Court Opinion

ID: 9723442
Source: CourtListenerOpinion
Date Created: 2023-08-26 10:15:18.375359+00
Date Added: 2024-06-11T18:24:48.852932
License: Public Domain

Peterson, C. J.
(dissenting) — I. I respectfully dissent. There is no dispute as to the facts in .this case, and they are fully and clearly stated in the majority opinion. The only question involved is one of law.
I am in disagreement with the majority opinion because it is my contention that the new bond issue can do no harm to plaintiff’s bonds. Iiis investment was not prejudiced in any manner. There was no change in his status as a bondholder, because of the terms of the resolution as to the new issue. Section 5 of the resolution with reference to the new bonds dated March 18, 1957, provides in part:
“The incomes and revenues of said plant and system shall continue to be set aside into a separate and special fund and, except as hereinafter otherwise provided, shall be used in maintaining and operating said plant and system, and after payment of the proper and necessary maintenance and operation expenses shall, to the extent provided, be used to pay the principal of and the interest on the outstanding Electric Revenue Refunding Bonds dated November 1, 1948, the outstanding Electric Revenue Bonds dated January 2, 1950, and the bonds hereby authorized. Each month after paying the proper and necessary maintenance and operation expenses, a sufficient portion of the first available net earnings of said plant and system shall be set aside and paid into the ‘Electric Revenue Bond Sinking Fund’ in the amounts and in the manner and as provided in the resolution adopted January 24, 1949, to pay the interest upon and principal of the Electric Revenue Refunding Bonds dated November 1, 1948 [plaintiff’s bonds], as the same become due. * * * It is hereby represented, certified and declared that all of the required and provided transfers and payments into said sinking funds as hereinbefore referred to are current.
“There is hereby created and, so long as any of the bonds hereby authorized are outstanding, there shall be maintained a special fund to be known as the ‘1957 Electric Revenue Bond Sinking Fund’ into which there shall be set aside each month *1033from the Det earnings of the municipal electric light and power plant and system, subject to the priorities in favor of the payments into the ‘Electric Revenue Bond Sinking Fund’ for the 1948 bonds [plaintiff’s bonds] md into the sinking fund for the 1950 bonds as hereinbefore referred to, such portion of the balance of said net earnings as will be sufficient to pay the interest on and principal of the bonds hereby authorized as the same become due, * * #:
“® * * that the bonds hereby authorized shall be subject to existing priorities in favor of said presently outstanding bonds and shall be payable only from the balance of the net earnings of said plant and system remaining after first setting aside the amounts required to be paid into the respective sinking funds for said outstanding bonds and which would otherwise be available to the City as directed by the City Council.” (Emphasis mine.)
II. Aside from question of prejudice as to plaintiff’s bonds by issuance of the new bonds, the majority opinion seems to hold that second, third, etc., issues of revenue bonds should be stopped until all previous issues have been paid. I disagree with this theory. I do not think the Simmer Act so states, nor that the legislature ever intended such restriction. In recent years we have witnessed great growth in most of our cities and county seat towns. For proper progress it is imperative that extension of electric or water service be arranged. In many cases the plants have become antiquated and worn out, and need replacement, as in the case of Independence, and yet there may be some bonds not matured. The service may have been extended, or will be extended by the improvement, so that sufficient revenue can be anticipated to easily carry the old and new bonds.
The statute is clear: “For the purpose of defraying the cost of any such plant, improvement or extension thereof, any such city or town is hereby authorized to issue negotiable, interest-bearing revenue bonds payable from and secured by the net earnings of the. plant * * Section 397.10. (Emphasis mine.)
There is nothing in this section, or the Simmer Act, prohibiting two or three bond issues if the anticipated revenue so justifies. The majority opinion reads meaning into the statute *1034wbieb is not present. If the legislature intended that only one bond issue should be in effect at a time it could and would have so stated.
Section 4.2, Code 1954, provides: “The rule of the common law, that statutes in derogation thereof are to be strictly construed, has no application to this code. Its provisions and all proceedings under’ it shall be liberally construed with a view to promote its objects and assist the parties in obtaining justice.” (Emphasis mine.)
