Rohwer v. Gibson

The petitioner in this action is the owner and holder of 1395 of the outstanding bonds of Reclamation District No. 2057, of the aggregate value of $1,395,000. All of said bonds are dated July 1, 1924, and are of the face value of $1,000 each, bearing interest at the rate of six per cent per annum, payable semi-annually. On July 1, 1932, there became due on each bond the sum of $30, as evidenced by the coupons attached thereto; that on the first day of July, 1932, there became due on the bonds held by your petitioner the sum of $41,850, being the amount of the interest coupons falling due on said date; that the respondent in this action is the County Treasurer of Colusa County, and is the custodian of the bond fund of Reclamation District 2047; that Reclamation District 2047, hereinafter referred to as “Reclamation District”, is a duly organized and existing reclamation district under the laws of the state of California existing in Colusa and Glenn Counties, the greater portion thereof existing in the county of Colusa, which county is designated as the main county of said reclamation district; that on the first day of July, 1932, the predecessor in interest of the petitioner presented to said County Treasurer of Colusa County, and custodian of the funds of said reclamation district, all of the coupons herein referred to, and demanded payment of the same by the said County

The petition then sets forth that there was due on the first day of July, 1932, on coupons outstanding, the sum of $54,840. The record shows, however, that these figures are inaccurate, and that there was in fact an outstanding indebtedness on coupons falling due on the first day of July, 1932, in the sum of $65,340. The petition concludes with a prayer that a writ be issued by this court directing and commanding the respondent, as custodian of the funds of said reclamation district, to pay to the plaintiff, in cancellation of the coupons referred to, the sum of $41,850, or to show cause why such payment should not be made.

The petition of the intervener, Delaplane Wilson, sets forth that he is the owner and holder of five certain bonds of said reclamation district of the value of $5,000; that said bonds were registered on the first day of June, 1928; that interest became due on said bonds on the first day of July, 1932, in the sum of $150; that demand has been made upon the respondent as custodian of the funds of said reclamation district, for payment, but that no such payment has been made, and that said payment has been refused. The prayer of the intervener is that the respondent be required to pay the interest due on said registered bonds and that priority be given in the making of such payment.

The answer of the respondent sets forth that following the first day of July, 1932, and the- eighth day of August, 193-2, there had been presented to the respondent for payment additional coupons on bonds of said reclamation dis

It is further shown that if the installments now delinquent on certain tracts of land are paid, or the lands redeemed from delinquent sales, additional sums will come to the hands of the respondent applicable to the payment of said coupons. The record does not show to what extent the delinquencies will affect the ability of the district to pay and discharge all of the coupons maturing on July 1, 1932; nor is there anything of record showing whether any moneys will actually be received by • the payment of delinquent taxes, or the sale of the lands upon which delinquent taxes have become due; nor is any time fixed within which such moneys will be, or can be received. In other words, the record leaves us wholly uncertain to what extent the insufficiency of the funds will affect the ability of the district to discharge its obligations. The only certainty shown by the record in relation to the funds of the reclamation district is that the total of the coupons falling due July 1, 1932, and presented for payment, exceeded the money in the hands

Upon the facts thus presented, what are the rights of the petitioner and intervener? Are they entitled to an order of this court directing full payment of the coupons presented by them, by reason of the fact that they have followed up their demand by this proceeding seeking to compel such payment ? Or should the court, recognizing that the money should not be held by the treasurer for an indefinite time, direct payment to the petitioner and intervener of a proportionate share of the moneys in the hands of the treasurer available for payment of matured coupons?

Before reviewing the cases cited by the respective counsel and making their application, the various sections of the Political Code relating to reclamation districts may profitably be compared with the sections of the California irrigation district laws, and their dissimilarity pointed out in order that the holdings of the different cases may be correctly applied to our decision herein. This course is necessitated by reason of the fact that some of the cases cited are based upon reclamation laws and others upon irrigation district laws.

