George B. COGGINS on behalf of himself and other taxpayers of the City of Asheville
v.
CITY OF ASHEVILLE and Ranger Construction Company.
No. 14.
Supreme Court of North Carolina.
April 14, 1971.*152 Bennett, Kelly & Long by E. Glenn Kelly, Asheville, for plaintiff-appellant.
Williams, Morris & Golding, by James N. Golding, Corp. Counsel, for City of Asheville.
*153 Van Winkle, Buck, Wall, Starnes & Hyde by Herbert L. Hyde, Asheville, for Ranger Construction Co.
HIGGINS, Justice.
In this action the plaintiff asked the court, (1) to restrain the defendants from performing their contract inter se; and (2) to restrain the City of Asheville from issuing bonds or using the bond proceeds to finance the contract. The evidentiary facts are not in dispute. However, only the ultimate facts found by the court and its conclusions of law based thereon are challenged.
In cases involving a temporary rather than a permanent restraining order, the court's findings of fact are not binding on the appellate court which may make its own findings. McIntosh North Carolina Practice and Procedure, Vol. 2 § 2219; Board of Provincial Elders v. Jones, 273 N. C. 174, 159 S.E.2d 545, citing Huskins v. Yancey Hospital, 238 N.C. 357, 78 S.E.2d 116. However, a different rule applies when the purpose of the action is a permanent restraining order. In the latter case, the trial court's findings of fact are binding on appeal, if supported by the evidence. Whaley v. Broadway Taxi Company, 252 N.C. 586, 114 S.E.2d 254; Smith v. Rockingham, 268 N.C. 697, 151 S.E.2d 568.
In cases in which the trial court passes on the facts, the court is required "`to do three things in writing: (1) To find the facts on all issues of fact joined on the pleadings; (2) to declare the conclusions of law arising on the facts found; and (3) to enter judgment accordingly.' * * * Where facts are found by the court, if supported by competent evidence, such findings are as conclusive as the verdict of a jury." Goldsboro v. Atlantic Coast Line R.R., 246 N.C. 101, 97 S.E.2d 486. Rule 52(a) Findings: Chapter 1A-1, General Statutes of North Carolina, 1969 Replacement.
The plaintiff does not controvert the evidentiary facts. However, he does contend the contract and plans for the use of the bond proceeds constitute a material diversion from the purposes specified in the ordinances authorizing the bonds and violates G.S. § 160-395. Specifically he argues the ordinances provide for new construction; and remodeling and the use of the old municipal auditorium are beyond the scope of the ordinances. G.S. § 160-395 provides: "The proceeds of the sale of bonds under this subchapter shall be used only for the purposes specified in the ordinance authorizing said bonds * * *."
The plaintiff, before Judge Ervin in the Superior Court, and on the review here, has insisted the contract between the defendants should be declared unlawful and its performance permanently restrained on the ground it contemplates the expenditure of bond money for purposes other than those authorized by the bond ordinances.
The plaintiff cites cases from a number of states which follow what is called the Strict Construction Rule. The rule is stated in the case of Tukey v. City of Omaha, 54 Neb. 370, 74 N.W. 613 (1898): "That, when the governing body of a municipality is authorized by a vote of the people, and only thereby, to incur a debt for a particular purpose, such purpose must be strictly complied with, and the terms of the authority granted be strictly and fully pursued * * *." Cases following this Strict Construction Rule are cited from Nebraska, New Mexico, North Dakota, Colorado, Oklahoma, Washington and West Virginia.
North Carolina and many other states follow a more liberal rule in construing statutory limitations upon the use of bond money for public improvements. Emphasis is placed on the final result sought to be accomplished. Bond ordinances are passed authorizing indebtedness for certain stated purposes. When an authorizing vote is required, the bond money is earmarked for the stated purposes. However, in planning large permanent improvements the governing authorities look ahead to the future fulfillment of the construction plans. The authorities will inspect and examine the work *154 as it progresses and minor changes from time to time are expected if conditions change and unforeseen developments occur.
In this case the bond resolutions were passed at the election held in 1967. Thereafter, the City authorities undertook the task of acquiring suitable lands upon which to erect the structures and to negotiate a contract for the completion of the projects. They were successful in acquiring a tract of land on Haywood Street adjoining the lot on which the City's auditorium was located. After the issues were approved, but before the construction plans were completed, land acquired and a contract entered into, the City authorities discovered that due to a period of rapid inflation (estimated to be 1 1/2% Per month) the proceeds from the bond issues would fall far short of financing the project.
