Court Opinion

ID: 6696873
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:54:23.674603+00
Date Added: 2024-06-11T16:01:16.692554
License: Public Domain

Clarkson, J.,
concurring. I was not a member of this. Court when the case of Cooper v. Comrs., 183 N. C., 231, was decided.
The section of the statute under consideration (Public-Local Laws 1919, ch. 74, sec. 10) is as follows:
“That for the purpose of providing for the payment of said bonds and the interest thereon, and for the construction, improvement and maintenance of the roads of said township, the board of county commissioners of said county shall annually, and at the time of levying the county taxes, levy and lay a special tax on all persons and property subject to taxation within the limits of said township, of not *37less than twenty-five cents and not more tban seventy-five cents on tbe one hundred dollars assessed valuation of property,” etc.
The statute could have been more explicit, as they usually are, in regard to creating a “sinking fund,” but I think it is sufficient and concur in the interpretation given it. The mandate of the Legislature must be followed, whatever may be the individual view as to the evil of sinking funds. I do not think it amiss to state that I heartily agree with the late lamented Chief Justice Walter Ciarle as to his view in reference to sinking funds:
A “sinking fund is not essential to the validity of the bonds, and indeed was unheard of until- suggested by Sir Robert Walpole, whose name recalls neither peculiar financial ability nor political honesty. He was the man who originated the expression ‘Every man has his price.’ Something over a century and a half ago he originated the sinking fund idea also, and procured Parliament to adopt it by suggesting that it would aid in securing better prices for the bonds. But in twenty years he procured another act perverting the sinking fund to his own use for other purposes. A half century later Pitt revived the idea of a sinking fund as an alluring hope for the extinguishment of the public debt by financial legerdemain. But the result was so unsatisfactory that the experiment was abandoned finally by the British Parliament in 1829 and has been ever since a condemned experiment. Browne on Sinking Fund.
“Sinking funds have so often become, as this Court has heretofore said, ‘a sunken fund,’ that they have becomé much discredited, and Massachusetts, and probably other States, have a provision prohibiting them. Bouvier Law Dictionary, Sinking Fund.
“There has been no sinking fund authorized in England since 1829, as already stated, and only once has a statute of the United States authorized a sinking fund for any part of our indebtedness, and that was allowed to become a dead letter until at the instance of Mr. Bout-well, then Secretary of the Treasury, it was repealed. It is a device which in practice has not proven successful and is considered by financial writers not advisable.
“Financial writers in works on the subject all point out that the sinking fund has not proven successful. If a pro rata part of the principal is to be collected each year it is conceded that the simplest and safest way is to issue serial bonds and pay one each year. There is no risk in this, whereas, with a sinking fund, the instances in which the fund has been diverted have been notoriously numerous. If a sinking-fund is invested in other bonds of the debtor it can be no additional security to the creditor, for it is just the same paper, and if it is composed of purchases of other bonds the fund may be lost by one reason *38or another and has very frequently been appropriated by later legislative action to other purposes. These increase the burden on the taxpayers without any real benefit to the bondholders.”
“Provision for the payment of public debt is sometimes made by the establishing of a sinking fund. A sinking fund contemplates the gradual extinction of a debt, provided by the law authorizing the debt, and while it has been discarded in the practice of the more advanced nations, is sometimes used by the nations of weaker credit.” New Inter. Ency., Vol. 7, p. 382 — Finance.
In the opinion of Mr. Justice Stacy, in reference to the Legislature creating a sinking fund for retiring the highway serial bonds, chapter 188, Laws 1923, it is expressly provided in the act how the sinking fund is to be invested, as follows:
“That moneys in the sinking funds herein shall not be loaned to any department of the State, but shall be invested by the State Treasurer in bonds of
(a) The United States;
(b) The State of North Carolina;
(c) Bonds of any other State whose full faith and credit are pledged to the payment of the principal and interest thereof;
(d) Bonds of any county, city, town, township or school district of North Carolina which are general obligations of the subdivision or municipality issuing the same, and for the payment of which, both principal and interest, there is no limitation of the rate of taxation;
(e) Bonds of any county having population of thirty thousand or more by the last preceding Federal census and of any city having a population of twenty thousand or more by such census, in any State of the Union, which are general obligations of the county or city issuing the same, and for the payment of which, both principal and interest, there is no limitation of the rate of taxation.”
Section 6 goes further into detail.
Every safeguard is put around the investment of the sinking fund. The vice complained of by the late Chief Justice in the Cooper case was that the act was too confined in scope and did not in language create the sinking fund or provide for a sinking fund in plain language, or how the sinking fund should be invested to save it from being a “sunken fund.” It will be noted that the act providing for the State Highway sinking fund, supra, was an emergency act. The State Highway System Road Act, Laws 1921, ch. 2, part of sec. 39, provides for serial bonds, etc., and is as follows:
“The State Treasurer is hereby authorized, empowered, and directed to issue and sell serial bonds of the State, payable in not less than ten nor more than forty years from the date of issue, and aggregating,” etc.
*39Tbe extraordinary large and 'unexpected fund realized from tbe automobile and gasoline tax made tbis sinking fund imperative until tbe señal highway bonds commenced to mature. Therefore tbe act of 1923, supra, was passed. Tbe original idea of tbe Legislature, no doubt, was that it would take ten years to complete tbe then contemplated road program, and tbe serial bonds were issued to commence to mature in ten years and would be thirty-year serial bonds. Tbe policy of tbe Legislature was to provide for State Highway serial bonds, not a sinking fund.
The Municipal Finance Act, 0. S., cb. 56, subsec. 3, and amendments thereto, its purpose is serial bonds, and tbe determining period for bonds to run is the probable period of usefulness of an improvement or property for which tbe bonds are issued.
Tbe new school laws, cb. 136, Public Laws 1923, Part 8, part of sec. 258, is as follows:
“Tbe bonds shall be serial bonds, and each issue thereof shall so mature that tbe aggregate principal amount of tbe issue shall be payable in annual installments or series, beginning not more than three years after tbe date of tbe bonds of such issue, and ending not more than thirty years after such date.”
So could be cited other legislative acts showing that tbe policy of tbe legislative branch of tbe Government representing the popular will is that when these undertakings for tbe betterment of all tbe people are undertaken, and a debt created for such as schools, roads, water supply systems, sewer systems, etc., that these investments for tbe benefit of the public should be paid back so much each year until tbe indebtedness is discharged. Tbis is safe public and private financing.