Section 52 of the California irrigation district laws specially provides that matured bonds and interest coupons shall be paid upon presentation. This section was amended after the decision of the Colorado Supreme Court based upon irrigation district laws reading the same as section 52, supra, prior to its amendment. The portion of the section referred to reads as follows: “Upon" presentation of any matured bond or any matured interest coupon of any bond of the District the treasurer shall pay the same from the bond fund.” The section was amended as to time of payment in 1931 (Stats. 1931, p. 172). Section 52, supra, also provides that unpaid coupons may be registered and shall bear interest at the rate of seven per cent per annum from the date of presentation for payment until notice is given that funds are available for making such payment. Section 39 of the California irrigation district laws provides for the levy and collection of taxes every year. This levy of taxes is not

It is further'provided in the California irrigation district laws that unpaid registered interest coupons shall be paid in the order of their registration; thus, if at any semi-annual period coupons are presented after the funds have been exhausted by payment of coupons previously presented, the holder of the coupons registered under such circumstances is entitled to priority of payment whenever funds are available therefor. The taxing power conferred by the California irrigation laws continues so long as the district is in existence, and by reason of the fact that unpaid coupons may be registered and thereafter draw interest at an advanced rate, compensation is made to the holder of such coupons for any disadvantage suffered by reason of deferred payments. The reclamation district laws are silent as to many of these provisions. The paragraph of section 3480 of the Political Code establishing a bond fund reads as follows: “All moneys collected by any County Treasurer upon any assessment upon which bonds have been issued, including all moneys derived from sale of land for delinquent installments, or from redemption thereof, or from sale of lands bought by the treasurer at any such sale shall be by such treasurer forthwith paid into the main county treasury, and except as otherwise provided in section 3466a of this Code, shall be credited to the bond fund of such Reclamation District and used exclusively for the payment of principal and interest of said bonds issued on such assessment, and of the principal and interest of any refunding bonds issued thereon.” Section 3466a, supra, relates to procedure of the sale of lands for delinquent taxes, and need not be further considered herein. Section 3456 of the Political Code con

After the plans for the reclamation district have been approved and the cost thereof ascertained or estimated, commissioners are appointed to view the lands within the district, and to make an assessment thereon according to the benefits that will accrue to each particular tract by reason of the reclamation. After this is done the amount of the assessment is called at different times and in different installments, as may be necessary to meet the expenses and pay the bonded indebtedness and the interest on the bonds.

Section 3459 of the Political Code authorizes the levying of a supplemental assessment in the event that the original assessment is insufficient to provide for the complete reclamation of the lands of the district, or if further assessments are from time to time required to provide for the protection, maintenance and repair of the reclamation works.

Section 3456, supra, also provides that in the levying of taxes there shall be included in incidental expenses an amount necessary for the payment of interest on any refunding bonds that may be issued by the district.

Section 3480, 'supra, also provides that the lien of any unpaid assessment upon which bonds shall have been issued shall continue until all said bonds and any refunding bonds that may be issued shall have been paid in full, and in the event that any bonds are unpaid, a supplemental assessment may be made upon the lands within the district, according to the provisions of section 3459, sufficient to pay the unpaid principal and interest. The supplemental assessment is authorized to be enforced in the same manner as the original assessment.

It will be noted that in the California irrigation district laws there is no limit to the levying of taxes similar to the provisions found in the reclamation district laws. One is a straight levying of taxes from year to year upon the assessed valuation of the property; in the other there is first an assessment placed upon the lands according to the estimated value of the benefits to accrue thereon. When the collection of taxes has reached the value of the benefits conferred upon the lands within the district, there is then no legal provision for placing any additional burdens. In

We do not need to consider the provisions of the P'olitical Code relating to refunding bonds, nor to the sections relating to the calling of installments of taxes, further than to say that the assessment mentioned in the section refers to the estimated value of the improvements to the respective tracts of land placed thereon by the commissioners appointed to view the lands of the district, and that the several installments relate to the amount of money called for when the estimate is made as to the sum needed to pay the maturing bonds and maturing interest coupons thereon. The assessment to which we have referred underlies the bond issue, and if the assessment is equal to the benefits accruing to the lands, there is nothing left to support the bond issue to the extent, if and when such bond issue exceeds in value the amount of the assessment.

The provisions of the Political Code relating to the collection of money for the payment of bonds and interest coupons refer only to the collection of installments. The installments are not separate assessments. There is only one assessment, although there may be a number of installments; that is, the payment of the one assessment may be called for at different times and in different amounts until the whole of the assessment has been called for. As we read the Political Code it contemplates that there shall be but one assessment

A reading of the different Political Code provisions prescribing the procedure to be followed in enforcing the payment of any particular installment shows very clearly that a long time must necessarily intervene. between the calling of the installment and the realization, if ever, of the collection of any delinquent taxes.

Section 3466a, supra, after providing for the sale of lands upon which taxes had become delinquent, empowers the trustees of the district, when the land has been sold to the treasurer as trustee, to manage and control the land, lease it out to tenants upon such reasonable rental as may be determined upon, and the revenues derived therefrom credited to the particular delinquent tract.

