Full opinion text
ANDREW- M. J. COCHRAN, District Judge. This suit is befóre me on final hearing and for decree. The relief sought is the removal of a cloud on plaintiffs’ title to sixteen interest-beáring bonds for $1,000 each, amounting in all to $16,000, dated December 1, 19-29, and due $5,000 December 1, 1945; $5,000 December 1,1946; and $6,000 December 1,1947, issued and sold by defendant December 30, 1929, to Magnus & Co. of Cincinnati, Ohio, for $16,026.27, principal and interest to that date paid to the defendant’s treasurer. The plaintiffs, citizens of Minnesota, purchased same, for value, without notice of any defect therein. The cloud complained of is the denial on the part of the defendant that the bonds are valid. That equity has jurisdiction of such a suit was decided in Thompson v. Emmett Irrigation District (C. C. A.) 227 F. 560. That it has jurisdiction of a suit to remove a cloud on title to personal property was held in Chicago Auditorium Ass’n v. Willing (C. C. A.) 20 F.(2d) 837. The decision was reversed by the Supreme Court in Willing v. Chicago Auditorium Ass’n, 277 U. S. 274, 48 S. Ct. 507, 72 L. Ed. 880, on the ground that the cloud complained of was not in fact a cloud. The defense to the suit is that the bonds are invalid. It is claimed that such is the ease on two grounds. One is that defendant had no authority to issue them. The other is that it did not in fact authorize the issuance. The basis of the latter defense is that there is no record evidence of its having so authorized. Section 4399'a-5* Ky. St., required it to keep a record of its transactions in a book furnished by the state board of education. In County Board of Education v. Durham, 198 Ky. 733, 249 S. W. 1028, 1029, it was said: “The governing body of a municipal corporation can speak only through its records. It can confer authority to make contracts only by proper proceedings had at a meeting regularly called and held for that purpose and where its acts and proceedings are duly recorded.” The defendant has a record book so furnished. It keeps in it minutes of its meetings and transactions and there is not recorded in it any reference whatever to the issuance and sale of these bonds. It is shown, however, by the evidence that a meeting was regularly held November 23, 1929, all members of defendant being present, and that at that meeting the issuance and sale of the bonds was authorized by them. Minutes of the meeting were prepared by the purchasers, written on a typewriter on loose sheets of paper, and were duly signed. These sheets of paper were attached to the record book with a slip-on paper clip. They in some way became detached and are missing. But certified copies thereof were made at the time and introduced in evidence. I think that what was done was a sufficient compliance with the requirement that authority to issue and sell the bonds must have been shown by record evidence. The other defense calls for a more detailed consideration. The bonds were issued to fund an existing floating indebtedness of the defendant. That indebtedness was represented by its notes held as follows: First National Bank of Williams-burg, dated June 4,1927....... $5*000.00 First National Bank of Williams-burg, dated April 2, 1928...... 6,000.00 Bank of Williamsburg, dated Sept. 10,1929 ..................... 2,000.00 First National Bank of Williams-burg, dated October 25* 1929... 3,000.00 Total .....................$16,000.00 The proceeds of the bonds were applied to their payment. The contention of defendant is twofold. There was no authority to incur this indebtedness. If there was, there was none to fund it. Whitley county is a taxing district for school purpose, and the defendant is its arm through which it operates its schools. As such taxing district it is a municipality in the thought of the Constitution of this state. It will first be considered whether, assuming the indebtedness to have been valid, the defendant had authority to fund it. To determine this question an understanding should be arrived at as to the authority of municipalities generally to fund their valid floating indebtedness. This depends on sections 157 and 158 of the State Constitution. Section 157 is in these words: “The tax rate of cities, towns, counties, taxing districts and other municipalities, for other than school purposes, shall not, at any time, exceed the following rates upon the value of the taxable property therein, viz: For all towns or cities having a population of fifteen thousand or more, one dollar and fifty cents ($1.50) on the hundred dollars ($100.-00); for all towns or cities having less than fifteen thousand and not less than ten thousand, one dollar on the hundred dollars ($100.00); for all towns or cities having less than ten thousand, seventy-five cents (754) on the one hundred dollars ($100.00); and for counties and taxing districts, fifty cents (50^) on the hundred dollars ($100.00); unless it should be necessary to enable sueh city, town, county, or taxing district to pay the interest on, and provide a sinking fund for the extinction of indebtedness contracted before the adoption of this Constitution. No county, town, city, taxing district, or other municipality, shall be authorized or permitted to become indebted, in any manner or for any purpose, to an amount exceeding, in any year, the income and revenue provided for such year, without the assent of two-thirds of the voters thereof, voting at an election' to be held for that purpose; and any indebtedness contracted in violation of this section shall be void. Nor shall sueh contract be enforceable by the person with whom made; nor shall sueh municipality ever he authorized to assume the same.” Section 158 is in these words: “The respective cities, towns, counties, taxing districts and municipalities shall not be authorized or permitted to incur indebtedness to an amount, including existing, indebtedness, in the aggregate exceeding the following named maximum percentages on the value of the taxable property therein, to be estimated by the assessment next before the last assessment previous to the incurring of the indebtedness, viz: Cities of the first and second classes, and of the third class having a population exceeding fifteen thousand, ten per centum (10%); cities of the third class having a population of less than fifteen thousand, and cities and towns of the fourth class, five per centum (5%); cities and towns of the fifth and sixth classes, three per centum (3%); and counties, taxing districts and other municipalities, two per centum (2%): Provided, Any city, town, county, taxing district or other municipality may contract an indebtedness in excess of such limitations when the same has been authorized under laws in foree prior to the adoption of this Constitution, or when necessary for the completion of and payment for a public improvement undertaken and not completed and paid for at the time of the adoption of this Constitution: And provided further, If, at the time of the adoption of this Constitution, the aggregate indebtedness, bonded or floating, of any city, town, county, taxing district or other municipality, including that which it has been or may be authorized to contract as herein provided, shall exceed the limit herein prescribed, then no such city or town shall be authorized or permitted to increase its indebtedness in an amount exceeding two per centum (2%), and no such county, taxing district or other