Court Opinion

ID: 3817545
Source: CourtListenerOpinion
Date Created: 2016-07-06 07:53:39.231116+00
Date Added: 2024-06-11T14:13:38.219320
License: Public Domain

The issue deemed by the majority vital, in this original action testing the constitutionality of the act of the 16th Legislature, article 10, ch. 50, p. 367, S. L. 1936-37, providing for "highway revenue anticipation notes" payable only from revenue derived from an excise tax on gasoline and conditionally for a portion of motor vehicle and registration fees, is whether a debt against the state would be incurred by the issue as inhibited by provisions of sections 23, 24, and 25, art. 10, Constitution. All other questions are deemed favorable to validity of the legislation.
Section 24, Id., is in no wise concerned. It has to do with debts to repel invasion, suppress insurrection, or to defend the state in war, and the amount allowable is unlimited.
Section 23, Id., limits state debts for casual deficits,failure in revenues, and expenses not provided for to the sum of $400,000.
Herein there is provision for the expense. There is no failure in revenues concerned, and casual deficit means, in its component parts, "that which happened by accident, or is brought about by an unknown cause" (Lewis v. Lofley, 19 S.E. 57, 92 Ga. 804; Civil Code La. 1900, art. 2023; In re Appropriation by General Assembly, 13 Colo. 316, 22 P. 464); and "a want in tax or revenue" (Mutual Loan  Bldg. Ass'n v. Price, 19 Fla. 127; In re Village of Plattsburg, 50 N.Y.S. 356,27 A.D. 333).
The only other constitutional limitation upon state indebtedness is that found in section 25, Id., and therein are found limitations as to proceedings essential to the contracting of such debts by or on behalf of the state. It reads:
"Except the debts specified in sections twenty-three and twenty-four of this article, no debts shall be hereafter contracted by or on behalf of this state, unless such debt shall be authorized by law for some work or object, to be distinctly specified therein; and such law shall impose and provide for the collection of a direct annual tax to pay, and sufficient to pay the interest on such debt as it falls due, and also to pay and discharge the principal of such debt within twenty-five years from the time of the contracting thereof. No such law shall take effect until it shall, at a general election, have been submitted to the people and have received a majority of all the votes cast for and against it at such election. On the final passage of such bill in either House of the Legislature, the question shall be taken by yeas and nays, to be duly entered on the journals thereof, and shall be: 'Shall this bill pass, and ought the same to receive the sanction of the people'."
It may truly be said that the purpose of this proposed debt is "some work or object."
There is no provision within the act for a direct annual tax to pay interest when due and principal within 25 years if, as elsewhere construed (hereinafter cited and quoted), these words require an ad valorem tax for such purposes. Consequently a vote of the people upon the act, whether favorable or unfavorable, would not in itself determine, correspondingly, validity or unconstitutionality of the legislation.
Returning to the vital question, we may divide it into two parts. (1) Does the act provide for a debt by or on behalf of the state, or is it such a debt as has been by this and other courts relegated to a special fund? (2) If a state, debt, is it such a debt as contemplated by section 25, supra? Unless both of these questions are determined as against the act, the legislation must be sustained.
No one disputes but that a debt would be created by issuance and utterance of the notes, but that such debt is not that of the state is the specific declaration of the Legislature by the text of the act. It is provided that such notes shall never become a general obligation of the state of Oklahoma, but shall be payable solely out of the revenues provided and pledged. This, the notes must show upon their face.
The revenues and funds from which the notes are to be paid are "forty (40%) of the three (.03) cents of the gasoline excise tax derived from each gallon of gasoline, referred to in section 2, of chapter 126, S. L. 1923, which is to be apportioned and credited to a special fund, out of which both principal and interest shall be paid, *Page 449 
with a further provision that if at any time it appears to the State Treasurer and State Auditor that sufficient money will not accumulate in said fund from that source of revenue to pay the principal and interest of said notes, then said officers shall cause one-half of the State Highway Commission's share of any registration or license taxes on motor vehicles to be placed in said special fund for such purposes."
Determination of the vital question is dependent upon whether this court will continue to indulge the "special fund doctrine," and whether that doctrine is applicable to the case at bar.
