Sparks v. Ewing , 120 Fla. 520 ( 1935 )

A bill of complaint was exhibited by Fred Ewing, C. W. Vaughn and J. W. Kaminski, citizens and taxpayers of the City of Hialeah, against G. C. Sparks, as Mayor, and other officials of the city, and Alton M. Ake in the Circuit Court for Dade County, Eleventh Judicial Circuit of Florida.

The purpose of the bill was to restrain the city through its officers from selling the property of the complainants for the non-payment of taxes for the year 1932 assessed for the purpose of raising funds with which to pay certain bonds issued by the city and to restrain it from assessing the complainants' property in any amount for that purpose and to restrain it from paying over to Alton M. Ake any funds on hand raised by the city for the payment of the bonds and interest thereon.

The officials of the City of Hialeah in September or October, 1926, issued five hundred thousand dollars of bonds in denominations of one thousand dollars as general obligations of the city. The defendant Ake acquired five of the bonds upon which interest had accrued amounting to seven hundred and twenty dollars, which he was seeking by mandamus against the city officials to collect.

The bill alleges in substance that the bonds were issued without any authority of law as no power existed by general law or under the city charter, in the city to issue them, that the bond issue was never validated by Act of the Legislature nor by any decree of the Circuit Court and no election was held in the city to determine whether such bonds should be issued; that a petition to validate the bonds was filed in the Circuit Court for Dade County in September, 1926; that the State Attorney interposed an answer admitting that the bonds should be validated, but the answer was made without investigating the issue; that no notice to taxpayers was ever published as required by law; that the affidavit showing a publication of such notice was false in that it stated that such a notice was published on September 10th and 17th and 24th, when in truth it was not published on the 24th of that month as the printing plant was destroyed by fire on September 18th and had not been replaced or repaired on the 24th of that month and no circulation of the notice to taxpayers of the pendency of the validation proceedings was given on that date and the complainants had no notice of the publication of any notice of such proceedings nor did they know of the pendency of the proceedings; that the defects in the alleged validation proceedings were not known to the complainants earlier than seventy-two hours before they began this suit and that the decree entered in the proceeding was void.

It is alleged that in August, 1926, the City Council adopted an ordinance numbered 43 under which the officials of the city proceeded to issue the bonds; that neither that ordinance nor any other provides for an election of the registered voters of the city to determine whether such bonds should be issued; that the ordinance was void and conferred no power upon the city to obligate itself by the bond issue; that the city levied a tax of seven mills on the dollar of the assessed valuation of the real estate, but as six mills of that amount was levied for numerous items, among which the above mentioned alleged bonded indebtedness and interest constituted one of such items, and the complainants have been unable to ascertain what part of the levy of seven mills constitutes a valid tax levy, they have not tendered, nor been able to do so, any certain amount of valid taxes due; that the city is threatening to sell the property of the complainants for the illegal tax for the year 1932 and threatens to levy a tax for such illegal purpose for the following year.

The Chancellor issued a temporary restraining order as prayed for in the bill. By an order made in May, 1933, Alton M. Ake was restrained from further prosecuting the mandamus proceedings against the City for the payment to him of any money in discharge of the accrued interest upon the bonds held by him.

The officials of the city answered the bill setting up Sections 46 and 47 of the City's Charter as authority for the issue of the bonds. The answer admitted that there was no election held in the city to determine whether the bonds should be issued, but averred that the power existed to issue the bonds which was exercised by the passage of the ordinance mentioned and that such issue was validated by the decree of the Circuit Court.

Several alleged owners of some of the bonds issued were made defendants by amendment to the bill and they answered admitting their ownership of certain of the bonds.

Alton M. Ake answered the bill admitting his ownership of five of the bonds; averred the legality of their issue and that they were issued to raise funds for lawfully authorized municipal purposes, and averring the validity of the court decree validating the bond issue.

Testimony was taken and the Master made his report which was filed in October.

The decree of the Chancellor found the equities to be with the complainants. The injunction previously entered was made perpetual. The defendant bondholders were enjoined from attempting to collect the bonds and coupons held by them, and Mr. Ake was restrained from proceeding with the mandamus case, and the officers of the city restrained perpetually from in any manner recognizing the bonds and coupons as valid obligations of the city.