From this résumé of the Political Code it is evident that the holders of unpaid bonds have no speedy or adequate remedy; that - the process of levying supplemental or additional assessments is not only long and tedious, but involves court proceedings and uncertainties which readily distinguish the right of such bondholders from the holders of bonds issued under and in pursuance of the irrigation laws of the state. These contingencies and differences we think differentiate the one from the other so that equitable principles which might not apply to one may be readily invoked and applied in the other in order that bondholders may have equal treatment and no one given special advantages.

The differences in the laws relating to irrigation districts and reclamation districts in other states from the code provisions of California must be kept in mind in considering the cases having to do with bonds of different districts. In the case of State ex rel. Bliss et al. v. Grand River Drainage Dist. of Livingston and Linn Counties, (Mo.) 49 S. W. (2d) 121 , 125, the Supreme Court of Missouri, in an action in mandamus, brought for the purpose of compelling payment of interest coupons, we find the following: “This Statute (referring to the Act of 1929), clearly contemplates that the taxing power with which a Drainage District is vested

The opinion in the Grand River Drainage District case further states that if the district were a private corporation with definite ascertainable assets, and those assets insufficient, when liquidated, to meet its obligations to creditors, principles of equitable adjustment could probably be invoked, but that the district was a municipal corporation with general assets, etc., and that its indebtedness was payable solely from a special fund to be derived from taxation of lands lying within the boundaries of the district.

The circumstances of the Grand River Drainage District case are not similar to those presented here. In the former case it is shown that the officers are proceeding with the collection of the taxes, and the court there was justified in assuming that a sufficient amount to pay all the maturing

Again, section 10788 of the Revised Statutes of Missouri providing for the issue of bonds by reclamation districts makes all the deferred interest coupons interest-bearing, that is to say, whenever an interest coupon is presented for payment, and funds are not sufficient to redeem the same, that coupon bears interest from the date of its presentation for payment until it is paid. The reading of the section is as follows: “All bonds and coupons not paid at maturity shall bear interest at the rate of 6 per cent per annum from maturity until paid, or until sufficient funds have been deposited at the place of payment, and the said interest shall be apportioned by the Board of Supervisors out of the penalties and interest collected on delinquent taxes, or any other available funds of the District.' ’ There is no similar provision in the Political Code of this state. Under the California reclamation laws interest coupons do not bear interest, and the holder thereof is not compensated for any delay caused by payment to a bondholder who has previously presented his interest coupons for payment and exhausted the fund available therefor.

The opinion of the court in the Grand River Drainage District case, supra, does not indicate that the court had before it or considered any question as to the moneys collected on account of the special improvement assessment being a trust fund to which all bondholders must look for payment, and to payment out of which each bondholder was equally entitled. That money paid into the hands of a depositary on account of improvement assessments is a trust fund is supported by all the authorities, some of which we will hereafter cite.

In the cases of Meyer v. Porter, 65 Cal. 67 [ 2 Pac. 884 ], and Meyer v. Widber, 126 Cal. 252 [ 58 Pac. 532 ], payment was allowed in full in mandamus proceedings, but an examination of those cases discloses that what we are here presenting was not considered. The opinions in those cases entirely overlooked the fact which exists in this ease of the moneys collected upon a special assessment constituting a trust fund.

Some weight appears to have been given in the Widber case to the fact that six months elapsed before any of the coupon holders had instituted an action; nor is there any

In Bates v. McHenry, 123 Cal. App. 81 [ 10 Pac. (2d) 1038 ], relied upon by the petitioner, this court was dealing exclusively with the irrigation laws which we have pointed out as being essentially dissimilar in its provisions from the reclamation district laws. We there called attention to the particular wording of section 52 of the irrigation district laws, as amended in 1931 (Stats. 1931, p. 172), section 1, Avherein the irrigation laws were amended providing that bonds and interest coupons should be paid upon presentation. Unpaid bonds and coupons could be registered, bear interest and thereafter take priority in payment. Those questions are not involved here.

Again, the moneys raised to pay the indebtedness of an irrigation district depend upon an inexhaustible taxing power which may be continued from year to year until all outstanding obligations are discharged. Under the reclamation laws this is not the case. A special fund, fixed by a special assessment, depending in its amount upon benefits conferred, is created for the redemption of the bonded indebtedness of the district. The holder of a bond against an irrigation district receives compensation on account of deferred payments, and at the same time relies upon the inexhaustible taxing power of the district. The holder of a bond issued by a reclamation district has simply one fund raised, as we have stated, out of which he may expect payment, and the taxing power is limited and circumscribed, and cannot constitutionally go beyond the benefits conferred upon the land.

