D.) 229 N. W. 105. The special fund doctrine was sustained in Fanning v. University of Minnesota (Minn.) 236 N. W. 217, where the bonds were payable not only from the net earnings of the dormitory, but partly from other revenue of the university, which was not owned by the state other than as trustee, and could be used for none other than university purposes. It must bo noted that this is analogous to the public building bond cases hereinafter discussed. But in Wilder v. Murphy (N. D.) 218 N. W. 156, the doctrine was rejected, where the act providing for the erection of dormitories pledged the income from three other dormitories which had already been completed at the expense of the state. Thus, the "expanded" special fund doctrine applied in some municipally owned utility cases is rejected in the dormitory eases.
The "special fund doctrine" is also invoked in another group of cases dealing with acts providing for the erection of public buildings with the revenue from lands granted for a specific purpose. The doctrine has a different application in these eases. The charge against the special fund is held not to be a debt because the state never had an unqualified ownership in the fund. It did not "belong to the state in the ordinary sense," but the state merely held it in trust. Therefore, no property of the state, in the real sense, was involved. State v. Clausen (Wash.) 235 P. 364; State v. Regents of University (N. M.) 258 P. 571. This theory is further reflected by the contrary holding in the dases where part of the state's generally owned property would be charged. State v. McMillan (N. D.) 96 N. W. 310; State ex rel. University of Utah v. Candland (Utah) 104 P. 285. Thus the doctrine in these cases is limited to obligations held in trust. Johnson v. McDonald (Colo.) 4 P. (2d) 1017.
There are other cases dealing with miscellaneous subjects, but based upon the theory th'at the project is self-liquidating, and no other fund is charged. In re Opinion of the Judges (S. D.) 162 N. W. 536; Casch v. Miller (Ohio) 135 N. E. 813; Clarke v. S. C. P. S. Authority, 177 S. C. 427, 181 S. E. 481.
Defendants, to sustain the validity of the act under consideration, rely principally upon cases from Washington, Oregon, South Carolina, New Mexico, Alabama, California, and Kansas, which we shall briefly analyze.
In Washington (Ajax v. Gregory, 32 P. [2d] 560) it was held no indebtedness of the state was created by the sale of bonds payable out of a liquor revolving fund, consist- ing of license fees, permit fees, penalties, and other money received under the State Liquor Act. The funds were acquired by the bonds for the purpose of putting into operation the Liquor Act, until it could become a going concern. In stating the rule which was there applied, the court merely quoted from State v. Clausen, supra, a typical public building bond case, based upon the qualified ownership in the state, and regarded the cases as indistinguishable.
Similarly, in Oregon (Moses v. Meier, 35 P. [2d] 981), the court held that the constitutional debt limitation was not violated by the issuance of certificates to be paid solely from anticipated revenues derived from the manufacture and sale of liquor. The money so raised was to be used for the relief of unemployment. It is important to notice that the court there relied on the self-liquidation theory, and regarded the dormitory bond case of McClain v. Regents of University, supra, announcing the "restricted" theory, as indistinguishable.
In South Carolina (Briggs v. Greenville County, 135 S. E. 153), the court did no more than announce the doctrine as analyzed above. It was there held that no state indebtedness was created by certain "reimbursement agreements," which were in effect bonds issued to build roads payable out of a fund created by the automobile license tax, federal aid moneys, and three-fifths of the gasoline tax. The court relied on cases from the utility group and a special assessment group, and construed these funds as_analogous to "special assessments upon property benefited by the improvement." The court went further in the case of State v. Moorer (S. C.) 150 S. E. 269, in sustaining the validity of an act which pledged, in addition to the proceeds of the gasoline tax and motor vehicle tax, "the full faith, credit, and taxing power" of the state. The court proceeded on the premise that the word "debt," in the ordinary sense of the term, was not the same as it is in the constitutional sense, which conclusion is not consistent with the view we have taken herein.
When we read the acts upheld in the eases from California and Alabama (California Toll Bridge Auth. v. Kelly, 21 P. [2d] 425; and Alabama State Bridge Corp. v. Smith, 116 So. 695), we notice that the courts had merely to consider orthodox toll bridge legislation. In California, the addition of certain appropriations to the tolls, for payment of the bonds, was contended to create 'a charge on state property. The court held that only the tolls were pledged and the appropriations were "a separate and distinct transaction, entirely aside the mark in considering the legality of the bonds in this ease. " In Alabama, the portion of the act regarding the application of the gasoline tax and other revenues, in addition to tolls, to the payment of the bonds was construed not to constitute a pledge of those funds, ' but only an authority so to do, if the Governor, in the exercise of executive discretion, approves such course of action." See concurring opinion by Justice Bricken. Thus the only thing pledged in both cases was the toll.