municipality, in an amount exceeding one per centum (1%), in the aggregate upon the value of the taxable property therein, to be ascertained as herein provided, until the aggregate of its indebtedness shall have been reduced below the limit herein fixed, and thereafter it shall not exceed the limit, unless in ease of emergency, the public health or safety should so require. Nothing herein shall prevent the issue of renewal bonds, or bonds to fund the floating indebtedness of any city, town, county, taxing district or other municipality.” Section 157 consists of three sentences and section 158 of two. The question under consideration has to do with the second sentence of the one, and the last or second sentence of the other. The first sentence of section 157 relates to the rate of taxation which a municipality may prescribe, and the first sentence of section 158 to the limit of indebtedness which it may incur. The first sentence of neither section has any bearing thereon, save as it may aid in the interpretation of what follows in the section. The second sentence of section 157 calls for interpretation first, and then the second or last sentence of section 158. They should be interpreted in this order. One is not equipped to interpret the latter until he has mastered the former. The third or last sentence of section 157 calls for no consideration. The second sentence of section 157 covers more than it expresses. All that it expresses is a prohibition against a municipality being authorized to incur indebtedness in any year in excess of the “income and revenue provided for such yearM without a vote. It implies a number of other things, each of which is as much a part of the provision as the prohibition which it expresses. One is that a municipality can be authorized to incur an indebtedness in any year not in excess of such income and revenue without a vote. It does not grant power to the Legislature to authorize its incurrence. It does no more than recognize that it has such power, and refrains from prohibiting it. The Legislature is not dependent on section 157 therefor; Not being prohibited from granting such power, it has it. The authority which the Legislature may so grant, however, is limited to an indebtedness not in such excess. This being the ease, the implication is that the indebtedness is to be paid out of such income and revenue. It cannot be carried over into the next year. Why so limit the indebtedness if it is not the intent that it be so paid? There follows from this the further implication that a municipality cannot be empowered to and it cannot contract to pay the debt beyond the year in which it is incurred. It must be payable in that year and out of such income and revenue when received. It cannot be postponed to a subsequent year, and the income and revenue of that year subjected to its payment. But its payment may have to be so postponed or the indebtedness go unpaid. This may happen if the anticipated income and revenue does not materialize, which may result to a certain extent from an inability to collect it, or it may result from default on the part of the collecting officer or the officer to whom same is paid and inability to collect it from either officer or his sureties. But payment may have to be postponed even though the income and revenue is collected and there is no default. This may happen if the municipality disregards its duty to apply the same in payment of the indebtedness and applies it otherwise. If for either reason the indebtedness remains unpaid at the end of the year, what happens ? The indebtedness is not invalidated by reason thereof. It is still to be paid; but when? Inasmuch as the section on its face knows of no other payment than out of the income and revenue for the year in which it was incurred, it must necessarily be taken that the intention is that it be paid out of the income and revenue for the next year. It cannot be postponed beyond that year. That the provision on its face does not contemplate such a contingency indicates that the thought was that the contingency could not arise if the municipal body exercised the-proper care and did its duty. But this does not exhaust the implications of the provision. There is still one more. Apparently an indebtedness can be authorized to be incurred without a vote to the full extent of the income and revenue for the year. This cannot be. The municipality has to operate, and a certain portion of its income and revenue is needed to enable it to do so. It follows that no indebtedness can be authorized to be incurred in excess of so much of the income and revenue as may be left after paying governmental expenses, without a vote. The sum and substance, therefore, of‘what has thus been put forth is that the provision in question permits the Legislature to authorize a municipality to incur an indebtedness without a vote equal to the amount of its income, and revenue for the year which will be left after paying governmental expenses; such indebtedness to be paid out of the income and revenue for that year. It cannot authorize the payment of such indebtedness out of the income and revenue of a subsequent year. If by reason of any of the happenings heretofore referred to it is not paid out of the income and revenue for the year in which it was incurred, it must be paid out of that for the next year. The only possible contingency in which its payment can be postponed beyond the year in which it has been incurred is the happening of nonpayment in either of the ways suggested, and then its payment cannot be postponed beyond the next year. It follows from this that if at the end of a given year an indebtedness incurred during that year, which is valid in that it did not exceed the portion of the income and revenue for the year applicable to its payment, remains unpaid, the municipality cannot contract to pay it beyond the next year. It must be paid out of the income and revenue of that year. The whole matter can be put in another way. The provision contemplates' and requires that without a vote a municipality shall do business on a cash basis. It shall always live within its means. It must pay as it goes. This sticks out of the provision and is as plain as the nose on one’s face. The Court of Appeals of Kentucky did not have occasion to think out the full contents of this provision until over a quarter of a century after the adoption of the Constitution. It first did so in the case of McCrocklin v. Nelson County Fiscal Court, 174 Ky. 308, 192 S. W. 494, 499, decided in 1917. By its opinion therein it interpreted the provision aright. This ease came before one of its judges upon an appeal from an order dissolving a preliminary injunction against the issuance of certain bonds by the defendant and appellee, Nelson county. The order was reversed and the injunction reinstated. All the judges of the court heard the case, and concurred in the opinion. On its return to the lower court a final hearing was had and injunction decreed. From this the county appealed, and the appellate court affirmed the decree. Nelson County Fiscal Court v. McCrocklin, 175 Ky. 194 S. W. 323, 326. In its opinion therein it adhered to the position taken on the former appeal. It is in order to make extensive quotations from these two opinions. In the first opinion it was said: “We have repeatedly held that the object of the provisions contained in the sections referred to [sections 157 and 158 of the Constitution] is