Allen Etc. v. Van Buren Township Etc.

184 N.E.2d 25, 243 Ind. 665, 1962 Ind. LEXIS 192

• Court: Indiana Supreme Court
• Decided: June 26, 1962
• Docket: 30,194
• Status: Published

Opinions

Bobbitt, J.

— Appellant brought this suit to enjoin appellees, and each of them, from taking further action regarding the issuance of bonds to finance the construction and equipment of an elementary school in Van Burén School Township in Madison County, Indiana, for the alleged reason that the proposed amount of such bonds, together with all other outstanding indebtedness will exceed the two per cent debt limit in both the civil and school townships in violation of the provisions of Article 13, §1, of the Constitution of Indiana.

Trial was to the court on a stipulation of facts by the parties.

Pertinent facts stipulated are:

Plaintiff-appellant is a resident of and ownér of taxable property located within both the Van Burén civil and school townships, and ,brings this suit for himself and for and on, behalf of all other resident taxpayers in such townships; that proper proceedings were instituted for the issuance of bonds of the school township in an amount not to exceed $100,000, arid of the civil township in an amount not to exceed $95,000; for the purpose of procuring funds to pay the cost of construction and equipment of an elementary school building in such school township; that it is proposed to issue bonds of the school township in an amount of $76,000, and of the civil township in án amount of $71,000; that the school township has heretofore issued and has now outstanding bonds in the amount of $56,000, and the civil township has heretofore issued and has outstanding bonds in the amount of $61,000; and that the total net taxable property within the school township, as shown by assessments for taxes for the year of 1960, payable in 1961, is $3,152,350, and for the civil township, $3,152,350.

It is readily apparent from the foregoing that on the basis of two per cent of the net assessed valuation the bonding limit of the school township is $63,047, and of the civil township also $63,047.

The amount of bonds which could legally be issued under the two per cent limit, based on the net. taxable property, is: school township — $7,047; and civil.township — $2,047.

The injunction was denied, and this appeal followed.

The sole error assigned is the overruling of plaintiff-appellant’s motion for a new trial, and we shall consider only Specification No. 1: “That the decision of the Court is contrary to law.”

Appellant asserts that the limit of indebtedness upon a political or municipal corporation pursuant to Article 13, §1, of the Constitution of Indiana, swpra, is two per cent of the net assessed valuation of taxable property within such political or municipal corporation and not two per cent of the “actual or true value” as contended by appellees.

Appellees rest their position upon the validity of Acts 1961, ch. 122, §2, which appellant asserts is invalid and void as being in violation of the provisions of Article 13, §1, supra, which is as follows:

“No political or municipal corporation in this State shall ever become indebted in any manner or for any purpose to an amount in the aggregate exceeding two per centum on the value of the taxable property within such corporation, to be ascertained by the last assessment for State and county taxes, previous to the incurring of such indebtedness; and all bonds or obligations, in excess of such amount, given by such corporation, shall be void: . . . .” (Our italics.)

Chapter 122, supra, provides that whenever a school corporation, municipal corporation or political subdivision proposes to issue bonds, it shall obtain from the county auditor a certificate indicating the value of taxable property which shall be certified as follows:

• “á. The total assessed valuation of such taxable property shall be set out;

“b. The percentage used in converting the value of property into assessed valuation as provided by Chapter 316 of the Acts of 1959 shall be applied to such assessed valuation in such a manner as to derive the valuation to be used as a base for limiting the bonding power of such corporation, as contemplated in Article 13, Section 1, of the Constitution of the State of Indiana and as used in Chapter 316, Acts of 1959.”

Chapter .316 of the Acts of 1959 provides for the reassessment,-for taxation purposes, of all real estate and improvements thereon in 1961 and every eight years thereafter. Section 5¹ of this Act provides that the rate of assessment shall be thirty-three and a third per cent of the “true cash value” of the real estate and improvements thereon, which the assessing officials shall determine from forms and standards adopted and promulgated by the State Board of Tax Commissioners, as of March 1 of the year preceding the making of any periodical reassessment.

The determinative question here is whether the two per cent debt limitation is to be based upon the true cash value or . upon the assessed value which is one-third of the true cash value.

If the two per cent debt limitation must be based upon the “assessed value” then the trial court erroneously denied the injunction and the proposed bonds may not be issued because they would exceed the constitutional bonding limit of both the civil and school townships.

Prior to 1949 all property in Indiana was, by statute, .required to be assessed at its true and actual value.

