In Re State to Issue Bonds to Fund Indebtedness

This is a proceeding instituted in the district court of Oklahoma county, by the Governor, Secretary of State, and State Treasurer, for the purpose of determining the existence, character, and amount of the legal outstanding warrant indebtedness of the state, and causing a statement thereof to be entered upon the records of the court, and to authorize and direct the issuance of funding bonds of the state, under the provisions of sections 372 to 381, inclusive, of Compiled Laws 1909. The proceeding was filed and notice given as required by statute, and certain citizens of the state appeared and filed protests against the issuance of the bonds. The trial court, originally treating such protests as demurrers to the application or petition, sustained the same. From the judgment, an appeal was taken to this court, and here the judgment of the trial court sustaining such demurrers was reversed, and the cause remanded for further proceedings; the opinion in the former appeal being reported in 33 Okla. 797, 127 P. 1065. After the case was remanded, the district court again heard and considered the matter, evidence being introduced in support of the application or petition. Judgment was duly entered, directing the issuance of fundings bonds in the sum of $2,907,122.19. A motion for new trial was filed and by the court overruled, and the case is again brought here on appeal by the parties filing one of the remonstrances or protests in the trial court. At the last hearing in the trial court, the officers of the state, making the application through the Attorney General, were permitted to amend the application by striking from the schedule of warrants originally submitted for funding certain warrants aggregating $34,042.32, and by adding to said schedule certain other warrants not originally listed, and amounting to $45,214.82, together with certain interest that had accrued upon the warrants as originally listed in the application filed. The case was tried in the lower court upon an agreed statement of facts and certain evidence introduced in open court, from all of which the trial court found that the total amount of outstanding indebtedness for the fiscal year ending June 30, 1911, would amount, on the 1st day of October, 1913, over and above the funds on hand to pay the same, to $2,907,122.19.

It becomes important, at the outset, to determine just how far the decision of this case on this appeal is to be controlled by the decision on the previous appeal.

For convenience, we shall refer to the plaintiffs in error as the protestants.

The contention is made that the decision on the former appeal is not binding now on the court. This contention is based, in part, upon the argument that the case presents, not the elements of litigated rights, but is merely an ex parte proceeding on the part of the state, acting by certain of its officers, and that the duty of the court is largely ministerial, having some relation to the duty of an auditor of the claims sought to be funded. This position, in our judgment, is not sound. It is true, the controversy arose upon the application of the state for the determination of its outstanding indebtedness as a basis for issuing the bonds required to take up and cancel the warrants. No one was required by law to be personally served, or to answer the application, or to protest against the procedure in any way, and if no one had appeared within the time fixed by law and stated in the publication notice, it would not have been a technical default, and the proceeding would have been, in that case, largely in the nature of anex parte hearing. But persons interested have the right, under the statute, to be present. The statute does not say in express terms that interested persons have the right to be heard by any form of pleading in opposition to the issuance of the bonds as sought. The protestants, however, appeared and filed their pleading, and the trial court rightly, we think, entertained and passed on the matters put in issue thereby. As we view it, the proceeding, both in form and substance, possessed, from the time such pleading by protestants was filed, the essential characteristics and elements of an ordinary suit between contending parties; it presented a real controversy, and one of much importance, not only to the parties actually before the court, but to the whole state as well, and to the holders of the warrants for which the funding bonds were sought to be issued.

But, even if it be granted that the proceeding was ex parte the state, by its officers, as contended, no good reason, in fact no reason at all, is suggested why the application of the doctrine of the "law of the case" should be different therein from its application in an ordinary controverted law suit. No reason for applying a different rule in those ex parte matters which the courts are sometimes called upon by the law to pronounce judgment in occurs to us. On the contrary, it would seem of equal, if not greater, importance that, where the decisions and actions of ministerial or executive officers are required to be reviewed by the courts, and the judgment of the courts expressed upon the regularity and validity of such ministerial or executive decisions and actions before finally in force, such judgments, when once solemnly given, should be final and conclusive to the same extent that any other judgment is. If this were not so, a judgment reversing the lower court in a matter of the character stated would furnish no standard for the conduct of the proceedings before the trial court after remand, and the officers of the state, after procuring judgment of the court of last resort, would find themselves, in subsequent stages of the action, right where they started.

