Brown-Crummer Inv. Co. v. City of Burbank

• Decision Date: 10 December 1936
• Citation: 17 F. Supp. 469
• Court: U.S. District Court — Southern District of California
• Parties: BROWN-CRUMMER INV. CO. v. CITY OF BURBANK et al. (two cases).

17 F. Supp. 469

BROWN-CRUMMER INV. CO. v. CITY OF BURBANK et al. (two cases).

District Court, S. D. California, Central Division.

December 10, 1936.

H. A. Postlethwaite, of San Francisco, Cal., Elcock & Martin and James G. Martin, all of Wichita, Kan., and Roscoe R. Hess, of Los Angeles, Cal., for plaintiff.

Ralph W. Swagler, City Atty., of Burbank, Cal., and James H. Mitchell, William Mackenzie Brown, and Leon T. David, all of Los Angeles, Cal., for defendant City of Burbank.

Everett W. Mattoon, Co. Counsel, and J. H. O'Connor, Deputy Co. Counsel, both of Los Angeles, Cal., for defendant county officials.

E. C. Pyle, of Los Angeles, Cal., for interveners Paul B. Hammond et al.

Victor Ford Collins, of Los Angeles, Cal., for intervener Gertrud Wieczorek.

McCORMICK, District Judge.

The Brown-Crummer Investment Company, a corporation of the State of Kansas, as complainant, filed two suits in equity against the City of Burbank, a municipal corporation in the County of Los Angeles, State of California, and certain public officers thereof and of Los Angeles County whose official duties relate to street improvement proceedings under applicable statutes of the State of California, as defendants. The two suits have been consolidated. The issues in both are identical, except that one relates to street improvement bonds that were issued by the City of Burbank as series VII to pay for the improvement of part of Grinnell Drive and other streets in a locality known as the Ben-Mar Hills subdivision in said city, while the other concerns series VIII of the same street improvement bond issues. Series VII of the bonds was issued on August 25, 1925, and series VIII on June 17, 1926.

The bills of complaint, after setting out the proceedings taken by the municipal authorities under the California Improvement Act of 1911 (Stat.1911, p. 730, as amended), which culminated in the issuance of the bonds in suit for the purpose of raising sufficient money to discharge finally the unpaid assessments on the cost of the improvement, amounting to $311,355.34, aver the purchase and ownership by complainant of series VII bonds in the principal amount of $114,000, and of series VIII bonds in the principal sum of $35,000. It is also alleged that the bonds bear interest at the rate of 7 per cent. per annum and that they are coupon bonds maturing and payable in ten equal annual installments commencing July 2, 1926, as to series VII, and July 2, 1927, as to series VIII.

These allegations in the bills of complaint are not denied by the defendants and stand as admitted by them and by all other parties appearing in the suits. It is then alleged that beginning with the fiscal year 1925-1926 assessments that should have been paid and collected became delinquent and unpaid upon each of said series of bonds and that the real property upon which the delinquent assessments were and are a lien was from time to time sold at tax sales, and that the City of Burbank, or the State of California on behalf of said city, became the purchaser thereof at such sales pursuant to applicable statutes of California.

These allegations are also admitted by defendants, except that the validity of the respective tax sales to the city, or to the State of California as the agent of the city, is contested and denied by the defendants.

The bills then substantially allege that complainant duly presented for payment at the respective due dates all bonds and coupons owned by it, but that no payments have been made and that the authorities of the municipality have refused to make any payment, upon the sole ground that there was not sufficient money in their hands in the funds created for the payment of the bonds and interest coupons with which to pay the entire amount that was due upon the respective series of bonds that were outstanding and unpaid.

Then follow averments in the complaint, some on information and belief, of multifarious irregularities, omissions, and misconduct by the municipal authorities and the city's agents regarding their respective duties relative to complainant's bonds under the California Improvement Bond Act of 1915 (Stat.1915, p. 1441, as amended). These assignments cover twelve pages in the complainant's bill, and it is considered unnecessary to set them out in detail in this memorandum. They all relate to governmental acts and to what complainant claims are the statutory duties of such public officers under the aforesaid Improvement Bond Act of 1915. There is no claim of dishonesty or corrupt motives by any one.

