Kerr Glass Manufacturing Corp. v. City of San Buenaventura

petitioner seeks the writ of mandamus to compel the respondents to levy a tax on all of the taxable property in the City of San Buenaventura sufficient to pay for all lands purchased by the city which were sold for delinquent improvement district assessment instalments in the years 1929 to 1935, inclusive, and to pay for all of such instalments which became delinquent on said lands subsequent to the sale thereof to the city. In the same proceeding the petitioner also seeks payment of $17,000 due on certain bonds held by it and payable out of the fund created for the redemption of bonds series “E” issued to discharge the cost of city improvement No. 201.

The street work known as city improvement No. 201 was authorized by the city council under the Improvement Act of 1911 (Stats. 1911, p. 730), and series “E” bonds were authorized, and issued pursuant to the Improvement Bond Act of 1915 (Stats. 1915, p. 1441). The bonds represented an obligation in the total principal sum of $132,-528.95. They were issued to mature in ten annual instal

During each of the years 1929 to 1935, inclusive, the city has become the purchaser of property in said improvement district sold for nonpayment of assessment instalments levied to pay the cost of said city improvement No. 201. It is alleged that the city has not paid into the bond redemption fund the amount of the delinquent assessments, penalties and costs which constituted in effect the purchase price of such lands at the time of sale thereof to the city; further that the city has also failed to transfer from the general fund to the bond redemption fund the amounts of assessment instalments falling due on said lands after such sale to the city. It is also alleged that in the years 1929 to 1933, inclusive, the tax collector has failed to file with the city council a demand that a suitable amount be included in the next tax levy to provide funds for transfer to the bond redemption fund wherewith to pay the purchase price of such lands sold to the city at delinquent tax sales. In August, 1934, such a demand was made by the tax collector on the city council, which thereupon included a tax levy of ten cents on each $100 of assessable property for the purpose stated. A similar demand in August, 1935, was met by a like levy. The petition shows that the respondents have offered to pay to the petitioner such proportionate amounts from said bond fund on account of interest and principal due it as the amount of such interest and principal bears to the total amounts of interest and principal on all of said bonds, series “E”, still outstanding and unpaid.

The respondents have demurred generally and specially to the petition and filed an answer thereto. In their an

The principal question for determination is whether the petitioner is entitled to payment in full from the bond redemption fund, there being sufficient funds for payment to it in full although not sufficient to pay in full all of the matured claims against said fund; or whether it must accept payment on some pro rata basis to be determined.

More recently in the case of Hammond v. City of Burbank, 6 Cal. (2d) 646 [ 59 Pac. (2d) 495 ], it was determined that not only was the ten-cent levy the only mandatory levy provided by the Improvement Bond Act of 1915, but that the purpose of the levy as provided by the act is limited and exclusive; that is, that the tax realized from the ten-cent levy may be used only to provide advances to pay the purchase price (the amount of the initial delinquent improvement assessment instalment, penalties and costs) of the lands sold to the city on delinquent tax sales.

A further review oí the cited cases or of the pertinent sections of the Improvement Bond Act involved therein is unnecessary for the purpose of making the observation that the immediate and important result of such recent decisions, viz., that the land in the district is the

Advances to the fund by the city are authorized to be made from two possible sources, one the mandatory levy not exceeding ten cents on each $100 of taxable property in the city, further limited by the amount required to meet the purchase price of lands sold or to be sold to the city at delinquent tax sales; and, second, the transfer of moneys from the general fund when there are surplus moneys available, as advances on the amount of improvement assessment instalments falling due on lands sold to the city subsequent to the delinquent tax sales. That fact, together with the further holding in the case of Hammond v. City of Burbank, supra, that the duty of the city to levy and collect the ten cent tax is continuing only so long as advances to the redemption fund on account of the purchase price of lands sold to the city have not been made, and that the city may not “pyramid” the levies omitted in prior years, make manifest the preliminary conclusion that the petitioner is not entitled to have the respondents do more than levy a ten cent tax each year until such levy has realized moneys sufficient to advance to the bond redemption fund the purchase price of all land sold to the city at delinquent tax sales. This duty the city has performed and it is not shown that there are surplus moneys in the general fund available for transfer to the bond redemption fund for the payment of assessment instalments falling due on such lands subsequent to the delinquent tax sales. It follows that the petitioner is not entitled to a writ directing the respondents in respect to any tax levy or transfer of funds.

