Court Opinion

ID: 3818714
Source: CourtListenerOpinion
Date Created: 2016-07-06 07:54:23.560946+00
Date Added: 2024-06-11T14:13:40.571442
License: Public Domain

I dissent. This is an appeal from the Court of Tax Review and involves the right of the city authorities of the city of Woodward to appropriate for another electric plant, a gas *Page 9 
and sewer improvements for said city, the balance remaining from the proceeds of the sale of its municipally owned light plant after the setting aside of sufficient funds with which to take care of the outstanding bonds which were voted to building said plant sold by the municipality.
The parties will be referred to as protestants and protestees, respectively, the protestants being the Atchison, Topeka  Santa Fe Railway Company, David Reid et al., and the protestees, the county excise board of Woodward county.
It is my view that the governing body of the city of Woodward was not required by law to transfer any of the moneys received from the sale of its light plant into the general or sinking fund, and that the city, acting through its governing body, could have used this entire amount, or any portion thereof, received from the sale of its light plant, which amount it had placed in a special fund, in the exercise of good faith, for any lawful enterprise, such as constructing another light plant, gas plant, and sewer improvements, as is contemplated by said city, so long as said city did not ask for an ad valorem tax for any project in which it was placing such fund; and, a fortiori, in the exercise of the discretion of its governing body, said governing body could have placed the entire amount of the proceeds of said sale, or any portion thereof, into the general or sinking fund. There is no general or statutory law, or any charter provision, prohibiting such disposition of said fund by the governing body of said city.
It appears that, on August 17, 1910, and prior to June 4, 1928, the city of Woodward voted on the question of issuing bonds in the sum of $30,000 for the purpose of providing funds for the construction of an electric light plant in said city, and the sum of $35,000 for the construction, additions, extension, and repairs to a system of waterworks, and the levying and collecting of an annual tax upon all of the taxable property in said city, sufficient to pay the interest on said bonds as it fell due, and also to constitute a sinking fund for the payment of the principal of said bonds within 25 years from the date of said bonds, dated September 1, 1910, as same became due and payable at such time or times, but not more than 25 years from their date, as the council may prescribe, and to bear interest at the rate of six per cent. per annum payable semi-annually. (See City of Woodward v. Raynor, 29 Okla. 493,119 P. 964.) Said city thereafter voted other and additional bonds for said plant, owned and operated its light and power plant pursuant to authority contained in article 18, sec. 6, and under the procedure provided in article 10, section 27, of the Constitution. Pursuant to chapter 94, Sess. Laws 1927, p. 155, proceedings were commenced to sell said municipal plant in response to a proposal from the Western Light  Power Corporation, a Kansas corporation, to buy said plant from said city for $505,000, in cash, and on June 4, 1928, the city of Woodward advertised for bids to sell the same. On June 9, 1928, the Western Light  Power Corporation submitted its written bid for aforesaid amount for said plant. On Auggust 6, 1928, the city council passed an ordinance accepting said bid, and also passed an ordinance granting to said corporation a franchise subject to the approval of the electorate. An election was held on September 14, 1928, and resulted in favor of the sale and issuance of the franchise. The sale was subsequently consummated, a license granted, and the physical assets were transferred to said corporation. On September 10, 1928, prior to said election, the city council passed a resolution declaring that the proceeds derived from the sale of said light plant "shall be placed in a separate fund and there held separate and apart from other moneys, and shall be used only for the purpose of retiring the outstanding bonded indebtedness of the city of Woodward as the same may become payable." At that time the governing body of the city of Woodward consisted of the city council and mayor. After said election, certain taxpayers instituted suit in the district court of said county, seeking to enjoin said sale and issuance of said franchise. The Western Light  Power Corporation and the city of Woodward were made parties in that action. The district court sustained the validity of the sale, and an appeal was taken to this court, which approved the action of the trial court. Thomas v. Reid,142 Okla. 38, 285 P. 92. While the appeal was pending in this court, a charter form of government was approved by the city of Woodward in March, 1928, whereby the governing body of the city of Woodward was changed from that of the mayor and city council to city commissioners, including a city manager. After the adoption of the charter form of government by the city, another suit was filed in the district court of said county styled "J.O. Little v. City of Woodward," wherein the plaintiff, including a number of former city officials, *Page 10 
sought to compel the amount which is in controversy herein, to wit, $326,000, to be placed in the sinking fund. This amount represents the balance of the sum received from the sale of said municipal light plant, after the deduction of certain indebtedness incurred for a Diesel engine, and a sufficient amount to retire the accruals and interest on the outstanding unmatured bonds, and in this way it was sought to retire all outstanding bonds of the city of every kind and character. An amended petition was filed and said plaintiff sought to enjoin the said city from attempting to construct, operate, or maintain a light plant with this fund, without first obtaining an approval therefor by a vote of the people. A temporary injunction was granted, but when the case was tried upon the merits, the court dissolved the interlocutory order, and rendered judgment in favor of the city. This case is pending in this court.
