Title: Thomas v. ALABAMA MUN. ELEC. AUTHORITY
Citation: 432 So. 2d 470
Docket Number: N/A
State: Alabama
Issuer: Alabama Supreme Court
Date: June 3, 1983

432 So. 2d 470 (1983)
Raimon G. THOMAS
v.
ALABAMA MUNICIPAL ELECTRIC AUTHORITY, a public corporation, etc., et al.
81-786.

Supreme Court of Alabama.
April 8, 1983.
As Modified on Denial of Rehearing June 3, 1983.
*472 E. Terry Brown and Robert D. Segall of Copeland, Franco, Screws &amp; Gill, Montgomery, for appellant.
Robert D. Thorington, W. Stanley Gregory, &amp; David W. Spurlock of Johnson &amp; Thorington, Montgomery, for appellees.
EMBRY, Justice.
This is an appeal from a decree of the Circuit Court of Montgomery County which validated and confirmed certain evidences of indebtedness proposed to be issued by the Alabama Municipal Electric Authority (Authority) and, in addition, authorized the execution of certain service agreements (Contracts) between the Authority and several state municipalities, utilities, and electric boards (Participants) for the purchase of electric power and energy.
The Authority is a public corporation of the State organized under the provisions of Act No. 81-681 (Act), now codified as § 11-50A-1, et seq., Code 1975. Generally, the Authority is empowered to construct, own and operate electric distribution systems and related facilities to assure that municipalities, utilities and electric authorities in the State have alternative sources of bulk electric power and energy in addition to those presently available and to operate their electric distribution systems in a dependable, efficient and economical manner.
The applicable proceedings and pertinent documents involved in the proposed financing sought to be validated are as follows:
On 11 March 1982 the Authority's Board of Directors (Board) adopted a resolution authorizing (1) the issuance, execution and delivery by the Authority of its Bulk Power Supply Services Revenue Notes (Note Resolution), (2) the execution and delivery of a loan agreement (Loan Agreement) with The Alabama National Bank of Montgomery (Bank), (3) the execution and delivery of the Contracts between the Authority and each of the Participants and, (4) the filing of a complaint pursuant to § 11-50A-10 and § 11-50A-11, Code 1975. The Note Resolution authorized the borrowing of the maximum aggregate principal amount of $3,000,000. Each of the notes authorized in the Note Resolution is to be dated the date of issuance, is to be payable to the lender or order in the amount evidenced thereby, is to be numbered from one up, is to be in such denomination as may be determined at the time of each borrowing evidenced thereby and is to mature on the first day of the month following the expiration of forty months from the date the first note is issued. The Note Resolution further provides that the notes are to bear interest from their date and their maturity at such rate or rates, fixed or floating, not exceeding 20% per annum, all as shall be provided for by the Authority prior to each borrowing or by contract authorized by the Board to be entered into by the Authority, with interest payable on 1 March and 1 September of each year. The notes and the interest thereon shall be payable at the principal office of the Bank and the notes reserve to the Authority the option of prepaying and redeeming any of the notes at any time *473 upon payment of the principal amount and interest accrued to date of prepayment. The Note Resolution provides that the notes shall not be general obligations of the Authority but shall be payable solely out of revenues derived by the Authority from the Contracts or, in certain events, a portion of the proceeds derived from the sale of the Authority's long-term bonds. In the Note Resolution, the Board pledges the revenues derived by the Authority from the Contracts solely for the payment of the principal of and interest on the notes.
On 13 May 1982, the Authority and the Bank entered into the Loan Agreement. It represents the terms and conditions of a portion of the $3,000,000 borrowing authorized by the Authority in the Note Resolution. Pursuant to that agreement, the Bank will lend the Authority a principal sum not exceeding $1,350,000 which loan will be evidenced by the notes. The notes will bear interest at a per annum rate equal to 63% of the Bank's prime lending rate, providing that such interest rate may never exceed 20% per annum. The proceeds of the notes shall be deposited in a Notes Proceeds Account as provided for in the Note Resolution and shall be disbursed out of that account to pay the costs of providing Bulk Power Supply Services, including without limitation (1) the costs of a feasibility study, (2) the costs incurred in connection with the issuance of the notes, and (3) the costs of reimbursing the Municipal Electric Utility Association of Alabama for monies advanced by that association to the Authority. The feasibility study to be financed from note proceeds will determine whether it is practical for the Authority to finance, require, construct, operate and maintain electric generation, transmission and distribution facilities in order to provide the participants with an alternative source of bulk electric power and energy to operate their respective electric distribution systems.