to protect the people from their own improvidence, and that of their officers.” Again: “It is our conclusion therefore that the controlling idea in section 157, Constitution, is that a county shall not create or contract in any year any indebtedness that cannot be paid out of its revenue and income for that year; and that it is not contemplated by the Constitution that a county shall, without a vote of the people, create in one year a debt to be thereafter paid in subsequent years, and for the payment of which no provision can be made out of the income and revenue provided for the year in which the indebtedness is created; and, moreover, that in any year all the outstanding valid indebtedness of the municipality, not created with the assent of two-thirds of the voters thereof, must be taken into consideration in determining whether in that year the municipality becomes indebted, in any manner or for any purpose, to an amount exceeding the income and revenue provided for the year. There is little or no reason why every county should not observe this rule, because its fiscal court can tell within a few hundred dollars, at least, the amount that will be collected each year, by way of revenue, by comparison with the collections of the previous year or years.” Again: “The law as well as good'business methods would seem to require that the fiscal court should not create debts in anticipation that the full amount of revenue would be collected. In other words, in creating debts it should make allowance for a loss of such a percentage of the revenue, from failure to collect, as will keep the expenditures for the year reasonably well within the amount of the revenue actually collected.” Again: “If, however, in good faith, a county does, in anticipation of its proper revenue, create debts in excess of what it collects, this surplus debt must be carried as a debt to the next year, and succeeding years until paid, and must be taken account of as an indebtedness of that year, and succeeding years, until paid, in exactly the same manner as if the carried-over debt was created in the year to which it was carried. This is clearly the meaning of section 157.” Again: “Under this constitutional rule there is no authority for fiscal courts to issue bonds payable in 2, 10; or 20 years, because a debt created in one year must be paid in that year, or, if not, in the next year.” And again: “If a fiscal court may issue bonds to take care of a deficit in one year, it can do the same the next year, and so on, as long as it may choose, without limit. The result would be that, in the course of a few years, counties would have large bonded debts, perhaps as much as $50,000 or $100,000, without the sanction of a vote of the people.” The opinion on the second appeal was directed mainly to the question whether an indebtedness could be incurred without a vote equal to the entire revenue and income for the year, or only to the excess thereof over and above the governmental expenses of the year. There was some uncertainty on this subject in previous decisions of the court. It was held that it could be incurred only to an amount equal to such excess. The court said: “Section 157 of the Constitution was intended to protect the people from the extravagance or recklessness of their officials in whom is lodged the power to levy taxes, such as fiscal courts, city councils, and the like, and these taxing authorities have no jurisdiction or authority to create in any year an indebtedness that cannot be paid out of the income and revenue of that year after there has been deducted therefrom a sum sufficient to satisfy the necessary fixed or current expenses of the county.” Again: “It will not be difficult for fiscal courts disposed to observe the constitutional limitations as we have described them to follow these rules, because the amount needed to defray the current or fixed charges of the county can be estimated at the beginning of each year with reasonable certainty based on the volume of such expenses for the preceding year, to which there should, of course, be added the amount of such other necessary expenses in the maintenance of public buildings and public institutions as the fiscal court sees proper to expend during the year; and the amount that can be realized from the income, and revenue of the county can likewise be estimated with reasonable certainty based on the income and revenue of the preceding year. Possibly in some years fiscal courts, acting in good faith and with the purpose not to violate the Constitution, might create a debt that could not on account of some unexpected or unanticipated cause be paid out of the revenue of the year; but if a condition like this should arise, which under good manágement ought not to be often, the indebtedness remaining unpaid must be carried over and paid out of the next year.” And again: “This section [157] lays down certain mandatory rales that fiscal courts, city councils, and other taxing authorities must observe. It is so plainly written and so easily understood that there is no room for two opinions about its meaning.” These decisions were cited with approval in the following cases, to wit: City of Winchester v. Nelson, 175 Ky. 63, 193 S. W. 1040; Carman v. Hickman County, 185 Ky. 630, 215 S. W. 408; Buford v. Jessamine County, 189 Ky. 277, 224 S. W. 769; Wesley v. Tartar, 197 Ky. 493, 247 S. W. 353; Tartar v. Wesley, 200 Ky. 14, 252 S. W. 109; Pulaski County v. Richardson, 225 Ky. 556, 9 S.W.(2d) 523. They seem to have a like constitutional or statutory provision in Missouri. In the case of Holloway v. Howell County, 240 Mo. 601, 144 S. W. 860; 862, it was said: “The theory of our present system of county government is that counties must ran their business affairs on the ‘cash system.’ Decker v. Diemer, 229 Mo. 296, loc. cit. 330; 129 S. W. 936. Running in debt is easy and pleasant while it lasts. Paying is ‘another story.’ The pleasure of debt making is denied by law to Missouri counties. They can anticipate their revenue, but only for the current year.” On the other hand there are a dozen recent decisions of the Kentucky Court of Appeals which ran counter to those in the Nelson County Cases in one particular. That particular is as to whether a municipality can. fund a floating indebtedness which is valid in that when incurred it was not in excess of the income and revenue for the year applicable to its payment but which for some reason was not paid out of same, can be funded, i. e., can have its payment extended beyond the next year. These decisions are to the effeet that it can be. This, as we have seen, is contrary to our interpretation of section 157 and to the decisions in the two Nelson County Cases. They began in 1927 about ten years after the decisions in the Nelson County Cases and have been rendered in the last seven years. They are as follows: Vaughn v. City of Corbin, 217 Ky. 521, 289 S. W. 1104; Wilson v. City of Covington, 220 Ky. 795; 295 S. W. 1069; Wilson v. City of Covington, 220 Ky. 798, 295 S. W. 1068; Davis v. City of Newport, 224 Ky. 546, 6 S.W.(2d) 693; Baker v. Rockcastle County Court, 225 Ky. 99; 7 S.W.(2d) 846; Welch v. City of Nicholasville, 225 Ky. 312, 8 S.W.(2d) 400; Rowland v. City of Paris, 227 Ky. 570, 13 S.W.(2d) 791; Hogan v. Lee County Fiscal Court, 235 Ky. 100, 29 S.W.(2d) 611, 614; City of Frankfort v. Fuss, 235 Ky. 143, 29 S.W.(2d) 603; Elliott v. Fiscal Court of Pike County, 237 Ky. 797, 36 S.W.