It also appears that a similar suit was commenced in the federal district court on August 13, 1930, by the Western Power, Light  Telephone Company, a Delaware parent corporation, in which the same relief was sought as in the aforesaid Little Case. In this case, a cross-appeal was filed by the city, charging the light company and said officials, who were in office at the time of the election and sale of the plant, with fraud, bribery, collusion, and corruption, and praying that the sale be set aside for said reasons. In this case, the city tendered into said court the sum of $326,000, to be returned to the purchaser in the event the city recovered judgment setting aside the sale. The city has taken the position in these suits that the sale is void, and, alternatively, if it is not void, that it has the right to spend the proceeds from said sale in constructing a new light plant, or for any other lawful purpose. The Court of Tax Review held, and, in my opinion properly so that the city was not required to place the balance on hand in the sinking fund. The protestants appealed from this portion of said holding. The Court of Tax Review also held that the attempted appropriation was void since it was not certified to or approved by the excise board. In this, it is my opinion that the Court of Tax Review erred. The protestee appealed from this latter portion of the judgment of the Court of Tax Review. The judgment of the Court of Tax Review, as set out in the, journal entry, in part, is as follows:
"The court holds that the sum of $332,048.25, cash on hand from the sale of the light plant, and now to the credit of the light fund, does not have to be paid into the sinking fund, and might be dealt with by the city council in such ways as it may decide is the best interest of the city, but does hold the attempted appropriation on the part of the mayor and city council, appropriating for the building of additions to the city in the way of gas plants and light plants, is void and have to be appropriated by the county excise board."
The real question for review is whether or not the city of Woodward may use this $326,000 for the purpose of building and constructing a light plant, a gas plant, and sewer improvements, without a vote of the people, and without the approval of the county excise board.
When the Legislature provided under chapter 94, S. L. 1927 (O. S. 1931, secs. 6180-6185), for the sale of a municipally owned public utility, no, provision was made therein for the disposition of the funds received thereby.
It is my opinion that there is no constitutional or statutory requirement which directs or compels the governing body of a city to place the balance of the proceeds from the sale of a municipally owned utility into the sinking fund, and even under what I consider purely obiter dictum announced in the case of Gulf, C.  S. F. Ry. Co. v. Excise Board of Love County,141 Okla. 134, 283 P. 1003, after the municipality has taken care of the payment of its outstanding indebtedness against the utility which was sold, it has performed its duty to the sinking fund and met all the requirements of law in that regard. The majority opinion now attaches to this dictum in the Gulf Case, supra, the additional and advanced theory that the original amount invested should also be repaid. In my opinion there is no basis for such a view.
