CITY OF CLINTON, OKL. v. FIRST NAT. BANK IN CLINTON, OKL.

• Citation: 39 F. Supp. 909
• Decision Date: 18 July 1941
• Docket Number: Civ. No. 66.
• Parties: CITY OF CLINTON, OKL., ex rel. SCHUETTER, v. FIRST NAT. BANK IN CLINTON, OKL., et al.
• Court: U.S. District Court — Western District of Oklahoma

39 F. Supp. 909

CITY OF CLINTON, OKL., ex rel. SCHUETTER, v. FIRST NAT. BANK IN CLINTON, OKL., et al.

Civ. No. 66.

District Court, W. D. Oklahoma.

July 18, 1941.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Henry G. Snyder and Walter A. Lybrand, both of Oklahoma City, Okl., and W. R. Banker, of Muskogee, Okl., for plaintiff.

Meacham, Meacham & Meacham, G. C. Loving, Arney & Barker, and R. H. Dunn, all of Clinton, Okl., and Jones & Wesner, of Cordell, Okl., for defendants.

George H. Shirk and Arnold T. Fleig, both of Oklahoma City, Okl., amici curiae.

VAUGHT, District Judge.

This opinion applies in part, also, to cases Numbers 192, 244, 258, 373, 435, 442, 519, 535, 539, 563, 575, 578, 583, 589, 599, 607, 608, 609, 614, 615, 617, 618, 620, 622, 627, 631, 632, 634, 642, 646, 694, and 695, now pending in this court. In all of these cases, suits have been filed in the name of the respective cities by and for the benefit of the bondholders owning paving bonds issued by the various cities named, for various street improvement or paving districts. The paving bonds were issued under the 1923 Act, Chap. 173, S.L.1923, 11 Okl.St.Ann. Chap. 3, § 81 et seq.

The various defendants have raised three main questions. The first question is applicable to all of the cases and the second and the third are applicable to certain of the cases. In order to facilitate the final disposition of these cases, all of the general matters in controversy are included in this opinion.

In all of these cases the defendants have pleaded the statute of limitations and, in support thereof, contend that, since the annual assessments have been delinquent for more than three years and no action in foreclosure had been instituted until three years after the tenth and final annual assessment had become delinquent, no action to enforce the payment of the bonds by foreclosure would lie since such action is barred by the statute of limitations.

These various bond issues were dated from January 5, 1924, to and including April 28, 1929, and the bonds were issued and the assessments levied to retire the bonds under the 1923 Act, supra. An examination of the 1923 Act, therefore, is necessary. Section 101 designates the property chargeable with the cost of paving improvements and provides for the apportionment of the costs. Section 103 is the important section in the consideration of these questions and is as follows: "Assessments in conformity to the appraisement and apportionment as corrected and confirmed by the governing body of such city or town, shall be payable in (10) equal annual installments, and shall bear interest at the rate of seven per cent (7%) per annum until paid, payable in each year at such time as the several installments are made payable. The governing body of said city or town shall, by ordinance, levy assessments in accordance with said appraisement and apportionment, as so confirmed, against the several lots and tracts of land liable therefor. Said ordinance shall provide that the owners of the property so assessed shall have the privilege of paying the amounts of their respective assessments without interest within thirty (30) days from the date of the publication of such ordinance. Such special assessments, and each installment thereof and the interest thereon are hereby declared to be a lien against the lots and tracts of land so assessed from the date of the publication of the ordinance levying the same, co-equal with the lien of other taxes and prior and superior to all other liens against such lots or tracts of land, and such lien shall continue as to unpaid installments and interest until such assessments and interest thereon shall be fully paid, but unmatured installments shall not be deemed to be within the terms of any general covenant or warranty. (Laws 1923, ch. 173, p. 285, § 23.)" Section 105 provides for the dates of payment of the assessments, interest, et cetera. Section 107 provides for the enforcement of the collection of assessments by legal action.

Section 103 makes the assessments and interest thereon a lien against the lots and tracts of land so assessed coequal with the lien of other taxes, and provides: "* * * and such lien shall continue as to unpaid installments and interest until such assessments and interest thereon shall be fully paid."

This act was construed by the Supreme Court of Oklahoma in Perryman v. City Home Builders, 121 Okl. 150, 248 P. 605, 606. The second and third paragraphs of the syllabus are as follows:

"Holders of municipal bonds issued for payment of street improvements under Session Laws Oklahoma 1907-08, c. 10, art. 1, payable in ten annual installments from a fund created from assessments against improvement district property, have a lien on the property continuing until assessments and interest are paid.

