Morris v. City of Oklahoma City

1956 OK 202, 299 P.2d 131, 1956 Okla. LEXIS 515

• Court: Supreme Court of Oklahoma
• Decided: June 26, 1956
• Docket: 37345
• Status: Published

Opinions

HALLEY, Justice.

L. M. Morris, a resident taxpayer of the City of Oklahoma City, filed this original action in this Court for himself and others similarly situated, against the City of Oklahoma City, Oklahoma Industries, Inc., William Gill, Jr., and Philip J. Rhoads, Trustees of the Oklahoma City Airport Trust, The Oklahoma City Airport Trust and the First National Bank .and Trust Company of Oklahoma City, seeking an injunction to restrain the defendants from proceeding further in promoting the issuance of $12,000,000 of bonds by the Trustees named, to enable them to construct improvements upon the .airports of Oklahoma City, to be leased to the United States for occupancy by the Civil Aeronautics Authority for a period of twenty-five years, the lease to include the improvements to be constructed and all airports now owned by Oklahoma City or acquired during the term of the lease.

This action was filed May 3, 1956. On January 13, 1956, the General Services Administration of the United States issued a binding Letter of Intent, which was accepted by Oklahoma City January 17, 1956, and under the terms of which it was agreed that the City would construct certain permanent facilities at Will Rogers Airport to be leased to the Federal Gevernment for occupancy and use of the Civil Aeronautics Authority.

The buildings and improvements to be constructed include space for offices and laboratory, warehouse and shops, paved outside storage, vehicle parking and railroad siding and utilities. The above improvements are to be completed and leased to the Government for a five year term, with right of renewal for succeeding periods of five years each, not to exceed a total of twenty-five years.

The annual rental rate for such buildings is based upon an amortization of the cost of construction, plus an annual interest rate not to exceed four' per cent over a period of twenty-five years, and which shall not exceed $63.36 ■ per annum per $1,000 cost of construction. It was stipulated that the cost of construction has heen estimated by reputable architects and engineers to be approximately. $12,000,000, and that the Government will invest approximately $18,000,000 in the contents of the buildings to be erected and will bring 800 employees to Oklahoma City with an annual payroll of approximately $6,000,000. The annual rental to be paid by the Federal Government will be approximately $700,000.

To enable Oklahoma City to take advantage of the opportunity offered, the Oklahoma Industries, Inc., a non-profit group, caused to be formed the “Oklahoma City Airport Trust” and deeded to the Trustees a 10 acre tract of land adjoining Will Rogers Airport. The Trust agreement provided that all land, money and property rights coming into the hands of the Trustees, shall be held for the beneficiary, the City of Oklahoma City.

The Oklahoma City Airport Trust was created April 1, 1956, by Oklahoma Industries, Inc. with the City of Oklahoma City as beneficiary, and for the purpose of enabling Oklahoma City to take advantage of the offer of the Federal Government to improve and expand its airport facilities, under the provisions of 60 O.S.1951 §§ 176 to 180, inclusive, as- amended, the Oklahoma Trust Act, 60 O.S.1951- § 175.1 et seq. and other statutes. •

The Trust has been created for the improvement and operation of airports and air navigation facilities, servicing aircraft and for the accommodation of air travelers; or for the use of aviation agencies of the United States, the State of Oklahoma, municipalities or other subdivision of the Government.' The City of Oklahoma City has leased for a term of twenty-seven years its three present airports and agreed to include any airports hereafter acquired during the term of this lease. The City agrees to pay the cost of maintenance, insurance and for' damages for personal injuries or property during the term of the lease.

It cannot be disputed that the Trust under consideration is-.-authorized by- our statutes known as the Oklahoma Trust Act, 60 O.S.19S1 § 17S.1 et seq., and Sections 175.2 and 171 provide as follows:

“A trust in relation to real, and personal property, or either of them, may be created for any purpose or purposes for 'which a contract may be made.”

“Express trusts may be created in real or personal property or both, with power in the trustee, or a majority of the trustees, if there be more than one, to receive title to, hold, buy, sell, exchange, transfer and convey real and personal property for the use of such trust; to take, receive, invest or disburse the receipts, earnings, rents, profits or returns from the trust estate; to carry on and conduct any lawful business designated in the instrument of trust, and generally to do any lawful act in relation to such trust property which any individual owning the same absolutely might do.”