As long ago as the decision in Campbell v. State ex rel. Brett, 23 Okla. 109, 99 P. 778, this court repudiated the special fund doctrine as applied to counties. In that case Washita county sought ownership of a courthouse under a plan whereby it would pay ten annual rentals aggregating $139,252.67. The rental payments were agreed to be reasonable and just. The so-called self-liquidating project was deemed to be a debt inhibited by the Constitution in that it covered "a period of years," and such "is never valid, except when approved by a vote of the electors. * * *" But there the project was not a truly self-liquidating project. The rentals provided for were to be paid out of a fund raised by taxes levied upon the whole taxable property of the county. It was said:
"In times of popular clamor and excitement the internal improvement craze often well-nigh wrecks the most flourishing counties and towns, even in staid and conservative commonwealths. Excuses for withholding the application of these restraints, wisely devised, however, should not be made to delay expenditures unless we find a substantial reason therefor in the organic law of our commonwealth."
The court then adopted this language:
"A debt is money due upon a contract, without reference to the question of the remedy for its collection." Mayor  City Council of Baltimore v. Gill, 31 Md. 375.
In State v. McMillian, 96 N.W. 310, North Dakota, from whence came our constitutional provision cited in Bryan v. Menefee, 21 Okla. 1, 95 P. 471, declared as an inhibited debt, bonds in the sum of $60,000, sought to be issued for purposes of a normal school wherein liquidation was to come from the sale, rental, and lease of school lands. They denied the doctrine to state agencies. Dakota had followed New York, Newell v. People, 7 N.Y. 9, wherein it was held:
"It makes no difference whether the debt is contracted on the general credit of the state or on the credit of a fund belonging to the state. When the interest on a loan is raised by a tax it comes from the pockets of the people individually; when it is paid out of a fund belonging to the people it is paid out of their common purse."
And:
"The extent of the obligation does not affect or qualify its nature. So long as there is an obligation assumed by the state, it constitutes a debt; something due from the state."
New York, as recited by the majority (Rodman v. Munson, 13 Barb. 63, 13 Barb. 188), denounced as inhibited debts "a debt payable only out of * * * a trust estate" irrespective of personal obligation or limited liability therefor, under the reasoning that a state, as applied to its agencies and property in trust to it, or one of them, owed an "obligation" of "executing the trust with fidelity."
Such was the holding in Wilder v. Murphy (N.D.)218 N.W. 156, and In re Application of State to Issue Bonds,33 Okla. 797, 127 P. 1065, construing article 10, supra. This court held:
"These limitations were intended to prevent the contracting of that class of pecuniary obligations not to be satisfied out of current yearly funds, or other funds in hand lawfully applicable thereto."
See, also, Graham v. Childers, 114 Okla. 38, 241 P. 178.
Therefore, and to and including the date of the decision in Zachary v. City of Wagoner, 146 Okla. 268, 292 P. 345, it conclusively appeared that in event, as in the case at bar, excise taxes were pledged to the payment of interest and principal of an obligation extending over a period of years, a debt was in existence.
In the City of Wagoner Case, the city contracted to purchase Diesel engines and to pay for them over a period of from 52 to 120 months from savings expected in cost of operation. This court, with my vote, repudiated again the special fund doctrine. We said:
"We are not unmindful of the rule followed in some jurisdictions that the purchase of property does not create an indebtedness if the purchase price is to be paid out of income therefrom (citing cases), but we cannot follow such holding. * * * Under the decisions of this court and the Constitution and laws of Oklahoma, the agreement to pay for the material purchased creates an indebtedness no matter from what source the funds are to be derived from which the payment is to be made. *Page 450 
Sections 26 and 27, art. 10, supra, contain nothing that limits their application to indebtedness to be paid from funds derived from ad valorem tax levy. They are general in their terms and they will be applied by this court to all manner of indebtedness, no matter how created or from what source the indebtedness is to be paid. As well might a municipality contend that an indebtedness was not an indebtedness because it was to be paid from receipts from gross production tax or other sources of income other than ad valorem taxation. We cannot give our approval to any such theory of the law." Layne-Western Co. v. City of Depew, 177 Okla. 338, 59 P.2d 269.
The transaction involved in the City of Wagoner Case in a different form came before the United States Circuit Court of Appeals for the Tenth Circuit, in Fairbanks-Morse Co. v. City of Wagoner, 81 F.2d 209. Therein the special fund doctrine as applied to municipalities of Oklahoma was upheld, in that a contract for the purchase of equipment for municipally owned utility to be paid for solely out of saving in cost of production of electricity, including operation, maintenance, upkeep of plant, equipment of building, so as to include a deduction for "depreciation," did not increase the tax burden.
But see modification of the rule obtaining in the federal court as applied to the special fund doctrine as stated upon rehearing. Fairbanks-Morse Company v. City of Wagoner,86 F.2d 288, under which it was held the city was unauthorized to enter into a special fund contract, but that the city was required to make restitution of the property obtained and compensate the seller for depreciation thereon, or to pay the balance due therefor.
