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Peo. Ex Rel. High School Dist. v. Hupe







In the public interest and because of the urgency of the cause, we have granted leave to the People, acting on the relation of Community High School District No. 231 of Cook County, (hereafter referred to as petitioner,) to file an original petition for writ of mandamus directing the respondent, Lawrence L. Hupe, treasurer for said district, to register, number and countersign bonds totaling $1,100,000, which relator has been lawfully authorized to issue, as he is required to do by section 19-7 of the School Code. (Ill. Rev. Stat. 1953, chap. 122, par. 19-7.) Respondent has refused to execute bonds in excess of $516,000 on the ground that such figure is the limit of relator's debt-incurring power.

Respondent's refusal is predicated on section 12 of article IX of the Illinois constitution as it is implemented by section 19-33 of the School Code. (Ill. Rev. Stat. 1953, chap. 122, par. 19-33.) The mandate of the constitutional provision is, that "No county, city, township, school district, or other municipal corporation, shall be allowed to become indebted in any manner or for any purpose, to an amount, including existing indebtedness, in the aggregate exceeding five per centum on the value of the taxable property therein, * * *." As regards school districts, section 19-33, as amended in 1953, (Laws of 1953, p. 1369,) ordains the following:

"§ 19-33. In computing the debt incurring power of any school district where there has been included in any such school district only a part of any former school district which at the time of such inclusion has outstanding bonded indebtedness, a proportionate amount of such bonded indebtedness shall be chargeable to such school district based upon the ratio that the assessed valuation of taxable property as equalized and determined by the State Department of Revenue in that part of the territory of such former school district that has been included in any such school district bears to the total assessed valuation of the said former school district as equalized and determined by the State Department of Revenue for the year in which the change occurred, and said proportionate amount of such bonded indebtedness shall be chargeable against such school district in determining its debt incurring power."

The facts which draw the foregoing provisions into the cause disclose that the petitioner was organized as the result of an election called by the county superintendent of schools on April 19, 1952, under the provisions of sections 10-9 and 10-10 of the School Code, (Ill. Rev. Stat. 1951, chap. 122, pars. 10-9 and 10-10,) and that it was formed entirely out of territory comprising a part of Non-High School District No. 216 of Cook County. Since its organization, the petitioner, having no school buildings, has incurred a debt of $200,000 for tuition; however, by elections held April 11 and October 10, 1953, and by proper board action in January, 1954, petitioner has been authorized to issue bonds totaling $1,100,000 for the purpose of purchasing a site and erecting a school building. The 1952 equalized assessed valuation of the taxable property in the territory which forms petitioner's district was $26,957,960; thus if the constitutional provision alone is controlling, petitioner has a debt-incurring power of $1,347,898 less the $200,000 indebtedness for tuition, or $1,147,898, and the issuance of $1,100,000 of bonds would not violate the constitution.

At the time petitioner was organized, however, Non-High School District 216, of whose territory only a part was taken to create the petitioner, had a bonded indebtedness of $2,808,000 (since reduced to $2,518,000,) and the paramount question here is whether section 19-33 operates to make a portion of such indebtedness chargeable to petitioner's debt-incurring power. The 1952 equalized assessed valuation of the taxable property in District 216 was $107,424,990 while, as previously stated, that of petitioner was $26,957,960, or 25.094 per cent of District 216's valuation. If section 19-33 is applicable, and interpreted literally, the result would be that relator's debt-incurring power would be charged with $631,780 of District 216's bonded indebtedness and would thus reduce petitioner's 5 per cent debt limit to $516,000, the figure beyond which respondent refuses to execute bonds. Petitioner contends that section 19-33 does not apply in this case, while the position of respondent is exactly to the contrary.

It is common knowledge that since 1945, Illinois has been engaged in a comprehensive reorganization of its school system to the end that a more efficient system of schools be provided. One of the important features of the program, as reflected by the reports of the School Problems Commission and by subsequent legislation, has been a studied attempt to eliminate non-high school districts wherever and whenever possible, (See: Ill. Rev. Stat. 1951 and 1953, chap. 122, article 11,) a non-high school district consisting of territory which is not in a high-school district or a district maintaining a recognized four-year school. It maintains no educational facilities of its own and its only function is to provide funds to pay the high-school tuition of its eighth grade graduates. (Ill. Rev. Stat. 1953, chap. 122, par. 11-1.) Inasmuch as petitioner was formed out of non-high school territory, thus having the effect of partially eliminating a non-high school district, this expressed purpose of the school administrators and legislators is relied upon heavily by petitioner as a basis for its contention that section 19-33 does not apply to school districts which include a part of a non-high school district.

