Brown v. Truscott Independent School Dist.

HICKMAN, C. J. The appeal is from an order of the court below sustaining a general demurrer, special exception, and plea in abatement to appellant’s petition, and dismissing the suit. Under the views which we entertain, it will not be necessary for us to consider the action of the trial court in sustaining the special exception and plea in abatement; but only its action in sustaining the general demurrer. The petition to which the general demurrer was sustained covers fifteen large pages of the transcript, but may be epitomized as follows: The plaintiff below, appellant here, sued H. C. Burt, doing business under the name of H. C. Burt & Co., the trustees of Truscott independent school district of Knox county, and the tax assessor and tax collector of such district, alleging, in substance: That on the 19th day of April, 1909, common school district No. 3, in Knox county, was created by an order of the commissioners’ court,.which district shortly thereafter bonded itself to the extent of $8,000. That, after *215 the bonds had been voted, the commissioners’ court extended the limits of the district so as to include about 4,100 acres of additional territory, 3,800 acres of which added territory belonged to the plaintiff. That thereafter the board of trustees levied a tax upon the property included in the added territory for the purpose of paying the interest and sinking fund on said $8,000 bond issue, and attempted to collect taxes on said added territory. That in a suit instituted by plaintiff in the district court of Knox county the collection. of such tax was enjoined, and the judgment enjoining same was never appealed from, but became final. That thereafter, in 1920, the Thirty-Sixth Legislature passed a special act (Loe. & Sp. Laws 36th Leg. 3d Called Sess. 1920, e. 93) undertaking to create the Truscott independent school district in Knox county, including within the boundaries of said independent districts the original territory in common school district No. 3 and also the territory which the commissioners! court had theretofore attempted to add thereto. Many allegations are made in the petition showing the unconstitutionality of the act of the Thirty-Sixth Legislature. These allegations will not be set out herein, for it seems to be conceded by both parties that such special act was unconstitutional. We shall therefore not further notice the special act of the Thirty-Sixth Legislature. That thereafter the Thirty-Eighth Legislature passed a special act, creating the Trus-' cott independent school district, including within its limits the territory described in the special act of the Thirty-Sixth Legislature. Said independent school district has 'been functioning through its trustees and officers since its creation. That, after the taking effect of the special act of the Thirty-Eighth Legislature, an election was held in said district on May 7, 1927, at which election three propositions were submitted to the voters of said district, to wit: (a) For maintenance tax; (b) for a tax of fifty cents on the $100 valuation of property for the purpose of creating interest and sinking fund on a bond issue of $40,000 to erect a new school building; and (e) for the assumption of the bonded indebtedness of $8,000 issued by common school district No. 3. That all three of the propositions were carried. That the Attorney General approved $29,000 of the bonds of the $40,000 issue, which said $29,000 of bonds were sold to the defendant Burt. That the other $11,000 of said issue have not been sold or approved. That the trustees of the independent district created by the Thirty-Eighth Legislature levied and assessed taxes against plaintiff’s property and the property of other persons situated in the added territory for the purpose, among other things, of paying the interest- and providing a sinking fund to discharge the $8,000 bonded indebtedness of the old common school district No. 3,. and paying the interest and providing a sinking fund to pay the $40,000 bond issue, and the tax collector of said district was attempting to collect such taxes from plaintiff. It is then alleged that the special act of the Thirty-Eighth Legislature, attempting to create the Truscott independent school district, was unconstitutional and void, and repugnant to section 16, art. 1, and section 3, art. 7, of the State Constitution, in that such act did not provide any lawful means for the payment of the $8,000 bonded indebtedness then existing against a portion of- the district, and because said act provided that the independent district acquired the property of common school district No. 3, without making any provision for the payment of debts against it. Follows then the allegation that, unless enjoined, the officers of the independent school district would levy and collect taxes against plaintiff’s land situated in the added territory, for the payment of which said land was not liable. It is further alleged that, prior to the ordering of the election for the purpose of voting the $40,000 bond issue, the defendant Burt came to the town of Truscott and entered into a contract with the trustees, by the terms of which Burt agreed that, in the event the bonds were voted, he would purchase the same, and the trustees, by an order placed on ■the minutes, agreed to sell to Burt the bonds which were thereafter to be voted. The petition further represents that, at the time the election to vote to assume the $8,000 bonded indebtedness was ordered, it was the intention of the trustees to wreck the old building which had been built with the proceeds of said $8,000 bond issue, and that, after said election was held, the trustees did destroy said building by having same torn down at an expense of $7S0, and realized from the salvage thereof less than $600. A further allegation is made that the $40,-000 bond issue was void because the petition and order for the election and the election notices stated that such bonds were to bear interest at the rate of 6 per cent, per an-num, while the bonds actually issued by virtue of such election bear interest at the rate of 5¾ per cent, per annum. The prayer was for judgment canceling the bonds and removing