It may here be stated that the decisions involving the special fund doctrine fall into three classes or groups: The first repudiates the doctrine entirely under the view that to permit the borrowing of money under a special contractual device for its payment, even though there is express provision against general liability for repayment and express provisions that the lender shall look only to restricted assets or income as security, in effect annuls and violates constitutional restrictions and limitations of indebtedness and are consequently void. In re Senate Resolution, 94 Colo. 101,31 P.2d 325; State ex rel. Diederich v. State Highway Com.,89 Mont. 205, 296 P. 1033; Crick v. Rash, 190 Ky. 820, 229 S.W. 63; Newell v. People, 7 N.Y. 9.
The second class limits the doctrine to obligations which do not undertake to pledge existing revenue of any plant, or other existing revenue producing asset, but limit payment to revenue produced from the plant or other project purchased or constructed from the proceeds of the notes, bonds, or debentures; that is, in these cases payment of the debt is limited to proceeds of self-liquidating projects provided. See annotation 72 A. L. R. 688.
Lastly, there is the class of decisions which affirms the rule that obligations, not payable from ad valorem or other direct annual taxes, but are made payable solely from excise taxes or other special and Independent revenue, do not constitute a debt of the state within prohibition of a constitutional or statutory debt limit. Board of Regents v. Sullivan (Ariz. 1935) 42 P.2d 619; Alabama St. Bridge Corp. v. Smith, 217 Ala. 311, 116 So. 695; Conner v. Blackwood St. Highway Com'r, 176 Ark. 139, 2 S.W.2d 44; California Toll Bridge Authority v. Kelly, 218 Cal. 7, 21 P.2d 425; Bates v. St. Bridge Commission, 109 W. Va. 186, 153 S.E. 305; Estes v. State Highway Comm., 235 Ky. 86, 29 S.W.2d 583; Tranter v. Allegheny Co. Authority, 316 Pa. 65, 173 A. 289; Brazos River Conservation and Reclamation Dist. v. McGraw, 126 Tex. 506,91 S.W.2d 665; and annotations in 72 A. L. R. 687, and 100 A. L. R. 900.
It appears that this court, after wholly repudiating the special fund doctrine, as applied to counties, cities, and other political subdivisions, in the cause of Baker v. Carter,165 Okla. 116, 25 P.2d 747, by a divided vote, indulged the theory as applied to bonds in the amount of $450,000, authorized to be issued by the State Board of Agriculture, the proceeds to be used to construct dormitories at the A.  M. College at Stillwater. Legislative authorization for the liquidation of principal and interest on the bonds from rentals was sustained. Fairbanks-Morse Co. v. City of Wagoner, Okla.,81 F.2d 209.
State and county treasurers were allowed to invest governmental sinking funds in the paper, and there was no provision that the principal and interest of the instruments was to be paid exclusively from the funds pledged to liquidation of the obligation. There the state authorized the issuance of the obligation just as in the case at bar. There the evidence of obligation was granted for money borrowed by the state and the money procured from the loan was for a state purpose, and one theretofore usually provided by an appropriation. The funds pledged to payment of the loan might *Page 451 
well have gone into the state treasury, as indeed failure in such revenues pledged, in which sinking funds had been invested, constituted a deficit which could only be liquidated in the customary manner by taxation both excise and ad valorem.
It is said in the briefs of plaintiff and intervener that the Baker Case is a typical case for the application of the special fund doctrine, and so it is. The force of the opinion on the matter publici juris is sought to be avoided and circumvented by the statement that the A.  M. College is a public corporation and a separate legal entity, whereas the State Highway Commission is neither.
That the college is a quasi-public corporation is beyond dispute, but it is not a legal entity in every sense of the word. The status of the corporation and property belonging to it, in relation to the state of Oklahoma, is substantially the same now as it was before statehood in the relation it bore to the territory.
In Oklahoma A.  M. College v. Willis, 6 Okla. 593,52 P. 921, the Territorial Supreme Court, in referring to the status of the A.  M. College, said: "That the defendant is a public corporation, * * * there can be no doubt." But it is not a legal entity in every sense of the word. It cannot be sued in the absence of express statutory authority. A.  M. College v. Willis, supra. "The obligations of the defendant (the A.  M. College) in the case at bar, are the obligations of the territory, * * * and to the territory its creditors must look for payment where there is no fund appropriated for the paymentof their claims."