The Authority entered into Contracts with each of the Participants,[1] and each Participant will be required to pay a pro rata portion of the "Costs of Bulk Power Supply Services," defined in the Contract as:
The pro rata cost to each participant is based on the number of kilowatt hours purchased by the respective Participant during the Participant's preceding fiscal year. Each Participant's allocated cost is payable solely out of the revenues to be derived by the respective Participant from the operation of its respective electric system, subject to certain prior lien pledges heretofore made by such Participant. The liability of the Participants under their respective Contracts for the payment of the costs of Bulk Power Supply Services to the Authority is several and not joint, each Participant being liable only for its allocated cost.
This action was commenced under and pursuant to § 11-50A-10 and § 11-50A-11, Code 1975. The complaint was filed on behalf of the Authority on 13 May 1982 in Montgomery County circuit court. On that same date, the circuit court entered an order scheduling the case for hearing on 16 June 1982 to show cause why the circuit court should not validate and confirm the Notes, Contracts, Loan Agreement, and all proceedings had or taken in connection therewith. That order also directed the clerk of the court to effect notice of the hearing to the taxpayers and citizens of the State by publication in a newspaper customarily published not less than five days during each calendar week in the cities of Montgomery, Birmingham, Mobile, and Huntsville, once a week for three consecutive weeks before the day of the hearing set above. The Participants and the Bank were joined as parties defendant because of their execution of, respectively, the Contracts and the Loan Agreement, which documents were sought to be validated by the circuit court. The case was submitted on the pleadings, the documents introduced in evidence in open court, and the oral testimony taken in open court. On 16 June 1982 the circuit court entered a decree validating and confirming the Notes, the Loan Agreement and the Contracts. Raimon G. Thomas, one of the defendants below, as a taxpayer and citizen of this State filed this appeal.
Appellant Thomas raises twelve issues on appeal. For ease of reference we will set out each of those issues together with our answer, in seriatim.
The Constitution of Alabama, 1901, § 45, requires, in part, that "[each] law shall contain but one subject, which shall be clearly expressed in its title."
Opinion of the Justices, 294 Ala. 555, 319 So. 2d 682 (1975).
Appellant contends that because the Act does not specifically mention "feasibility study" as a power granted to the Authority it violates § 45 and the Authority is, therefore, outside the subject-matter of its authorized powers when it attempts to issue notes to finance such a feasibility study. We believe, as the appellees do, that a necessary concomitant of, or prerequisite to, the Authority's power to construct and operate massive electrical generation projects, or any other project germane to those powers authorized in the Act, is the power to *475 ascertain in advance, before the expenditures of large quantities of monies, the economic, engineering, and financial practicability of a proposed project. The applicable rule of law concerning this issue was well-stated in Kendrick v. Boyd, 255 Ala. 53, 51 So. 2d 694 (1951):
Appellant also contends the Act further violates § 45 because its title fails to notify the public that the Authority is required to pay the State a fee in the amount of 2.2% of the gross receipts in lieu of taxes from all electric power sold by the Authority. We fail to find this discrepancy. The title of the Act contains the following clause: "to provide for certain payments to be made by the Authority in lieu of ad valorem, sales, use, license and severance taxation." It is our opinion that the "fee" enumerated above is embraced in the "in lieu of" provision in the title.
Appellant contends the Act adopts and incorporates by reference the judicial validation procedures found in §§ 11-81-220 through XX-XX-XXX, Code 1975, and attempts to modify the provisions so adopted without publishing the amended provisions at length as required by § 45, Const. of Ala.
Section 45 provides, in pertinent part, that "no law shall be revived, amended or the provisions thereof extended or conferred, by reference to its title only; but so much thereof as is revived, amended, extended or conferred, shall be reenacted and published at length."
Section 10 of the Act (§ 11-50A-10, Code 1975) provides generally that "the validity of any Bonds may be determined in the manner provided in Sections 11-81-220 through XX-XX-XXX, Code of Alabama 1975." This reference to an existing bond validation statute is first modified and particularized by correlating the defined terms used in the bond validation statute to certain of the terms defined in the Act. For example, the Act provides that "the term `unit' shall mean the authority; the term `organizing subdivision' shall mean the state", etc. This is done merely for the sake of explanation and convenience since the bond validation statute by its own terms does not apply to the Authority. This court has held that Const. of Ala., 1901, § 45, does not apply to acts which are independent and complete within themselves, although they adopt by reference merely the provisions of other laws on the same subject. In Re Opinion of the Justices, 262 Ala. 345, 81 So. 2d 277 (1955). In Newton v. City of Tuscaloosa, 251 Ala. 209, 219, 36 So. 2d 487 (1948), this court opined:
The Act before us is in nowise an amendatory or revival act, nor does it extend or confer the provisions of other laws contrary to the provisions of § 45. The Act is original in form and in itself complete and intelligible.
