City of Shidler v. HC Speer & Sons Co.

Decision Date21 December 1932
Docket NumberNo. 703.,703.
Citation62 F.2d 544
PartiesCITY OF SHIDLER v. H. C. SPEER & SONS CO. et al.
CourtU.S. Court of Appeals — Tenth Circuit

M. L. Holcombe, of Pawhuska, Okl. (Clarence Lohman, of Pawhuska, Okl., and W. R. Bleakmore and John Barry, both of Oklahoma City, Okl., on the brief), for appellant.

Streeter B. Flynn, of Oklahoma City, Okl. (R. M. Rainey and Rainey, Flynn, Green & Anderson, all of Oklahoma City, Okl., and L. E. Mifflin, Co. Atty., of Idabel, Okl., on the brief), for appellees.

Before LEWIS and McDERMOTT, Circuit Judges, and POLLOCK, District Judge.

McDERMOTT, Circuit Judge.

At an election called for that purpose, the property owners of the City of Shidler voted to issue its negotiable bonds for the construction of municipal waterworks. The bonds were issued and sold to innocent purchasers for value, and the proceeds used for the construction of the waterworks, which the city now enjoys. The first interest coupons were paid, but the city refused payment of subsequent interest coupons, and of the bonds maturing in 1927.

The plaintiff, a nonresident of Oklahoma and the owner of $5,000 of these bonds, brings this suit in equity. The issuance of the bonds, their purchase by the plaintiff in reliance upon the recitals therein and the certificate of the Attorney General appended thereto, are alleged. The bill also alleges that the city has collected taxes for the purpose of paying said bonds, which it is threatening to divert to other purposes, and has otherwise repudiated the obligations thereof; and that the County Excise Board has refused to levy the taxes necessary to pay them. The prayer is that the defendants be enjoined from diverting taxes collected for the purpose of paying said bonds, and that an accounting of such moneys be had; that such funds be applied to the payment of the bonds, and if they be insufficient, that judgment be rendered against the city for the balance due; that the County Excise Board be required to levy such taxes as are necessary to retire the bonds as they mature. The holders of the balance of the issue, two of them being residents of Oklahoma, intervened and prayed for the same relief. The answer denies that the bonds are valid obligations of the city because the voters cast their ballots at one polling place instead of three, and because the election was held to be invalid by a decision of the Supreme Court of Oklahoma rendered more than two years after the bonds were issued and sold; it denies that plaintiff and interveners acquired the bonds in good faith.

There is little dispute in the facts. The parties agreed that all of the interveners, except Honnold, acquired their bonds before maturity, for value, and in good faith, without actual knowledge of any defect therein or any pending litigation, and in reliance upon the recitals contained in the bond. Evidence was taken as to the good faith of the plaintiff and Honnold, from which the trial court found, upon ample evidence, that they stood in the same stead. The trial court made findings of fact and entered a final decree (1) enjoining all of the defendants from appropriating any of the moneys in the sinking fund created for the purpose of paying such bonds; (2) directing the City Treasurer to pay into the registry of the court the moneys in this sinking fund; (3) rendering judgments against the city for the amounts due and unpaid upon the bonds; (4) directing the County Excise Board to make sufficient tax levies to pay the judgments so rendered, and the interest and principal of the bonds as they mature; (5) directing the City Treasurer to transmit to the fiscal agency of the state the moneys collected under the levies to be made by the County Excise Board; (6) disbursing the moneys paid into the registry of the court to those entitled, the amounts so disbursed to be credited upon the judgments against the city; (7) reserving jurisdiction at the foot of the decree, to make such further orders as might be necessary in the premises.