But it is futile to waste time to argue that public educational institutions are any less a part of the sovereignty than is a State Highway Department. It is readily apparent that where the state is one of the contracting parties, and where the department of state or the quasi-public corporation is a part of the state, the obligations of the instrumentalities of government are the obligations of the state. So being, the question recurs, whether the obligation is such a debt as is contemplated by section 25, art. 10, Constitution, and in determining this question, this court has resolved the question in the negative by consideration of the limited manner of payment of the obligation. Solemnly the court recorded its approval of the A.  M. College Dormitory bond issue by deciding in effect that the obligations were the obligations of the special fund pledged toward liquidation and not the general obligation or debt of the state. The Legislature acted upon such advice of a co-ordinate branch of government, and various and sundry obligations of like character have been issued under legislative authorization as a consequence of the judicial determination. The executive department of government in approval of subsequent legislation has been in accord with the court's decision.
Over my vigorous protest and dissenting opinion, this decision definitely placed this court's stamp of approval on the special fund doctrine as applied to projects undertaken by the state or on the state's behalf, as depicted by the subsequent legislative record. The court, having placed its hand to the plow, cannot now with good grace turn back. This court, as I view it, cannot afford, in matters publici juris, to exercise on one occasion an approval such as that given by a Chief Magistrate or Governor, and on a subsequent occasion, as applied to resulting legislation involving the same subject-matter, exercise a judicial veto.
The reasoning upholding the theory in one of its stages is apparently that, since only net revenue produced and to be produced by the project purchased with or constructed from the proceeds of the notes or bonds sold are to be applied to their payment (in case of failure of such revenue, payment likewise falls), it is assumed that without the project there would be no such revenue. And since no other sources of revenue may be tapped to supply funds, no indebtedness intended to be inhibited by the Constitution is incurred. That is to say, those who pay direct or ad valorem taxes are no worse off by having the utility or public work, and the state, or municipality, as a whole, may benefit. Thus it is reasoned no harm is done and some good may be accomplished, and by setting up a "special fund" as payment; and no debt is incurred except by the "Special Paymaster."
In the cited case this court, following the decision in Graham v. Childers, 114 Okla. 38, 241 P. 178, limited the meaning of "state debt" as prohibited by section 23, art. 10, Constitution, to a condition whereby the Legislature, under section 4, art. 10, Constitution, is required to provide for liquidation by levying a tax. And this court cited with approval the rule stated in 59 C. J. 225, sec. 370, to the effect that:
"Obligations issued by a state, if payable only from revenues to be realized from a particular * * * property, acquired with *Page 452 
the proceeds of the obligation, if payable only from the revenue to be realized from special taxes for a particular * * * property, or if payable only from a special fund to be raised from the sale or lease of lands previously set apart for the purpose of the obligations, do not generally constitute debts of the state within the meaning of the constitutional limitations on indebtedness."
In the cited case the meaning of "state debt" was narrowed in accordance with the construction in South Dakota, 38 S.D. 635, 162 N.W. 536, so as to indulge legislation providing for the "borrowing of money on the good faith and credit of the state" and authorizing the issuance of bonds where repayment was to be made "out of some fund then within the immediate control of thecorporation."
It is to be noted that the highway construction fund is now largely within the control of the State Highway Department; that the present tax on gasoline and license tax are devoted to the purposes of that fund; that the present act continues that object in view and particularly pledges that fund for the purposes of liquidation of the obligation herein considered. The act of the Legislature is just as effective and binding, so long as it stands, as would be a constitutional provision by amendment as experienced in the state of Kansas and elsewhere specifically pledging such revenues and thus eliminating them as a source from which the general expense of state government may be defrayed. Indeed, under the contract clause of state and federal government, it may be seriously questioned whether, when such revenues are once pledged and the obligation issued, the Legislature would possess the power, pending the unliquidated outstanding obligations, to repeal and devote the revenue to other purposes. State ex rel. Freeling v. Howard,67 Okla. 296, 171 P. 41; In re Assessment First Nat. Bank of Chickasha, 58 Okla. 508, 160 P. 469; Runnells v. Oklahoma City,150 Okla. 292, 1 P.2d 740; Perryman v. City Home Builders,121 Okla. 150, 248 P. 605; Moore, Co. Treas., v. Otis, 275 F. 747; Fazende v. City of Houston, 34 F. 95; State ex rel. McKinley v. Cordozo, 8 S.C. 71; Willis et ux. v. Miller, Treas., 29 F. 238; State ex rel. Tipton v. Erickson (Mont.)19 P.2d 227.
