Farson, Leach & Co. v. Board of Commissioners

JUDGE EASTIN delivered the opinion of the court. By tlie provisions of an act of the legislature of Ken — 121 — tucky, approved March 30, 1880, the commissioners of the sinking fund of the city of Louisville, appellees herein, were charged with the payment of the floating indebtedness of that city existing on the 1st day of January, 1879, and, for the purpose of paying same, the general council of said city was authorized and directed to cause to be issued and turned over to said commissioners, for sale, the coupon bonds of said city to the amount of one million dollars, bearing interest at the rate of five per cent, per annum, one-half of said bonds to be so issued that they might be called in and paid off at any time after ten years from their date, and the other half, at any time after twenty years from their date. Under an ordinance passed by the general council of said city in pursuance of said act, bonds of the city to the amount above named, bearing date May 1, 1880, and conforming to the provisions of said ordinance and said act, were issued and delivered to appellees for the purpose above mentioned, and were sold by them. For the purpose of enabling appellees to call in and pay off the one-half of the bonds so issued which were made payable at the expiration of ten years from their date, the legislature of Kentucky passed another act, which was approved May 22, 1890, whereby the mayor of the- city of Louisville was authorized and directed to cause to be issued other bonds of said city to the amount of five hundred thousand dollars, payable twenty years after date, and bearing interest at the rate of four per cent, per annum, and to deliver said bonds, when issued, to the appellees, to be by them sold at the best price obtainable, but not at less than par, and to apply the proceeds thereof, when sold, to the payment of the bonds issued under said act of March 30, 1880, or to exchange them, in whole or in part, for the bonds issued un — 122 — dev this last mentioned act, if terms of exchange could be agreed upon. The bonds authorized by the act of May 22, 1S90, amounting to the sum of five hundred thousand dollars, were accordingly issued in conformity with said act, and were delivered to appellees, who subsequently offered the same for sale, and on November 7,1894, received a proposition in writing from appellants, offering to purchase the entire issue of bonds at par, which proposition was, on the same day, accepted in writing by appellees. Under said contract of sale, the bonds were tendered to appellants, and payment therefor was demanded by appel-. lees, but refused, and suit having been brought to enforce the performance of said contract, the lower court adjudged that the same be enforced, and from that judgment this appeal is prosecuted. The grounds upon which appellants base their refusal to comply with their offer are, as we understand from the answer filed by them in the court below, as follows, to-wit: 1st. That, as the act of May 32, 1890, under which these bonds were issued, was not acted upon, and as none of said bonds were sold, until after the adoption of the present State constitution, which went into effect on September 28, 1891, and some of the provisions of which are supposed to forbid the issuing of these bonds, therefore they are void as being issued in violation of the State constitution. 2d.-That this act of May 22, 1890, was repealed by .the general act subsequently, passed with reference to the sinking fund of the city of Louisville, and found under the head, “Sinking Fund” at page 1023, and being sec. 3010, of the Kentucky Statutes, and 3d. That there was no authority in the mayor or in ap — 123 — pellees to make these bonds jjayable in gold, and that both principal and interest thereof being made payable in gold coin of the United States, they are, for that reason, void. Briefly considering these objections in their order, we need only say that we can not agree with appellants in their contention-that the issuing of these bonds is violative of any provision of the constitution of this State. The argument for appellants on this branch of the case is based largely upon the assumption that the creation of this indebtedness of five hundred thousand dollars, by the is»“ie of bonds to that amount, would increase the aggregate indebtedness of the city of Louisville to an amount in excess of the constitutional limit of ten per centum of the assessed value of the taxable property therein, as fixed by sec. 158 of the constitution, for cities of the first class, to which the city of Louisville belongs. In reply to this argument, it is only necessary to call attention to the fact that the certificates of the officials of the city of Louisville in charge of these departments, viz.; of the secretary and treasurer of the sinking fund, of the city comptroller and of the city assessor, purporting to give the respective amounts of the bonded indebtedness, the floating indebtedness and the assessed value of the taxable property in said city as of the date on which this contract for the sale of these bonds was made, all of which certificates were filed and are to be considered in evidence in this case, conclusively show that, even if the indebtedness represented by the bonds here in issue were to be considered as an additional item of indebtedness, still this would not make an aggregate indebtedness nearly equal to ten per centum of the assessed value of the taxable property in said city. — 124 — This argument must, therefore, fail because it is based on a mistaken assumption of fact. But, even, if this were not so, it seems to us that as these bands are expressly issued for the purpose of retiring or taking the place'of other outstanding bonds of said city, the amount represented by them is not to be considered as an increase of the city’s indebtedness, in estimating the amount of indebtedness which it may incur under the constitutional limit above referred to, but that it is expressly excluded from such calculation by the closing sentence -of said sec. 158 of the constitution, which is in these words, to-wit: “Nothing herein shall prevent the issue of renewal bonds, or bonds to fund tlie floating indebtedness