Our general law in, regard to Trusts for the furtherance of public functions was amended in 1953. Section 176, as amended, is as follows:

“Express trusts may be created in real or personal property, or either or both, or in any estate or interest in either or both, with the State, or any county, municipality, political or governmental subdivision, or governmental agency of the State as the beneficiary thereof, and the purpose thereof may be the furtherance, or the providing of .funds for the furtherance, of any authorized or proper function of the said beneficiary. Provided, that no funds of said beneficiary derived from sources other than the trust property, or the operation thereof, shall be charged with or .expended for the execution of said trust, except by express action of the legislative authority of the bene-, ficiary first had. The officers or any other governmental agencies or authorities having the custody, management or control of any property, real or personal or both, of the beneficiary of such trust, or of such a proposed trust, which property shall be needful for the execution of the trust purposes, hereby are authorized and empowered to lease such property for said purposes, after the acceptance of the beneficial interest therein by the beneficiary as hereinafter provided, or conditioned upon such acceptance.”

Section 177, of the above Act, provides for the acceptance by governing body of municipalities and the recording of such instrument.

The trust property here consists of the land conveyed to the Trust by the Trustor, a lease by‘the beneficiary, City of Oklahoma City, of airports and airport properties owned by the City of Oklahoma City and leased by the City to the Trustees, and all income accruing during the life of the Trust, or until the Trustees’ bonds have been retired or retirement fully provided for. The plaintiff claims that the indebtedness proposed to be incurred by the Trustees violates Sections. 23, 25, 26 and 27, Article X of our State Constitution.

Prior to the filing of briefs by the plaintiff and defendants these parties entered into a stipulation of facts which is considered important in that it eliminates controversy as to the facts involved and leaves for our consideration the questions of law presented by the plaintiff and the defendants and those who have intervened. We shall recite here the substance of the first four sections of the stipulation and copy in full Sections 5 and 6.

1. It is first agreed that the United States, through the General Services Administration, issued a binding Letter of Intent on January 13, 1956, and accepted by Oklahoma City January 17, 1956, under the terms of which permanent facilities are to be constructed at Will Rogers Airport and leased to the Government for occupancy by the Civil Aeronautics Authority. Such facilities to consist of office and laboratory space and for other purposes above mentioned.

The above facilities will be leased to the Government for five years with right of renewal by the Government for successive periods of five years each, the entire term not to exceed twenty-five years.

The annual rental for such improvements when construction is completed shall be based upon amortization of construction costs, plus an annual rental rate not to exceed four per cent over a period of twenty-five years, and that shall not exceed $63.36 per $1,000 of cost of construction, plus an agreed amount to cover estimated cost of insurance and structural maintenance. The amortization rate is based upon monthly rental payments. When required, the City is to construct, additional hangar space to be leased upon terms similar to those of the' original facilities.

2. Reputable architects and- engineers have estimated costs of proposed improvements at approximately $12,000,000. The City of Oklahoma City has no funds available for such purpose, and the Public Trust Law, 60 O.S.1951 §§ 176 to 180, as amended, and the Oklahoma Trust Act are being utilized to enable the making of such improvements and the proposed contract with the Federal Government to be carried out.

3. Attached to the plaintiff’s petition are copies of (a) Trust Indenture between Oklahoma Industries, Inc., a corporation, as Trustor and William Gill, Jr. and Philip J. Rhoads as Trustees of the Oklahoma City Airport Trust; (b) Ordinance No. 7765, enacted April 24, 1956, by the City Council of Oklahoma City and affidavit of publication; (c) Lease Agreement dated April 25, 1956, between Oklahoma City and the Trustees named; (d) Bond Indenture dated April 1, 1956, between the Trustees and the First National Bank and Trust Company of Oklahoma City.

4. That approximately $12,000,000 of bonds will be issued by the Trustees, depending upon the exact cost, of construction; that interest of Trustees’ bonds during the period of construction will be capitalized for a period of 18 months; that a Reserve Fund to be created over a period of tw.o years will be approximately $840,000, which is for the purpose of securing payment of principal and interest of bonds should it be necessary to prevent default; that this Reserve and Construction Account are to be invested in United States Government Bonds which today would yield three per cent interest per annum and believed to yield a minimum of two and one-half per cent during the life of the bonds.