The defendant Ake filed a petition for a rehearing which was denied. The officials of the city and Mr. Ake took an appeal.

The questions presented by the appellants in their brief are, taken in the reverse order in which they are presented, whether the City of Hialeah had authority to issue bonds of the city under the provisions of the Charter, which was Special Act 11516 of the Extraordinary Session of 1925, without an election held under the provisions of Sections 3010, 3011 C. G. L. 1927, and were the bonds so issued without such an election void?

The second question is necessarily embraced in the one just stated as it presents the question of legislative power to authorize a municipality incorporated under a local or special charter to issue bonds for municipal purposes without an election to determine whether bonds shall be issued. As no legislative authority was exercised attempting to vest such power in the City of Hialeah except as evidenced by the provisions of Chapter 11516, supra, the question is did such Act vest the city with such power.?

The first question, as listed in the brief, is whether a taxpayer of the city may enjoin the prosecution of a previously instituted mandamus proceeding by the owner of city bonds to enforce the payment of the city of past due interest coupons attached to such bonds on the grounds that the bonds issued by the city and acquired by the holder thereof are void?

Chapter 11516 of the Extraordinary Legislative Session of 1925 constitutes the Charter of the City of Hialeah. It was approved by the Governor in November, 1925.

The city was empowered to contract and be contracted with and to sue and be sued; to raise money annually by taxation as the City Council shall deem necessary for the purposes of the city; to pave streets, sidewalks and public highways, and hold liens therefor and to regulate the use of the highways; to impose special or local assessments for local improvements; to contract debts, borrow money and make and issue evidence of indebtedness; to expend money for lawful purposes; to acquire real and personal property; to make public improvements, acquire and maintain, aviation fields, golf courses, swimming pools, museums and other "cultural and educational institutions"; to purchase and operate local and public utilities; to acquire lands to provide an adequate water supply; to establish and improve water rates and charges for gas and electricity; to operate bathing beaches, public landing wharves and docks within the city; to grant franchises for public utilities; to abate nuisances; to establish and regulate the operation of a fire department; to support orphans, sick and aged people; to provide for the general health; to exercise full police powers and to provide for the general welfare. Many other powers were enumerated and there was a general clause empowering the city to "exercise all other powers not enumerated herein, conferred on cities and towns by the general laws of the State of Florida."

Section 45 of the Act provides that when necessary to supply deficiencies in revenue the city may obtain temporary loans for said purpose and issue a note or notes therefor to an amount which at no time shall exceed one-half of one per cent. of the assessed value of the taxable property in the city according to the last tax assessment roll preceding the said loan or loans and no loan shall be for a longer period of time than one year, etc., cannot be considered as authority for borrowing money on a long time loan and executing bonds as evidence of the obligation. The section should be considered in connection with the general provision in Sub-Section 3d of Section 3 which provides as stated above that the city shall have power "To contract debts, borrow money and make and issue evidences of indebtedness." That power was limited by the provisions of Section 45 above mentioned.

That such is the correct interpretation of the sections of the Act is evidenced also by other provisions which require a submission by the Mayor to the City Council of a budget estimate of the expenditures and revenues of all city departments, divisions and offices for the ensuing fiscal year. The regulations respecting annual appropriations to meet the necessary expenses of the city government and expressly prohibiting any officer or employee of the city to incur any liability except in accordance with the provisions of the annual appropriation ordinance also indicate that there was no purpose to vest in the city the power by the general provision for contracting debts to extend the debt service beyond the necessities which a deficit in the annual revenues for ordinary expenses may entail.

The Charter of the City, which is very full, provides with meticulous care in minute detail how and in what manner the numerous powers of the city may be exercised. It is provided that bonds for two purposes may be issued. One purpose may be for any municipal purpose except for maintenance and repairs. Such bonds become general obligations of the city and are limited in an amount not exceeding twelve and one-half per cent. of the fair market value or twenty-five per cent. of the full cash value of the taxable property within the city as the same shall appear upon the tax assessment roll next preceding the issuing of the bonds.