Article 10 of the Constitution of Oklahoma is designated "Revenue and Taxation." Revenue and taxation, in my opinion, is applied to each fiscal year for which the tax was levied and collected. The proceeds of the sale of the plant in question cannot be construed as coming within the terms of money borrowed under section 16, art. 10. The majority opinion holds as follows:
"It has been said that the strict enforcement of these constitutional and statutory limitations and restrictions against municipal indebtedness, which may require the invalidation of contracts, will often result in hardship. This may be true. * * * But the *Page 11 
hardships that may are not comparable with those to be suffered by the citizens of this commonwealth, if these wise and salutary limitations, imposed by the people themselves against themselves, shall be swept aside, or evaded by ingenious reasoning, to meet the supposed necessities of a situation, or even the apparent equities of a particular case." (O'Neil Engineering Co. v. Town of Ryan, 32 Okla. 738, 124 P. 19).
"We, therefore, hold that the provisions of sections 16 and 27, art. 10 of the Constitution are applicable not only to the immediate use of the money borrowed, but to any subsequent use thereof, and that they apply as well to the proceeds of the sale of the property purchased with borrowed money as to the borrowed money with which the property was purchased.
"When a municipal utility, which was purchased, constructed, or repaired with borrowed money, is converted into money by reason of a sale of the property, the proceeds of the sale are controlled by the provisions of sections 16 and 27, art. 10 of the Constitution, and may be used only for the purpose for which the money was borrowed. When the proceeds of the sale are not used for the purpose for which the money was borrowed, they must be used to reimburse the taxpayers."
There is no authority cited for the annunciation of the rule therein announced, to wit:
"Where the proceeds of the sale are not used for the purpose for which the money was borrowed, they must be used to reimburse the taxpayers."
How could the taxpayers be reimbursed? What taxpayers? The opinion also holds that the amount in controversy herein was revenue on hand from the previous fiscal year or years, and that by reason of the appropriation made on the 7th of July, 1930, being the first Monday of July of that year, there was no appropriation of this fund. The court defines "revenue" as income from sources other than ad valorem tax; citing the case of Monsell v. Excise Board of Tulsa County, 142 Okla. 130,285 P. 836. Reference to that opinion shows that the term "revenue" was defined without citation of authority, and, in the instant case, the court states that the amount in controversy herein was revenue on hand from the previous fiscal year or years. I am unable to subscribe to this view. The funds on hand are neither revenue nor levy. It represents the proceeds from the sale of a municipally owned utility plant. The opinion also holds that such a fund derived from the sale of a public utility and being on hand at the close of the fiscal year, and not appropriated by the municipal authorities, must be considered by the excise board in fixing rates of levy for municipal purposes for the ensuing fiscal year. In my opinion this is without support of charter, statutory or constitutional authority, and may lead to an impairment of the rights of many municipalities in conducting their municipal affairs. If, for instance, a public utility plant should be destroyed and insurance thereafter collected for the payment of same, standing undisposed of at the end of the fiscal year through neglect, inadvertence, or misunderstanding of the governing body of the city to make appropriations of said amount, then, according to the majority opinion, the same must be considered by the excise board in fixing rates of levy for municipal purposes for the ensuing fiscal year. It is my opinion that this view of the law as announced in the majority opinion is unsound. The Constitution fixes the fiscal year as coming on the first day of July of each year. The sinking fund ordinance for the retirement for all outstanding indebtedness, Principal and Interest Against Said Plant, and the designation of certain investment bonds to be set aside and apart within said sinking fund as an offset to said indebtedness, published on May 2, 1930, was as follows:
        (Published in Woodward News-Bulletin May 2, 1930)                "Sinking Fund Ordinance No. 279.
"An Ordinance Covering the Matter of the Receipt of Monies in the Amount of Five Hundred Five Thousand Dollars ($505,000), Plus Interest, Derived from the Sale of the Woodward Municipal Light Plant: Creating a Sinking Fund for the Retirement of All Outstanding Indebtedness, Principal and Interest, Against Said Plant, and the Designation of Certain Investment Bonds to Be Set Aside and Apart Within Said Sinking Fund as an Offset to Said Indebtedness, and Declaring an Emergency.
                     "(Emergency Ordinance.)
"Be it ordained by the Commission of the city of Woodward, Oklahoma.