It follows from these considerations that while if it were necessary to reaffirm everything said in the case of Bates v. McHenry, supra, that case would not be controlling here by reason of the differing provisions of the acts of the legislature involved in the respective cases.

The circumstances under which a writ of mandate will be issued requiring payment in full, are clearly stated in the opinion of the Supreme Court of Florida in the case of State ex rel. Gillespie et al. v. Carlton et al., (Fla.) 138 South. 612 , to wit: “To support relator’s contentions in this respect, there appear to be many adjudicated cases which hold that the rule is that, when a fund has accrued in the hands of a debtor which is insufficient to pay all bonds payable out of such fund, one bondholder of the series for which the raising of such fund was pledged when the bonds were issued may have his bonds ordered paid in full from the funds in his debtor’s hands, even though the fund, at the time of bringing suit, is not sufficient to pay all the outstanding bonds then matured, it appearing that the funds in hand are accruals from the exercise of an inexhaustible power of taxation, and that the whole fund required, of

In the recent ease of Meyers et al. v. City of Idaho Falls et al., 52 Idaho, 81 [ 11 Pac. (2d) 626 ], the Supreme Court of Idaho, in considering the nature of the fund collected on account of special improvement assessments, held as follows: “Under the statute the municipality had the power to levy the entire cost of each improvement in one assessment. Its officers chose, however, to issue bonds for- a ten-year period. The bonds succeed to the lien of the original assessment, and the assessments thereafter levied and collected are a ‘trust fund pledged by law for the payment of the bonds’. (Jewell v. City of Superior, (C. C. A.) 135 Fed. 19 .) The only duty with which the city officials are charged is the levying of assessments and payment of the funds collected to the bondholders (More v. City of Nampa, (C. C. A.) 18 Fed. (2d) 860), and there is no contention that the city has not fulfilled its obligation in this connection. The deficiencies which exist have arisen because the owners of certain parcels of property within each district failed to pay their assessments and general taxes, and the property reverted to the county, freed of the liens of the bonds. It follows, as hereinbefore stated, that the funds

In addition to the foregoing cases holding such moneys to be trust funds, we may also cite the following: Conway v. City of Chicago, 237 Ill. 128 [ 86 N. E. 619 ]; Wells v. Village of Wilmette, 193 Ill. App. 30 ; People v. Flynn, 265 Ill. 414 [ 106 N. E. 961 ].

In the case of Roschild v. Village of Calumet Park, 262 Ill. App. 96 , an action to enforce pro rata payment of bonds and interest coupons based upon a special assessment, it was held that the court might properly direct payment of a certain percentage of the moneys held by the treasurer or custodian of such funds, so as to pay to each bondholder his proportionate share of the trust fund.

In People ex rel. Security Trust Co. of Rochester v. Treasrer of Monroe County, 191 N. Y. 15 [ 83 N. E. 661 ], the Court of Appeals of the State 'of New York upheld a mandamus proceeding directing the payment of a percentage of the moneys collected based upon a special improvement assessment, where the moneys were insufficient to pay the entire indebtedness, holding that the bondholders were entitled to be paid such percentage pro rata out of the moneys in possession of the treasurer; that such distribution should not be delayed indefinitely or await the possibility of collecting all of the assessment, or until sufficient funds might possibly be collected to make payment in full. The procedure pointed out in that case, and also in the case decided by the appellate court of Illinois, supra, seems to us to be both just and equitable. The holding of those cases is to the effect that the treasurer or custodian of the funds collected on account of the special assessment may properly he required to pay, out of the funds so collected, to each of the bondholders, his proportionate share thereof, and that mandamus is a proper remedy; that the person bringing the mandamus proceeding is entitled only to his proper

It appearing from the record in this case that the respondent now has in her possession as custodian of the funds of Reclamation District No. 2047, the sum of $50,878.50, against which there is an outstanding indebtedness due and payable in the sum of $65,340, distribution can be made of a substantial sum to the respective bondholders, and that at least payment can be made to the extent of 75 cents on each dollar of the indebtedness evidenced by the interest coupons now due.

It is therefore ordered that a writ of mandate issue directing the respondent to make payment in that sum to the petitioner herein, and also to the intervener.

Thompson (R. L.), J., concurred.