Grimes County v. W. L. Slayton Co. , 262 S.W. 209 ( 1924 )

The court rested the judgment in favor of the appellee upon the special grounds: (1) That, although the refunding warrants, as well as the original indebtedness, were not in conformity with the law and were invalid, yet the circumstances concerning the issuance and sale of the refunding warrants were of a nature sufficient to work and to predicate estoppel upon the county from questioning and pleading their invalidity between it and a bona fide purchaser for value, as was the appellee; and (2) that estoppel was available to the appellee as a remedy, as pleaded, for (a) the refunding warrants were not absolutely void for a lack of any authority to issue them in the first instance, because, as a fact, at the time of the creation of the indebtedness and the issuance of the said warrants, there was available to the county a sufficient road and bridge tax to raise the annual interest and sinking fund required, and (b) there was not failure of consideration, as the county received the full proceeds of the sale of the refunding warrants and used same to pay off and discharge demand warrants and scrip against the road and bridge fund for labor and materials actually performed and furnished "on the roads and bridges of said county." The propositions stated in the appellants' brief in effect center upon the points in view that, as it was conclusively established by the recorded orders of the commissioners' court and the evidence that the county had previously appropriated and exhausted, and had exceeded, the full 15-cent tax limit provided by the Constitution for road and bridge purposes at the time the refunding warrants in suit were issued and the original indebtedness was created, there was a total want of power in the county to further borrow money by promised special taxation in the future against the road and bridge fund, and therefore estoppel could not be predicated against the county from questioning and pleading such want of power, although the refunding warrants were held and sued on by a bona fide purchaser. If it conclusively appears as a fact, as contended by appellants, that the county had appropriated and exhausted the full tax to the maximum amount allowed by the Constitution of the state for road and bridge purposes of a county, at the time of the issuance of the refunding warrants sued on, then, obviously, there was a total want of power on the part of the county, acting through the commissioners' court, to issue the refunding warrants against the road and bridge fund, and as well to create the original indebtedness payable in the future. Where there is a total want of power on the part of a county to issue bonds or refunding warrants, in virtue of constitutional or statutory restrictions the county will in no case be estopped from questioning and pleading such lack of power, even against a bona fide holder. Citizens' Bank v. City of Terrell, 78 Tex. 450,14 S.W. 1003; Bridge Co. v. City of San Antonio (C. C.) 62 F. 882; Lake County Commissioners v. Graham, 130 U.S. 674, 9 S. Ct. 654, 32 L. Ed. 1065. Bonds or warrants issued in excess of constitutional limits are void. Buchanan v. City of Litchfield, 102 U.S. 278, 26 L. Ed. 138. For a purchaser of bonds or refunding warrants is bound to take notice of the constitutional and statutory limitation upon county indebtedness, the orders of the commissioners' court, and as well the official assessments showing the valuation of taxable property within the county. Buchanan v. City of Litchfield, 102 U.S. 278, 26 L. Ed. 138; Ball v. Presidio Co.,88 Tex. 60, 43 S.W. 1042. And as well are courts without power, as a fundamental principle of law, to validate and enforce by a judicial decree an excessive indebtedness, evidenced by bonds or warrants or otherwise, which the Constitution expressly prohibits or forbids a county from incurring. A judicial decree enforcing by mandamus the levy and collection of a tax which in effect exceeds the constitutional limit of taxation for the special purposes, and which excess is forbidden by the Constitution, operates to be violative of the constitutional restriction, as much so as would be the act of the commissioners' court in attempting the illegal issue and to enforce payment of the same by the levy and collection of an unconstitutional tax. However, under a thoroughly settled rule, where a county issues bonds or refunding warrants which are irregular and not in conformity with law, but not ultra vires, or from a total want of power to issue, the county can be estopped, if warranted by the evidence, from questioning and pleading their invalidity between it and a bona fide purchaser. Nolan County v. State, 83 Tex. 183,17 S.W. 823; City of Tyler v. Building Loan Ass'n, 99 Tex. 6,86 S.W. 750; Town of Coloma v. Eaves, 92 U.S. 484, 23 L. Ed. 579; Dallas County v. MacKenzie, 94 U.S. 660, 24 L. Ed. 182; Dixon County v. Field, 111 U.S. 83, 4 S. Ct. 315, 28 L. Ed. 360; Cairo v. Zane, 149 U.S. 122, 13 S. Ct. 803, 37 L. Ed. 673; Hitchcock v. City of Galveston, 96 U.S. 341, 24 L. Ed. 659; Slayton Co. v. Panola County (D.C.) 283 F. 330.