"Section 1. That cash having been received and placed to credit of the light plant fund of the city of Woodward, Okla., in the amount of $505,000, plus interest on bank deposit on said fund in amount of $2,398.75, making a total in the amount of $507,398.75.
"Section 2. Since the bonds outstanding against the municipal light plant in the amount of $152,500 are not due and cannot be paid prior to maturity unless voluntarily *Page 12 
surrendered by the holders thereof, therefore:
"In order to provide in full for the retirement of all outstanding bonds of the light plant, which have not previously been levied for and for which there is not now cash on hand to apply on principal, we hereby order that there be placed to the credit of the sinking fund account of the city of Woodward the amount of $122,878.76 to be held intact in such fund and together with other funds already on hand to be invested in such bonds and securities as are now held by such sinking fund of the city of Woodward, in the amount of $153,176, as hereby enumerated:
City Hall Bonds, Woodward ----------------- $10,000 Park Bonds, Woodward ----------------------  11,000 Water Works Bonds, Woodward ---------------  15,000 City Hall Bonds, Woodward -----------------  36,000 Airport Park Bonds, Woodward --------------  25,000 Ardmore City Bonds ------------------------   9,000 Woodward Board of Education Bonds ---------  34,000 Supply Electric Light Bonds ---------------   2,500 Canadian County Bonds ---------------------  10,676
"until such time as said light plant bonds shall mature and become payable or until they may be retired prior to such maturity, at such time said sinking fund investment securities shall revert to the credit of the other bond fund reserves on hand and such light fund bonds shall be retired with cash from such fund.
"Section 3. The entire proceeds from the investment of such funds in the above enumerated bonds and warrants shall be placed to the sinking fund account of the city of Woodward as long as they shall be held in order to offset the interest annually required to be paid on said light plant bonds until their maturity or payment.
"Section 4. The balance of the amount received from such sale of the municipal light plant, after making the above transfer to the sinking fund and after taking up all other existing indebtedness against the light plant, shall be placed to the credit of a fund known as special improvement fund and shall be carried by the city treasurer as such in depository banks of the city, properly covered by surety bond or by approved securities, until such time as may elapse until the city commission may, by appropriation, authorize its expenditure and outlay for such city improvements and capital outlay as it may deem to be to the best interests of the city.
"Section. 5. The amount held to be due to the sinking fund from the light plant sale proceeds has been allocated as follows:
"Amount of reserve accruals in sinking fund and to retire light plant bonds, to and including fis- cal year 1929-30 ________________$ 66,566.66
"Less: Sinking fund deficit March 30, 1930, including deficit on water and other public im- provement bonds, as well as the deficit on the light plant bonds_$ 46,945.42
"Funds on hand to apply on the payment of principal of light plant bonds after providing for entire sinking fund deficit of the city of Woodward ________________$ 29,621.24
"Add: Amount ordered trans- ferred to sinking fund account from the proceeds of the light plant sale ______________________$122,878.76
"Total: The minimum amount to be carried in sinking fund re- serve to be used to retire said light plant bonds at maturity ____$152,500.00
"Such bonds, as itemized in sec- tion two, being in the amount of  $153,176.00
"Section 6. That on account of the necessity for making up a certain deficit in the present sinking fund of the city of Woodward and in order to make immediate and proper provision for the retirement of the outstanding principal and interest of the municipal light plant bonds, it is necessary for the public peace and safety that this ordinance take effect and be in force immediately; therefore, an emergency is declared to exist and by reason thereof this ordinance shall take effect and be in full force from and after its passage, approval and publication.
"Passed by the Commission and signed by the mayor this 28th day of April, 1930; and correctly enrolled.
"J.H. Richardson, Mayor.
"Attest: Catherine Greeing, "City Clerk. (Seal)."
