Sidney Spitzer & Co. v. Commissioners of Franklin County

Stacy, J.

In this action, or proceeding, plaintiff makes application for a writ of mandamus to compel tbe defendants, commissioners of Franklin County, by order of court, to lay and collect, a special tax annually of not less than 25 cents and not more than 75 cents on tbe $100.00 assessed valuation of all property subject to'taxation within tbe limits of Harris Township, Franklin County, for tbe purpose of paying tbe interest, as it accrues, upon certain road bonds, and to provide a sinking fund to pay tbe principal of said bonds at maturity, as required by tbe following provisions in chapter 74, Public-Local Laws 1919, as amended by chapter 40, Public-Local Laws, Extra Session 1920, under which tbe bonds now held by plaintiff were issued and sold by tbe defendants:

“That for tbe purpose of providing for the payment of said bonds and tbe interest thereon, and for the construction, improvement and maintenance of tbe roads of said township, tbe board of county commissioners of said county shall, annually, and at tbe time of levying tbe county taxes, levy and lay a special tax on all persons and property subject to taxation within the limits of said township, or not less than twenty-five cents and not more than seventy-five cents on the one hundred dollars assessed valuation of property,” etc.

Plaintiff is the purchaser and bolder of bonds issued by tbe defendants in 1919 and 1920, under and by virtue of elections held in Harris Township, Franklin County, as authorized by tbe two acts above mentioned; and tbe defendants duly levied a tax in 1920 and 1921, sufficient in amount and within tbe limits fixed by the statutes for tbe purposes now in question, but in deference to the decision of this Court in tbe case of Cooper v. Comrs., 183 N. C., 231, they have now declined to levy a greater tax than is necessary to meet tbe interest on said bonds as it falls due. Tbe court below placed its judgment upon, the' recent *32decision of this Court in the Cooper case, and declined to grant the relief sought, and dismissed plaintiff’s petition or application for writ of mandamus. It is conceded that if the Cooper case is to be followed, the judgment below must be affirmed; otherwise not.

There is no doubt as to the validity of the bonds held by plaintiff; they are not in dispute. The single question presented by the appeal is whether the defendants may be required by mandamus to lay and collect an annual tax, sufficient in amount not only to pay the interest on said bonds as it becomes due, but also to provide for the payment of the principal of the bonds at maturity. This would seem to be the plain meaning of the statute, and the contrary holding in Cooper v. Comrs., 183 N. C., 231, is disapproved.

Much was said on the argument in favor of adhering to this recent decision, but the doctrine of siare decisis is not to be observed with inflexible strictness, especially where no rule of property is involved, and it should never be employed to perpetuate an error. 15 C. J., 956; Lowdermilk v. Butler, 182 N. C., 502. “The rule of stare decisis is entitled to great weight and respect where there has been, on a point of law, a series of adjudications all'to the same effect; but when we are presented with a single decision which we believe to have been inadvisedly made, it is encumbent on us to overrule it if we entertain a different opinion on the question submitted.” Morphy, J., in Griffin v. His Creditors, 6 Rob. (La.), p. 228. There is no virtue in sinning against light or in persisting in palpable error, for nothing is settled until it is settled right. i To quote the late Chief Justice Ciarle, “There should be no blind adherence to a precedent which, if it is wrong, should be corrected at the first practical moment.” Indeed, the doctrine of stare decisis et non quieta movere has been quite accurately and correctly stated, as follows:

“A deliberate or solemn decision of a court or judge, made after argument on a question of law fairly arising in a case, and necessary to its determination, is an authority, or binding precedent, in the same court or in other courts of equal or lower rank, in subsequent cases, where ‘the very point’ is again in controversy; but the degree of authority belonging to such a precedent depends, of necessity, on its agreement with the spirit of the times or the judgment of subsequent tribunals upon its correctness as a statement of the existing or actual law, and the compulsion- or exigency of the doctrine is, in the last analysis, moral and intellectual, rather than arbitrary or inflexible.”

In the well-considered case of Jones v. Comrs., 137 N. C., 579, fortified, as it is, by numerous authorities cited therein, it was held that where the Legislature had passed an act authorizing and empowering a county to fund its existing indebtedness, incurred for necessary expenses, *33by issuing bonds therefor, mandamus was the proper remedy to compel the county commissioners to issue the bonds as required by the act of the Legislature. Here, we think, the act sought to be enforced is clearly mandatory. The commissioners are required to levy a special tax, annually, within the limits specified in the act, for the purpose of providing for the payment of said bonds and the interest thereon. This language admits of but one construction, and, in our opinion, the plaintiff has a clear legal right to demand that the provisions of the statute be observed. Person v. Doughton, 186 N. C., p. 724, and cases there cited.

