Opinion ID: 1642699
Heading Depth: 2
Heading Rank: 2

Heading: Use of the proceeds from the Series 2002 Warrants

Text: However, the appellants contend that, given the trial court's ruling that the proceeds from the court fee and the lodging tax cannot be used to construct a new courthousea ruling that we now affirm the trial court erred in not enjoining the County Commission from using the proceeds from the Series 2002 Warrants for that purpose. The appellants give two reasons for this contention. First, the issuing documents pledge the proceeds from the court fee and the lodging tax to repay the Series 2002 Warrants. Second, the language of the official statement should bind the County Commission's actions with regard to the Series 2002 Warrants, especially in light of the trial court's finding that the official statement apparently contained misstatements or misrepresentations concerning the County Commission's intentions regarding the existing county courthouse. The appellants argue that for these reasons the trial court erred in holding that the proceeds from the Series 2002 Warrants could be used for a purpose other than the demolition of the existing county courthouse and the construction of a new courthouse. As to the appellants' first argument, while the proceeds from the court fee and the lodging tax were pledged for the repayment of the Series 2002 Warrants, it is apparently undisputed that the proceeds from those sources were not necessary to fund the Series 2002 Warrants. The Series 2002 Warrants were backed primarily by a pledge of certain ad valorem and sales taxes that made the pledge of the proceeds from the court fee and the lodging tax superfluous. Although we agree with the appellants that the proceeds from the court fee and the lodging tax cannot be pledged to repay warrants issued to fund the demolition of the existing county courthouse and the construction of a new courthouse and that the court fee and the lodging tax therefore must be excised from the list of pledged funds, we cannot hold that the fact that those proceeds were initially pledged to repay warrants issued for that purpose bars the County Commission from using the proceeds of the Series 2002 Warrants to build a new courthouse. As to their second argumentthat the official statement binds the use of the proceeds of the Series 2002 Warrantsthe appellants claim that, in light of our decision in Orange v. Bailey, 548 So.2d 424 (Ala.1989), the trial court erred in not barring the use of the warrant proceeds to demolish the existing county courthouse and to construct a new one. In Orange, we held that, under Ala.Code 1975, § 11-28-2, [5] proceeds from warrants issued by the Jefferson County Commission that were, according to the Commission's resolution authorizing the issuance of the warrants, dedicated to be used for certain delineated projects, could not be used for a project not delineated in the resolution. 548 So.2d at 427-28. However, while this case is governed by a statutory provision similar to the one that governed in Orange, Ala.Code 1975, § 11-15-13 (providing that [t]he proceeds derived from the sale of any warrants (other than refunding warrants) may be used only to pay the cost of acquiring, constructing, improving, enlarging and equipping a project or any part thereof as may be specified in the proceedings in which the warrants are authorized to be issued )(emphasis added), we do not believe that Orange compels the conclusion argued by the appellants. In Orange, the prospectus and the warrant resolution were not in conflict, and it was clear that the resolution, and not the prospectus, contained the provisions that controlled the warrants. 548 So.2d at 427-28 (noting that the prospectus made reference to the warrant resolution for the exact terms of the warrants, and that the warrant resolution, not the prospectus, was a binding contract with the holders of the warrants). Here, the official statement (a prospectus) and the first supplemental indenture (through which the warrants were officially issued) do appear to conflict, but the official statement makes it clear that the terms of the indenture control, just as the prospectus indicated that the terms of the warrant resolution controlled in Orange. The official statement provides, in part: This Official Statement contains brief descriptions of the Building Authority, the New County Jail and the County Courthouse, as well as information respecting the use of the proceeds of the Series 2002 Warrants and summaries of certain provisions of the Series 2002 Warrants, the Lease and the Indenture. Appendix A to this Official Statement contains certain demographic information regarding the County; Appendix B contains certain financial information regarding the County (prepared from unaudited data) and compiled by the Department of Examiners of Public Accounts of the State of Alabama; and Appendix C contains a copy of the proposed approving opinion of Bond Counsel respecting the Series 2002 Warrants. The summaries of the documents herein contained are not complete or definitive, and every statement made in this Official Statement concerning any provision of any document is qualified by reference to such document in its entirety. For complete details of any and all terms and conditions respecting the Series 2002 Warrants, prospective purchasers are referred to the Lease and the Indenture, copies of which may be obtained from the office of the Trustee or from the offices of The Frazer Lanier Company, Inc., in Montgomery, Alabama (the `Underwriter'), the underwriter of the Series 2002 Warrants. Terms used but not defined in this Official Statement shall have the meanings given them in the specific documents in which they are defined and used. (Emphasis added.) As shown above, the indenture clearly states that the Series 2002 Warrants were being issued to fund the demolition of the existing county courthouse and the construction of a new courthouse. Therefore, because the indenture controls, it appears that, unlike Orange, the use of the warrant proceeds in this case to demolish the existing county courthouse and to construct a new courthouse is proper. Accordingly, we affirm the trial court's refusal to enjoin the County Commission from using the proceeds from the Series 2002 Warrants in accordance with the purposes specified in the indenture.