On July 7th, the governing body of the city of Woodward met on the first Monday of July and made appropriations for the balance of said fund. This fund was kept in a separate fund. The same was not used to take care of any of the current expenses of said city, and how could the taxpayer be prejudiced to an appropriation being made on the 7th day of July, rather than prior to the first day of July, so long as said fund remains separate and apart from the general or sinking fund of said city, and did not constitute a part of the revenue or levy of the fiscal year in question? The excise board did not convene on the 7th of July, 1930, and, in my opinion, on that day did not and never did acquire any jurisdiction over the balance of the fund, to wit, $326,000. The issuing of the original bonded indebtedness in the sum of $30,000, and the additional bonded indebtedness for said plant, constituted a contract between the *Page 13 
bondholders and the city, whereby the city agreed to raise by taxation on all personalty and real property within the limits of said, city a sufficient sum to annually retire a portion of the principal of said bonded indebtedness, and to provide an annual tax in the sinking fund and take care of the interest on said bonds. This constituted an executed contract. The city was not required to take care of this bonded indebtedness except according to the face and tenure of said bonds. To my way of thinking this court, by its majority opinion, is writing another and different contract when it requires the city to pay out of this fund at this time the total amount expended by said city on said plant. The city was not required to extinguish this debt other than as represented by said bonds. There is no charter, statute, or constitutional provision designating what should be done with the proceeds of the sale of a municipal light plant. The Legislature did not see fit, when it provided under chapter 94, Session Laws 1927, for the sale of a municipally owned public utility, as to what disposition should be made of said funds.
The Supreme Court of the United States, in the case of City of East St. Louis v. United States, 28 L.Ed. 162, in an opinion by Mr. Justice Mathews, said:
"But the question, what expenditures are proper and necessary for the municipal administration, is not judicial; it is confided by law to the discretion of the municipal authorities. No court has the right to control that discretion, much less to usurp and supersede it. To do so, in a single year, would require a revision of the details of every estimate and expenditure, based upon an inquiry into all branches of the municipal service; to do it, for a series of years, and in advance, is to attempt to foresee every exigency and to provide against every contingency that may arise to affect the public necessities."
Section 6, art. 18 of the Constitution, provides:
"Every municipal corporation within this state shall have the right to engage in any business or enterprise which may be engaged in by a person, firm, or corporation, by virtue of a franchise from said corporation."
In Re Bliss, 142 Okla. 1, 285 P. 73, this court, in speaking of the aforesaid section of the Constitution, said:
"Under that provision, a municipally owned water plant may be operated as a private enterprise under legislative regulations. In our opinion this may be done, under existing legislation, through a fund separate and apart from the current expense fund."
The record in this case shows that the city, prior to the establishment of its charter form of government, operated this plant as a private enterprise, with no ad valorem tax, and created a light, and power plant fund separate and apart from the current expense fund, and that the city officials appropriated such funds and published an itemized statement as required by law.
The Court of Tax Review declared the appropriation invalid because it was made by the city officials and not by the excise board. The appropriation by the city officials was not void by reason of it not having been submitted to the excise board and approved by it. In re Bliss, supra; Protest of St. Louis-San Francisco Ry. Co., 153 Okla. 283, 5 P.2d 763.
The balance of the fund in controversy arose by virtue of the bonded indebtedness and earnings derived from the operation of the plant, which earnings had accumulated, from time to time over a long period of years, and which were, in part, expended in the form of enlargement, new equipment, and extensions in the plant. In fact, the fund in question is nothing more than a change of the corpus into cash, which the city now seeks to replace in another utility plant. The city had the right to make these expenditures in the development of its plant, without regard to procedure provided in the general taxation statutes, so long as the expenditure was for a lawful purpose and the city published its statement as required by law. In re Bliss, supra; In re Protest of St. L.-S. F. Ry. Co.,153 Okla. 283, 5 P.2d 763. The aforesaid section of the Constitution, section 6, art. 18, supra, permits the municipal corporation the right to engage in a public utility enterprise, and this may be done without a vote of the people, but if the city seeks to engage in any such public utility enterprise, and thereby create an indebtedness whereby the limitations presented by law are exceeded, a vote of the people is necessary to lend validity to such an indebtedness. In that respect the aforesaid section 6 of article 18 is not self-executing, but must be exercised in connection with sections 26 and 27, art. 10, of the Constitution.