■The question here presented is one of first impression in this State.

Four other jurisdictions with practically identical constitutional provisions have considered the question with which we are faced in the present ease. Three of them, Iowa, Utah and Washington, support appel-lees’. position here,; and .the. State of Illinois supports the. position of appellant.

The question was before the Supreme Court of Iowa in N. W. Halsey & Co. v. City of Belle Plaine (1905), 128 Iowa 467, 104 N. W. 494, and Miller v. City of Glenwood (1920), 188 Iowa 514, 176 N. W. 373; and before the Supreme Court of Utah in Board of Education v. Passey (1952), 122 Utah 102, 246 P. 2d 1078, and State v. Spring City (1953), 123 Utah 471, 260 P. 2d 527; and the Supreme Court of Washington in Hansen v. City of Hoquiam (1917), 95 Wash. 132, 163 Pac. 391, and Schoen v. City of Seattle (1921), 117 Wash. 303, 201 Pac. 293.

We are not impressed with the reasoning in these cases. While well-reasoned opinions from other jurisdictions may be persuasive in the determination of a new question of law they are, however, not conclusive. We are, for the reasons which will presently appear, not persuaded by the reasoning in the decisions upon which appellees rely, and accordingly we decline to adopt the result which they have reached.

Section 1 of Article 13, supra, of the Constitution of Indiana was adopted as an amendment to the Constitution in 1881, and was proposed at a time when towns, cities, townships and counties were overburdened with debt as the result of extravagant spending in the Reconstruction Era and the cry came from townships, cities and towns for protection against increased debt and taxation.

Our Constitution provides that" the “General Assembly shall provide, by law, for a uniform and equal rate of assessment and taxation, . . . .” Article 10, §1, Constitution of Indiana.

Although the statutes pertaining to the assessment of property have, from the time of the adoption of §1 of Article 13, supra, of the Constitution of Indiana, to 1949, provided that property should be assessed at its “true cash value,” it is common knowledge and a fact of which we take judicial notice, that assessing officials have always assessed property at a part only of its “true cash value,”, and we see no reason why the Legislature should not add some uniformity to this method of assessment by requiring that all real' estate and improvements thereon shall be assessed at a fixed per cent of its true cash value as determined by standards fixed in the statute,² thus eliminating inequalities which have existed between the various taxing districts within the State.

Since the adoption of the amendment in 1881, the two per cent limit on bonded indebtedness has, without exception, been determined and calculated in Indiana by taking two per cent of the net assessed valuation- of the property, for taxation purposes, within the unit issuing the bonds. This has been the customary practice in all governmental units, and with attorneys who have approved the validity of the bonds, and with the full knowledge of taxpayers, attorneys and officials involved, that the value of the property to which the two per cent limitation was applied, was less than its true cash value.

A recognition of this custom of accepting, the assessed value as the basis for determining the two per cent limit of indebtedness is also to be found in the decisions of this court.³

While- the custom and practice of using the net assessed value of taxable property as the basis for calculating and ascertaining the limit of. indebtedness pursuant to .Article. 13, §T, supra, is not binding upon us, however, because this practice has been consistently followed by the administrative officers involved, accepted by attorneys who have approved, the legality .of bond issues for the past 70 years, and accepted for more than 80 years by the general public and the Legislature, they are forcibly persuasive and are entitled to great weight iii the interpretation of the provisions of Article 13, §1, supra, here in question. Sutto v. Board of Medical Registration (1962), 242 Ind. 556, 180 N. E. 2d 533; Romero v. International Term. Operat. Co. (1959), 358 U. S. 354, 3 L. Ed. 2d 368, 381, 79 S. Ct. 468 (Rehearing denied, 359 U. S. 962, 3 L. Ed. 2d 769, 79 S. Ct. 795.

In attempting to determine the meaning intended by the framers of the Constitution of our State by the use of the phrase, “to an amount in the aggregate exceeding two per centum on the value of the taxable property within such corporation, to be ascertained by the last assessment for State- and county taxes,” we must consider the phrases in their entirety and cannot be guided solely by the meaning of the word value standing alone.

We are also governed by the rule of construction enunciated by this court in State ex rel. v. Grant Superior Court (1930), 202 Ind. 197, at page 210, 172 N. E. 897, 71 A. L. R. 1354, which is as follows:

“It is to be presumed that the Constitution was carefully made, and that every word in it was carefully chosen to express the intention of the constitutional convention, and especially to express any limitation on a power granted by it unless expressed in such language readily and easily interpreted by any of the citizens under its authority.”