the lien thereby created from plaintiff’s property, restraining defendants from attempting to collect taxes on plaintiff’s land for the payment of the $8,000 bond issue, for a writ of injunction restraining the tax assessor from assessing said property and the tax collector from collecting taxes for any interest or sinking fund, and for a da' cree that the purported creation of the Trus- , cott independent school district-was illegal and void. . The special act of the Thirty-Eighth Legislature which was attacked was.House Bill No., *216 176, chapter 17, Acts of the Thirty-Eighth Legislature, Second Called Session (1923). This act was pleaded in full in the petition, and consists of three sections besides the caption and the emergency clause. These three sections are as follows, to wit; “Section 1. That the Truscott Independent School District is hereby created and established in Knox County, Texas, including within its limits the Truscott Independent School District as created by the Thirty-Sixth Legislature, Regular Session, with metes and bounds as follows: [Here follows the same description as that of Common School District Number 3, as enlarged, also Truscott Independent School District as attempted to be created by the Act of the Thirty-Sixth Legislature.] “Section 2. The management and control of the public free schools of said Truscott Independence School District as created by this Act is hereby vested in a board of trustees composed of seven members; provided, that the trustees in charge of the public schools now in existence within the territory of said District shall serve as trustees of said Truscott Independent School District until the time for the next succeeding election for trustees of independent school districts as is provided by General Laws for the election of trustees in Independent School Districts organized for school purposes only; at which time seven trustees, who shall be resident citizens and qualified voters within said district, shall be elected and serve in accordance with the provisions of this Act and General Laws of the State. “Section 3. The Said Truscott Independent School'District, as created by this Act, shall have and exercise and is hereby vested with all the rights, powers, privileges, and duties of a town incorporated under the General Laws of this State for free school purposes only, and the board of trustees of the said Truscott Independent School District shall have and exercise all of the rights, powers, privileges, and duties conferred and imposed' by the General Laws of Texas upon the trustees of independent school districts incorporated under the General Laws of the State for free school purposes only.” The controlling question of law presented is the constitutionality of the above act. On the authority, principally, of Burns v. Dilley County Line Independent School District et al. (Tex. Com. App.) 295 S. W. 1091, 1094, and Millhollon'v. Stanton Independent School District (Tex. Com. App.) 231 S. W. 332, it is urged that the special act is repugnant to various provisions of the State and Federal Constitutions. None of the vices condemned in those cases are contained in the above act. It does not in any manner under-takeito impose any character of tax upon the added territory. It is silent with reference thereto. It creates, the district, defines its boundaries, provides for its trustees and vests in the district the rights, powers, privileges and duties of a town incorporated under the general laws for free school purposes, and confers upon the board of trustees such rights, powers, privileges, and duties as are conferred and imposed by the general law upon trustees of independent school districts incorporated under the general law for free school purposes only. The particular provisions of the creating acts in the Burns and Millhollon Cases which rendered such acts void are not contained in the special act under investigation. There being no question that the Legislature at that time had the power to pass such law, and there being no provision therein contrary to the Constitution, we can perceive no reason why the special act was not a valid exercise of legislative power. It is therefore pur conclusion that the act in question is not unconstitutional. This leads us to the most difficult question presented. It is urged that an independent school district created under the general law has no power to assume an outstanding bonded indebtedness existing against a portion of such district, and that there is no provision of the general law authorizing an election in an independent school district for the purpose of determining whether such district shall assume the outstanding bpnded indebtedness of a portion thereof. We are cited to no article in the statute expressly providing that, when territory is added to a school district, such district as extended may vote upon the assumption of the bonded indebtedness of the old district. Clearly, before a valid tax can be voted, legislative authority, either express or implied, must exist for holding the election. We know of no express authority therefor, and have made a rather careful study of the authorities with the view of deciding whether it has been determined that such authority is implied.' The Constitution, art. 7, § 3, has been construed by our Supreme Court in the case of Crabb v. Celeste Independent School District, 105 Tex. 194, 146 S. W. 528, 533, 39 L. R. A. (N. S.) 601, in the following language: “Where an independent school district votes a special tax, pursuant to the authority conferred by said section of the Constitution, and afterwards extends the boundaries of. such district, the existing special tax so authorized cannot be levied and collected against the property in such extension until such assessment is authorized by a vote of the qualified taxpaying voters of the district as extended.” In the case of Yorktown Independent School District v. Afflerbach, 12 S.W.