When the danger of losing the contemplated improvement became manifest, the Council sought the advice of architects, civic organizations and individual citizens as to what course could then be pursued and the purposes contemplated by Bond Issues Nos. 1 and 3 be accomplished. After extensive hearings the City Council concluded that by combining the two projects into one complex and by using the City's lot on Haywood Street and so much of the auditorium as fitted into the plans for the whole, the complex could be built in a manner to take care of and accomplish the objects contemplated in both Bond Resolutions 1 and 3. The plans for the complex contemplated the outlay of nearly $600,000 in rebuilding and reconstructing the old auditorium, using only a part of it which could be fitted into the project. By using the property the City already owned and the grant of $1,500,000 from Redevelopment, the City was in a position to finance the project and to enter the contract with the co-defendant, the lowest bidder. This action challenges the validity of the contract and the right to sell the bonds on the ground the plans constitute an unlawful diversion from the projects authorized.
"A law authorizing a bond issue for various purposes which does not declare what proportion of the proceeds of the bonds shall be applied to each specific purpose is not void. Such matter may properly rest within the sound discretion of the municipal authorities." McQuillinMunicipal Corporations, Vol. 15, Section 43.68.
"It lies within the sound discretion of the legislative body of the City * * * to decide whether to proceed with one of the projects, even though there would be insufficient funds to proceed with the other project. * * * (T)he legislative body of the City * * * is not subject to the control of the courts in the absence of an abuse of discretion, fraud or collusion." Krieg v. City of Springfield, 92 Ohio App. 436, 106 N.E.2d 652 (1952).
"A definition of corporate purpose cannot be static. Changing conditions require that application of the limitations * * * be tempered with due recognition of the existing situation so the purpose for which the public body was organized may be accomplished and enjoyment thereof by the public made possible." Michigan Boulevard Bldg. Co. v. Chicago Park District, 412 Ill. 350, 106 N.E.2d 359.
"Of necessity, the division of the proceeds of the sale of the bonds between sewerage and waterworks must be left to the discretion of the municipal authorities * * *. The exact cost of each could not be well determined by the Legislature." Red Springs Hotel Co. v. Red Springs, 157 N.C. 137, 72 S.E. 837.
"It is true, the act does not declare what proportion of the proceeds of the bonds shall be applied to each specific purpose, but that is wisely left to the sound discretion of the city authorities * * *." Gastonia v. Citizens' Nat. Bank, 165 N.C. 507, 81 S.E. 755.
"While the law will not justify the use of the proceeds of a state or municipal *155 bond issue for purposes other than those specified in the Act authorizing the issue * * * it does not follow that immaterial or temporary changes consistent with the general purpose of the legislative act should be interpreted as unlawful diversions of public funds. Atkins v. McAden, 229 N.C. 752, 51 S.E.2d 484; Worley v. Johnston County, 231 N.C. 592, 58 S.E.2d 99." Teer v. Jordan, 232 N.C. 48, 59 S.E.2d 359.
In Waldrop v. Hodges, 230 N.C. 370, 53 S.E.2d 263, Barnhill, J., later C. J., stated the rules appropriate to the facts in this case: "While the defendants (Board of County Commissioners and School Trustees) have a limited authority, under certain conditions, to transfer or allocate funds from one project to another, included within the general purpose for which bonds are authorized, the transfer must be to a project included in the general purpose as stated in the bond resolution * * *. The funds may be diverted to the proposed purposes only in the event the defendant Board of Commissioners finds in good faith that conditions have so changed since the bonds were authorized that the proceeds therefrom are no longer needed for the original purpose."
In the case of Sykes et al. v. Belk, Mayor and City Council of Charlotte, 179 S.E.2d 439, decided by this court on March 10, 1971, with respect to the use of bond money, this court says: "The courts will not interfere with the exercise of discretionary powers of a municipal corporation unless its actions are so unreasonable and arbitrary as to amount to an abuse of discretion." The parties stipulated in this case that the Council did not act arbitrarily or capriciously or in abuse of their discretion. It is worthy of note the cases on the subject emphasize "deviation from the general purpose for which bonds are authorized" and do not outlaw such changes as are necessary under existing conditions to accomplish the general purpose. For example, in this case the plaintiff contends the provision in the bond issues authorized the purchase of land but did not authorize the use of lands the City already owns. The use of property already owned by the City would be a saving and not a diversion. The Supreme Court of the United States in Bain Peanut Co. v. Pinson, 282 U.S. 499, 51 S. Ct. 228, 75 L. Ed. 482, gave us this admonition: "We must remember that the machinery of government would not work if it were not allowed a little play in its joints."
The record in this case is long, but neither tedious nor cumbersome. Counsel for all parties have ably prepared and presented this case both before Judge Ervin and this court. Judge Ervin, with care and accuracy, determined the issues before him. We conclude the judgment which he entered in the Superior Court of Buncombe County is correct and should be and is now
Affirmed. HUSKINS, J., dissents.