It is the rule of this state that the decisions of appellate courts upon all questions of law involved in any case are binding, not only on the lower court, but on the appellate court as well, in case of a subsequent appeal. Atchison, Topeka Santa Fe Ry. Co. v. Baker, 37 Okla. 48, 130 P. 577;Oklahoma Gas Electric Co. v. Baumhoff, 21 Okla. 503,96 P. 758; Chicago, R.I. Pac. Ry. Co. v. Broe, 23 Okla. 396,100 P. 523; Harding v. Gillett, 25 Okla. 199, 107 P. 665; StateBank of Waterloo v. Citizens' National Bank, 26 Okla. 801,110 P. 910; First National Bank of Claremore v. C. M. Keys etal., 27 Okla. 704, 113 P. 715; Harper v. Kelly, 29 Okla. 809,120 P. 293; Harsha v. Richardson, 33 Okla. 108, 125 P. 34. This rule is in harmony with authority from other jurisdictions, and seems, in fact, not to be seriously questioned anywhere. Terre Haute v. Baker, 4 Ind. App. 66, 30 N.E. 431; Heidt v. Minor, 113 Cal. 385, 45 P. 700; City ofHastings v. Foxworthy, 45 Neb. 676, 63 N.W. 955, 34 L. R. A. 321; Standard Sewing Machine Co. v. Leslie, 118 Fed. 557, 55 Cow. C. A. 323; McKinney v. State, 117 Ind. 26, 19 N.E. 613;Wilson v. Binford, 81 Ind. 588.

The rule as stated, however, is subject to the exception that if, to follow the former decision would work gross or manifest injustice, it should be overruled. A., T. S. F. Ry. Co. v.Baker, supra; Okla. G. E. Co. v. Baumhoff, 21 Okla. 503,96 P. 758.

It follows that, unless gross or manifest injustice will result from allowing the former decision in this case to stand, that decision, in so, far as it is applicable to the questions raised on the present appeal, will be treated as binding. The former decision was handed down on November 15, 1912, and we believe any lawyer, after an examination thereof, would be justified in advising his client that the warrants herein sought to be funded constitute a safe investment, and that it is not the policy of this state to allow its just obligations, contracted for necessary expenses of government, at any time to be dishonored. Confidence in the integrity of the state's obligations is a necessary conclusion from the opinion, as written, and that the business world has, to some extent, acted on that decision is, we think, a perfectly legitimate inference. If any person or concern has extended credit to the state for its current needs, or purchased any of these warrants in reliance upon the assurance that the law of the state would not permit the repudiation of such obligations, such person or concern would be injured by overruling the decision which fixed the law. In such a case the exact converse of the exception to the rule for application of "the law of the case," as above stated, would appear. We recognize fully that to issue these bonds will place upon the people the burden of some $3,000,000, with interest, to be paid by taxation. Still it is shown, and in fact conceded, that the people who must pay this sum have received its equivalent in services and supplies actually necessary to the maintenance and conduct of the business of government — without which the state government could not be carried on at all. These warrants paid the officers, cared for the convicts, paid for food and clothing and treatment for the insane. These things have to be paid for from day to day, if the business of organized government is to continue, and there come times when only the stability of state credit will purchase supplies and procure the services necessary to their performance. We do not regard it as a gross or manifest injustice to the parties prosecuting this appeal to require them and their property and their posterity to pay a share of the burden thus created. That the warrants in question are evidence of obligations, sound in every moral regard, is conceded here. The very foundation of the law is found, in good morals, and it would do no violence to correct legal interpretation, in case of conflict between law and morals, to require the former to yield to the latter. The moral code is the foundation of the proper legal code, and the ideal system will never be reached until every expression of the law finds its response in sound moral principles.

The persons resisting the issuance of these bonds are, in a sense, representatives of the citizens of the state, for the decision here reached will affect all the people alike. We are not unmindful of the vast importance of the correct interpretation by the courts of the fundamental law, but we see nothing in the former decision that does violence to the safeguards the makers of the Constitution sought to throw around the people in the administration of public affairs. Treating the state as an individual, it is required, by the construction given in the former decision, to meet the necessary demands of its existence, and no more. There is nothing in that opinion that would form even an excuse on the part of the state's ministerial and executive agents for the exploitation of the people by expenditures, without their consent, of money for any enterprise in which said agents might conceive the state to be interested, and by following that interpretation we do not mean to furnish such an excuse.