In accordance with this provision we have often held that Acts of the legislature should be liberally construed. Chiesa & Co. v. City of Des Moines, 158 Iowa 343, 138 N.W. 922, 48 L. R. A., N. S., 899; Sullivan v. Harris, 224 Iowa 345, 276 N.W. 88; Tusant v. City of Des Moines, 231 Iowa 116, 300 N.W. 690; Blakeley v. Estate of Shortal, 236 Iowa 787, 20 N.W.2d 28.
III. The majority opinion presents in support of its position the principles announced in Van Eaton v. Town of Sidney, 211 Iowa 986, 231 N.W. 475, 71 A. L. R. 820. This decision was rendered prior to enactment of the Simmer Act and pertains to general law as to power of municipalities. It can be distinguished from the case at bar. Sidney did not purchase or build an electric light plant and issue revenue bonds to secure the funds with which to pay for the plant as provided by statute. It entered into a conditional sales contract for erection of the plant, leaving the title in the seller until paid for, and issued documents known as “pledge orders” to be paid monthly from revenue, until purchase price was fully paid. The court properly held there was no statutory basis for a municipality to execute such a contract, nor to let title remain in seller until final payment. I do not find any such flagrant disregard of statute in the instant case.
IV. The primary purpose of the Simmer Act was to grant municipalities authority to issue revenue bonds to buy, build, improve or extend municipal electric or waterworks plants, and provide a program for payment of the bonds. The Act has been in effect since 1931. It has been attacked from every conceivable angle, and has been repeatedly approved by this court.
Constitutionality approved: Pennington v. Town of Sumner, 222 Iowa 1005, 270 N.W. 629, 109 A. L. R. 355; Iowa South*1035ern Utilities Co. v. Cassill, 8 Cir., 69 F.2d 703. Maximum rate omitted from contract does not nullify bonds: Interstate Power Co. v. Forest City, 225 Iowa 490, 281 N.W. 207. Power of cities to adjust rates: Iowa-Nebraska Light & Power Co. v. City of Villisca, 220 Iowa 238, 261 N.W. 423. Bonds do not affect city debt limitation: Interstate Power Co. v. Town of McGregor, 230 Iowa 42, 296 N.W. 770, 146 A. L. R. 315. City definitely authorized to pledge future earnings as security for purchase price: Greaves v. City of Villisca, 217 Iowa 590, 251 N.W. 766. Taxpayer not entitled to injunction against construction of plant, because it would be paid for gut of future earnings: Iowa Public Service Co. v. Parsons, 272 N.W. 613. This is only a cross-section of decisions approving the Act. There are about ten others. The specific question involved has not heretofore been before us. It has been so obvious for more than twenty-five years that if improvements and extensions were needed, and the excess revenue could carry the load, there was no reason why more bonds should not be issued.
Almost the identical question was considered in Indiana in 1953. The second issue of bonds was approved, although the first issue had not been fully paid. Ahlborn v. City of Hammond, 232 Ind. 12, 22, 111 N.E.2d 70, 75. There is no specific statutory authority in Indiana for issuance of more than one bond issue when a previous issue is unpaid. Conversely, there is no provision against such procedure. In this respect the statutes are similar to Iowa. In the above cited case the court said:
“Section 48-5305, Burns’ 1950 Replacement, authorizes the issuance and sale of bonds for the construction, alteration, and building of a waterworks system, parts thereof, additions, extensions, and betterments thereto. * * '* Section 48-5319, Bums’ 1950 Replacement, provides, in part, that ‘the board of trustees of said water department shall be and they are hereby authorized to issue and sell bonds from time to time * * *. It is apparent from the reading of the entire act that the Legislature has not undertaken to limit appellees to only one bond issue in effect at any given time.” (Emphasis mine.)
V. The majority opinion emphasizes the fact that holders of negotiable revenue bonds do not need to look to resolutions of *1036the council as to terms of the bonds. In general this is correct, but the city is bound by any action taken in the form of resolutions. For example, whether plaintiff had knowledge of it or not when he bought the bonds, the City of Independence cannot repudiate the provisions of its resolution of March 18, 1957, establishing the priority of his bonds. 64 C. J. S., Municipal Corporations, section 1969, states: “A bona fide purchaser of municipal bonds has a right to rely on recitals in the municipal records as to matters affecting the validity of the bonds, and as against him the municipal corporation is estopped to contradict such records.” s
I would affirm.