The eases from New Mexico and Kansas are based primarily, not upon the special fund doctrine, but upon the interpretation which those states have seen lit to give their Constitutions. In State v. Connelly (N. M.) 40 P. (2d) 1097, TOO A. L. R. 878, the court sustained the validity of bonds issued to erect a Supreme Court building, payable out of a fund created by the imposition of a fee on all cases filed in the district courts of the state. It was held that the debt limitation provision of the Constitution -was designed to apply only to debts contemplating the levy of a general property tax for their retirement. In State ex rel. Boynton v. Kansas State Highway Comm. (Kan.) 28 P. (2d) 770, the court sustained the validity of warrants issued for the construction and maintenance of highways payable from special taxes on motor vehicles and motor fuels. By constitutional amendment as construed, it was specifically provided that the debt limitation provisions should not apply and the special taxes in question could be used for no other purpose.
It is said that the "special fund doctrine" has been recognized and applied by this court in the case of Baker v. Carter, 165 Okla. 116, 25 P. (2d) 747, and so it has. It is urged that the recognition of said doctrine in that case constitutes a precedent for the validity of the act under consideration herein. In that case, however, a public corporation, the Agricultural and Mechanical College of this state, was authorized to issue certain certificates of indebtedness for the purpose of constructing a dormitory, the sole provision for payment being the revenues produced from the rental of the conveniences of said dormitory. The revenues which were to create the special fund had no existence prior to the issuance of the obligations; they were to 'arise wholly out of the property created by the use of the proceeds of the bonds authorized. The fund created was in no sense derived from a tax of any kind. No property of the state already producing income was to be utilized in any way to help create the special fund. The public revenues of the state were not concerned. The contemplated asset was to be a self-liquidating project. Therein the court quoted from the California case of Garrett v. Swanton, 13 P. (2d) 725:
" An indebtedness or liability is incurred when by the terms of the transaction a municipality is obligated directly or indirectly to feed the special fund from general or other revenues in addition to those arising solely from the specific improvement contemplated. It 'also seems to be well settled, as a second limitation to the doctrine, that a municipality incurs an indebtedness or liability when by the terms of the transaction the municipality may suffer a loss if the special fund is insufficient to pay the obligation incurred.
"The 'special fund' doctrine was never intended to be applied to a situation where the municipality, directly or indirectly, is or may be compelled to feed the special fund from other revenues in addition to those arising from the special improvement contemplated. Such a subterfuge, if sanctioned, would go far to eventu'ally wipe out the purpose and intent of the constitutional provision."
But in the case at bar the so-called fund is created from specific taxes which constitute a part of the state's general revenue. The levy of taxes therefor had alre'ady been made and a similar fund had been in existence for many years. The fund is created out of tax money which can otherwise be devoted by the Legislature to any legitimate public use. The m'aker of the obligation here is not a separate legal entity, but is merely an arm or agency of the state. The roads heretofore built from the proceeds of various ad valorem taxes, gasoline taxes, and county bond issues will be used by those purchasing gasoline the same as the roads to be constructed from the indebtedness sought to be authorized herein. It is manifest, therefore, that the project contemplated by this act of the Legislature is in no sense a self-liquidating project.
The "special fund doctrine" was specifically rejected by this court in the ease of Zachary v. City of Wagoner, 146 Okla. 268, 292 P. 345, which w'as distinguished by this court in Baker v. Carter, supra. Therein the city had purchased certain Diesel engines as a unit in a municipally owned lighting system to be paid for out of the "savings" from the operation of said system. While the federal court, in the case of Fairbanks-Morse & Go. v. City of Wagoner (C. C. A.) 81 Fed. (2d) 209, thought this court had misperceivecl the distinction, we are impressed that, the case coming to us upon a demurrer to the petition, the allegations of which were taken as true, the distinction pointed out was real. We have not departed from the principles therein enunciated. See Layne-Western Co. v. City of Depew, 177 Okla. 338, 59 P. (2d) 269.
We are referred to the case of Edwards v. Childers, 102 Okla. 158, 228 P. 472. In that ease it was sought to enjoin the payment of certain obligations of the state out of the state highway maintenance and construction fund. An attack was leveled against certain sections of chapter 101, S. L. 1923-24, which levied a tax of two 'and one-half cents per gallon on gasoline and provided that 60 per cent thereof he placed in a special fund designated as "the State Highway Construction and Maintenance Fund," to be expended by the State Highway Commission in the maintenance and construction of state highways, on the ground that said sections did not lawfully appropriate said funds to a specific purpose. It was held that the creation of a special fund by a continuing spe,-cific tax, the whole of which was designated to a specific purpose, constituted an appropriation within the meaning qf the provisions of section 5», article 5, of the Constitution of this state. There is not the remotest relationship between the issue presented therein and the issue involved in the instant case. The term "special fund," as used in that case, relates to a particular fund created by the levy of a specific tax for a specific purpose, as distinguished from the "general revenue fund" of the state created for the payment of the general expenses of state government.
