Hicks v. State

108 S.E.2d 187, 99 Ga. App. 302, 1959 Ga. App. LEXIS 842

• Court: Court of Appeals of Georgia
• Decided: March 20, 1959
• Docket: 37457
• Status: Published

Opinions

Townsend, Judge.

It thus appears from the stipulated facts, as against the contentions of the intervenor that Lavonia is the owner of an option to purchase, the facilities from Toccoa which, if enforceable, is sufficient to meet the objections urged against validating the Lavonia revenue certificates. If it is not enforceable, then the objections are good. The answer to this single question is to be found within the Revenue Bond Law, Code (Ann.) Ch. 87-8. Code (Ann.) § 87-806 provides in part: “Any resolution or resolutions authorizing the issuance of bonds under this Chapter to finance in whole or in part the acquisition, construction, reconstruction, improvement, betterment, or extension of an undertaking may contain covenants (notwithstanding that such covenants may limit the exercise of powers conferred by this Chapter) as to: . . . (j) Limitations or restrictions as to the leasing or otherwise disposing of the undertaking while any of the bonds or interest thereon remain outstanding and unpaid. . . The provisions of this Chapter and of any such resolution or resolutions shall be a contract with every holder of said bonds; and the duties of the municipality and the governing body and the officer’s of the municipality under this Chapter and under any such resolution or resolutions shall be enforceable by any certificate holder by mandamus or other appropriate suit, action, or proceeding at law or in equity.” Under Code (Ann.) §§ 87-808 and 87-809, if a municipality defaults in the payment of principal or interest according to the tenor of its obligations, or shall “default in any material respect in any agreement made with the holders of the revenue bonds” upon application of the aggrieved bondholders or any of them the court may appoint a receiver to “take possession of the undertaking and each and every part thereof.”

Thus, two things very clearly appear from this record. First, the provision of the Toccoa resolution of July, 1951, (on which its own 'bond validation proceeding was based, and which antedates the franchise and option contract between the municipalities) pledges itself, as it is specifically authorized by law to do, not to dispose of its facilities so long as any part of the revenue-anticipation certificates or interest thereon remains unpaid. This constitutes a binding contract between Toccoa and each of its bondholders, which any of the latter may enforce at any time in a court of law or equity if the covenant is broken. Secondly, the very option upon which the City of Lavonia relies provides that “the exercise of the option shall conform in every respect to the provisions of the Gas Revenue Certificate Resolution heretofore adopted by the City of Toccoa.” The resolution having provided that the City of Toccoa may not sell or otherwise dispose of its gas distribution system or any part thereof so long as any of its revenue-anticipation certificates issued to construct that system remain unpaid, and it appearing that Toccoa issued $1,700,000 worth of certificates of which $1,500,000 are still outstanding, the issuance of $200,000 worth of revenue-anticipation certificates by the City of Lavonia for the purchase of that part of the Toccoa gas distribution system within its corporate limits is clearly unfeasible at this time, unless it is shown that all of the revenue-anticipation certificates previously issued by the City of Toccoa would thereby be retired. So long as one of them is outstanding, the holder of that one can enforce its covenant and either prevent the City of Toccoa from selling any or all of its gas distribution system, and thus prevent the acquisition by the City of Lavonia of the property for the purchase of which it seeks to have these bonds validated, or if after the sale of the facilities covered by the Toccoa revenue certificates has been consummated to Lavonia, and such facilities are covered by the Lavonia certificates also, and should there then be a default in the payment of the Toccoa certificates, the holders thereof may proceed against the entire Toccoa system including these facilities under the provisions of Code (Ann.) §§ 87-808 and 87-809, supra. Thus, it appears that the Lavonia certificates sought to be validated in this proceeding would constitute no more than a second lien against the revenue of the facilities in question so long as any of the Toccoa certificates remained unpaid. Accordingly, such a proposition, as a matter of law, is unfeasible and economically unsound. The present holders of Toccoa Gas Revenue Certificates and their assigns will have the prior lien upon all of the facilities of the system until all of the certificates then issued have been paid off. It follows from this that the City of Toccoa is not in a position to divide up its facilities and sell a part of them, pay off certain of its bond holders or even all of them pro rata, and then restrict the lien of the bondholders to that part of the system which it elects ¡not to sell.

Accordingly, the trial court erred in entering up judgment validating the revenue-anticipation certificates of the City . of Lavonia.

Judgment reversed.

Felton, C. J., Carlisle, Quillian and Nichols, JJ., concur. Gardner, P. J., dissents.