It can make no difference whether the statute contains an express designation of a sinking fund or not; it -provides for the annual levy and collection of sucho special taxes as may be necessary to meet “the-payment of said bonds and the interest thereon.” This language is sufficiently explicit to require no judicial interpretation. It imposes a duty on the county commissioners to levy annually a special tax, within the limits fixed by the statute, for the purpose of providing for the payment of said bonds and the interest thereon.

What other meaning can this language have ? Call it a sinking fund, or what not, the command of the Legislature is that, if the bonds are sold, provision shall be made for their payment by levying an annual tax, sufficient in amount to meet the interest as it falls due, and to pay the bonds at maturity. It is not for us to say that some future generation should pay for the roads built and enjoyed by the present generation. The question before us is, What provision has the Legislature made -for the payment of these bonds? The lawmaking body, in our judgment, has spoken in unequivocal terms. The commissioners of Franklin County are directed to levy each year a tax sufficient to pay the interest on said bonds as it becomes due, and to provide for a sum sufficient to retire the bonds at the maturity. Spruill v. Davenport, 178 N. C., 364; Manly v. Abernethy, 167 N. C., 220; Comrs. v. Henderson, 163 N. C., 114; Asbury v. Albemarle, 162 N. C., 247. This necessarily implies the laying aside periodically of a sum which, when invested at interest and when the interest is added to the annual payments, will amortize the bonds at maturity. Such a fund is usually called a sinking fund. But if the name be distasteful, let it be nameless, as the Legislature has chosen to leave it without a name in the present statute.

It is suggested that this appeal is simply an attempt to secure a rehearing of the Cooper case, which is now res adjudícala. We do not so understand the record. The Cooper case dealt with a special levy for roads in Sandy Creek Township, Franklin County, made under chapter 173, Public-Local Laws, 1919. The present case deals with a-*34special levy in Harris Township, Franklin County, authorized by chapter 74, Public-Local Laws, 1919, 'as amended by chapter 40, Public-Local Laws, Extra Session, 1920. The two acts are separate and distinct. True they contain similar provisions with respect to the levying of a special tax, and in each it is required that the board of county commissioners shall annually levy and lay a special tax, in the designated township, for the purpose of providing for the payment of the road bonds issued in connection with the building of the roads in said township and for the payment of the interest thereon. This is the extent of their similarity; they relate to different things and are wholly disconnected. The doctrine of res adjudícala has no application to the instant facts and is foreign to the ease.

In Hicks v. Cleveland, 106 Fed., 459, it was held that where the Legislature of a State has authorized a municipality to issue bonds, and provided in the same act for the annual levy of taxes to pay the interest thereon as it accrues and the principal at maturity, such provision becomes a part of the contract on the issuance of the bonds, and may not be repealed by subsequent legislation unless some other adequate method is substituted in its place; and a Federal court which has rendered a judgment against the municipality on such bonds or their coupons may compel the levy of a tax for its payment by mandamus. Simonlon, Circuit Judge, delivering the opinion, took occasion to observe : “The provisions of law existing at the time of issuing the bonds, providing for a tax, form a part of the contract, which cannot be impaired by any subsequent law. Butz v. City of Muscatine, 8 Wall., 575; 19 L. Ed., 490. Where at the time of issuing said bonds there existed an act authorizing an annual tax for their payment, it was beyond the power of the Legislature to repeal it, so far as concerned the bonds in question, unless some other adequate remedy was substituted in its place. City of Galena v. Amy, 5 Wall., 705; 18 L. Ed., 560.”

To like effect is the decision of the United States Supreme Court in the case of East St. Louis v. U. S., 120 U. S., 600; 30 L. Ed., 798, where Chief Justice Waite, delivering the opinion of the Court, said:

“The judgment is for interest in arrear and a small amount of principal. The law required a tax to be levied annually, sufficient to pay all interest as it accrued, and the principal when due. This was neglected, and consequently there is now a large accumulation of debt, which ought to have been paid in installments. Thus far the inhabitants have been allowed to escape taxation at the time it ought to have been made, and to which they were under constitutional obligations to submit. The accumulation of the debt was caused by their own neglect as members of the political community which had incurred the obligation. Such being the case, we see no reason why it was not in the power of the court to order a single levy to meet the entire judgment, which *35was all for past-due obligations.” See, also, Holt County v. Nat. Life Ins. Co., 80 Fed., 686, and Darlington v. Atlantic Trust Co., 78 Fed., 596.