(2d) 619, 621; Pace v. City of Paducah, 241 Ky. 568, 44 S.W.(2d) 574, 575; Bond v. City of Corbin, 241 Ky. 663, 44 S.W. (2d) 576, 577. The municipality involved in these cases was either a city or county. In no one of them was a school taxing district involved. Whether those decisions apply to such a municipality is passed for the time being. Before taking this up something is to be said about these decisions. In the City of Frankfort Case, a vigorous dissent was entered to the position taken in them by three of the seven judges of the court. There is no indication when this dissent arose. It was not mentioned until then. In the City of Paducah Case, the minority gave in to the majority, not because of change of conviction, but because it was conceded to be useless to dissent further. The court, in its opinion, written by Judge Rees, one of the dissenters, said: “Beginning with City of Frankfort v. Fuss, supra, Chief Justice Thomas, Judge Dietzman, and the writer of this opinion, have consistently registered their dissent from the majority view approving the ruling in the Vaughn Case, and have maintained that the opinion in that case is unsound and should be overruled.- Their views on the question will be found in the dissenting opinion in City of Frankfort v. Fuss, supra, and they are of the opinion that section 1 of chapter 68, Acts of 1892, now section 3077, Kentucky Statutes, is strongly persuasive of the correctness of the views therein expressed. They have those convictions now, but in view of the numerous opinions in which the Vaughn Case has been followed and approved, they deem it to be the better policy to consider the question as definitely settled in accordance with the rale announced in that ease, in order to allay all doubt as to the validity of bonds which have been, or may be, issued by a municipality for the purpose of funding a valid floating indebtedness.” ’ The position taken in these decisions is based on the second or last sentence of section 158 of the Constitution, which is in these words: “Nothing herein shall prevent the issue of renewal bonds, or bonds to fund the floating indebtedness of any city, town, county, taxing district or other municipality.” In none of the opinions of the court in these cases before that in the Lee County Case was mention made of the, decisions in the Nelson County Cases. In the Pike County Case the court said that the Nelson County Cases “appear to have ignored the concluding provision of section 158 of the Constitution.” It cannot be said that they ignored section 158,- for in the first one express reference was made thereto. The fact that it did not refer to its concluding sentence specifically does not indicate that it did not have that sentence in mind in what it said in regard to the section. But there was a real ignoring by the court in these later decisions. Section 157'was wholly ignored. In no one of them was it considered as having any bearing on the question involved. The cases called not only for its consideration, but for its consideration before taking up the concluding sentence of section 158. Section 157 comes before section 158. It has to do solely with the creation of indebtedness, whereas the concluding sentence of section 158 is limited to the renewal 'or refunding of indebtedness. One is not equipped to interpret that sentence until he has first come to terms with section 157. According to the interpretation which I have made of that section, which is the interpretation put on it in the Nelson County Cases, it requires that an indebtedness properly incurred without a vote, in that it was not in excess of the income and revenue provided for the year in which it was incurred above governmental expenses which for some reason is not paid out of that income and revenue and remains valid notwithstanding its nonpayment, shall be paid out of the income and revenue for the next year. It constitutes a part of the budget of that year. Such being the case, its payment cannot be postponed beyond that year. It cannot be funded. If, then, the concluding sentence of section 158 is interpreted as authorizing the funding of such indebtedness, it is brought into direct conflict with section 157. To give that sentence effect it is not necessary to make it apply thereto. It can have application without so doing. It can apply to bonded or floating indebtedness of a municipality existing at the time of the adoption of the Constitution. On its face such is its significance. It was inserted in the section to make sure that a renewal of the one or a funding of the other would not be affected by the limitations prescribed in the first sentence. It does not grant power to renew or to fund. It assumes that such power continues to exist, and merely adds that its exercise is not prohibited by such limitation. The construction placed upon the concluding sentence of section 158 in these decisions may be described as a nullification of section 157 in its requirement that an indebtedness which it permits to be incurred without a vote shall be paid in that or the succeeding year. The case of Knipper v. City of Covington, 109 Ky. 157, 58 S. W. 498, 499, involved, as the court expressed it, an attempted “nullification” of the requirement of section 157 that no indebtedness in excess of the current income and revenue shall be incurred without a vote. The court refused to nullify it. It said: “The first section, in plain and unambiguous language, provides a barrier against any indebtedness for any purpose, without a vote, beyond the revenues of the year. The second section is not a grant of power beyond this, but imposes an additional limitation on the creation of indebtedness in the aggregate.” It said also: “Each section provides a limitation on the power to create indebtedness. Neither of them is a grant of power.” And it said further: “We therefore must give each section full effect, and apply the limitation provided for in each of them.” According to the construction of such sentence in these twelve decisions, it, though negative in phraseology, contains an express grant of power to fund a floating indebtedness which according to the requirement of section 157 cannot be funded. In the Lee County Case, where first mention was made in this line of eases of the Nelson County Cases, the court first stated the position taken therein in these words: “Any valid indebtedness carried over from one year into another must be taken into consideration in ascertaining the indebtedness which the county may incur in the succeeding year. The outstanding valid indebtedness at the end of a year must be deducted from the revenue of a county for the succeeding year under these opinions, and the county may then contract debts only equal in amount to the remainder after the deduction. These opinions likewise held that fixed charges, such as salaries and other governmental expenses, must be treated as an indebtedness in determining the amount of debts which may be contracted.” This is a correct statement of the positions so taken, except in one particular. The court did not say that the fixed charges should be treated as an indebtedness. What it said was that in determining what indebtedness the municipality may incur without a vote so mueh of the income and revenue as was necessary to pay such charges is not to be considered. Apparently an indebtedness may be incurred to the full extent of the income and revenue. But this is not so. An indebtedness may