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CITY OF COLUMBIA v. J.H. SANDERS

March 14, 1957

THE CITY OF COLUMBIA, RESPONDENT,
v.
JOE H. SANDERS, JR., ET AL., APPELLANTS.



The opinion of the court was delivered by: Oxner, Justice.

March 14, 1957.

This action stems from the merger of the Town of Eau Claire and the City of Columbia. A declaratory judgment is sought with respect to the right of the City of Columbia, as it existed prior to the merger, to issue further revenue bonds on a parity with those now outstanding for the purpose of enlarging and improving its water and sewer facilities. Involved is the question of whether the consolidation of the two municipalities resulted in the merger of their municipally owned utility systems.

The following is a summary of the facts stated in the complaint:

Pursuant to the procedure prescribed in Title 47, Chapter I, Article 2 of the 1952 Code, relating to the extension of the corporate limits of cities and towns, the territory within the Town of Eau Claire was annexed to the City of Columbia on December 2, 1955. No question is raised as to the validity of the annexation. As permitted by Section 47-13 of the Code, the corporate authorities of the two municipalities entered into an agreement as to the terms and conditions of the consolidation which was printed in full on the ballots used in the election. The provisions pertinent to this discussion are the following:

"The form of government now in effect for the City of Columbia shall be the form of government for the consolidated city.

"Identical water rates will prevail throughout the consolidated city, it being understood that the rate shall be sufficient to meet all present and future revenue bond covenants existing in Columbia and Eau Claire.

"The City of Columbia, South Carolina (the enlarged City), shall assume and will assume all of the outstanding bonded indebtedness of Eau Claire, South Carolina, as well as any and all other outstanding obligations, claims and causes of action of whatsoever kind or nature justly due and owing by Eau Claire, South Carolina.

"All of the assets, choses in action, property, real or personal and any other property or right of any nature or kind possessed by Eau Claire, South Carolina, shall be vested in and become the property of the enlarged The City of Columbia, South Carolina."

In 1949, the City of Columbia issued $2,000,000 of Waterworks and Sewer Refunding and Improvement revenue bonds, of which $1,475,000 are now outstanding. In the resolution authorizing these bonds the city reserved the right to issue from time to time thereafter, subject to certain stated conditions, additional revenue bonds on a parity with those then being issued. Availing itself of this parity provision, the City of Columbia in 1953 issued bonds in the amount of $2,000,000, payable from the revenues of its utility system, of which $1,670,000 are now outstanding. In 1954 there was a further issue of $1,500,000, of which $1,450,000 are now outstanding. All of these bonds, as above stated, are of equal rank.

In the resolution of the City Council of Columbia declaring the Eau Claire territory annexed to and a part of said city, it was provided that the waterworks and sewer system of Eau Claire "shall be operated and maintained as a separate system for so long a time as any" of its revenue bonds shall remain outstanding, but upon payment of all of said bonds "that said system shall be combined and merged into the Waterworks and Sewer System of the City of Columbia, as part and parcel thereof." Accordingly, since the annexation the revenues from the Eau Claire territory have been segregated from those derived elsewhere and there had been charged to same a proportionate share of the cost of operation and maintenance. Identical water rates have been maintained in the two areas.

Due to the rapid growth of the City of Columbia, additional large capital outlays are necessary for the purpose of improving and enlarging its utility system. The city now contemplates a further issue of bonds in an amount not less than $1,000,000 payable from the revenues of its waterworks and sewer system exclusive of that derived from the Eau Claire territory, and desires to issue these bonds on a parity with those issued by the City of Columbia prior to the annexation of Eau Claire. The primary declaration sought is whether the city has the right to do so. It seems to be conceded that such parity bonds cannot be issued if the result of the annexation was to merge the utility system of the Eau Claire territory with that of the City of Columbia. The major question, therefore, presented is whether the utility systems of the two areas have now been combined and in the further issuance of bonds must be considered as one system. The Court below held:

"1. The merger of the Cities of Columbia and Eau Claire has been accomplished without merging or consolidating the two utility systems of the two respective municipalities.

"2. The holders of the revenue bonds issued by the City of Eau Claire, payable from the revenues of its utility system, have no claim to any revenues derived from the operation of the utility system operated by the ...


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