In the cited case this court quoted with approval the decision of California in Shelton v. City of Los Angeles,206 Cal. 544, 275 P. 421, and Garrett v. Swanton (Cal.)13 P.2d 725, indulging the special fund doctrine. That case is to the effect that the overwhelming weight of judicial opinion in this country is to the effect that bonds or other form of obligations issued by public agencies under legislative authority are to be sustained when the obligations are secured by and payable only from revenues to be realized from the particular property acquired with the proceeds of the obligations. Reliance was had upon the decisions in Butler v. City of Ashland (Ore.) 232 P. 655, and Schnell v. City of Rock Island, 232 Ill. 89, 83 N.E. 462, 14 L. R. A. (N. S.) 874.
Herein the revenues devoted to pay the obligations have traditionally, by legislative enactment, been devoted toward state highway construction. There are but limited exceptions. Herein such revenues, if not solely to be derived from use of the construction contemplated, at least are to be augmented thereby. It is not feasible to collect a direct toll for the use of the public roads, but the collection of these excise taxes substantially arrives at the same end. By use of the highway provided, the funds increase.
In State ex rel. Capitol Add. Building Commission v. Connelly (N.M.) 46 P.2d 1097, 100 A. L. R. 878, the question arose as to the validity of an act authorizing a bond issue pledging certain excise taxes for the payment thereof without a levy of an annual property tax for such purpose, and without submitting the question to a vote of the people. The provisions of the New Mexico Constitution are similar to ours. The requirement there is that the law authorizing the debt must provide for an annual tax levy sufficient to pay, etc. Our Constitution requires a direct annual tax. In that case the special fund provided was not the income or revenue derived from rentals, etc., of the public building, or utility to be constructed from the proceeds of the sale of the bonds, but a special tax in the nature of an excise tax levied or charged upon the filing of each civil action filed in the office of the clerks of the various district courts of the state. The main question there, as here, was whether the debentures in question, when issued, would constitute a general obligation of the state. Therein it was said:
"In considering the question before us, we are not unmindful of a cardinal rule of construction applicable when dealing with state Constitutions, as distinguished from the federal Constitution. 'The Constitution of the United States is a grant of power, and the various departments of the federal government possess only those powers which are expressly or impliedly conferred on *Page 453 
them by the Constitution.' 12 C. J. 743, sec. 157. But, 'the Constitutions of the several states, unlike the federal Constitution, are not grants of power. On the contrary, they are limitations on the legislative powers of the states. * * * But however definitely the powers to be exercised under a state Constitution may be pointed out, the legislative powers of the states are very general and very indefinite, notwithstanding; and the generally accepted doctrine is that they may pass any acts that are not expressly, or by necessary implication, inhibited by their own Constitutions or by the federal Constitution.' 12 C. J. 745, sec. 167.
"The debt limitation provisions of our state Constitution are just what the term implies, 'limitations,' and not grants of power. If the latter, it might with force and precedent be contended that a grant of power to create an indebtedness of a certain kind or in a certain manner was a denial of power to create a debt of any other kind or in any other manner. This under the doctrine of expressio unius est exclusio alterius. State v. Board of County Com'rs, 4 Neb. 537, 19 Am. Rep. 641."
It was further said:
"So, too is the power of the Legislature plenary in the matter of incurring indebtedness, except as limited by the Constitution. 59 C. J. 213, sec. 350, under topic, 'States.' And no more in the one case than in the other may the courts convert into a grant that which concededly is a limitation, and thus deny to a co-ordinate branch of the government the exercise of a power not withheld from it by the framers of our fundamental law.
"Now, either the debentures here assailed are to be condemned because not repayable from the proceeds of a property tax levy, or they are not within the interdiction of article 9, sec. 8, because not the kind of debt therein contemplated. One or the other conclusions seems inescapable. The framers of the Constitution were not unacquainted with excise taxation as a source of revenue, as witness the language of art. 8, sec. 2, as originally adopted. They thus either purposely denied to the state, through its Legislature, the power to employ same as a basis of credit to any extent whatsoever, and deliberately imposed the whole burden of repaying such indebtedness as lawfully might be created upon property taxpayers; or they left the Legislature in possession of its plenary powers touching the subject.