On this same issue, appellant contends the title of the Act is misleading with respect to the jurisdiction of the Public Service Commission and also with respect to the nature and source of funds available to the Authority to pay for projects financed by bonds, bond anticipation notes and notes. It is, however, our opinion that what has heretofore been said about the validity of a title with respect to "germane" and "cognate" matters contained in the body of the Act is equally as pertinent to the two preceding contentions as they relate to the Const. of Ala., 1901, § 45. The subject of the Act is sufficiently expressed in the title and the Act contains no more than one subject.
For the benefit of the Participants, the Authority is required to provide, during the term of the Contracts, those services described in Section 3.1 thereof and defined as "Bulk Power Supply Services." The fee or price to be charged by the Authority to each Participant in return for the Bulk Power Supply Services so rendered is fixed as the "Allocated Cost," effectively defined in the Contracts as a portion of the total costs incurred by the Authority in providing Bulk Power Supply Services measured generally by the number of kilowatt hours of electric energy purchased by such Participant during a specified period of time.
The obligation of the Municipality to pay its Allocated Cost is discharged to the extent that at the time payment becomes due the Municipality has insufficient current revenues from its electric distribution system and such payments may not be compelled in a subsequent fiscal year even though the Participant might in that later year have sufficient revenues to make up the prior deficit.
In Hillard v. City of Mobile, 253 Ala. 676, 47 So. 2d 162 (1950), this court opined that a contractual obligation for the payment of money that by its terms is payable solely from the funds received during the same fiscal year as the money becomes payable does not constitute a debt of the obligor and is, therefore, not an indebtedness as defined under Section 225, Const. of Ala., 1901, as amended by Amendment No. 268. See also, Opinion of the Justices, 335 So. 2d 376 (Ala.1976); Abrasley v. Jefferson County, 241 Ala. 660, 4 So. 2d 153 (1941). This principle is a logical corollary of our constitutional concept of the term `debt': "the *477 obligation to pay more money than can be supplied by current funds, or by current revenues provided by lawful taxation for the fiscal year." Brown v. Gay-Padgett Hardware Co., 188 Ala. 423, 66 So. 161 (1914); accord, Wharton v. Knight, 241 Ala. 218, 2 So. 2d 310 (1941). Without regard to the amount of the Allocated Cost payments, they cannot be considered debt until the payments become due. Payments do not come due under the Contracts until the Authority incurs Allocated Costs and submits bills therefor to the municipalities. If they are paid by the municipalities out of the funds available at that time then no debt liability arises.
Therefore, we conclude the obligations under the Contracts do not constitute debts of the municipalities proscribed by § 225.
Section 10 of the Act (§ 11-50A-10, Code 1975) describes the procedure to be followed by the Authority in obtaining judicial validation of the Notes. A necessary part of that procedure includes notice by publication to the taxpayers and citizens of the State:
Pursuant to the circuit court's order of 13 May 1982, the notice by publication called for in Section 10 of the Act was effected. Under Section 10 of the Act and § 11-81-221, Code 1975, the taxpayers and citizens of the State are necessary defendants in this proceeding. In accordance with the provisions of Section 10 of the Act and § 11-81-222, Code 1975, notice of the hearing required to be held by the circuit court was given to the taxpayers and citizens of the State through publication once a week for three consecutive weeks in those cities enumerated in § 11-50A-10. Under § 11-81-222, these provisions, authorizing service of process by newspaper publication in "bond validation suits," have been upheld by this court against the claim that such provisions do not comport with due process requirements. In Salmon v. Birmingham Parking Authority, 294 Ala. 226, 314 So. 2d 687 (1975), this court found that failure of the Legislature to require personal service on every "taxpayer and citizen" does not render these bond validation provisions unconstitutional.