In the present record there is no conflict in the testimony pertaining to the question considered. The order of the commissioners' court directing the issuance of the refunding warrants, as well as the refunding warrants themselves, contains the recital, and such recital is true in point of fact, that such warrants were issued as and were payable as "road and bridge warrants." The order of the commissioners' court provides that —

"For the payment of the interest on said warrants, as it accrues, and for the payment of said warrants at maturity, there shall be and there is hereby levied for the year 1916, and for each succeeding year during which said warrants or interest coupons may be outstanding and unpaid, a direct annual tax of 3 cents on the $100 valuation upon all the taxable property in said county."

At the time of and long before the issuance of the refunding warrants in April, 1916, and the creation of the original indebtedness beginning in November, 1915, there existed the power in the commissioners' court of Grimes county to levy a tax rate, as the maximum rate allowed by law, of 15 cents on the $100 valuation of the taxable property of the county for road and bridge purposes. The county had not voted an additional tax. The assessed valuation of property at the time was $12,202,840. There were outstanding road and bridge bonds in the sum of $103,000, and outstanding interest-bearing refunding warrants against the road and bridge fund in the sum of $65,000. All of this indebtedness was due long after the year 1916. And, as conclusively shown by the orders of the commissioners' court, provision had been made for the annual payment of the interest and sinking fund on the outstanding bonds and refunding warrants. The face of the original orders, made at the time of the issuance of the different series, considered all together, show, as can be seen from the orders, that the total sum of 23 cents against the road and bridge tax had been formerly set aside to pay the interest and to create the sinking fund of these different series. But in point of fact, as a mere matter of calculation, the levy of a total tax rate of 15 cents, the maximum rate allowed by law, was more than sufficient to annually raise, in view of the official assessment of the taxable property in the county at the time and continuing since, the amount of money necessary to satisfy the interest and redemption fund required for all such bonds and refunding warrants. And in virtue of this fact the commissioners' court, in July, 1916, at a regular term, in effect revised and modified the former orders fixing the tax rate so far as to fix and levy a somewhat lower tax for the year of 1916, as sufficient to raise the interest and sinking fund of all the outstanding series of bonds and refunding warrants, including the warrants in suit. In the order of July, 1916, the total tax rate fixed and levied for all road and bridge indebtedness was in the total sum of 15 cents, which amount did not exceed the maximum allowed by law. In point of fact, as a matter of calculation, the total 15-cent tax on the assessed valuation of the property would in itself be sufficient to raise $18,420.61, which would provide the interest and sinking fund for the outstanding refunding warrants and bonds, and pay in full the $3,000 principal of the bond issue of 1899, and besides leave more than $2,000 surplus. Also the tax rate or per cent., so fixed in such order for each bond and warrant issue, is separately in itself sufficient to raise the annual interest and required sinking fund for each bond and warrant issue. The amount of taxes so undertaken to be raised, considered all together or separately, would in the succeeding years after 1916 exceed, in no inconsiderable sum, the required interest and sinking fund for all the outstanding bonds and refunding warrants, including the refunding warrants sued on.