There remains for determination the principal question whether the petitioner is entitled to a writ directing payment to it in full of the sum of $17,000 due on the bonds held by it. If it is not so entitled, or if it is not entitled to any partial payment in excess of the offer made by the district and refused, its petition in this respect must also be denied. (State v. Little River Drainage Dist., 334 Mo. 753 [ 68 S. W. (2d) 671 , 679].)

Section 3 of the act provides that the bonds and interest “shall be paid at the office of the city treasurer of said municipality who shall keep a redemption fund designated by the name of said bonds, into which he shall place all sums received by him from the collection of the assessments made for the payment of the cost of improvements upon which the bonds are issued and of the interest and penalties thereon and from which fund he shall disburse and pay the said bonds and the interest due thereon upon presentation of the proper bonds and coupons; and under no circumstances shall said bonds or the interest thereon be paid out of any other fund. Said city treasurer shall keep a register . . . and shall cancel and file each coupon and bond so paid.” The petitioner contends that the italicized language of said section compels the same result as in the case of Bates v. McHenry, supra. That case involved section 52 of the California Irrigation District Law which provided that upon presentation of any bond or interest coupon, payment should be made from the bond fund. In the opinion it was pointed out that the particular language of the act, together with the further provisions that unpaid bonds and interest coupons should be registered and bear interest from the date of registration and creating an unlimited continuing obligation of the district to levy sufficient taxes to discharge the obligation in full, distinguished the facts from such cases as Thomas v. Patterson, 61 Colo. 547 [ 159 Pac. 34 ], and Norris v. Montezuma Valley Irr. Hist., 248 Fed. 369 , and compelled a conclusion that payment in full upon presentation was contemplated by the act even though the fund was at the time insufficient to discharge all the matured claims against it. The same court rendering the opinion in the case of Bates v. McHenry, supra, arrived at a contrary conclusion in the ease of Rohwer v. Gibson, 126 Cal. App. 707 [ 14 Pac. (2d) 1051 ], following the cases dis

It is unnecessary to extend the discussion in view of the facts presented by the petition and answer and the direct bearing upon the solution of the problem resulting from the decisions in this state hereinabove cited which define the limited liability of the city under the Improvement Bond Act of 1915. As in the act involved in the case of Rohwer v. Gibson, supra, there is no provision in the Improvement Bond Act which can be interpreted to inhibit the settlement of the claims of all bondholders ratably when the necessity requires. The language in section 3 above quoted and relied upon by the petitioner, unaccompanied by any provisions which would give it a mandatory character, must be deemed to be directory only. In Meyers v. City of Idaho Falls, supra, a provision for payment in numerical order was held to be directory only and not to prevent the distribution of the moneys as a trust fund. Pursuant to direction for payment upon presentation, if it were possible for all bonds remaining unpaid to be presented simultaneously, the trea

The authorities herein cited support the conclusion that the question of the impairment of a contract right is not involved in the consideration of the problem. The limited liability of the city as defined herein and by the cases above cited was a part of the bond contract. The bondholders accepted the limitation that the principal and interest of the bond were payable exclusively from the redemption fund. (Stege v. City of Richmond, 194 Cal. 305 [ 228 Pac. 461 ].) The question is simply one of the adequacy of the fund, under the conditions alleged to exist, to discharge in full the obligations against it created by the provisions of the act and the bond issue. In fact it has been held that a discharge of the obligations on a pro rata basis, by thus excluding payment in full to some to the prejudice of others, obviates the possibility of any impairment of their contract rights, inasmuch as all have an equal right to share in the trust fund. (Moran v. State, 111 Fla. 429 [ 149 So. 477 ].)

The petitioner is therefore not entitled to any of the relief prayed for.

Seawell, J., Curtis, J., Langdon, J., Waste, C. J., Thompson, J., and Edmonds, J., pro tem., concurred.