"It is not unusual to find words employed in a Constitution in a less comprehensive sense than they are capable of bearing. 'Taxes' is surely a term broad enough to cover excise as well as property taxes. And yet we have held in accordance with the courts of other states that the word 'taxes,' as used in the constitutional guaranty of equality and uniformity does not apply to excise taxes. State v. Mirabal, 33 N.M. 553,273 P. 928. Construing together these companion sections of article 9, in order to arrive at the true meaning and intent of the framers of the Constitution (Cutierrez v. Middle Rio Grande Conservancy District, 34 N.M. 346, 282 P. 1, 70 A. L. R. 1261), we hold the debt contemplated in section 8 thereof is one secured by a property tax, and not an excise tax.
"And so we conclude that the debentures in question, neither requiring nor warranting a resort to the general taxing power of the state for their retirement, but payable instead from proceeds of an imposition in the nature of an excise * * * will not constitute a general obligation on the part of the state. Hence they are not within the interdiction of art. 9, sec. 8, of the state Constitution."
The decision in the above case is well fortified by authorities from other states to the same general effect. They are Moses v. Meier, 148 Or. 185, 35 P.2d 981; Ajax v. Gregory, 177 Wash. 465, 32 P.2d 560; Briggs v. Greenville Co., 137 S.C. 288, 135 S.E. 153; State v. Moorer,152 S.C. 455, 150 S.E. 269; State v. Stevens, 173 S.C. 149,175 S.E. 213; State v. Kansas State Highway Commission, 138 Kan. 913, 28 P.2d 770; Alabama St. Bridge Corp. v. Smith, 217 Ala. 311,116 So. 695.
The opinion quotes extensively from said decisions. We deem it unnecessary to repeat the quotations here. Suffice it to say that the cases fully sustain the ruling in the New Mexico case.
The Kansas case, supra, is assailed upon the ground that it is based upon a constitutional amendment. But the amendment mentioned was not to the section of the Constitution limiting state indebtedness. It was an amendment whereby a prohibition against the state engaging in carrying on or engaging in internal improvements was eliminated to the extent that the state might adopt, construct, reconstruct, and maintain a state system of highways with the provision, "But no general property tax shall ever be laid nor bonds issued by the state for such highways." (Art. 11, sec. 8, now sec. 9.) And the state was given the power "to levy special taxes for road and highway purposes on motor vehicles and motor fuels." (Art. 11, sec. 9, now sec. 10.)
Prior to said amendments the state of Kansas, as such, could not engage in the building of a state highway system nor could it levy special or excise taxes to be devoted to that purpose. *Page 454 
It may be observed that our Constitution, sec. 1, art. 16, specifically authorizes and directs the Legislature to establish a Department of Highways, and the power is granted to create improvement districts, and provide for building and maintaining public roads. Then in that respect the Legislature of Oklahoma has, since the adoption of the Constitution, had the power which the amendment to the Constitution of Kansas, adopted in 1928, gave to the Legislature of the state of Kansas, or rather removed a restriction from the Constitution which prohibited the exercise of such power. Furthermore it has long been held that the Legislature of this state had the power to levy excise taxes and the gasoline and license or registration fees on motor vehicles and devote the same exclusively or in part to the construction and maintenance of state highways. The only difference between the law of the state of Kansas and that of Oklahoma is that in Kansas the excise tax referred to must, by constitutional provision, be devoted to road and highway purposes exclusively, while in this state the power is given by the Constitution to levy and collect such taxes and fees, but it is left to the discretion of the Legislature to determine what disposition shall be made of the money so provided.
Section 36, art. 5, of the Constitution provides:
"The authority of the Legislature shall extend to all rightful subjects of legislation, and any specific grant of authority in this Constitution, upon any subject whatsoever, shall not work a restriction, limitation, or exclusion of such authority upon the same or any other subject or subjects whatsoever."
Thereunder, the Legislature has, for the most part, devoted that part of the excise tax on gasoline, and that part of the motor vehicle and license taxes or fees, apportioned to the state to state highway purposes. Its power so to do has never been questioned. In the act in question the Legislature has merely provided for the pledge of 40 per cent. of its share of the gasoline tax, and under certain circumstances, a possible pledge of a part of its share of the motor license and registration fees, to the payment of the notes in question. And that in effect by legislative act effectively devotes that portion of the tax to highway purposes. This may be done as effectively under legislative act, while the act is in force, as by the Constitution. Therefore, the authority under which the warrant issued in the Kansas case was sustained is no greater than that which the Legislature has always had under our Constitution.
The majority opinion recited that section 9, art. 10, Constitution, before the amendment thereto August 15, 1933, authorized an ad valorem tax for state purposes not to exceed 3 1/2 mills, but that the amendment provided that "no ad valorem tax shall be levied for state purposes * * *"; "that the state is now wholly dependent upon funds derived from levies of specific taxes for the operation of the affairs of government."