Paragraphs 5 and 6 of such stipulation are copied in full:

“5. Reputable accountants have approved the following .statistical information : .

“(a) -In setting up this $12,000,000 bond issue at a 4% coupon rate with mandatory call for redemption each, six months as rapidly as funds accumulate in the Sinking Fund, the said bonds can be retired by the Trustees from a 25-year amortization schedule as required by the Civil Aeronautics Authority.

“(b) Calculating the reserve balance to.be invested at 2-½ % all bonds will be paid at the end of twenty-five years from .t.he said $63.36 per thousand annual rental payments and will leave an accumulated balance after all bonds are retired in the amount of $325,745.

“(c) The total expense of the Trust over the entire period or life of the bond issue will amount to a sum approximately $237,500; which "in turn leaves an unexpended balance of $88,-245.

“(d) That although the City Manager (whoever may hold the office) is a Co-Trustee, he receives no compensation or remuneration whatsoever.

“(e) In the event the Reserve Fund is invested (as can be done today to yield 3% per annum) there would be an additional income of $95,000.

“(f) The ’Construction .Account which arises from the proceeds from the sale of bonds can also be invested in short-term Government securities during the construction period, yielding from such investment an income of $75,000 to $100,000.

“(g) Therefore, taking the unex-pended accumulated balance of $88,245 from the bond schedule and an additional estimated amount of $95,000 from the ½ of 1% additional invested income -rate plus another minimum amount of $75,000 interest income from the Construction Account would leave a net accumulated unexpended balance which would go to The City of Oklahoma City (the beneficiary of the Trust) on termination of the Trust of a sum of $258,245 — none of which has been from city-owned property and all has been accumulated as a result of rentals and interest income received entirely from the. Civil Aeronautics Authority facilities.”

“6. That the Civil Aeronautics Authority of the United States had advised the City that approximately 800 persons will be moved to Oklahoma City as permanent employees on' said facilities with an annual payroll of approximately '$6,000,000. That approximately $18,000,000 will be invested by the United States of America in the contents of said facilities.”

In view of the foregoing stipulation, it appears that the rental to be paid to the Trustees by the Civil Aeronautics Authority and interest income will not only pay the proposed bonded indebtedness, the cost of operations and all expenses of the Trust, but would leave a net balance accumulated unexpended at’ the close of the Trust period of $258,245, which would go to the beneficiary, the City of Oklahoma City. This balance of accumulated income would result entirely from rentals and interest income secured from the Civil Aeronautics Authority and investments in Government Bonds.

It may be argued 'with reason that the five year term of the lease agreement may not be renewed each five years for the entire twenty-five yéars. Since the Civil Aeronautics Authority has agreed to invest $18,000,000 in equipment to be placed in the leased premises, and move 800 employees to Oklahoma City, with an annual payroll of approximately $6,000,000, it seems that the danger of failure to renew the lease for the entire twenty-five years is remote.

Plaintiff submits that the Trustees are “Agents of the State” and that since the indebtedness of the Trustees here is of the type prohibited by Sections 23, 25, 26 and 27 of Article X of our Constitution, they are therefore void and that the Public Trust Law--purporting to authorize such indebtedness is unconstitutional.

The cases cited by the plaintiff in support of this contention are not applicable here. This court recently held in Board of County Commissioners of Oklahoma County v. Warram, Okl., 285 P.2d 1034, 1035, that such indebtedness' is not unconstitutional. In the first, third and seventh paragraphs of the syllabus it is said:

“A valid trust in property, with a governmental entity as beneficiary, may be created for the furtherance, or the providing of funds for the furtherance, of any public function which the-governmental entity might be authorized by law to perform; * *

“Trusts for the benefit of governmental entities are ‘charitable trusts’; and the common law recognizes that the purposes for which such trusts may be established include a broad field of objectives for the benefit of a large class of the public dr for- lessening the btirdens of government.”