The Authority is a public corporation of the State; it may operate anywhere within the State; its activities may properly be considered to be the concern of all citizens and taxpayers of the several members of the Authority. The Legislature could reasonably determine that notice by publication in newspapers published in the four largest cities of the State, was best calculated to apprise the large class of defendants of the commencement of these proceedings. The method of notice chosen must give reasonable assurance of actually giving notice in light of the other available means. Mullane v. Central Hanover Trust Co., 339 U.S. 306, 70 S. Ct. 652, 94 L. Ed. 865 (1950). It is our opinion that, in this case, where the class of defendants is so large, no other practicable method of providing adequate notice is available or required. Service of process by publication is acceptable where other methods do not offer a sensible or effective way of notifying parties to an action of the pendency of that action. We opine that appellant's contention, that notice by publication was insufficient to satisfy the due process requirements of the Fourteenth Amendment, is without merit.
Appellant contends that the proceedings below fail to satisfy the requirements of Section 11 of the Act (§ 11-50A-11, Code 1975), which states as follows:
The record does indicate that no notice by publication pursuant to XX-XX-XXX(d) was given to the taxpayers and citizens of the municipalities.
Section 11-81-222(d), Code 1975, states:
Appellees argue that no special notice is required because § 11-50A-11 is inapplicable to the Contracts. Appellees contend that section requires special notice only with respect to "Power Sales Contracts" described in § 11-50A-17, which states, in pertinent part, as follows:
It is our opinion that § 11-50A-17 does not apply solely to the sale of electric power, but encompasses other aspects of the Authority's "resources" or "undertakings" for which the municipalities may wish to contract under the statute, and which, as already stated, includes feasibility studies and all other matters reasonably related to the subject-matter of the Act. Therefore, we find that proper notice was not given under § 11-81-222(d); publication being required in each organizing subdivision under that section. Because the jurisdictional requirements under § 11-81-222(d) were not met, we reverse and remand with respect to the validation and confirmation of the Contracts.
Appellant contends that § 11-50A-7 provides for a fee in lieu of taxes which will *479 clearly have an impact on revenues available to the State and, as such, should have originated in the House.
In Beeland Wholesale Co. v. Kaufman, 234 Ala. 249, 260, 174 So. 516 (1937), this court construed Section 70 as follows:
Under Section 70, the "chief purpose" of the bill must be to create revenue. Glasgow v. Aetna Ins. Co., 284 Ala. 177, 223 So. 2d 581 (1969).
Section 11-50A-7, Code 1975, does not taint the entire Act by making it a bill to raise revenue which could not constitutionally originate in the Senate. The text of the Act clearly indicates that its "chief purpose" is the establishment of the Authority, not the raising of revenue.
(6) Is the Act a general law or a local law?
Section 110, Const. of Ala., 1901, as amended by Amendments 375 and 397, defines a general law as "a law which in its terms and effect applies either to the whole state, or to one or more municipalities of the state less than the whole in a class."
Appellant contends the Act is a local law and not a general law and therefore violates the Alabama Constitution. As to that contention, appellant argues that section 1(f) of the Act (§ 11-50A-1(6), Code 1975) distinguishes between two classes of municipalities, which renders the Act a local act because, in that respect it applies to less than the whole State as of its effective date.
We hold that the Act is clearly a "general law," as that term is defined in Section 110 of the Constitution and it could thus be lawfully passed by the Legislature without the advertisement required by Section 106 of the Constitution, as amended by Amendment 341. The Act does not constitute a local law, in that (1) it is a law which in its terms and effect applies to the whole State, and (2) the provisions of Section 1(f) of the Act respecting criteria for membership in the Authority and the requirement of an election in those cities that did not on the effective date of the Act own and operate electric distribution systems do not classify municipalities in the State on the basis of criteria not reasonably related to the purpose of the Act.
A local law also is one that applies to a particular locality or particular localities to the exclusion of others. Jefferson County v. Braswell, 407 So. 2d 115 (Ala.1981). Membership in the Authority, however, is available to any city or town in the State that chooses to satisfy the statutory prerequisites.
It is our duty to construe an act as a general one when it is so worded and framed as to be reasonably susceptible to interpretation as such, in order to save its constitutionality. Brittain v. Weatherly, 281 Ala. 683, 207 So. 2d 667 (1968).
It is our opinion, after a thorough review of the Journals of the Legislature, that the passage of the Act through the Senate and House of Representatives was properly accomplished and all constitutional requirements applicable to its enactment were met. The trial court made proper findings of fact and conclusions of law when it answered regarding these issues:
Section 7 of the Act (§ 11-50A-7, Code 1975) relates to tax exemptions and payments in lieu of taxation. Appellant contends that because of the nature of the Authority, it may not be indirectly subjected to ad valorem taxation as presently contemplated by the Act. In support thereof, the appellant cites to In Re Opinions of the Justices, 235 Ala. 485, 179 So. 535 (1938), in which this court characterized a municipal housing authority as "a corporation brought into existence upon the order of a city government, public in nature, and charged with the duty of performing an important element of the police power of the city under whose sanction it shall come into existence." 235 Ala. at 486. The Authority, on the other hand, is a public corporation of the State, organized at the direction of the Legislature, and does not act as the agent of municipalities in the exercise of their police powers.