The “value of taxable property” on which the two per cent limit is based is “to be ascertained by the last assessment for State and county taxes.” The value is “to be ascertained” — how?—“by the last assessment”

Ascertain is defined by A New English Dictionary on Historic Principles, Yol. 1, Part 1, p. 483, as “to render certain”; “establish as a certainty”; “to establish”; “to fix”; “to determine”; and by Webster’s Third New International Dictionary as “to establish”; “determine with certainty”; and “to make certain— exact.”

The Constitution does not say that the value for the purpose of determining the two per cent debt limitation shall be the true or actual value of property as determined or ascertained by using the assessed value as the basis for computing’ the true cash value — but that it is to be ascertained or determined by the last assessment for State and county taxes. If the Legislature, in drafting and proposing a constitutional amendment which resulted in Article 13, §1, supra, of the present Constitution, had intended that the “true cash value” be used as the basis of determining the debt limit instead of a value to be ascertained by assessment figures, they could have so stated in the amendment.

In our judgment the phrase “by the last assessment” is used in the sense of comparison, as “by the yard,” “by the year,” or “the weight of the load 'of coal is to be ascertained by deducting the weight- of the truck from the gross weight of the load.”

In expressions involving comparison, the word “by” is defined to mean “to the amount of” — “indicating an amount.” Webster’s New International Dictionary, Second Edition.

We choose to follow the well-reasoned opinion in City of Chicago v. Fishhurn (1901), 189 Ill. 367, 59 N. E. 791, in which the Supreme Court of Illinois, in considering the meaning of a provision of the Constitution of Illinois, which is identical in its provisions to the one here under consideration and is as follows:

“[0]n the value of the taxable property therein, to be ascertained by the last assessment for state and county taxes, previous to the incurring of such indebtedness.”;

held that in ascertaining the value of the taxable property in the City of Chicago, by the last assessment, the limit of indebtedness is to be based upon the assessed value, which was one-fifth of the full value.

The provisions of our Constitution being identical to those in the Constitution of Illinois, the reasoning of the Supreme Court of Illinois in the City of Chicago case applies with equal force to the present case here.

At pages 793-794 of 59 N. E. it is stated:

“But it is urged by counsel for appellants that the word ‘value,’ used in the constitution, must mean actual value; that any attempt of the legislature to direct assessing officers to take one-fifth of such value as the assessed value is void; and that, inasmuch as the statute provides for a determination of such actual value, it must be held to be a. basis of the limitation. The central and dominant idea of the constitution in the assessment of property for taxation and in the payment of taxes is uniformity and equality, but we find no provision which prevents the legislature from fixing the assessed value at less than full value. Justice and uniformity between taxpayers may be as well secured by a proportionate basis, and, while the value cannot be fixed by the legislature, it is within the legislative power to enforce the provision for uniformity by any proportionate rule. Assessors had always assessed property at a part only of the full value, and we see no reason why the legislature may not prevent the varying methods by which property was assessed unequally between different counties and municipalities of the state, by enforcing a fixed and uniform rule. So long as the correct proportion between the different subjects of taxation is maintained there is no language of the constitution which limits the legislative.power to prescribe a basis for the action of the assessors.”

Appellees further assert that because property was assessed at its “fair cash value” at the time of the adoption of Article 13, §1, swpra, it must have been contemplated that municipal corporations and political subdivisions could incur indebtedness up to two per cent of the fair cash value of the property within their boundaries, and it was never intended that this limit could be changed by the Legislature.

There is no provision in our Constitution which prohibits the Legislature from fixing a bonding limit less than two per cent.

Article 13, §1, supra, provides only that indebtedness may not exceed two per cent on the value of taxable property,, etc. It does not say that the Legislature may not make the limit one per cent, or two-thirds of one per cent, as appellees contend will be the effect of holding that the limitation is based on the net assessed value.

If the Legislature has the power to reduce the debt limit below two per cent by fixing a smaller percentage, then it must follow logically that it can reduce the debt limit by requiring that property be assessed at one-third of its true cash value as was provided by Acts 1959, ch. 316,⁴ §5, p. 819.

Article 13, §1, swpra, fixes a maximum limit not a minimum limit. It did not restrict the power of the Legislature to fix a limit lower than two per cent of the value of taxable property to be determined as provided in this section of the Constitution.