“The trustees of trusts for the furtherance of public functions being by law a state agency, indebtedness incurred by them and payable solely from the trust estate- and its revenues, is not violative of Article X, sections 23 and 25 of the Constitution; and the fact that such trustees also are designated as regularly constituted authorities of a beneficiary governmental subdivision does not violate sections 26 and 27 of Article X of the Constitution.”

In In the Matter of Application of Oklahoma Planning and Resources Board for the Approval of Bonds, Okl., 274 P.2d 61, it was held that Park Bonds payable from the operation of State Parks were not vio-lative of any constitutional provisions. The Court followed an earlier decision in In Re Application of Oklahoma Planning and Resources Board, 201 Okl. 178, 203 P.2d 415, 417, in which it was said:

“The first question presented is whether said bonds, if issued, constitute an indebtedness of the State of Oklahoma in violation of section 23, Art. 10 of the Constitution as amended and approved on March 11, 1941, and sections 24 and 25, Art. 10 of the Constitution. These sections prohibit the contracting of debts against the state, and have been held to apply only to debts, obligations or deficits for the payment of which resort might properly be had to the taxing power of the state. Graham v. Childers, 114 Okl. 38, 241 P. 178. They do not prohibit the incurring of indebtedness payable only out of a special fund, which indebtedness is not, and cannot, become a debt of the state payable out of taxes levied by the state. The right of the Legislature to provide for the carrying out of self liquidating projects by state agencies has been upheld in numerous cases. Sheldon v. Grand River Dam Authority, 182 Okl. 24, 76 P.2d 355; Baker v. Carter, 165 Okl. 116, 25 P.2d 747; In re Application of Board of Regents for Oklahoma Agricultural and Mechanical Colleges, 196 Okl. 622, 167 P.2d 883.”

Plaintiff submits that the Trust instruments are invalid because the City of Oklahoma City in leasing its airports to public trustees, including income therefrom, has violated Sections 26 and 27, Article X of our State Constitution, .without a vote authorizing such indebtedness. Section 26 of Article X expressly provides that “No * * * city * * * shall be allowed to become indebted * * * to an amount exceeding, in any year, the income and revenue provided for such year, without the assent of three-fifths of the voters * * *.”

Plaintiff states that he will present his principal argument under this proposition. It should be kept in mind that the instruments involved, including the lease of its airports by the City, all expressly provide that the bonded indebtedness shall never become an obligation of the State nor of the beneficiary, Oklahoma City.

The fact that the City of Oklahoma City has leased its airports to the Public Trustees, including income therefrom, is not violative of the Oklahoma Constitution. Any income resulting from leased property is only incidental to and a necessary part of the authority to lease the property to the Public Trustees.

The pledging of the payment of the Trustees’ Bonds and Trust expenses from the revenues of the Trust Estate as set out-in the lease agreement and as defined in the bond indenture does not violate the provisions of sections 26 and 27, Article X of the Constitution.

The airports and all of their present facilities are not being mortgaged to secure the payment of the bonds. Only the lease by the City to the Trustees is an obligation resting upon the City. The lease by the City to the Trustees provides that it shall cover only the facilities upon the land owned by the City and that only the ten acres of land deeded to the Trustees and the Civil Aeronautics Authority facilities is covered by the lien to secure the payment of the bonds.

The Lease Agreement between Oklahoma City and the Trustees is necessary for carrying out the purposes of the Trust. The Trustees agree to operate the Trust Estate in a good and efficient manner; to report annually and secure the approval of the City Authorities as to the terms of any proposed contract‘or lease and the fees to be charged by the Trustees. The Trustees agree not to mortgage or permit to be mortgaged the title of the City to any part of the leased real estate of the City or to permit any such property to be charged with the payments of any obligation of the Trust.

The City does agree to co-operate with the Trustees and to pay expenses incident to operation and maintenance of its airports. This obligation rests upon the City in any event. The Lease Agreemént provides that improvements placed upon leased property shall be deemed personal property and that upon payment of the Trust indebtedness title to all Trust property shall become vested in Oklahoma City.

Section 1, Article I of the Charter of Oklahoma City provides that the City may secure property and hold, lease, mortgage, convey or otherwise dispose of any of its property real or personal.

Section 65.4, 3 O.S.1951, provides that every city may by sale, lease or otherwise, dispose of any airport, air navigation facility or other property.