There is an allegation by complainant that, notwithstanding repeated demands by it and by others that the defendants and the city council of Burbank cause assessment foreclosure suits to be instituted and prosecuted "against the delinquent lands and for the collection of the delinquent installments of assessments," as provided for by sections 11(b) and 11(c) of the Improvement Bond Act of 1915 (as amended by St.1927, p. 889), the defendants did not bring or prosecute any of such foreclosure suits until June, 1930, that those suits that have been commenced have not been diligently prosecuted, and that no sales have been made or attempted as the result of the foreclosure suits commenced, and therefore no moneys have been paid into the redemption fund by reason of such foreclosures. It is further averred by complainant, on information and belief, that, because of the neglect and delay by the defendants in commencing the foreclosure suits and prosecuting them to judgment and sale, the lands cannot be sold for an amount sufficient to discharge the delinquencies, but that, if defendants had exercised diligence, the lands could and would have been sold for an amount not less than the several judgments against them, and the moneys derived therefrom would have been transferred into the redemption fund and the delinquencies in complainant's bonds would have been paid.

At the hearing of these suits on the merits the complainant dismissed the actions against all of the individual defendants in their personal capacities, and in their brief the complainant's attorneys state: "While various City and County officials were originally named as parties defendant in both cases, yet, the plaintiff is primarily seeking money judgments against the City of Burbank, the other parties being proceeded against in their official capacities so that any decree of the Court herein rendered may be readily enforced."

The demand of complainant in substance is that it have a general judgment against the City of Burbank for the face value of its bonds and interest coupons which are past due and delinquent, together with interest after maturity on the principal sums of bonds presented at the respective due dates, and that this court should regard the defendant municipality as a trustee whose absolute liability and obligation under the bonds and under the aforesaid Improvement Bond Act of 1915 and in the light of the evidence in this record is to pay and discharge the respective installments of principal and interest when due, and that therefore the city should now be compelled to account to complainant accordingly.

Issue has been joined by defendants by separate answers, wherein no claim is made by any of them to the money that has been collected upon the assessments and that is now in the hands of public officers or agents of the city or impounded in the registry of this court for the account of said bonds. On the contrary, the defendant city and its officers admit that all such money belongs to the bondowners and will be distributed and paid to the several bondowners as their respective rights thereto shall be determined by the court. The defendants, however, deny that the city or its public officers or tax collection agencies are trustees of the bondholders to the extent asserted by complainant, and also deny that the city is generally liable for the payment of the delinquencies that have ensued in any of the bonds of complainant or other bondowners.

The city also alleges that after conferences with complainant's attorney during the month of October, 1929, the council of the city, at complainant's application and request, passed resolutions on December 5, 1929, ordering and directing that all assessments then delinquent upon the assessments levied for the purpose of paying off all bonds in series VI, VII, and VIII be foreclosed, and that such foreclosure suits were ordered and commenced at the request and express consent of the complainant. After denying that these suits have not been prosecuted with diligence or that the suits have been futile, the city alleges that a considerable sum of money has been paid into the redemption funds by those against whom the foreclosure proceedings have been commenced, in order to redeem their property from foreclosure sales. The city acknowledges its liability to pay all money now in its treasury that has been deposited as payments on the bonds in suit, and asks this court to determine priorities and rights thereto among the bondholders respectively and to decree distribution accordingly.

Subsequent to the institution of the two actions, the complainant by supplementary bill obtained an order of this court dated February 6, 1935, that brought into the consolidated suit as interveners all parties who owned or held bonds in any of the eight series of street improvement bonds that the city had issued for the improvement of part of Grinnell Drive, and also by such supplementary bill the complainant had brought into and had impounded in the registry of this court all of the money that had been accumulated in the redemption funds in the hands of the city treasurer of Burbank for the payment and retirement of outstanding street improvement bonds. Upon the petition of complainant the defendants have been restrained until further order of the court from paying or disbursing to any one any money that has been paid into the...