Therefore it appears in point of fact, as found by the trial court, that the refunding warrants sued on "could have been legally issued" by the county, as within its power to do in the first instance, "after taking into consideration the outstanding indebtedness" and the levy of a tax rate sufficient to pay the interest and to provide the sinking fund required for the same. Put this fact can be made legally determinative of the question in the event only that the commissioners' court, sitting in July, 1916, had the power and authority to revise and modify the orders made by the commissioners' court sitting at prior terms, fixing at the time a definite tax rate or per cent., in the nature of a provision, for the payment of the interest and sinking fund required for the different series of bonds and refunding warrants issued. Stating it precisely for illustration: On June 8, 1914, bonds were issued for the construction of bridges in the total sum of $40,000, bearing 5 1/2 per cent. interest, maturing in 20 years; and the order of the commissioners' court provided:

"It is ordered that, to provide for the proper payment of the interest of said bonds, and to constitute and maintain a sinking fund for the payment of the principal and interest thereof at maturity, there shall be and there is hereby levied for the year 1914, and for each succeeding year, during which said bonds or coupons may be outstanding and unpaid, a direct continuing annual tax of 3 1/2 cents on the one hundred dollars valuation on all taxable property in Grimes county, and said tax shall in each of said years be assessed and collected and the proceeds thereof be placed in a special fund to be designated `Bridge Bonds of 1914, Interest and Sinking Fund,' and shall be used solely for the payment of principal and interest of said bonds."

And in July, 1916, at a regular term, the commissioners' court revised and amended the above order, as well as the others formerly made, to the extent and in the words following:

"There shall be levied and collected a road and bridge bond interest and sinking fund tax for bonds dated June 8, 1914, of two and one-half (21/2) cents on the one hundred dollars valuation of assessed property."

It is quite certain that the mere act of fixing a tax rate or per cent. to raise the annual interest and sinking fund required for bonds and refunding warrants is in its nature purely an administrative function, pertaining to the ordinary county business, and may be revised at a subsequent term of the court, unless individual rights are prejudicially affected and changed thereby. 11 Cyc. p. 402; 15 C.J. p. 470. To that effect is the holding in Bassett v. City of El Paso, 88 Tex. 168,30 S.W. 893. In that case, as stated:

"The first question presented is, Was it necessary, under the law, for the council to actually levy a tax running through the period of 30 years until the maturity of the bonds, at the time of providing for their issuance?"

The court answered the question, construing the Constitution and laws, that —

"The language and purpose of these provisions seem to be satisfied by an order providing for the annual collection by taxation of a `sufficient sum to pay the interest thereon and create a sinking fund,' etc., though it does not fix the rate or per cent. of taxation for each year by which such sum is to be collected, but leaves the fixing of such rate for each successive year to the commissioners' court or city council. To so construe these provisions as to require, at the time the debt is created, the levy of a fixed tax to be collected through a long series of years, without reference to the unequal `sums' that would in all probability be realized therefrom, instead of the collection annually of a certain `sufficient sum' to pay the annual interest and create the sinking fund required by law, would be doing violence to the language used, and authorize, in cases where land values rapidly increase, the extortion from the taxpayers of large amounts of money in excess of the amount necessary to satisfy the interest and principal of the bonds, and this, in turn would invite municipal corruption and extravagance. * * * It would be the duty of the city council annually to levy a tax sufficient to collect the same, which duty the bondholder could enforce, but the validity of the bonds could not be affected by the failure or refusal to levy such tax, or by the levy of an insufficient tax during any year."

Where the original order of the commissioners' court provides in terms for the annual levying and collecting of a tax to pay the interest on the bonds issued thereunder and to create a sinking fund for their redemption, the "ascertaining the sum to be collected, and the rate per cent. necessary to be levied upon the taxable values of the county each year," is a "ministerial act," and "the performance of this duty the district court had the authority to enforce by writ of mandamus." Mitchell County v. City National Bank, 91 Tex. 361, 43 S.W. 880. Therefore we think the court's conclusion, being warranted by the evidence and the law, should be sustained. The order of July, 1916, revising and apportioning a tax rate or per cent. to each series of outstanding indebtedness, operates to be a rescission and modification of the former orders, to the extent only of an annual tax rate, and such order would relate back and become a part of the contract of each series of indebtedness, including the one sued on.

We have considered all the assignments of error made, and think they should be overruled.

Acting on our own motion, we think that the judgment of the trial court should be reformed so far as it authorizes the levy "of 3 cents of the 15-cent road and bridge tax," so as to authorize 2 1/2 cents, as provided in the order of July, 1916. As so reformed, the judgment will in all things be affirmed.