Brown-Crummer Inv. Co. v. City of Florala, Ala.

• Court: U.S. District Court — Middle District of Alabama
• Writing for the Court: KENNAMER
• Citation: Brown-Crummer Inv. Co. v. City of Florala, Ala., 55 F.2d 238 (M.D. Ala. 1931)
• Decision Date: 25 August 1931
• Docket Number: No. 432.,432.
• Parties: BROWN-CRUMMER INV. CO. OF WICHITA, KAN., et al. v. CITY OF FLORALA, ALA., et al.

55 F.2d 238 (1931)

BROWN-CRUMMER INV. CO. OF WICHITA, KAN., et al. v. CITY OF FLORALA, ALA., et al.

No. 432.

District Court, M. D. Alabama.

August 25, 1931.

G. W. L. Smith, of Brewton, Ala., and Elcock & Martin, of Wichita, Kan., for plaintiffs.

M. S. Carmichael of Montgomery, Ala., and F. J. Mizell, Jr., of Florala, Ala., for City of Florala, Ala.

A. R. Powell, of Andalusia, Ala., and Rushton, Crenshaw & Rushton, and Steiner, Crum & Weil, all of Montgomery, Ala., for various defendant landowners.

KENNAMER, District Judge.

The city of Florala, a municipal corporation in Covington county, Ala., issued and sold, pursuant to law and article 33 of chapter 43 the Alabama Code of 1923 (sections 2174-2237), two separate series of street improvement bonds, series D in the sum of $53,000, series C in the sum of $100,000, both series bearing 7 per cent. interest, payable semiannually, evidenced by interest coupons. These bonds represented the cost of street paving projects Nos. 3 and 4 and all of the bonds were signed by the mayor and treasurer of the city, and executed and sealed in the corporate name of the city of Florala. The city was the only obligor on said bonds and coupons. The bonds were issued, dated May 1, 1925, and made to mature ten years from date on May 1, 1935, and were issued under section 2227 of the Alabama Code of 1923. All of said bonds are of the denomination of $1,000 each, and the interest coupons of $30 each maturing semiannually. The bonds are in the usual form and recitals, being the promise of the city to pay, and in the face of each bond is also the following recital:

"This bond is issued by virtue and in pursuance of section 2227 of the Code of Alabama, of 1923, for the purpose of paving, grading, draining and improving the driveways, sidewalks, curbs and gutters and the crossings and intersections thereof in and along the avenues and streets and crossings and intersections thereof and public places within the corporate limits of the City of Florala, Covington County, Alabama, under and pursuant to an Improvement Ordinance adopted and approved by the Mayor and City Council of said City on December 4, 1923, and Resolution confirming such Ordinance and ordering the improvements made, duly and legally adopted and approved by the Mayor and City Council for said City January 1, 1924, within the area and limitations of such Ordinance and Resolution and the avenues, streets, portions of streets and public places, and crossings and intersections.

"This bond and the interest coupons hereto attached is a lien only against the property improved as aforesaid under said Ordinance and Resolution and as provided by the laws of Alabama, and against the funds to be collected from the assessments levied against the property improved and this bond and interest coupons attached are payable solely from the said assessments so collected and not otherwise, this bond and coupons not being the general obligation of the City of Florala, Alabama, nor shall said City be in any way liable to the holder hereof in case of failure to collect the same, as provided by section 2227, Code of Alabama, 1923, and the owner of this bond shall have all right, title and interest in and to said assessments, and the lien against the property assessed, with full power to enforce the collection of said assessments, as is conferred by said section 2227, Code of Alabama, 1923."

The city paid some of said bonds by calling them in, and also paid promptly all of the interest coupons at maturity until November 1, 1928, on one series and until May 1, 1929, on the other series, when the city declined to pay the interest, and, in effect, repudiated all of the bonds and coupons.

As alleged in the bill and shown by the evidence, the bonds were sold, the city received the money, the city streets were improved, and the work accepted by the city when both projects were completed. The special assessment taxes were levied by the city in the years 1924 and 1925 on the various lots of land composing the abutting property improved to pay the cost of each project and each series of bonds under article 33 of chapter 43, sections 2174 to 2237, of the Alabama Code of 1923. The bonds were issued, advertised, and sold, under sections 2270, 2281 of the Code. All of the assessments were declared past due and unpaid, were sued on, and the interest coupons were sued on that were past due. The bill also sought to establish and foreclose the liens on the abutting property improved. The bill as first filed was against the city of Florala and its officers only. Later at the suggestion of the then presiding judge, Clayton, the plaintiffs amended the bill, and made all owners of the abutting property improved parties defendant. The pleadings in the case were at a later time settled by the then presiding judge, W. I. Grubb. The defendants, city of Florala and landowners, made numerous defenses, contending, among other things, that the bill of complaint ought to be dismissed for want of federal jurisdiction on various grounds; that the bonds and interest coupons were null and void; that all of the special assessment taxes levied for the payment of the bonds and interest coupons were null and void; that all of the liens were null and void; that the landowners were not proper parties defendant; and that there was a misjoinder of parties. Some of these issues will be considered in the following order:

