State v. City of Key West , 153 Fla. 226 ( 1943 )

I concur in the conclusion in the opinion prepared by Mr. Justice TERRELL.

It is my conclusion that that part of Section 8 of that certain Ordinance approved April 16, 1943, entitled:

"An Ordinance authorizing the acquisition of a complete electric plant and system by the City of Key West and the improvement and extension thereof, authorizing the issuance thereof, authorizing the issuance of $1,500,000 Electric Revenue Bonds of the City of Key West to pay the costs thereof, providing for the security and payment of such revenue bonds and making certain covenants and agreements in that connection, confirming the sale of such revenue bonds, and providing for the manner of the acquisition and operation of such electric plant and system." and which said part of Section 8 reads as follows: "The Mayor and City Clerk, upon the advice and approval of the City Attorney, are hereby authorized and directed to disburse or pay out the necessary amount of the proceeds of said revenue bonds for acquisition of the said properties through the purchase of the controlling capital stock of said company, to vote such stock in the name of the city for the liquidation or dissolution of said company by payment of all liens and obligations and effecting transfer of said properties to the city free and clear of liens and encumbrances, and all of such proceeds remaining after making the disbursements aforesaid shall be deposited with the Trustee (hereinafter provided for and designated) and shall be set aside by the Trustee into the 'Reserve and Contingencies Fund,' which is created and established in paragraph G of Section 9 of this ordinance, and shall be used for purposes designated in said paragraph. It is the intention by this Section to authorize the Mayor and City Clerk, upon advice and approval of the City Attorney, to do all things for and on behalf of the city deemed necessary preliminary to and in connection with the acquisition of said properties, but, to the extent that further and more specific provision for such procedural detail may prove to be needed, it may be prescribed and provided for by resolution or resolutions to be hereafter adopted by the City Council.", is in conflict with and repugnant to Section 10 Article IX of the Constitution of Florida.

It is elementary that the municipality may do no act which the Constitution prohibits the Legislature to authorize a municipality to do. Section 10 of Article IX of our Constitution provides, "The Legislature shall not authorize any county, city, borough, township or incorporated district to become a stockholder in any company, association or corporation, or to obtain or appropriate money for or to loan its credit to, any corporation, association, institution or individual."

It, therefore, follows that the municipality is not authorized either by contract or by ordinance to become a stockholder with others in any company, association or corporation. It appears that the part of our Constitution, supra, was taken from the Constitution of Ohio and that a like provision has been adopted in Pennsylvania. In the case of Alter v. Cincinnati, et al., and Ampt v. Cincinnati, et al., 56 Ohio State Reports 47, it was held:

"1. Under Section 6 of Article eight of the Constitution, a city is prohibited from raising money for, or loaning its credit to, or in aid of, any company, corporation or association; and thereby a city is prohibited from owning part of a property which is owned in part by another, so that the parts owned by both, when taken together, constitute but one property.

"2. A city must be the sole proprietor of property in which it invests its public funds, and it cannot unite its property with the property of individuals or corporations, so that when united, both together form one property."

I have considered the case of the Western Saving Fund Society of Philadelphia, et al., v. The City of Philadelphia, 31 Pa. State Rep. 175, and do not consider the same in point.

In Wheeler, et al., v. Philadelphia, 27 Pa. State Rep. 338, referring to a like provision of the Constitution of Pennsylvania, it was said:

"This clause in our Constitution, as well as the one in reference to special legislation, was borrowed from the Constitution of the State of Ohio. In Walker v. The City of Cincinnati, before cited, the Supreme Court held that an Act of Assembly authorizing the entire construction of a railroad by a city of the first class, where such road was material to the development of the city, and to empower the local authorities to provide means therefor by the taxation of its citizens, was not in violation of the constitutional provision referred to. Says Chief Justice Scott, in delivering the opinion of the Court: 'The mischief which this section interdicts is a business partnership between a municipal or subordinate division of a state, and individuals or private corporations or associations. It forbids the union of public or private capital or credit in any enterprise whatever. In no project, originated by individuals, whether associated or otherwise, with a view to gain, are the municipal bodies named permitted to participate in such manner as to incur pecuniary expense or liability. They may neither become stockholders, nor furnish money or credit for the benefit of the parties interested therein."

What was said in that case is applicable here because in this instance the municipality proposes to purchase the common stock and a majority of the preferred stock, leaving the balance of the preferred stock outstanding in the hands of minority stockholders and the proceeds to liquidate the business of the corporation which, under the terms of the statute, infra, may conceivably be continued in the hands of director-trustees for a period of three years.

Any acquisition by a municipality of any stock (less than entire ownership) in any corporation is ultra vires and void and the municipality is without authority to use stock so acquired for any purpose whatever. The municipality by the operation of Section 10, Article IX, supra, is precluded from exercising the powers of "a majority in interest of the stockholders of a corporation" which is conferred by Sections 611.31, et seq., Fla. Statutes 1941, (referred to supra) and, therefore, the municipality, is not authorized to proceed under the provisions of that part of Section 8 of the ordinance above quoted.

I do not think that that part of the ordinance herein referred to necessarily vitiates the bond issue here under consideration because this provision of the ordinance merely directs procedure by which the acquisition of the utility, that is the properties of the Key West Electric Company, is to be accomplished.

The bonds proposed to be issued are for the purpose of providing a fund with which to acquire the property, which is a lawful purpose.

The decree appealed from, however, fails to recognize the infirmities herein pointed out. So it is, the decree should be reversed with directions for further proceedings.