be incurred only to the extent of the excess thereof over sueh charges. After making this statement of the position taken in the Nelson County Cases, the court proceeded as follows: “That means that when the aggregate of the valid outstanding floating indebtedness becomes greater than the revenues of the county for the year, the county is without power to function at aM.” But under those positions it is not possible for the aggregate of such indebtedness to be so great. In the very nature of things according to the conception of section 157 sueh an indebtedness can be very slight only. On its face the section does not contemplate that there will be any, inasmuch as it contemplates that the indebtedness incurred will be paid out of the current income and revenue. The only possibility of there being any indebtedness at all is in a mistake being made as to the income and revenue to be received, a default on the part of the collecting and receiving officers, or a deliberate violation of the section by the municipality in not applying the income and revenue applicable to the payment of the indebtedness thereto, but diverting it to other purposes. Even in the latter contingency the income and revenue for the next year over and above fixed charges should be sufficient to pay said indebtedness. As it was sufficient to meet the indebtedness in the year when incurred, there is no reason why it should not be sufficient in the next year. The sole effect of paying it out of the income and revenue for that year may be to leave nothing above what is necessary to pay fixed charges applicable to any other purpose. In no event will the county be without power to function at all. So mueh of the income and revenue as is necessary to pay fixed charges cannot be used in paying the indebtedness. It is applicable to the payment of sueh charges only. It is clear, therefore, that the court had an incorrect notion as to the effect of the positions taken in the Nelson County Cases, in thinking that under them the municipality may cease to function. Such is not the ease. The sole effect of those positions is to make the municipality pay as it goes and keep from becoming indebted beyond the next year without a vote. The court then said: “A way was provided by section 158 of the Constitution for a county to emerge from its difficulties when it found itself in sueh a condition. The closing sentence in section 158 authorizes a county to fund its floating indebtedness.” If a municipality lives up to the requirements of section 157 it will not find itself in such condition. There will be no difficulty for it to emerge from. The statement in the closing sentence that section 158 authorizes a county to fund its floating indebtedness is in direct conflict with the requirement of section 157 and in the teeth of the statement in the ease of Knipper v. City of Covington, supra, that section 158 contains no grant of power. The court continued as follows: “When the two provisions of the Constitution, sections 157 and 158, are construed together, and it has always been the rule that they should be so construed, we find that a county may fund its floating indebtedness by the issuance of bonds. This means that an outstanding valid, floating indebtedness, which was created in a legal way and was valid at the time of its creation, may be funded, and when that is done the only thing which it is necessary to consider and charge up against the county in a current year is the amount of interest and the sinking fund that must be set apart to take care of the outstanding funded indebtedness.” Such is not a true construing of the sections together. It makes them fit, but it does so by nullifying the requirement of section 157, that if an indebtedness properly incurred without a vote, in that it is not in excess of the income and revenue for the year over and above fixed charges, is for some reason not paid out of such income and revenue, it shall be paid out of the income and revenue for the year over and above fixed charges, is for some reason not paid out of sueh income and revenue, it shall be paid out of the income and revenue for the next year. It nullifies it by making it so that it need not be so paid, but by funding its payment may be postponed for years. Construing the two sections together so as not to nullify any of the require'ments of either is arrived at by viewing the-concluding sentence of section 158 as not a grant of power to fund any indebtedness. It is simply a provision that the renewal of bonds or funding of a floating indebtedness existing at the time of the adoption of the Constitution will not be a creation of any indebtedness in excess of that to which a municipality is limited by the first sentence of the section. The two* sections cannot otherwise be construed together. Space forbids the consideration in detail of each of these twelve decisions. It is not amiss; however, to analyze the first one, to wit, Vaughn v. City of Corbin, through which this discordant note crept into the decisions of the Court of Appeals, and bring out just how the position there taken came about. Corbin is a city of the third class. It had a floating indebtedness of $75,-000. The court held that it had power to fund this indebtedness by issuing 6 per cent, bonds payable, one-third in ten years, one-third in twenty years, and one-third in thirty years. It was based on- two positions in regard to section 157, in support of which it cited previous decisions of the court. One was as to the rate of taxation which a municipality may levy under the first sentence of sueh section. It was that the municipality was not limited to the rate there prescribed. In addition thereto it may make a levy sufficient to pay the interest on and provide a sinldng fund for the payment of the principal of indebtedness which under the second sentence has been favored by a two-thirds vote. Corbin had a right to levy not only the 75 cents authorized by the first sentence, but sufficient to make sueh provision for sueh indebtedness. The other was as to the indebtedness which a municipality may incur without a vote. It was not limited to the excess of the income and revenue provided by the levy actually made over and above governmental expenses. It could extend to the excess of the income and revenue which would have been provided by a levy to the full extent which it had power to make if the levy actually made was less than this. The soundness of this latter position, and that it is supported by the decisions cited, is accepted without reflection. The suit was brought under the Declaratory Judgment Act (Civ. Code Prae. § 63S*a — 1 et seq.). The petition admitted that the $75,000 floating indebtedness proposed to be funded was valid. The city had for some years an outstanding bonded indebtedness created pursuant to a two-thirds vote. Its levy had been limited to 75 cents. No levy had been made to pay the interest on this bonded indebtedness and to provide a sinking fund for its payment which the municipality had a right to make in addition to the levy of 75 cents. The interest thereon had been paid and provision for the sinking fund had been made out of the 75 cents levy. This was not done purposely. The failure to make this additional levy was because it was not thought that the city had power to make it. It was thought that it was limited to the 75 cents. In the course of time the city was put to certain extraordinary expenses. Corbin is a