The other purpose is for local improvements in which are included highway improvements, sidewalk, sanitary sewer, storm sewer and water front improvements. Under the provisions of the Charter for the latter purpose the assessments against specific property for such purpose are pledged to the payment of the principal and interest of the bonds authorized under those provisions to be issued. Bonds may be issued for the entire cost of the improvement, but not in excess of the contract price and estimated cost of incidental expenses. Such bonds need not be limited in amount to the cost of any one improvement. The Act does not require the question of issuing such bonds or the making of such improvements to be submitted to the voters. It is expressly provided that in such case the initiative and referendum provisions of the Charter shall not be applicable. It is in reference to bonds issued for such purpose that the provisions of the Charter that no irregularity or illegality in connection with any of the proceedings authorized shall effect the orders for such improvements or the special assessments or bonds or contracts issued, apply. Such bonds have all the qualities of negotiable paper under the law merchant and are incontestable in the hands of bona fide purchasers, so the statute provides.

The sections of the Act relating to such improvements and the bonds which may be issued for such purpose are Sections 48 to 66, inclusive.

Those sections of the Act relating to the issuing of bonds by the city which become general obligations of the city for the payment of which a general tax may be levied are Sections 46 and 47. These sections grant the power to the municipality of issuing such bonds in the following words:

"Sec. 46. Within one year after this Act takes effect, the City Council is hereby authorized to provide by ordinance for the issuance of bonds in an amount not to exceed One Million Dollars, of such denominations, bearing such rates of interest not exceeding six per cent., becoming due at such time not exceeding thirty years from the date of issuance, and upon such conditions as may be prescribed by ordinance. Said bonds shall not be sold for less than ninety per cent. and accrued interest and the proceeds from the sale of said bonds may be used for any municipal purpose.

"Sec. 47. The City Council is hereby authorized to provide by ordinance for the issuance of bonds for any municipal purpose except for maintenance and repairs in an amount not exceeding twelve and one-half per cent. of the fair market value or twenty-five per cent. of the full cash value of the taxable property within the City, as the same shall appear on the tax assessment roll next preceding the issuance of the bonds, of such denominations, bearing such rate of interest not exceeding six per cent., becoming due at such times, not exceeding thirty years from the date of issuance, and upon such conditions as may be determined by ordinance."

The remainder of Section 47 has to do with the sale of the bonds.

The grant of power is not absolute. It is coupled with the restriction that the Council shall provide by ordinance for the issuance of the bonds. As the municipality has only such power as the Legislature expressly or by necessary implication confers upon it, see Scott v. City of Tampa, 62 Fla. 275, 55 So.2d Rep. 983; State, ex rel. Simpson, v. Ackerly, 69 Fla. 23,67 So.2d Rep. 232; Anderson v. Shackleford, 74 Fla. 36,76 So.2d Rep. 343; Malone v. City of Quincy, 66 Fla. 52,62 So.2d Rep. 922, Ann. Cas. 1916D, 208 n; Wyeth v. Whitman,72 Fla. 40, 72 So.2d Rep. 472; State, ex rel. Ellis, v. Tampa Water Works Co., 56 Fla. 858, 47 So.2d Rep. 358, 19 L.R.A. (N.S.) 183; Ferguson v. McDonald, 66 Fla. 494, 63 So.2d Rep. 915, and as all doubts as to the existence of a power in a municipality should be resolved against the city, State, exrel. Triay v. Burr, 79 Fla. 290, 84 So.2d Rep. 61, it follows that the Council cannot by ordinance vest in the city a power which has not been vested in it by the Legislature.

The phrase, therefore, "authorized to provide by ordinance for the issuance of bonds" must necessarily mean that if the power to issue bonds is granted by the Legislature in certain circumstances or coupled with certain conditions or restrictions the Council is authorized by ordinance to provide the machinery by which the city may avail itself of the exercise of the power in accordance with the conditions and restrictions imposed. The phrase merely means that the city by and through its Council shall signify its acceptance or use of the power granted by making due provision for the utilization of it.

The City Charter of the City of Hialeah, Chapter 11516,supra, as above shown provides that the city may "exercise all other powers not enumerated herein, conferred on cities and towns by the general laws of the State of Florida." See Sub-Sec. 3mm of Sec. 3.

In the matter of issuing bonds by the city, which, as in the case at bar purport to be a general obligation of the city for the payment of the principal and interest thereof a general tax may be levied upon all the taxable property in the city, the inquiry is what powers not enumerated in the Charter are conferred on cities and towns by the general laws of the State?