One of the problems which has beset the reorganization of the school system has been that of fixing liability for existing indebtedness where two districts are consolidated or where a part only of one district is annexed to another. While there appears to be no question that petitioner did not, in this case, become liable for any of the bonded indebtedness of District 216, petitioner's arguments that a proportionate share of such debt is not chargeable to petitioner's debt-incurring power requires some consideration of the manner in which the problem of debt liability has been treated by the legislature.

In the absence of statutory provisions the established rules are, first, if two or more municipal corporations are consolidated or the entire territory of one municipal corporation is annexed to another, the indebtedness of both becomes the indebtedness of the consolidating or annexing corporation (Kocsis v. Chicago Park District, 362 Ill. 24; People ex rel. Moore v. Chicago, Burlington and Quincy Railroad Co. 414 Ill. 419;) and, second, if only a part of one municipal corporation is annexed to another or created into a new municipal corporation, the one to which territory is annexed, or the new corporation formed, does not become liable for any part of the debt of the corporation from which territory has been taken, the latter remaining liable on its indebtedness as though there had been no change in its boundaries. People ex rel. Hagler v. Chicago, Burlington and Quincy Railroad Co. 380 Ill. 120, p. 127; People ex rel. Raymond Community High School Dist. v. Bartlett, 304 Ill. 283, p. 286.

The only provisions in the School Code prior to 1949 which modified the general rules were sections 19-9, 19-30, and 19-31. (Ill. Rev. Stat. 1947, chap. 122, pars. 19-9, 19-30, and 19-31.) Section 19-9 provided that the county clerk should extend taxes against all taxable property in any school district, with a population of less than 500,000, as of the date of the registration of the bonds, in amounts sufficient to pay the principal and interest thereon. Sections 19-30 and 19-31 implemented section 19-9. The effect of the three sections was to confirm the general rule as to detachments of parts of school districts but to change the rule when an entire district was taken into or consolidated with another. This court so construed section 19-9 in Spence v. Selcke, 404 Ill. 98, where it was held that no change in the boundaries of a school district, whether a detachment or a consolidation, affected the liability on existing bonded indebtedness. In 1949, presumably in anticipation of the Spence decision, the legislature added section 19-32 to the School Code, providing that upon the creation of any consolidated school district, community unit district or school district organized under the School Survey Act, (Ill. Rev. Stat. 1949, chap. 122, pars. 713 to 732,) the new districts would assume the bonded indebtedness of all the underlying school districts wholly included within their boundaries. By implication, this direction of the legislature removed the restrictive effect of section 19-9 on the types of districts embraced by section 19-32. At the same time, the General Assembly enacted section 19-33 as a companion measure, providing that where newly created community unit districts or School Survey Act districts included a part only of a former district which then had an outstanding bonded indebtedness, a proportionate amount of such indebtedness was chargeable against the debt-incurring power of the new district. These sections were construed and withstood constitutional attack in McLain v. Phelps, 409 Ill. 393.

In 1951, the legislature further treated upon the matter of the assumption of bonded indebtedness when it added section 4B-12 to the School Code. (Ill. Rev. Stat. 1951, chap. 122, par. 4B-12.) This section, which expressly applied only to boundary changes accomplished by the action of the newly created county boards of school trustees in the manner required by article 4B of the School Code, provided as follows:

"§ 4B-12. Unless otherwise provided in this Article whenever the boundaries of any school district, other than a non-high school district, are changed by the detachment of territory from one district and the annexation thereof to another school district or the dissolution of a district and its annexation to another district under any of the provisions of this Article the district as it exists on and after the change of boundaries shall assume the bonded indebtedness of the original annexing district and the liability for the bonded indebtedness of any territory so annexed. The tax rate for such indebtedness shall be determined in the manner provided in Section 19-9 of this Act."

While this section did not, by its terms, apply to districts newly created in the manner provided for in sections 10-9 and 10-10, as was the petitioner, it becomes important because it is the exclusionary language relating to non-high school districts and a later amendment to the section, upon which petitioner predicates its claim that section 19-33 has no application when the boundary changes which occur affect non-high school territory. Applying the contention to the facts of his case, petitioner insists that because its territory was taken from a non-high school district (District 216), it is not chargeable, under section 19-33, with a proportionate share of the non-high school district's bonded indebtedness in computing its debt-incurring power.

The amendments to the School Code which give rise to petitioner's contention were contained in House Bill No. 76, as passed in 1953 by the sixty-eighth General Assembly, (Laws of 1953, pp. 1368-1369,) wherein sections 19-30, 19-31 and 19-32 were repealed and sections 4B-12, 19-9 ...

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