railroad center. There was a prolonged railroad strike, and it had to spend and spent a very large amount of money in maintaining order. To* protect the health of its citizens it had to enlarge its waterworks and build pits to dispose of its sewage. It had other extraordinary expenses besides those not specified. The amount of revenue yielded by the 75 cents tax was not sufficient to care for these extraordinary expenses in addition to the ordinary governmental expenses and earing for the bonded indebtedness. Hence resort was had to borrowing sufficient money to meet all expenses. The floating indebtedness of $75,000 thus incurred was not in excess of what would have been yielded had there been a levy during these years in addition to the 75 cents of a sufficient amount to care for the bonded indebtedness. The borrowing of this sum was not consciously against this additional levy. The city was not conscious that it had power to make it. ■But as a matter of fact it did not exceed such additional levy. It was in this way that the court conceived that the floating indebtedness was valid. To meet it the court conceived of but two alternatives. One was to make a single levy payable in one year or to fund it. It was contended against funding it that the first alternative should be pursued. The court stated this contention in these words: “It is insisted for the appellant that the city, having failed to make a sufficient levy as it should have done in the years that are past, ought now to make a levy for those years and pay off its indebtedness.” To this- the court responded: “But this would impose upon the people of the city a very great burden in one year, for to raise $75,000 in one year, in addition to its otherwise necessary levy, would require a very heavy tax in a city of this size.” It said that such being the case only the question of power is presented. The ease, therefore, which*, the court had before it, as it conceived it, was how to provide for an indebtedness incurred by the city in ignorance of its right to raise the money by levy of a tax in addition to that which it actually levied and which it had the power to levy to care for the safety and health of its inhabitants, which could only be provided for in one or the other of the two ways stated. This was a hard ease, and it is said that hard cases are sometimes the source of bad law. It would seem that in providing for this indebtedness the city as an alternative to funding it was not limited to levying a tax payable in one year sufficient to pay it. No reason occurs why its payment could not be distributed over a number of years so as to lighten the burden of the taxpayer, beginning at once. By so doing the city would not be crippled in its operation. Its wings would simply have been clipped until the indebtedness was paid. By funding the indebtedness it could continue to soar as before. The power to fund was found by the court in the concluding sentence of section 158. Concerning this sentence the court said: “But it will be observed that bonds issued to fund the lawfully contracted floating indebtedness of any city are excepted out of the operation of that section.” The court concluded from this construction of that sentence as follows, to wit: “It results therefore that the city council has power to issue the $75,000 of bonds, although this may increase the bonded indebtedness of the city beyond the limit fixed in that section.” The section referred to is section 158. It is true that the concluding sentence of that section excepts out of its operations, i. e., the limitation prescribed by it, the funding of floating indebtedness, by which is meant such as has been “lawfully contracted.” But to except such funding from such limitation does not confer power to fund. That must be found elsewhere in the thought of the sentence. As the court has said in the Knipper v. City of Covington Case, the section contains “no grant of power.” And there can be no power to fund when it is prohibited by section 157. There was no possibility of the limitation prescribed by section 158 being exceeded by funding the $75,000 floating indebtedness. The sole trouble in the way was section 157, which did not occur to and was not considered by the court. There was no attempt made to come to terms with section 157, before construing the concluding sentence of section 158. In the court’s thought that section had nothing to do with the question before it.” The court concluded its opinion with this general statement: “When, in any year, a levy sufficient to cover necessary expenses incurred was not levied, the unpaid balance should have been provided for in the levy for the next year. But the failure to do this did not invalidate the debt, and the council had power then to fund this debt. This is true as to each succeeding year, and the power of the council to fund this debt exists now as it did at the end of each year and may be exercised now at one time. There is no suggestion in the record that the excess of indebtedness now shown was not properly created under the constitutional provision. Its validity is conceded in the pleading. The issuing of bonds to fund a floating debt adds nothing to the indebtedness of the city. It merely changes the form of the existing debt. The power to fund a floating indebtedness is as broad as the power to incur such indebtedness.” This brings out the unusual character of this ease, in that it involved a floating indebtedness incurred against a levy that might have been made, but was not. In all the other twelve cases the indebtedness held to be valid and capable of being funded was incurred against the levy actually made, which indebtedness was not paid out of the levy. Such is the case here. There is no distinction in principle between the two kinds of cases. If any indebtedness incurred against a levy not made can'be funded, so can an indebtedness incurred against a levy made but not paid out of the levy. Hence the decision is an authority for funding an indebtedness in the latter kind of ease and its reasoning is applicable thereto. This leads me to take note especially of this part of this quotation, to wit: “The issuing of bonds to fund a floating debt adds nothing to the indebtedness of the city. It merely changes the form of the existing debt.” This is undoubtedly true. But it does not follow from this that power to fund exists. The question is not whether funding increases the indebtedness. It does not. It is whether power to extend the time of payment of the indebtedness involved in funding exists. If it does, then power to fund may exist. If it does not, such power cannot exist. Power to extend time of payment and hence to fund an existing floating indebtedness valid in that it was properly incurred against a levy actually made but not paid out of such levy is prohibited’by section 157, in that it requires same, if not paid out of such levy, to be paid out of the levy next year. Though funding a debt by a municipality does not increase its indebtedness, it enables it to increase it without a vote. It makes it so that it can so do. If it is bound to pay same out of current income and revenue its power to incur indebtedness without a vote until it is paid is curtailed. Take the ease of the City of Corbin. After funding this $75,000 of floating indebtedness pursuant to the decision in that ease, thereby postponing its payment from ten to thirty years, there was nothing to prevent its