Tbe wisdom or impolicy of providing “sinking funds” for tbe payment of bonds at maturity is not a matter for us to decide. Tbis is a legislative and not a judicial question. One of tbe outstanding features of tbe legislation under wbicb North Carolina is building and financing ber State highways is tbe fact that a sinking fund has been provided for tbe payment of tbe road bonds wbicb, like other funds for highway construction and maintenance, is derived from a source that does not impose any direct tax on tbe people of tbe State and wbicb at tbe same time affords a certain income. Under tbe provisions of chapter 188, Public Laws of 1923, there is set aside an' annual fund of $250,000 from tbe revenue derived from tbe 3-cent tax on gasoline and from tbe revenue on motor vehicle licenses, and in addition, $250,000 is to be drawn from tbe general fund of tbe State Treasurer, making a total annual sinking fund of $500,000 for retiring tbe highway serial bonds. Besides tbis fund, wbicb is specifically set aside, any surplus wbicb remains from tbe above-mentioned revenue after deducting tbe interest on outstanding highway bonds, cost of maintaining tbe State Highway System, and tbe operating expenses of tbe commission, reverts to a sinking fund for tbe retirement of outstanding-bonds issued for purposes of highway construction.

In tbe Cooper case, 183 N. C., p. 235, tbe quotation, “Without legislative authority a sinking fund could not be created,” ostensibly taken from Hightower v. Raleigh, 150 N. C., 571, is not an exact quotation from tbe opinion in tbe Hightower case. In that case tbe Court said: “Without legislative authority a special tax could not be levied or a sinking fund created.” Tbe authority to levy a “special tax,” where no special tax has been authorized, was tbe question involved in that ease. In tbe reference there made to tbe creation of a sinking fund, tbe Court said, and intended to say, that no special tax, where none bad been authorized, could be levied for a sinking fund. It did not mean to say, for tbe question was not presented, that moneys could not be appropriated annually into a sinking fund if there weré surplus sums wbicb could be used for such purpose. “Every opinion, to be correctly understood, ought to be considered with a view to tbe case in wbicb it is delivered.” Marshall, C. J., in U. S. v. Burr, 4 Cr., 470.

In Gastonia v. Bank, 165 N. C., 507, it was held that, although there was no provision of law for a special levy of taxes to pay tbe interest and to create a sinking fund, nevertheless tbe city did have tbe power to pay tbe interest and create a sinking fund for tbe bonds if tbe general revenue derived under tbe limit fixing its taxing power was sufficient to do so. Indeed, tbe authority to levy a special tax annually to be *36applied to the payment of the principal and interest of a public debt, such as is contained in the statute now before us, comes within the very definition of a “sinking-fund tax.” A sinking fund is defined to be a fund derived from particular taxes, imposts, or duties, which is to be appropriated toward the payment of the interest due on a public loan and for the payment of the principal. 36 Cyc., 460; 7 Words and Phrases, 6522. The object of every sinking fund is to diminish the debt whose existence warranted its foundation. N. Y. Sav. Bk. v. Grace, 102 N. Y., 313. And “a 'sinking-fund tax’ is a tax raised to be applied to the payment of the interest and principal of a public loan.” U. P. R. R. Co. v. Buffalo Co., 9 Neb., 449.

The only valid tax authorized to be levied by the present statute is an annual tax of not less than 25 cents nor more than 75 cents on the $100 assessed valuation of property. Unless provision is made, as contemplated by the statute, the county will not be in position to pay these bonds at maturity out of the funds derived from the tax now being levied. In Proctor v. Comrs., 182 N. C., 60, it was said: “The authority to issue bonds or to pledge the faith and loan the credit of a subordinate political subdivision of the State is limited by its ability, under the law, to provide for the ultimate payment of said obligations.” And further, it is the accepted position with us that where bonds are issued or other acts- done, under special sanction of legislative authority, the statutory provisions on the subject are controlling. Comrs. v. Webb, 148 N. C., 120; Robinson v. Goldsboro, 135 N. C., 382.

In dismissing plaintiff’s application for writ of mandamus, the learned judge of the Superior Court who heard the case below placed his judgment squarely upon the decision of this Court in Cooper v. Comrs., supra, which contained our latest expression on the subject. In this he was right; but, 'after earnest reflection, we are convinced that the Cooper case must be overruled, and this necessarily carries with it a reversal of the judgment of the Superior Court, entered in the present case.

Error.