The distinction between the term "special fund," as used in Edwards v. Childers, supra, and the "special fund doctrine," 'as defined and applied in Baker v. Carter, supra, is readily discerned. In the latter the fund therein was to consist wholly of revenues derived from the contemplated project, which revenues were pledged to the payment of-the cost of constructing the project. As heretofore pointed out, it was a self-liquidating project, and such a project is not involved in either the instant case or in the case of Edwards v. Childers, supra. The fund herein could be termed a "special fund", as the term is used in Edwards v. Childers, supra, without doing violence to our conclusion that the two dases are not analogous.
A careful study of the various authorities cited by defendants discloses that in some jurisdictions the failure to observe the distinction between a particular fund derived from a specific tax levied for a specific purpose, which has been termed a "special fund," and a fund partaking of the nature of a trust fund derivable from a self-liquidating project under the "special fund doctrine," has led to a confused interpretation and to an unwarranted extension of the "special fund doctrine," which we refuse to follow.
Defendants have referred to other decisions of this court which they contend are applicable by analogy. It is urged that the cases of In re State Funding Bonds of 1935, Series A, 173 Okla. 622, 50 P. (2d) 221, and In re State Funding Bonds of 1935, Series B, 173 Okla. 626, 50 P. (2d) 226, support their contention. In those cases the court approved the issuance of funding bonds to liquidate an existing state debt evidenced by outstanding warrants. It was specifically pointed out that bonds which were issued to fund a valid indebtedness neither create nor increase the debt of the state, but merely change the form of existing indebtedness. These cases are not analogous to the sitúa tion presented here.
We are likewise referred to certain decisions relating to the public building fund bonds issued pursuant to the provisions of section 2, chapter 89, Session Laws 1910-11. See In re Assessment First National Bank of Chickasha, 58 Okla. 508, 160 P. 489; State ex rel. Freeling v. Howard, 67 Okla. 296, 171 P. 41. The funds pledged to the payment of the bonds were moneys received from the sale and rental of certain lands granted to the state by the United States for charitable and penal institutions and public buildings and constituted trust funds and not general revenue funds of the state.
Our attention is also directed to the case of Security Bank & Trust Co. v. Barnett, 169 Okla. 298, 36 P. (2d) 874, which involved the liquidation of the depositors' guaranty fund, wherein it was held that holders of depositors' guaranty fund warrants issued pursuant to legislative authority for procuring funds to replenish the depositors guaranty fund • were entitled to full payment thereof, since the Legislature had provided that said warrants should constitute a first and prior lien against said fund. In that ease the power of the state to become indebted in excess of the amount provided in the Constitution was not involved. Moreover, the fund was raised, not under the taxing power of the state, but under the police power. Noble State Bank v. Haskell, 22 Okla. 48, 97 P. 590.
When we analyze the authorities on which defendants rely to sustain the validity of the act under consideration, we find ourselves unable to give our constitutional provisions limiting the right to incur debts the construction given to the Constitutions of the states herein referred to as construed by their courts. As heretofore pointed out, it is our opinion that the framers of the Constitution of this state intended to limit the amount of indebtedness incurred against the state without the 'approval of the electors thereof in the manner designated by section 25 of article 10, whether that indebtedness be payable by a general ad valorem property tax or by funds derived from a specific tax which would otherwise be available for general revenue purposes of the state.
By section 17 of the act, the Legislature declares that the provisions of the act are severable. íhis declaration will be given force when possible, but since the main features of the act depend on the creation of the special fund, it is apparent that all of those parts of the bill dependent upon the creation of such special fund must fail as being ineffective without such unconstitutional features. See Parwal Inv. Co. v. State, 71 Okla. 121, 175 P. 514; Williams v. Standard Oil Co., 278 U. S. 235, 73 L. Ed. 287. In this connection, however, it may be said that, although the appropriation provided by section 15 is challenged, it is not shown that any payment thereunder has been threatened in such a manner as to challenge our consideration thereof. It may be that the Legislature expected to pay special counsel for services rendered whether the main features of the bill were or were not defeated. This question, in view of the record, will be reserved for a proper case.
Having taken the view hereinabove set out, that the indebtedness sought to be created by said act is contrary to the Constitution of this state, it is unnecessary to discuss the other questions raised by plaintiffs. Eor the reasons herein stated, we hold Senate Bill No. 205, in so far as it purports to authorize the issuance of highway revenue anticipation notes, is unconstitutional and invalid, and that an appropriate writ should issue.
Honorable Denver N. Davison, a Justice of this court from the Eighth District, having certified his disqualification in this ease, Honorable Thomas P. Holt was appointed as Special Justice by the Governor to sit in his stead.
BATLESS, Y. C. J., and CORN, GIBSON, and HURST, JJ" concur. PHELPS, J., concurs in part and dissents in part. RILEY and WELCH, JJ., and HOLT, Special Justice, dissent.