"The laws existing at the time of the issuance of municipal bonds, and under the authority of which they are issued, enter into and become a part of the contract in such a way that the obligations of the contract cannot thereafter be in any way impaired or its fulfillment hampered or obstructed by a change in the law."

In the foregoing opinion the court reviewed the paving laws of Oklahoma prior to the adoption of the 1923 Act, emphasized the principal features of the prior acts which were carried forward into the 1923 Act, and held that the lien created by the assessments for the payment of the paving bonds continues until such assessments and interest thereon are fully paid.

In Moore v. Otis et al., 275 F. 747, 751, the Circuit Court of Appeals, Eighth Circuit, in passing upon the Oklahoma statute, said:

"The law under which appellees obtained the bonds expressly guaranteed to them in our opinion an equality of liens with other taxes and also that such liens should continue to exist until the bonds were fully paid. * * *

"The laws existing at the time of the issuance of the bonds and under the authority of which they were issued, enter into and become a part of the contract in such way that the obligation of the contract cannot thereafter be in any way impaired or its fulfillment hampered or obstructed by a change in the law."

This case is cited with approval by the Supreme Court of Oklahoma in McGrath v. Oklahoma City, 156 Okl. 34, 9 P.2d 711.

The status of the bonds and the provision that the liens of the assessments levied to pay same should continue until the bonds were fully paid, were fixed by the statutes of the state and the construction placed thereon by the highest court of the state, at the time the bonds were issued.

The defendants contend that the decision of the State Supreme Court rendered March 4, 1941, in the case of Board of Education of Duncan, Okl. v. Johnston, Okl.Sup., 115 P.2d 132, not yet reported in State Report, supports their theory that these actions are barred by the statute of limitations.

It was evidently the intention of the Oklahoma Supreme Court that such ruling should not have application to property other than that owned by municipal corporations, or branches of the sovereignty, where the assessments must be raised by general taxes. Even then such decision may not impair the contractual rights of bondholders, because not only the statutes as they existed at the time the bonds were issued, but also the judicial construction then placed upon such statutes became a part of such bond contract.

The rule is stated in Board of Education of Town of Carmen, Okl., et al. v. James, 10 Cir., 49 F.2d 91, 96, thus: "The validity of municipal bonds arising in a suit in a federal court will be determined by the law as judicially declared by the highest court of the state when the bonds were issued, and the rights and obligations of the parties, which accrued under such a state of the law, will not be affected by a different course of judicial decisions subsequently rendered, any more than by subsequent legislation. Douglass v. County of Pike, 101 U.S. 677, 25 L.Ed. 968; Wilkes County v. Coler, 180 U.S. 506, 531, 21 S. Ct. 458, 45 L.Ed. 642; Id., 190 U.S. 107, 23 S.Ct. 738, 47 L.Ed. 971; Loeb v Columbia Township, Trustees, 179 U.S. 472, 490-493, 21 S.Ct. 174, 45 L.Ed. 280; First National Bank v. Obion County (D.C. Tenn.), 3 F.(2d) 623, 627; Thompson v. Perrine, 103 U.S. 806, 26 L.Ed. 612."

The same rule was stated in Douglass v. County of Pike, cited in the above case, as follows at page 686 of 101 U.S., 25 L.Ed. 968: "As a rule, we treat the construction which the highest court of a State has given a statute of the State as part of the statute, and govern ourselves accordingly; but where different constructions have been given to the same statute at different times, we have never felt ourselves bound to follow the latest decisions, if thereby contract rights which have accrued under earlier rulings will be injuriously affected."

At the time the bonds here under consideration were issued, the Oklahoma Supreme Court had held that the lien of the assessments for street improvements "shall continue as to unpaid installments and interest until such assessments and interest thereon shall be fully paid," as the statute itself states. The above cited cases construing such statute held that it meant just what it said. This became a rule of property which may not be affected by later decisions.

No cases have been cited from other states, holding the statute of limitations applicable where said statutes have a parallel provision to that of Oklahoma, namely, that the lien of the assessments and each installment thereof shall continue until paid, except from states where the statute of limitations specifically includes the lien of taxes. Such cases from other jurisdictions, consequently, are not controlling on the question here involved.

A clear distinction has not been made in all of the briefs submitted, between the street improvements assessments and the street improvement bonds. Only the assessments constitute liens upon the real...