(1) The federal jurisdiction is challenged. The interest coupons do not contain the recitals above referred to, but plainly the provisions of the bonds govern the coupons the same as if they were expressly written thereon. These bonds and coupons were made by a corporation, the city of Florala, they were made payable to "bearer," and are instruments which may be sued on in a federal court under the Acts of Congress, paragraph 1, § 41, chapter 2, title 28 of the Code of Laws of the United States (28 USCA § 41 (1). Scott County v. Advance-Rumley Co. (C. C. A.) 288 F. 739, see first and second headnotes, see pages 742 to 743.

The controversy is between citizens of different states, and the amount exceeds $3,000, exclusive of interest and costs. The face of the interest coupons sued on amount to more than $16,200. The amount of the past-due assessments levied to secure the payment of series D bonds amount to more than $53,000. The amount of the past due and unpaid assessments levied to secure the payment of series C bonds amount to more than $100,000. All of such assessments are sued on. The lots of land assessed and on which liens are given to secure the payment of the bonds are averred to be not less than $120,000 in value in the plaintiff's amendment No. 3 to the bill. The city of Florala in the recitals on the bonds made a sale and conveyance to the bondholder of all liens and assessments made by the city on the various lots of land. The assessments when levied belonged to the city of Florala under sections 2203, 2202, 2200, and 2199 of the Alabama Code of 1923, but, when the bonds were issued under sections 2227 and 2225 of the Alabama Code of 1923, these assessments were transferred and sold by the city to secure the payment of the bonds. This sale, transfer, and conveyance, made by the city to the bondholders of these liens and assessments, was as a unit or single transaction, and had the effect of the city tying together all of the assessments and liens and passing them over to the bondholders. Therefore the controversy is primarily one between the bondholders and the city, and only incidentally can there be any controversy between the bondholders and plaintiffs on one side and the various property owners on the other side. The defendants contend that a separate suit exists between the bondholders and each landowner, and that plaintiffs have tied the assessments together to make the amount large enough to give the court jurisdiction.

If the amount in controversy is to be determined by the value of the property in litigation, authorities will be found that show that this value has been the test to fix the jurisdictional amount in controversy. Lion Bonding & Surety Co. v. Karatz, 262 U. S. 77-90, 43 S. Ct. 480, 67 L. Ed. 871; Hunt v. N. Y. Cotton Exchange, 205 U. S. 322, 27 S. Ct. 529, 51 L. Ed. 821.

A federal court has jurisdiction of an action to recover on coupons from municipal bonds aggregating in amount the jurisdictional amount, exclusive of interest, although a plea of limitations is sustained to some of the coupons sued on, which reduces the amount of recovery below that sum. Board of Com'rs of Kearny County, Kan., v. Vandriss, 115 F. 866, 53 C. C. A. 192, certiorari denied 187 U. S. 642, 23 S. Ct. 843, 47 L. Ed. 346.

In some cases the amount in controversy was the amount of the bonds that have been repudiated and are attempted to be made null and void, and in that class of cases the main controversy was, not the amount charged against each taxpayer, but the validity of the whole issue of the bonds, and federal jurisdiction was sustained. Brown v. Trousdale, 138 U. S. 389-397, 11 S. Ct. 308, 34 L. Ed. 987, loc. cit. 990.

In another case different owners of two promissory notes aggregating in jurisdictional amount were sued on to enforce the lien given to secure the payment of the notes, and the court held that it is enough if their interest collectively equals the jurisdictional amount. The notes were separate and distinct, but the security for the payment of both notes was common, single, and undivided. Troy Bank v. G. A. Whitehead & Co., 222 U. S. 39, 32 S. Ct. 9, 56 L. Ed. 81; Green County v. Quinlan, 211 U. S. 597, 29 S. Ct. 170, 53 L. Ed. 345; Beadles v. Smyser, 209 U. S. 393, 28 S. Ct. 522, 52 L. Ed. 849.

Another case where jurisdiction was sustained as to the amount in controversy was one where four promissory notes were secured by four different mortgages on separate pieces of real estate, but all of the notes and mortgages were made...