of any city, town, county, taxing district or other municipality.” And furthermore, even if the indebtedness represented “by these bonds had in fact increased the aggregate indebtedness of said city to an amount in excess of the constitutional limit of ten per centum of the assessed value of the taxable property therein, yet the fact that it was authorized under the act of May 22, 1890, passed prior to the adoption of the constitution, would'seem to protect it, under the language of another.clause in .said sec. 158 of the constitution, which is in these words, to-wit: “Provided, any city, town, county, taxing district or other municipality may contract an indebtedness in excess of such limitations (ten per centum of the assessed value of taxable property in this' case), when the same has been authorized under laws in force prior to the adoption of this constitution.” A question very similar to this was recently considered by this court in ihe case of Aydelott v. South Louisville, reported in 16 Ky., Law Rep. 166, in which the validity of — 125 — certain bonds of Mouth Louisville, issued subsequently to the adoption of the present constitution, under an act of the legislature passed prior to the adoption of the constitution, was questioned upon the same grounds urged here, and in that case the bonds were held valid and unaffected by the provisions of the constitution. We refer to that case, without quoting from the opinion, as settling the question now under consideration here. In the next place, as to the contention of appellants that this act of May 22, 1890, under which these bonds were issued, was repealed by sec. 3010 Kentucky Statutes, it .is sufficient to say that, not only is there nothing in this general act, found in sec. 3010, inconsistent with the provisions of the act of Slay 22, 1890, but the very first clause of said sec. 3010 is in these words, to-wit: “The sinking fund to pay the bonded debt of the city is hereby continued as now established by law.” There was, therefore, no repeal of this special act by sec. 3010, Kentucky Mtatutes. The only other ground upon which it is claimed that these bonds are invalid is based upon the fact that they are made payable, both principal and interest, in gold coin of the United States, while there is nothing said in the act authorizing their issue, as to the kind of currency or money in which they are to be; made payable. The precise question here raised was passed upon by the Supreme Court of Alabama, and that court, in its opinion sustaining the power of the city to make its bonds payable in gold, although the act authorizing them was entirely silent on the subject, uses this language, to-wit: “Express and general power to issue negotiable bonds, in the absence of legislative restriction, carries the implied — 126 — or incidental power to make them payable generally; that is, in currency which is constitutionally a legal tender, or payable in the particular coin which constitutes the legal and commercial standard by which the value of other kinds of currency is measured.” (Judson v. City of Bessemer, 87 Ala. 240.) See also Ashley v. Board of Supervisors, etc., 60 Fed. Rep. 55, and Moore v. City of Walla Walla, 60 Fed. Rep. 961. It seems to us that in every grant of power of this kind, the legislature may be presumed to have left something to the discretion of the grantee of the power where the exercise of discretion would necessarily or naturally be incidental to a full and complete execution of the power in all its details: In other words, there is comtemplated in and embraced by every such grant not only the powers conferred in express words, but those fairly implied in or incident to the powers expressly granted. In determining the extent of the power, therefore, some regard should be had to the object of the grant. As said in the case of Smith v. City of Newbern, 70 N. C. 14, in discussing the powers of municipal corporations under legislative grants: “If we say they can do nothing for which a warrant could not be found in the language of their charter, we deny them, in many cases, the power of self-preservation, as well as many of the means necessary to effect the essential object of their creation; hence they may exercise all the powers within the fair intent and purpose of their creation which are reasonably necessary to give effect to powers expressly granted, and in doing this they must have the choice of means adapted to ends, and are not confined to any one mode of operation.” Looking now at the powers granted in the case before us, — 127 — and the objects and purposes of the same, we find that they were among other things, and mainly, to issue its negotiable securities, running oYer a period of twenty years, for the purpose of borrowing money by the sale thereof at their face value and carrying a low rate of interest. These bonds are to be offered on a market in which there is current more than one circulating medium, but one which is regarded more stable and less subject to fluctuations than any other, which is the recognized standard of value, and which is the equivalent of and corresponds in value with that wdiich the borrower is to receive for its bonds. Can there be any legal reason why the borrower, in case it should seem, in the exercise of a sound discretion, both prudent and advantageous to stipulate for the payment of the loan in that particular medium of circulation, so that the exact measure of the contract — what is to be paid by the borrower on the one hand and what is to be received by the lender on the other — maybe fixedand understoodbyboth contracting parties, should not be allowed to so contract? It seems not to us; and it further seems to us that this is purely a matter of contract which should be and is entrusted to the discretion of the borrower, who is thus authorized to go into the open market to negotiate the desired loan, and who might, under some circumstances, be seriously embarrassed, or possibly rendered wholly unable to negotiate his securities, if denied this privilege of contracting as to these details as an individual might do. We therefore see no valid objection to these bonds by reason of their having been made payable in gold, and the judgment of the lower court is affirmed.