It is suggested here that to impose the debt limit on the assessed value (one-third of the true cash value) would require increasing resort to more expensive means in order to finance needed public improvements; while to hold that the true cash value, as provided by Acts 1961, ch. 122, §2, supra, is the basis upon which the . two per . cent limit should be computed, would minimize the need of local governments to resort to more costly methods of financing new improvements.'

While courts in some jurisdictions may resort to such reasoning in order to provide the means to impose additional indebtedness on the local taxpayers, this court is not yet ready to adopt the philosophy that the end justifies the means, and we refuse to decide constitutional questions upon such a basis.

We still adhere to the principle expressed in Gross Income Tax Div. v. Surface Comb. Corp. (1953), 232 Ind. 100, at page 136, 111 N. E. 2d 50, as follows:

“It has been suggested that because, 'The increasing social burdens assumed by our governments, both State and national, will require increasing and more searching taxation for their support,’⁵ we should follow the present trend of some of our courts and steer our course by principle rather than by precedent, in order to sustain questionable taxes when imposed and extended in an effort to secure additional revenue. We are not impressed with this suggestion, nor are we disposed to cut loose the moorings of the past and embark upon an uncharted sea without regard to precedent and with only the wavering compass of ever-shifting needs to guide us into uncharted seas, in order to meet the expense of increased burdens being assumed from year to year by our state and national governments. Principles never change, but their application may be varied to meet the needs of an advancing society. However, this does not require, or permit, a distortion of principles and time-honored precedents merely to satisfy the lust of a greedy and overindulgent, benevolent government;”

and in our judgment the principle above expressed is applicable to the situation here.

It is our judgment that “the value of the taxable property” within the meaning of Article 13, §1, supra, is the assessed value of the property as determined by the last complete assessment for State and County taxes, previous to the incurring of the proposed indebtedness.

Section 2 of ch. 122 of the Acts of 1961, attempts to effect an increase in the bond limitation in contravention of the limit fixed by Article 13, §1, supra, and is, therefore, invalid and void.

If appellees desire to increase the bonding limit of local units of government in Indiana, their remedy is by amendment to the Constitution of the State of Indiana and not in this court.

Since the issuance of the proposed bonds would exceed the two per cent debt limitation of both the Van Burén School and Civil Townships, without including the advance of $137,000 from the Veterans Memorial School Construction Fund to the Van Burén School Township, pursuant to Acts 1955, ch. 312, being §28-175, et seq., Burns’ 1961 Cum. Supp., it is not necessary to consider whether or not such advance is a debt of the school township within the provisions of Article 13, §1, supra.

Because the proposed bond issue, when added to the present indebtedness of each, would exceed two per cent of the assessed value of the taxable property in both the Van Burén School and Civil Townships, the trial court erred in denying the injunction sought by plaintiff-appellant and its decision is, therefore, contrary to law.

The judgment of the trial court is reversed, and since a new trial would serve no useful purpose, the trial court is instructed to issue the injunction as prayed.

Judgment reversed with instructions.

Arterburn, C. J., and Jackson, J., concur. Achor, J., concurs with opinion. Landis, J., dissents with opinion.

1 . Ch. 316 of the Acts of 1959 was repealed by §2011 of ch. 319 of the Acts of 1961. See: Acts 1961, ch. 319, §109, for re-enactment of this provision.

2 . Acts 1959, ch. 316, §5. See Acts 1961, ch. 319, Article 14, p. 927.

3 . See: Rappaport v. Dept. of Public Health (1949), 227 Ind. 508, 87 N. E. 2d 77, 88 N. E. 2d 150; Brown v. Guthrie, Auditor (1916), 185 Ind. 669, 114 N. E. 443; Edwards v. Housing Authority of City of Muncie (1939), 215 Ind. 330, 19 N. E. 2d 741; Dept. of Pub. Sanitation v. Solan (1951), 229 Ind. 228, 97 N. E. 2d 495; Becker et al. v. Albion-Jefferson School Corp. et al. (1956), 235 Ind. 204, 132 N. E. 2d 269; Martin v. Ben Davis Conservancy Dist. (1958), 238 Ind. 502, 153 N. E. 2d 125; Book v. Board of Flood Control Comrs. etc. et al. (1959), 239 Ind. 160, 156 N. E. 2d 87.

4 . See Note 1 on page 670.

5 . Stone v. York Ice Machinery Corporation (1942), 193 Miss. 638, 10 So. 2d 380.