repeating the incurrence of an indebtedness to this amount again without a vote, except the will of its city council. It could either refrain from levying the full tax it was authorized to levy, the same as before, and borrow against the tax not levied, or levy the full tax and borrow against the excess of the income and revenue thereby provided over governmental expenses and requirement of bonded indebtedness, refrain from paying same out of such excess and divert it to other purposes, and could keep this up for years, either funding the indebtedness at the end of each year or after a number of years, i. e., as long as it can hold its creditors off — all this without a vote. The only limit to its so doing would be the limitation prescribed by section 158. It is not true to say that the power to fund a floating indebtedness is as broad as the power to incur it. The power to incur indebtedness by a municipality without a vote is very limited under section 157. So far as what it says is concerned, it does not know of any such power. But the power to fund such indebtedness as it has power so to incur does not exist at all in that that section impliedly requires it to be paid out of the current income and revenue or that of the next year. The statement above quoted from the opinion in this case, to the effect that funding a debt does not increase it, may be characterized as an epigram. It was quoted a number of times in the later decisions and seems to have been effective in bringing them about. This is an instance which warns one that epigrams are dangerous. As stated it is the decision in this case that brought the discord in the decisions of the Court of Appeals. In the last one, which was another Corbin Case, it is said: “The case of Vaughn v. City of Corbin, 217 Ky. 521, 289 S. W. 1104, is conclusive of this one. The opinion in the Vaughn Case has been approved in the following eases.” Then follows the ten eases between it and that case. The position here advanced and taken in the Nelson County Cases is bottomed on the idea that section 157 impliedly prohibits the authorization of a municipality to fund a floating indebtedness which is valid in that it was properly incurred in anticipation of current income and revenue of that year. This it so does in that impliedly it requires same to be paid out of such income and revenue or that of the next year. If that idea is not sound, that position cannot be maintained. That it is sound is inescapable. Not prohibiting the authorization of the incurrence of an indebtedness not in excess of the income and revenue for the year of its incurrence over governmental expenses implies not only that it may be incurred, but that it is to be paid out of such income and revenue. On the face of the section the thought is that it can and will be paid out of it. It does not contemplate that it cannot or will not be so paid. If as a matter of fact it is not so paid, either because of a deficiency in collection, default, or a will not to pay, it must be taken that the implied requirement is that it shall be paid out of the income and revenue of the next year. It cannot be otherwise if the section is to be true to itself. But as heretofore stated, these twelve decisions had to do with a municipality consisting of a city or county considered as a governmental unit. Neither one of them had to do with a municipality consisting of a taxing district within the meaning of those words as used in sections 157 and 158. It must be taken, however, that they apply to such a municipality which is like a city or county so considered which is operated solely by a single arm; the city by its counsel, and the county by its fiscal court, in that it too is operated by a single arm. There is no room to draw a distinction between such a taxing district and a city or county. Were such a taxing district involved here, the question would arise whether this court is bound by these twelve decisions or whether it is at liberty to follow its own interpretation of sections 157 and 158 and that of the decisions in the Nelson County Cases. The latest expression of the Supreme Court of the United States on the duty of a federal court in the matter of following decisions of the highest court of the state is to be found in the case of Edward Hines Yellow Pine Trustees v. Martin, 268 U. S. 458, 45 S. Ct. 543, 545, 69 L. Ed. 1050. It there said: “When questions affected by the interpretation of a state statute or a local rule of property arise in a federal court, that court has the same authority and duty to decide them as it has to decide any other questions which arise in a cause, and where state decisions are in conflict or do not clearly establish what the local law is, the federal court may exercise an independent judgment and determine the law of the case. * * * This court has refused to follow a rule established only by single state decision rendered, after the rights involved in the case in the federal court accrued * * * or a single decision when not satisfied that it is conclusive evidence of the state law.” But such a taxing district is not involved here. The taxing district involved here does not operate solely through a single arm. It operates through two arms, to wit, a hoard of education and a fiscal court. The hoard administers the schools. It has no power to levy and collect taxes to enable it to so do. The function of the fiscal court is to levy such taxes. The board is required each year to make out a budget of its needs for that year and require the court to levy a tax to meet that budget, which is to be collected by the sheriff and banded over to the board. It has the absolute right to have the fiscal court to make such levy. The court has no discretion in the matter. Fiscal Court of Logan County v. Board of Education, Logan County, 138 Ky. 102, 127 S. W. 527, 529; Grant County Board of Education v. Chandler, 144 Ky. 348, 138 S. W. 271; Spradlin v. Floyd County Board of Education, 162 Ky. 677, 172 S. W. 1065; Breathitt County Board v. Breathitt County Fiscal Court, 188 Ky. 674, 223 S. W. 830, 832; Breathitt County Fiscal Court v. Breathitt County Board, 191 Ky. 437, 230 S. W. 914, 915; County Board of Education v. Fiscal Court, 221 Ky. 106, 298 S. W. 185; Board of Education of Marshall County v. Fiscal Court, 229 Ky. 774, 17 S. W.(2d) 1009. In the Logan County Case the court said: “When the board of education requests the fiscal court to levy a property and capitation tax within the statutory limit, it is the duty of the fiscal court to levy the property and capitation tax requested by the board, if it is within the statutory limit. The fiscal court has no discretion to exercise on this subject. It must lay the levy demanded. In submitting to the fiscal court an estimate of the amount that in the judgment of the board is needed it is not necessary that the board should mention the specific purposes, or any of the purposes, to which it intends to apply the funds. The expenditure of the funds within the statutory limits is entirely within the discretion of the board of education.” In the last Breathitt County Case, it said: “It was the intention of the Legislature that such boards should be the sole judges of the needs of the schools, and to make them entirely independent of the city councils and fiscal courts through whose tax levies they-must be supplied with funds for maintaining the schools; otherwise they often might be obstructed in the necessary