It is difficult to understand how these statements can be made in view of our holding in Adams v. City of Hobart,166 Okla. 267, 27 P.2d 595. It is true that ad valorem taxes for current expense purposes of state government were abolished by the amendment, but the amendment as adopted contained the provision as before, "except as herein otherwise provided." It is obvious and adjudicated by this court that the exception clause left intact such constitutional provision for governmental debt as provided by sections 23, 24, 25, and specifically 27, of art. 10. Section 25, id., requires a direct annual tax to pay "and sufficient to pay" such a state debt. Such an annual tax in the cited case was an ad valorem tax, and it was sustained in addition to the limitation provided by the amendment. Thus for a capital investment the amendment to section 9, art. 10, Constitution, has no function to perform, and a contrary view nullifies provisions of section 25, id.
Under the authorities above cited, I conclude that the notes in question, when and if sold, not requiring the levy of a direct annual ad valorem tax for their retirement, but payable entirely from proceeds of an excise or special tax, will not become a general obligation on the part of the state, within the provisions of sections 23, or 25, of art. 10 of the Constitution.
In 1929, the Supreme Court of Iowa had before it a case involving the procedure adopted for the incurring of a state debt which was to be repaid by a direct annual tax and also from a fund arising from gasoline and motor vehicle licenses. See State ex rel. Fletcher v. Executive Council, 207 Iowa 923,223 N.W. 737. The court held:
"The General Assembly has no power to pledge or to substitute indirect taxes for the direct tax required by the Constitution for the payment and discharge of a state bonded indebtedness approved by the people under section 5, art. VII."
Thus it is seen that, under section 25, *Page 455 
art. 10, Constitution, should we follow the decision of Iowa, an affirmative vote of the people on the present proposal would not satisfy a debt incurred under the exception provided by the constitutional provision, supra, but that this is the character of obligation not inhibited by the constitutional limitation, but a new species of obligation arising under exercised legislative plenary power.
The annotation contained in 100 A. L. R. 901, supports the view herein expressed:
"Although the cases are not entirely in accord and dissenting opinions have been frequent, it has generally been held that an obligation payable exclusively from a special fund created by the imposition of fees, penalties, or excise taxes, and for the payment of which the general credit of the state of municipality is not pledged and resort may not be had to property taxation, is not a debt within the meaning of the constitutional debt limitations. Differences in constitutional and statutory provisions to some extent account for the differences in reasoning and results of the various cases.
"Thus, in Ajax v. Gregory (1934) 177 Wash. 465,32 P.2d 560, the issuance and sale by the state liquor control board of bonds payable only from a 'liquor revolving fund,' consisting of license fees, permit fees, penalties, forfeitures, and other money received under the State Liquor Act, which provided that each bond and interest coupon should show on its face that it was payable solely from such fund and not otherwise, and that neither the state nor the board nor any member thereof should incur any liability by reason of such bonds, was held not to create an indebtedness of the state within a constitutional debt limitation.
"Following the Ajax Case (Wash.) in Moses v. Meier (1934)148 Or. 185, 35 P.2d 981, it was held that a constitutional provision that the legislative assembly should not 'in any manner create any debt or liabilities which shall singly or in the aggregate with previous debts or liabilities exceed the sum of $50,000' was not violated by the issuance of certificates of indebtedness payable solely from the 'state unemployment relief fund', which consisted of revenues derived 'from the manufacture, sale, distribution, taxing, or licensing of liquor.' The court said: 'From the above statutory provisions it is clear that these certificates of indebtedness drawn on a special fund and to be paid solely from anticipated revenue derived from the manufacture and sale of alcoholic beverages are not general obligations of the state. In the event the anticipated profits do not materialize and the fund becomes exhausted, the purchaser of such certificates has no legal redress against the state. He must look solely to the fund upon which they are drawn. Whether there would be a moral obligation to redeem such certificates of indebtedness is a matter with which this court is not concerned. Suffice it to say there is no legal obligation to do so in the event the special fund is exhausted. * * *' In the event the net revenues turned into the relief fund are insufficient to redeem the certificates of indebtedness, there will be no additional tax burden by reason thereof, for, as previously stated, there is no general obligation on the part of the state to redeem them. A 'debt' within the meaning and purview of the constitutional provision in question is that which the state in any event is bound to pay.