Section 91, Const. of Ala., 1901, as amended by Amendment No. 373(k) provides, in part, that "[t]he legislature shall not tax the property, real or personal, of the state, counties of other municipal corporations." Because the Authority is unquestionably not a county or a municipal corporation, the only question presented here is whether the Authority, as a public corporation of the State, may partake of the State's exemption from ad valorem taxation. We hold that the property of the Authority is exempt from ad valorem property taxes and any other taxes only to the extent provided in the Act and the Authority therefore does not partake of the exemption from property taxes accorded municipal property under § 91, as amended by Amendment No. 373(k). The Legislature may, therefore, impose on the Authority the payments in lieu of taxes described in Section 7.
Section 14 of the Alabama Constitution provides "that the State of Alabama shall never be made a defendant in any court of law or equity." This court has held that the use of the word "State" in Section 14 was intended to protect from suit only immediate and strictly governmental agencies of the State. Ex parte Board of School Commissioners of Mobile County, 230 Ala. 304, 161 So. 108 (1935). In Curtis v. Alabama Elk River Development Agency, Inc., 372 So. 2d 353 (Ala.Civ.App.1979), the Court of Civil Appeals held the acts of public corporations are not acts of the "State" *481 within the meaning of Section 14 because they are made "independent entities" by the terms of the creating act. This court, in Armory Commission of Alabama v. Staudt, 388 So. 2d 991 (Ala.1980), then added that some determination, other than the fact of incorporation, is required. There we stated:
In this case, the Authority exists as a public corporation separate and apart from the State. Any liabilities the Authority might incur would never be payable out of the State Treasury. The Authority does not operate as an agent of the State. And while there are certain entities which are "a part of the State" and "agencies of the State," the Authority, by the clear intent of the Act, is neither, as was meant by Section 14 of the Constitution.
Sections 93 and 94, Const. of Ala., 1901, were designed to prevent the expenditure of public funds in aid of private individuals and corporations by reason of which a pecuniary liability is incurred. A public corporation is a separate entity from the State and from any local political subdivision thereof. The prohibitions of Sections 93 and 94 are directed to the State and not to public corporations. Opinion of the Justices, 294 Ala. 571, 319 So. 2d 699 (1975); Knight v. West Alabama Environmental Imp. Authority, 287 Ala. 15, 246 So. 2d 903 (1971). Therefore, the Act does not violate §§ 93 and 94.
Section 213, as amended, provides that no new debt may be created by the State. This court has held time and again that public corporations are entities separate and distinct from the State and the bonds and other debts of those corporations are not debts of the State within the meaning of Section 213, as amended. Opinion of the Justices, 407 So. 2d 548 (Ala.1981); Edmondson v. State Industrial Development Authority, 279 Ala. 206, 184 So. 2d 115 (1966); see also, Rogers v. Garlington, 234 Ala. 13, 173 So. 372 (1937). The Authority's debts are not debts of the State; the Authority is not empowered to borrow moneys from the State for the purpose of financing any operations or activities. Therefore, the Notes do not constitute debts of the State in violation of Section 213 of the Alabama Constitution as amended.
Based on the foregoing facts in the record and applying the law to those facts, we find the judgment of the trial court is due to be affirmed, with the exception of that conclusion of law concerning notice to the municipalities under § 11-50A-11, Code 1975; that finding is due to be reversed and the case remanded for a disposition of that issue consistent with this opinion.
AFFIRMED IN PART; REVERSED IN PART; AND REMANDED; REHEARING DENIED AND OPINION MODIFIED JUNE 3, 1983.
TORBERT, C.J., and MADDOX, FAULKNER, JONES, ALMON, SHORES, BEATTY and ADAMS, JJ., concur.
[1]  The participants which have executed contracts with the Authority and which were joined as parties defendant pursuant to § 11-50A-11, Code 1975, are: the cities of Dothan, Alexander City, Troy, Fairhope, Lafayette, Lanette, Piedmont, and Opelika; the utility boards of Sylacauga, Foley, and Tuskegee; and the electric board of the City of Luverne.