The Public Trust Act under which the Trust bonds are here issued, authorizes the lease agreement here involved. Section 176, above quoted, provides that an express trust may be created in real or personal property, with the State or any municipality as beneficiary thereof, the purposes of which may be the providing of funds for the furtherance of any authorized or proper function of such beneficiary, provided that no funds of the beneficiary derived from sources other than the trust property or the operation thereof, shall be charged with or expended for the operation of said trust except by express action of the Legislative authority of the beneficiary first had. It expressly provided that the officers of a City may lease such property for such purposes after the acceptance of the beneficial interest therein by the beneficiary.

The foregoing provisions remove any doubt as to the authority of Oklahoma City to lease its airports as is here proposed to be done.

In Atlas Life Insurance Company v. Board of Education of City of Tulsa, 83 Okl. 12, 200 P. 171, this Court upheld a 99 year lease by a school district. The first paragraph of the syllabus is as follows:

"Municipal corporations possess the incidental or implied right to alienate or dispose of the property, real or personal, of the corporation of a private nature, unless restrained by charter or statute.”

In Robinson v. Hal Johnson & Co., 206 Okl. 397, 243 P.2d 657, 659, this Court sustained the validity of a lease of an entire city airport for 49 years for a rental of $1.00 per year, with an option to renew the lease for an additional 49 years. The City of Shawnee relied upon the Municipal Airports Act, 3 O.S.1951 §§ 65.1 to 65.22, enacted in 1947, and especially Section 65.4 of such Act. In the body of the opinion it was said:

“In 1947 the Legislature adopted a comprehensive Municipal Airports Act, 3 O.S.1951 §§ 65.1-65.22. It ratified and validated prior acquisitions, actions and bond issues dealing with municipal airports, sec. 65.11. Specific authority for the sale, lease or disposal of airport property was granted in sec. 65.4. Except as limited by the terms and conditions of any grant, loan or agreement with the State or Federal governments the municipality was authorized to dispose of an airport by sale or lease in accord with the provisions of the laws of the State or the provisions of its charter, governing the disposition of other property of the municipality. This entire Act is silent as to any requirement of first submitting the disposal of airport property to a vote of the people, and we hold that no such submission is necessary.”

In Christopher v. City of El Paso, 98 S.W.2d 394, it was held by the Court of Civil Appeals of Texas that terms of a statute authorizing cities to acquire municipal airports do not prohibit leasing by cities of property acquired for airport purposes.

We find no merit in the contention of plaintiff that the instruments here involved are invalid under Section 17, Article X of our Constitution, which is as follows:

“The Legislature shall not authorize any county or subdivision thereof, city, town, or incorporated district, to become a stockholder in any company, association, or corporation, or to obtain or appropriate money for, or levy any tax for, or to loan its credit to any corporation, association, or individual.”

Certainly there has been no statute enacted which authorizes the City of Oklahoma City to become a stockholder of any company, association or any corporation, and such question is not involved in this case. In the case of Murray v. Tyndall, 223 Ind. 641, 63 N.E.2d 703, it was held that a municipality having authority to acquire and improve aviation facilities had authority to make a lease to the Federal Government for the purpose of developing air transportation.

It is further contended that the Trust here • involved does not come within the intent and provisions of the Public Trust Act, contained in 60 O.S.19S1 §§ 176 to 180, as amended. A careful examination of the Trust Indenture, Ordinance accepting the same, Lease Agreement and Bond Indenture discloses a substantial compliance with the Public Trust Act above mentioned. We think the provisions of such Act have been fully complied with.

The injunction of the plaintiff is héreby-denied and the Trust Indenture, Ordinance of the City of Oklahoma City accepting the same, 'the Lease Agreement and Bond Indenture herein referred to and all instruments incident to the Oklahoma City Airport Trust, including the Bonds issued thereunder are hereby held-to be valid and binding instruments.

This Court has assumed original jurisdiction of this matter because it is clearly a matter áffected with the public interest and thé instruments before Us disclosed the urgency of a prompt decision of the issues presented by the plaintiff.

JOHNSON, C. J., and WELCH,' CORN and HUNT, JJ., concur. WILLIAMS, V. C. J., and. DAVISON, BLACKBIRD and JACKSON, JJ., dissent.