Seeing no reason in this case to depart from the wise rule of construction stated, we declare here that it is the duty of the court, in disposing of the appeal, to apply the law as laid down in the former decision, so far as that decision adjudicates the questions now before the court. In doing this, it is not necessary to discuss again the reason or the authorities by which a majority of the court was controlled in reaching the conclusions set forth in the former opinion. It is necessary, however, to apply the law as stated therein, and determine just bow far it controls the controversy in its present state. It is interesting to note, since the former appeal in this case was decided, practically the same question, though arising in a little different manner, was before the Court of Appeals of the state of Kentucky in the case ofRhea v. Newman, 53 Ky. 604, 156 S.W. 154, in a proceeding involving the expenditure of moneys by the state, and the same conclusion was reached as in the former decision by this court.

As has been said in the former appeal, the protest filed against the issuance of the bonds was treated as a demurrer. It was held that the demurrer should have been overruled by the trial court. It becomes pertinent now to inquire whether or not the proceedings in the trial court, after the case was remanded, were in substantial compliance with the law as laid down in the opinion of this court. If so, the trial court's judgment to that extent must be affirmed. Okla. G. E. Co. v.Baumhoff, 21 Okla. 503, 96 P. 758.

In pursuance of the order of this court, the trial court treated the petition or application as sufficient under the law, and heard evidence in its support. This evidence, and the stipulations of the parties, show that the warrants sought to be funded by substitution of bonds were largely for services rendered and supplies furnished during the fiscal year ending June 30, 1911, and that all of said warrants were issued against actual existing appropriations. Certain warrants were shown to have been withdrawn from consideration because of doubt as to their validity, but as to this action the protestants have no right to complain. The court did not examine in detail every warrant proposed to be funded, but the evidence introduced was sufficient to support the finding and judgment that all the warrants offered were legal and valid, representing actual obligations of the state.

The proceedings of the state's officers in arranging the funding proceedings, and preparing the requisite preliminaries to the court's action, were shown to have been regular and in substantial compliance with the law. The evidence supports the allegations of the application or petition in every material regard, and is sufficient to sustain the judgment and findings of the trial court.

The first paragraph of the syllabus of the former opinion states the construction given to the section of the Constitution relied on by protestants as follows:

"The limitations of section 23, art. 10, Williams' Ann. Const., Okla., were not intended to apply to that class of pecuniary obligations arising out of the ordinary necessary current expense of maintaining the state government, and which were in good faith intended to be paid, and were lawfully payable, out of the current yearly revenues, and other resources of the state, for the fiscal year within which such obligations were incurred." (33 Okla. 797, 127 P. 1065.)

It is clear from the record that the warrants in question come within the law as thus stated, and that the bonds should be allowed to issue in the place of such warrants, unless they must be stricken down for some other reason than that they are prohibited by the constitutional provision referred to. Inasmuch as section 23, article 10, of the Constitution, does not apply to indebtedness incurred for necessary current expenses of state government, it must follow, as a matter of course, that said section does not prohibit the issuance of obligations as evidence of expenses of that character. We have not overlooked the force of counsel's argument, to the effect that no revenue was in fact provided to meet these warrants, and that as a consequence they are illegal and void, but it would be impossible to uphold that contention in the face of the declaration of law, as stated by the court on the former appeal. Inasmuch as we now hold that declaration to be binding on the court as the law of the case, it is apparent that the contention made cannot now be upheld. Indeed, it is frankly contended in the brief on file that this court was in error in holding that the issuance of warrants in excess of $400,000, for the payment of which there were no funds on account of the failure in revenues, was not the creation of indebtedness, within the meaning of section 23, art. 10, of the Constitution. But a mere error in the holding made by an appellate court is not ground for overruling its decision in the same case on a subsequent appeal. In the absence of a showing of manifest or gross injustice on the subsequent appeal, such error is immaterial. Ayer Lord Tie Co. v. Commonwealth ex rel. (Ky.) 85 S.W. 1096; Tool Co. v. Champ Spring Co., 146 Mo. App. 1, 123 S.W. 513; Jacobson v. U.S. Gypsum Co., 150 Iowa, 330, 130 N.W. 122; Schmidt v. Beiseker, 19 N.D. 35, 120 N.W. 1096; Jeffrey v.Osborne, 145 Wis. 351, 129 N.W. 932; New York Life Ins. Co. v.McIntosh (Miss.) 46 So. 401; Baum v. Hartman, 238 Ill. 519, 87 N.E. 334; Evans v. Nail, 7 Ga. App. 129, 66 S.E. 543; Lewisv. Jones, 97 Ark. 147, 133 S.W. 596.