"So, in State ex rel. Boynton v. Kansas State Highway Commission (1934) 138 Kan. 913, 28 P.2d 770, a statute authorizing the State Highway Commission to borrow money from an agency of the federal government for highway purposes, and to issue therefor warrants payable solely from a fund created by a special tax on motor vehicles and motor fuel, was held not unconstitutional as creating an indebtedness within the meaning of constitutional provisions making debts in excess of $1,000,000, void unless submitted to and ratified by a vote of the people. The court said: 'The debts referred to in (the Constitution) are debts to be paid by general property tax. This is clear from the reading of the sections. What the framers of our Constitution were guarding against was the incurring of debts in excess of a million dollars payable by a general property tax without the question having beeen submitted to and adopted by the people. They regarded property as the basis of taxation. * * * They were not dealing with the question of obligations to be paid only by special tax, such as on motor vehicles or motor fuels, or from funds raised in some manner other than by a general property tax.'
"And in Briggs v. Greenville County (1926) 137 S.C. 288,135 S.E. 153, where the state agreed to repay moneys advanced by counties and highway districts for road construction, from a special fund consisting of the proceeds of the automobile license tax, three-fifths of the gasoline tax, and federal aid moneys, it was held that such agreements did not constitute debts within the meaning of a constitutional provision requiring their submission to a popular vote. The court said: 'The proposed reimbursement agreements will not constitute a general liability of the state. The reimbursements to be made thereunder can be made only from a special fund consisting of the gasoline tax, automobile license tax, and federal aid. No property tax can ever be levied to meet these obligations. Is such a limited liability a debt of the state in the *Page 456 
constitutional sense? The underlying purpose of the constitutional provisions concerning the creation of state debt was that they should serve as a limit of taxation — as a protection to taxpayers, and especially those whose property might be subject to taxation. This purpose will not be defeated if it should be held by this court that a debt for the construction of a state highway system, payable exclusively from federal aid moneys and special license taxes to be borne by the persons who will derive the principal benefits from the state highway system, is not a debt of the kind required by the Constitution to be approved by the voters of the state before it is incurred. According to the weight of authority in other states, such a debt does not fall within the terms of such a constitutional provision.'
"The court quoted from Briggs v. Greenville County (S.C.) supra, in California Toll Bridge Authority v. Kelly (1933)218 Cal. 7, 21 P.2d 425, where the special fund consisted of the proceeds of gasoline tax. Holding that the statute in question contemplated a present appropriation of existing funds for building approaches to and operating and insuring bridges, and for that reason did not create a debt within the constitutional limitation, the California court said: 'Under the authorities from other states, however, even if the statutes had purported to pledge these funds for these purposes, such action would not constitute the pledging of the credit of the state. These funds are special funds, and obligations payable solely from such funds do not constitute a debt within the meaning of the constitutional limitation involved.' "
"In Alabama State Bridge Corp. v. Smith (1928) 217 Ala. 311,116 So. 695, holding the issuance of bonds by the state bridge corporation, under a statute pledging for their payment, the surplus from gasoline tax collections, as well as the right to collect toll from bridges constructed, not violative of the constitutional provision that 'no new debt shall be created against or incurred by this state,' the court said: 'Debt', within the meaning, the purview, the whole content, of the constitutional provision, is that which the state in any event is bound to pay, an obligation secured by the general faith and credit of the state.' It pointed out that in the present case 'there is no promise on the part of the state to pay in any event; there is no pledge that there will be a surplus of any fund; there is no pledge of the general credit of the state; there will be no debt within the meaning' of the Constitution.
"Again in Re Opinion of Justices (1935, Ala.) 163 So. 105, it was held that a proposed statute authorizing certain counties to issue obligations payable solely out of gasoline tax collected by the state and allocated to the counties, and expressly declaring that they were not to be a charge on the general credit of the counties, would not authorize the creation of debts of the counties within the constitutional limitation. * * *
"See, also, Laredo v. Frishmuth (1917, Tex. Civ. App.)196 S.W. 190, where the court said: 'It is the rule, well sustained by authority, that contracts may be made without incurring a debt within the meaning of the Constitution — when the debt is made payable out of a special fund raised or to be raised. — The fact that such special fund is not in existence at the time when the bonds were issued does not make the expenditures incurred on the credit of the fund and only payable therefrom an indebtedness in the purview of the Constitution.' In that case the fund from which the obligations were to be paid consisted in part of the proceeds of a property tax, and in part of amounts derived from the sale of municipal lands, from buildings erected with the borrowed money, and in fines and forfeitures collected by the city."
I conclude that the matters covered by the act come within the subjects of rightful legislation and that the act in no sense violates any provision of the Constitution.
The writ sued for should be denied.