The general laws of the State on that subject are expressed in Sections 3008, 3009, 3010, Compiled General Laws 1927. Section 3008 vests the power in the city Council to borrow money or contract loans for the use of the city with the approval of a majority of the registered voters of the city residing therein who own real estate in the city and have paid their taxes for the preceding year and actually voting. Section 3009 vests the power in the City Council to issue bonds only with the approval of two-thirds of the registered voters of the city having the qualifications named, and Section 3010 provides that before any such bonds are issued the question of issuing them as well as the amount to be issued shall be submitted to the electors of the city having the qualifications mentioned in the manner and after such public notice as may be deemed necessary by the City Council. That section as well as Section 3009 requires an affirmative vote of two-thirds of the votes actually cast by the electors in favor of the bond issue before the bonds may be issued.

It is apparent that the general law vests in the electorate of the city initiatorily the power to determine whether the bonds of the character described in the bill should be issued and if that approval is not obtained it is not lawful declares the statute for the bonds to be issued. See Stern v. City of Fargo, 18 N.D. 289, 122 N.W. Rep. 403.

The general statutes provide, it is true, that the bonds may be issued when it is deemed necessary for building of public works, but the Charter of the City of Hialeah provides specially for the building of such public works as highway improvements, sidewalk, sanitary sewer, storm sewer and water front improvements, and provides that the assessments made against property for the special benefits incident to such improvements shall be the pledge for the payment of the principal and interest of the bonds issued for that purpose.

So when it is desired to issue bonds which are general obligations of the city, which require a general tax to retire, no power exists in the city or its Council to issue them until the electorate of the city by a vote of two-thirds of those actually voting in the election approve of the proposition. Without such approval bonds issued by the City Council of the character of those described in the bill are void. They have no more binding obligation upon the city than if they had been issued by some clerical or administrative agency of the city government. No greater power in that regard exists in the Council than in the Fire or Police Departments.

The City Council is required to provide for the means of exercising the power by the electorate by enacting an ordinance for the holding of an election after due notice to decide the question.

The ordinance which the Council adopted in August, 1926, and which was numbered 43, under which the bonds referred to were issued, makes no provision for an election. It recites in its preamble that the City Council deemed it necessary and expedient to issue the bonds. Some of the bonds to be issued were to run for a period of thirty years before maturing. Some of the purposes to which the money was to be applied were such public improvements that for the construction of which the local assessments for benefits would under the Charter constitute the pledge for the redemption of the bonds. Other purposes were such that required a vote of the electorate to approve before the bonds should be issued. The ordinance provided that the bonds should recite that the levy and collection of a direct annual tax upon all the taxable property in the city would be made to repay the indebtedness evidenced by the bonds.

The City of Hialeah was not exempt by its Charter from the operation of the general law relating to the issuing of municipal bonds as a general obligation of the city. There are no provisions in the local law upon the subject inconsistent with those of the general law. See City of St. Petersburg v. Pinellas County Power Co., 87 Fla. 315, 100 So.2d Rep. 509; City of Apalachicola v. State, 93 Fla. 921, 112 So.2d Rep. 618; West v. Town of Lake Placid, 97 Fla. 127, 120 So.2d Rep. 361.

It is conceded to be the general law that bonds issued by officers of a municipality or county in violation of a requirement by statute that the proposed bond issue shall be submitted to the voters to determine whether it shall be made are void and unenforceable. See 15 C. J. 580, 617; Onstott v. People, 123 Ill. 489, 15 N.E. Rep. 34; Stone v. Gregory,110 Ky. 492, 61 S.W. Rep. 1002; Nelson v. Haywood Co., 87 Tenn. 781,11 S.W. Rep. 885, 4 L.R.A. 648, in which latter case it was said that if the Constitution of 1870 abrogated the Act of February, 1870, authorizing the County to issue bonds the exercise of the power to issue the bonds was unauthorized and void. The Constitution of 1870 provided that bonds of the kind issued and for the purpose stated in that case should not be allowed except upon an election to be first held by the qualified voters of the county, city or town, and the assent of three-fourths of the votes cast at said election.

