In August of 1928, Carter County School District No. 72 (“School District”) purchased eight (8) school buses for $17,025.00, less a credit of $900.00 for old buses. The School District had requested funding for the buses during that fiscal year, but no appropriation was made for the purchase. When the School District failed to render payment, suit was filed by the bus manufacturer, W.S. Spears Motor Company. Although the School District filed a General Answer and Denial in the case, judgment was rendered to bus manufacturer a short time later. The principal and interest of the judgment was listed by the School District on its estimate of needs for sinking fund purposes the following fiscal year. The estimate of needs provides the basis for ad valorem tax levies for sinking funds to cover bonded indebtedness and judgments under Title 62 O.S §361 et seq. (Judgments Against Municipalities Act). Carter Oil Company, an ad valorem taxpayer, filed a protest before the Court of Tax Review seeking elimination of the school bus payment judgment from the levy. The protest was sustained and correction of the appropriation was made. The County Excise Board appealed this decision.
In this case, Protest of Carter Oil Co., 1931 OK 15, the Oklahoma Supreme Court upheld the decision of the Court of Tax Review and found that the underlying judgment was invalid. The Court further found that purchase of the buses was in direct violation of the debt-limiting provisions of the Constitution due to the School District’s use of a judgment to pay for the purchase. This was a creative, but unconstitutional way to buy buses on credit.
It its final paragraph, the Supreme Court discussed the motives of those involved. It noted as follows:
There is nothing in this record to indicate that the school district officers, the motor company, or the trial court acted from corrupt motives. Their efforts were to the end that the school district might have adequate transportation facilities for the use of the school children. The school district officers thought that an appropriation would be made out of which the buses might be purchased and they made their estimate accordingly. When they learned that the appropriation would not be made and could not be made, they were without facilities for the transportation of the school children and they did what they thought was for the best interests of the school district without considering the limitations imposed by the Constitution or the interest of the taxpayers of the school district. The fact that they acted in good faith is of no avail and cannot be considered by this court in determining whether or not they violated the constitutional limitations imposed upon them.
Especially in challenging economic times, elected officials are forced to make difficult decisions and establish spending priorities for their communities. This case is an excellent reminder of the importance of the annual budgetary process. It is also a reminder to avoid the temptation to creative financing of purchases that circumvent the process set forth in debt-limiting provisions of the Oklahoma Constitution and the provisions of the Judgment Against Municipalities Act.