City of Laredo v. Looney

In this action a mandamus is sought against the Attorney General to compel his approval of a proposed issue of bonds of the City of Laredo in the amount of $31,000 for the purpose of refunding in like amount bonds of an original issue, in 1883, of $75,000, for street improvement, city hall, and market house purposes.

The individual bonds of the original issue, so far as is disclosed by the record, were all sold and delivered at the same time. The issue was void to the extent of approximately $39,000, being that much in excess of the amount for which the city could at the time have lawfully issued its bonds for the purposes named under the amendment of section 9, article 8, of the Constitution, then in force. The city has paid off and retired forty-two bonds of the original issue, aggregating $42,000, and has available funds sufficient to retire two other bonds of the issue. This would leave $31,000 of the original issue outstanding, for which amount the refunding issue is proposed.

The contention of the relator is that although the original issue was partly void, under the Constitution, and the city could have then validly issued its bonds for the stated purpose only in the amount of approximately $36,000, it is lawful for the city to refund the issue in the amount of $31,000, since the bonds could, originally, have been lawfully issued in that amount.

The power to issue refunding bonds can be exercised only where the original debt was valid. If it was partly invalid, it may be refunded only to the extent that it was valid. If bonds of a partly invalid issue are shown to have been delivered at different times, those first delivered, up to the amount of the debt that could have been lawfully created, should be paid, and the remainder be treated as nullities. The bonds of such an issue thus representing the valid part of the debt could be lawfully refunded. But if all of the bonds of the partly invalid issue were delivered at the same time, as appears to have been the case here, none of them could have any right of priority over the others, and the amount of the valid debt should be distributed equally between them. Citizens Bank v. City of Terrell, 78 Tex. 460. Each bond now outstanding of this original issue, to the extent of its proportionate excess above the amount for which the debt could be lawfully created, was, therefore, invalid in its inception, and is still so invalid. Each of them being but a part of the whole debt created, partakes alike of its validity and invalidity. If they may be refunded for their full amount, the result is a clear evasion of the Constitution. It would simply mean the maintenance of the whole debt against the city through an attempted validation of the outstanding balance. The property within the city has already been taxed for the payment of those bonds of the issue which have been retired, and if the remainder may be lawfully refunded it will be further taxed for their payment. It would thus be subjected to taxation for the admittedly invalid part of the debt.

The purpose of the constitutional provision is to prevent such taxation. For such part of the outstanding debt as is valid, refunding bonds may be issued; but not for its full amount.

The writ of mandamus is refused.

Mandamus refused.