The principle is the same when applied to a city's authority to issue bonds where the city derives its power from a legislative enactment, because to the city the legislative Act is its Constitution. It follows, therefore, as announced in Williams v. Town of Roberts, 88 Ill. 11, that where a municipality is empowered to issue bonds for a certain purpose, but it is also required that there shall first be an affirmative vote of a majority of the electors of the municipality to that effect, no power exists to issue the bonds until after such vote shall have been obtained at an election held for that purpose called by the authority prescribed by law and upon such notice of the time and place of holding elections as the law directs.

In the case now before us the general law applicable to municipalities upon the subject of bond issues which become a general obligation of the city, where there is no inconsistent provision in the city Charter, expressly declares that such bonds shall not issue unless in pursuance of authority conferred by a two-thirds majority of the voters in the city actually voting at an election called for the purpose. The voters of the city are alone vested with the power to determine whether the bonds should be issued. If they do not exercise the power none exists to issue the bonds. There cannot be in force at the same time within the same jurisdiction and governing the same subject matter two conflicting statutory provisions.

The Town Council of Hialeah had no legal authority to brush aside the requirements of the law and by the simple process of adopting an ordinance vest themselves with a power which the statute expressly denied to them. The bonds issued by them, therefore, under such assumed or usurped power were issued without authority of law and are absolutely null and void. See 19 R. C. L. 997.

It is next contended that the so-called court validating proceedings gave validity to the bonds and that the taxpayers of the municipality are estopped to deny their validity.

In the case of Weinberger v. Board of Public Instruction,93 Fla. 470, 112 So.2d Rep. 253, this Court, speaking through Mr. Justice STRUM, said: "It must be borne in mind that there is a vital distinction between an entire absence of power under the Constitution to issue the bonds involved — which no Act of the Legislature may remedy — and the imperfect or irregular exercise of lawful authority in the issuance of the bonds. Deficiencies of the latter character may be waived or the complaining taxpayer may estop himself with reference thereto. Such deficiencies may be cured by validation proceedings" pursuant to Section 3296 R. G. S 1920 (5106 C. G. L. 1927).

It was also said in that opinion that the Legislature by a curative statute may even validate bonds originally issued without authority provided the Legislature could have authorized the issuance of the bonds in the first instance. State, ex rel. Nuveen, v. Greer, 88 Fla. 249, 102 So.2d Rep. 739.

The principle that what the Legislature could have authorized it can ratify if it can authorize at the time of ratification, was announced in Charlotte Harbor N. R. Co. v. Welles,78 Fla. 227, 82 So.2d Rep. 770, affirmed by the Supreme Court of the United States in 260 U.S. 8, 67 L.Ed. 100.

The Act of the Legislature providing for the validation by court procedure of municipal bonds, Section 5106 C. G. L.,supra, may not be considered as vesting in a Circuit Court the power of validation of such bonds possessed by the Legislature. The court has no power by its decree to give validity to a bond issue which the City Council in the first instance had no power under the statute to make. Although the Legislature may by a validating Act give validity to a bond issue made by the City Council without the authority of the electors voting at an election held for the purpose of determining whether the power shall be exercised, because at the time of validating such an issue the Legislature had power to authorize the issue, it does not follow that an Act authorizing a court of law or equity to inquire into the regularity of proceedings through which bonds were issued and enter a decree as to the effect of any irregularities in procedure upon the validity of such bonds, vests in the court the legislative power to make valid that which without legislative action is void ab initio.

The words used by this Court in some cases expressing the view that the purpose of a decree validating and confirming bonds under the law of our State is to put in repose any question of law or fact that may be raised affecting the validity of the bonds, should be construed to mean the questions of law and fact arising from alleged irregularities in procedural matters, such as the initial resolution providing for incurring the debt, the procedure in the matter of calling the election where an election is required, the conduct of the election, the recitations in the bonds, etc., but not to mean that basic requirements affecting power may be cured by a court decree.

The complainants were therefore not estopped from questioning in this proceeding the power of the City Council to issue the bonds without first providing by ordinance for the holding of an election in the city that the voters might decide whether the power vested in them to order the bond issue should be exercised as the statute requires.

That requirement was fundamental. It was a condition precedent to the imposition upon the people of the city of the debt to be evidenced by a bond issue to be a general city obligation and the attempt by the Council to issue the bonds without first obtaining the authority of the people in the manner required was a vain and utterly void act of which the purchasers of the bonds were charged with notice.

ON REHEARING.