(2d) 130, the opinion in which was adopted by the Supreme Court, Judge Speer of the Commission of Appeals in discussing section 3, art. 7, of the Constitution says that the language thereof is broad enough to include the levying of taxes to discharge the assumption of exist- *217 tag bonds issued for tbe purpose of maintaining a public free school or tbe erection and equipment of school buildings. The effect of this construction is that by implication the Constitution permits the Legislature to authorize such an election. There is no question but that under general statutes, such as article 2784, Rev. St. 1925, an independent school district may vote a bond tax. It may vote bonds for the purpose of purchasing sites for, building, and equipping school buildings. It seems to us that the same reason which would lead to the above construction of article 7, § 3, of the Constitution would lead to a construction of the general statutes as an implied authorization by the Legislature to a school district to hold an election like the one held in the instant case. In other words, if the Constitution impliedly conferred the power to assume, the statutes have impliedly conferred the authority to hold an election to assume. The recorded cases abound in expressions that, under the general law an extended school district has the power and authority to hold just such an election as wtas held in the instant case. In the case of Burns v. Dilley County Line Independent School District, supra, it is stated: “If the special act was silent in respect to the mode whereby the. new district could assume the obligation of the old district, the general law on that subject would prevail.” In Tilton v. Dayton Independent School District (Tex. Civ. App.) 2 S.W.(2d) 889, 892, it is said: “It is well settled that where an independent school district votes bonds and a maintenance tax rate pursuant to the authority conferred by the Constitution, and after the bonds of said district are extended, the qualified tax paying voters of the entire district as extended may vote to assume the indebtedness of the old district and to levy and collect the maintenance tax rate of the old district against the property in the district as extended.” Citing many authorities. In the case of Willamar Independent School District v. Lyford Independent School District et al. (Tex. Civ. App.) 8 S.W.(2d) 239, 240, in an opinion by Chief Justice Fly of the San Antonio court, it is said: ‘“The general law gave them the authority to call an election and submit to the voters the question of assuming the debts of that part of the district segregated from the old district.” Other expressions could be cited, but the foregoing are sufficient to disclose that uniformly our courts have regarded the general statutes as sufficient authority to authorize an election within an independent school district for the purpose of levying taxes for the discharge of bonded indebtedness on a portion thereof. None of the reported cases present exactly the same situation as that presented in the act under construction, but, ⅛ a district incorporated under the general law has the authority to hold such an election, clearly the district in the instant case has such am thority, for ⅛ was expressly clothed with all authority of an independent school district organized under the general law. It seems to us that authority to vote bonds, to increase a tax, and to enlarge a district implies the authority for an enlarged district to vote a tax for the purpose of discharging bonded indebtedness of the old district before it was enlarged and extended, as otherwise territory added to an independent school district organized under the general law could never assume its pro rata part of the obligations of the district, the benefits of which it shares, and there would exist in the enlarged district a greater tax rate upon the old territory than upon the added portion. The taxes within such district would not, therefore, be equal and uniform. It is further presented that, according to the allegations of the petition in the instant case, the old schoolhouse into which the proceeds of the $8,000 bond issue went was practically worthless at the time the election was held, and the contention is urged that the tax levy was void as to the added territory in so far as such levy was for the purpose of discharging that bond issue, because the property owners in the added territory were by the vote of persons residing in the original district, compelled to assume the indebtedness, without receiving any benefits or consideration therefor. We cannot sustain this contention. If the district as enlarged and extended had the power and authority to vote to assume the indebtedness of the original district, then such authority did not depend upon the fact that such extended district received a full consideration in the form of buildings for such assumption. There is no authority established by law for determining the value of the consideration to be received by an extended district for assuming such indebtedness. To validate such tax levy only in proportion that the value of the building bears to the amount of the bonds would lead to hopeless confusion. There are many benefits derived by those in the enlarged districts which cannot be definitely ascertained or measured. We overrule the contention that the issue of $29,000 in bonds was void because they were voted upon as 6 per cent, bonds and were issued by the trustees as 5¾ per cent, bonds. It is not necessary to issue bonds at the maximum rate of interest authorized by the vote. 44 O. J. p. 1208. As said in 28 Cyc. 1592: “The validity of municipal bonds will not be affected by the fact that they provide for interest at a lesser rate than that which they are authorized to bear.” The plea of res ad judicata is not sustained. The judgment relied upon in support of this plea in the petition is described therein as a judgment enjoining common school district No. 3 from attempting to levy a tax upon appellant’s lands. Appellees were not parties *218 to that suit, and cannot, therefore, be bound by that judgment. The right of the independent district to levy and collect the tax is not at all dependent upon whether or not the common school district had that right. It is our opinion that the trial court did not err in sustaining the general demurrer to appellant’s petition, and the judgment of that court dismissing the case upon appellant’s declining to amend is affirmed.