Several "points for reversal not involved in the formerappeal" are urged here. It is contended that the warrants in question are within the inhibition of section 23, art. 10, of the Constitution, and that no revenue has been legally provided with which to meet at least a large portion of such warrants. These contentions are disposed of by the former holding that section 23, art. 10, of the Constitution was not intended to apply to indebtedness of the character under consideration in this proceeding. That being true, there is no constitutional inhibition against the warrants or the bonds sought to be issued in their stead.

The contention that the proof was insufficient to show the validity of the warrants has already been disposed of, and requires no further treatment.

Certain warrants first presented to the lower court were withdrawn or disallowed, and it is contended that the bond issue, as ordered by the trial court, is void for the reason that the bonds do not cover the outstanding indebtedness of the state. Warrants so withdrawn were withdrawn by consent of the court, for the reason they were of doubtful validity. The court's judgment recites that the proof established the total warrant outstanding indebtedness of the state in the amount of the bonds ordered issued. We see no reason why persons not the holders of the warrants omitted or denied should be heard to complain of this finding. Certainly it was the duty of the court not to allow bonds to issue covering illegal or doubtful warrants. It would seem that one of the strongest grounds for requiring the bond issue to be reviewed by the court would be in the nature of a precaution that all warrants of the illegal or doubtful class be eliminated from the bond issue.

The only other contention made that requires consideration is to the effect that the statute under which this proceeding was brought was repealed on May 16, 1913, when the Revised and Annotated Laws of Oklahoma, generally referred to as the Harris-Day Code, took effect, and that such repeal operated to abate the proceeding. Sections 372 and 381 of the Compiled Laws of 1909 were not brought forward by the Harris-Day Compilation. Section 54, article 5, of the Constitution provides:

"The repeal of a statute shall not revive a statute previously repealed by such statute, nor shall such repeal affect any accrued right, or penalty incurred, or proceedings begun by virtue of such repealed statute."

This is certainly a proceeding begun prior to May 16, 1913. Sections 372 and 381, of the Compiled Laws of 1909, omitted from the Harris-Day Code, specifically gave the state, by its officers, the right to institute this proceeding, and when the protests or remonstrances were filed, the proceeding took on the nature of a litigated dispute, as has been observed. It affects, not only the immediate parties, but the holders of the warrants and the taxpayers as well, and it appears to be a proceeding begun, saved by the Constitution in the sections just quoted.

The adoption of the Harris-Day Code operated to repeal preexisting sections omitted therefrom, but such repeal does not affect the validity of a proceeding of the character under consideration, as appears from the express terms of the adoption act. The saving provision is found in section 1, chapter 39, Session Laws 1911, the act by which the Harris-Day Code was adopted as the Revised Laws of the state. It is in the following language:

"All general or public laws of the state of Oklahoma not contained in said revision are hereby repealed. Provided, that this act shall not be construed to repeal, or in any way affect any special or local laws, or any appropriation, special election, validating act or bond issue thereby authorized, nor to affect any pending proceeding or any existing rights or remedies, nor the running of the statute of limitations in force at the time of the approval of this act; but all such local and special laws, appropriations, special elections, validating acts, bond issues, pending proceedings, and existing rights and remedies shall continue and exist in all respects as if this act had not been passed; provided, further, that this act shall not be construed to repeal any act of the Legislature enacted subsequent to the adjournment of the extraordinary session of the Legislature which convened in January, 1910."

This proceeding being one begun prior to, the date when the act of adoption went into effect, and being for the purpose of procuring an issue of bonds, it comes within the letter of the statute, as a proceeding begun and pending, as a necessary step in a bond issue authorized by the omitted act. The bond issue can only be saved by saving the proceeding provided for that purpose. It follows that the proceeding did not abate or become invalid by reason of the repeal of the statute under which it was begun prior to such repeal.

The judgment of the trial court is affirmed.

HAYES, C. J., and KANE and WILLIAMS, JJ., being disqualified, the Governor appointed Messrs. J. B. A. ROBERTSON, P. D. BREWER, and R. M. CAMPBELL to sit in their places in the consideration of this case. TURNER, LOOFBOURROW, and BREWER, JJ., concur. ROBERTSON, J., dissents.