exercise of their powers or performance of their duties by the whims ox caprices of the latter, to the great injury of those entitled to the education to be bad in the common schools.” Such being the nature of the taxing district involved here, those twelve decisions have-no application thereto. Unhampered by them I am free to determine what powers the board of education of such district has in the matters-of incurring and funding indebtedness. It is to be noted before proceeding further that the taxing district is not the board of education nor the fiscal court. They are simply the arms by which the taxing district operates. The taxing district is the county operating for school purposes. The powers which the board of education of such a district has depends entirely on the legislation pertaining to it. It has no other power than that which the Legislature has conferred upon it. Conceivably it may confer the power of incur-ring and funding indebtedness on the fiscal' court on request of the board of education the same as the power to tax to meet the necessities of the board of education. If the-concluding sentence of section 158 be taken •as a grant of power, it grants no power to such a taxing district to incur indebtedness. It only grants power to fund it. As to funding indebtedness, it does not say which arm of such a taxing district shall exercise it. That it does not, makes against the position that that sentence contains a grant of power at all. Nor can the second sentence of section 157 be said to grant power to a board of education of such taxing district to incur indebtedness not in' excess of its income and revenue for the year. It contains no grant of power. It merely-limits the power of the Legislature in the matter of authorizing the incurrence of indebtedness. If it be construed as itself granting such authority, it does not say which arm of the taxing district shall have such autboiity. So it must be taken that a board of education of such a taxing district has no other-power than such as may have been conferred' upon it by the Legislature. The courts can-: not supply any omission of that body in this particular. The legislation relating to a taxing district consisting of a county operated for school purposes by its two arms is to be found in articles 5, 7, 8, 9> 15, and 16 of chapter 113 (section 4-363 et seq.), Kentucky Statutes, entitled, “Schools — Common.” By section 4434a-7, Kentucky Statutes (19-30 Ed.) art. 8, it is provided: “The various county boards of education in this Commonwealth shall assume the payment of'any legal indebtedness contracted by the old boards of trustees under the old law and pri- or to the taking effect of the act of 1908, by compromise, partial payment or otherwise, as is deemed expedient and proper by said board of education. Said payments to be made out'of the general school fund of the county. This law shall also apply to common school subdistriets that have become graded common school districts since 1908.” Prior to the act of 1908, here referred to, the various counties of the state were divided into several common school districts, each governed by a board of trustees. Each of these districts was a taxing district. The board of trustees not only operated the school in the district, but also levied the taxes to enable it to operate it. By that act these districts were established and converted into one county district operated by the county board of education and fiscal court in the way heretofore pointed out. The boards of trustees for the old districts had been empowered to incur indebtedness and at the time of the enactment of that act many, if not most of these districts, were legally indebted, and the section quoted originating in that act made provision for the payment of such indebtedness by the county board of education out of the general school fund for the county. Section 4399a-8 provides for the board of education making a budget. It refers to it as “an itemized and detailed school budget,” and provides that it shall show “the amount of money needed for supplementing teachers’ salaries, for permanent improvements, repairs, furniture, old buildings, maintenance and support of schools during the succeeding school year.” This section provides further for the disbursement by the board of education of the moneys raised by the levy pursuant to its request and received by it. It provides that they “shall be devoted first and exclusively, up to the amount of the minimum levy herein provided, for the purpose of supplementing the teachers’ salaries engaged in teaching in the territory affected by the provisions of this section until the minimum salary now allowed by law or as may hereafter be allowed by law for teachers is reached, and after said minimum has been reached the money raised by such levies may be used for supplementing teachers’ salaries, building of sehoolhouses, equipping same, and other costs of maintenance and operation as in the judgment of the county board of education may be determined.” In these provisions no mention is made of indebtedness of the board as having a place in the budget or the items of disbursement, though it would seem that as a matter of fact any indebtedness of the old school districts, existing before the act of 1908, should have a place in them. There is no authority conferred on the county board of education to incur indebtedness in any year in anticipation of the funds to be received by it from the taxes levied by the fiscal court pursuant to its request. A taxing district for school purposes is created as to each city of the first, second, third, and fourth class, and provision is made for its operation by two arms as in case of a comity school taxing district so operated, i. e., a board of education and the city council. In each instance the city board of education is authorized to incur indebtedness in anticipation of the taxes to be received by it. The provision is the same as to each class. It is in these words: “The board shall have power to borrow money on the credit of the board in anticipation of the revenue from school taxes for the fiscal year in which the same is borrowed and to pledge said school taxes for the payment of the principal and interest of said loan: Provided, that the interest paid shall in no ease exceed six per cent (6%) per annum and the principal shall in no ease exceed fifty per centum (50%) of the anticipated revenue.” Sections 2978a-24, 3235a-25, 3469a-2, and 3587a-16, Kentucky Statutes.' This survey of this legislation would seem to be convincing that a county board of education has no power to incur an indebtedness in anticipation of its revenue. If it has such power it is without any legislative provision conferring the power on it, and it has power to incur an indebtedness to the full extent of the income and revenue coming to it when a board of education of a city of either one of these four classes is limited to 501 per cent, thereof. How then does the matter stand under the decisions of the Court of Appeals? The eases to be considered are the following, to wit: Breathitt County Board of Education v. Breathitt County Fiscal Court, supra; Breathitt County Fiscal Court v. Breathitt County Board of Education, supra; Elliott County Fiscal Court v. Elliott County Board of Education, 193 Ky. 66, 234 S. W. 947, 948; King v. Christian County Board of Education, 229 Ky. 234, 16 S.W.(2d) 1053, 1055; Hockensmith v. Franklin County Board o