As to the contention raised in respect to the tender of the aforesaid balance in the federal case, supra, it is my opinion that this contention is without merit, and is not subject to the order of the federal court. *Page 14 
In the case at bar, the Constitution of this state, section 6, art. 18, specifically provides that a municipality shall have the right to engage in a public utility enterprise. The governing body of said city submitted the sale of the utility plant to the qualified voters of said city and said sale was approved. This submission of the question to the voters did not thereby nullify the constitutional provision of section 6, art. 18. That provision of the Constitution was operative at all times so far as the rights of said municipality were concerned. The city did not grant to the purchaser of said utility plant an exclusive franchise, nor did it attempt in any manner to exclude said city from re-entering or continuing in the operation of a utility business. The municipality has the right to incur indebtedness, to make expenditures in respect to public utilities which it may be operating, and it has the right and authority to acquire, operate, and maintain a light plant, gas plant, or provide for the improvement of its sewer system, under limitation presented by law. This is a continuous right which the city enjoys. See City of Joplin v. Southwest Missouri Light Co., 191 U.S. 150, 48 L.Ed. 127.
In the instant case there is nothing in the record to indicate that the governing body of said city is contemplating incurring any general indebtedness for the purpose of constructing a light plant, gas plant, or sewer improvements in conflict with any statutory or constitutional limitation. The city has set aside a sum from said sale sufficient to take care of the outstanding bonded indebtedness as it pertained to the light and power plant so sold, and other indebtedness incurred thereby, and in the exercise of its discretion has not seen fit to transfer the balance of the proceeds of said sale to the sinking fund. It is my opinion that this is a question solely within the sound discretion of the governing body of said city, and the governing body of said city, in the absence of any special statutory, constitutional or charter provisions, may control such funds as in their judgment are advisable for the best interest and needs of said city. See Travaille v. City of Sioux Falls (S.D.) 240 N.W. 336. On this question the judgment of the governing authorities of said city, when exercised in good faith, is conclusive and must be accepted by this court. When the city of Woodward voted these bonds for the construction of the electric light and power plant, the same constituted an executed contract. See Hall v. Redd (N.C.)146 S.E. 583. The issuance of the bonds for the indebtedness thereof created pledged the good faith and credit of the city of Woodward, and the electric light and power plant was in no way pledged by said city as security for the payment of such bonded indebtedness as is provided by law when a municipality orders special improvements to be made.
In the instant case the record shows that no plan for the construction, operation, or maintenance of a light and power plant exists which will require the incurrence of any general indebtedness, or an ad valorem tax against said municipality. It is true that the action of the governing body of said city may eventually create a condition whereby the revenue from the light or gas plant would be insufficient to take care of any building and equipment which said city might contemplate erecting, but such a question is not now before this court.
So long as said municipality seeks to operate a light and power plant for the use and benefit of said municipality from the earnings to be derived from the operation of the same and the aforesaid balance, without the imposition of an ad valorem tax, it is my opinion that there is no valid reason why said municipality should be denied such constitutional right, and not be governed in this regard by its governing authorities in the exercise of its corporate powers without submitting this question to the voters of the people in said municipality. Under such conditions there is no occasion or authority for the appropriation of aforesaid balance to be made by the excise board of said county. It is my view that the city of Woodward at all times did have, and now has, the right and privilege to be exercised by its governing body to enter at any time the utility business in furnishing light, water, and power for said city under section 6, art. 18, of the Constitution, and may appropriate for such purpose the aforesaid balance of cash on hand at the discretion of its governing body, and that it is not required to transfer the cash in question into the general or sinking fund, so long as said city does not ask for an ad valorem tax for the operation and maintenance of said plant, or for the retirement of any bonded indebtedness created for said enterprise and said fund not being in the general or sinking fund need not be appropriated by the excise board.