From this decree, an appeal was prosecuted by the City of Shidler alone. Appellees move to dismiss on the ground that the decree is joint, and there were no proceedings in summons and severance. The point, if well taken, is jurisdictional. Newton v. Consolidated Gas Company, 264 U. S. 571, 44 S. Ct. 401, 68 L. Ed. 855; Id., 265 U. S. 78, 82, 44 S. Ct. 481, 68 L. Ed. 909; Garcia v. Vela, 216 U. S. 598, 30 S. Ct. 439, 54 L. Ed. 632; Hardee v. Wilson, 146 U. S. 179, 13 S. Ct. 39, 36 L. Ed. 933. The rule is only applicable to joint decrees, Osage Oil & Refining Co. v. Mulber Oil Co. (C. C. A. 10) 38 F.(2d) 396; whether the decree is joint is to be determined by the face of the decree. Hartford Accident & Ind. Co. v. Bunn, 285 U. S. 169, 52 S. Ct. 354, 76 L. Ed. 685. It is argued that the part of the decree which renders judgment against the city is separable from the parts directed against the City Treasurer and the County Excise Board, who have not appealed. If that is so, then a final decree stands which commands the County Excise Board to levy the necessary taxes to pay the bonds, and commands the City Treasurer to pay the moneys so raised to the plaintiff and the interveners. That is the substance of the relief sought; whether the judgment is valid is pretty close to a moot question. However, the decree is open to the interpretation that the relief granted against the city and county officers was intended to be ancillary to and dependent upon the judgment rendered against the city. Cf. Reed v. Allen, 286 U. S. 191, 52 S. Ct. 532, 76 L. Ed. 1054. Because the decree is open to that construction, and because a consideration of the case upon the merits arrives at the same result, we pass on to such consideration.

Appellant challenges the jurisdiction of the trial court because two residents of Oklahoma were permitted to intervene. The objection is not well taken. Supreme Tribe of Ben Hur v. Cauble, 255 U. S. 356, 41 S. Ct. 338, 65 L. Ed. 673; Boynton v. Moffat Tunnel Improvement Dist. (C. C. A. 10) 57 F. (2d) 772, 783, certiorari denied, 53 S. Ct. 20, 77 L. Ed. ___.

Section 27, article 10 of the Oklahoma Constitution provides:

"Any incorporated city or town in this State may, by a majority of the qualified property tax paying voters of such city or town, voting at an election to be held for that purpose, be allowed to become indebted in a larger amount than that specified in section twenty-six, for the purpose of purchasing or constructing public utilities, or for repairing the same, to be owned exclusively by such city: Provided, That any such city or town incurring any such indebtedness requiring the assent of the voters as aforesaid, shall have the power to provide for, and, before or at the time of incurring such indebtedness, shall provide for the collection of an annual tax in addition to the other taxes provided for by this Constitution, sufficient to pay the interest on such indebtedness as it falls due, and also to constitute a sinking fund for the payment of the principal thereof within twenty-five years from the time of contracting the same."

This is a self-executing grant of power. Dunagan v. Town of Red Rock, 58 Okl. 218, 158 P. 1170; State v. Short, 113 Okl. 187, 188, 240 P. 700; St. Louis-San Francisco R. Co. v. Andrews, 137 Okl. 222, 226, 278 P. 617. An ordinance was passed calling an election for the purpose of submitting to the qualified electors the question of whether the indebtedness, represented by these bonds, should be incurred for the purpose of providing funds with which to construct a waterworks system. The election proclamation, duly published, provided that the polling place should be at the city hall. There were three wards in the city. The bonds were carried by a substantial majority, the votes properly canvassed, and a bond ordinance passed. The bonds, dated January 15, 1924, are negotiable in form, and recite "that all acts, conditions and things required to be done, precedent to and in the issuance of this bond, have been properly done, happened and been performed in regular and due form and time as required by law."

The bonds were registered in the office of the Treasurer on February 22, 1924. On March 3, 1924, the Attorney General, Ex-Officio Bond Commissioner of the State of Oklahoma, appended to the bonds the following certificate:

"I HEREBY CERTIFY that I have examined a certified copy of the record of proceedings taken preliminary to and in the issuance of the within bond; that such proceedings and such bond show lawful authority for the issue and are in accordance with the forms and methods of procedure prescribed and provided by me for the issuance of bonds of like kind; and that said bond is a valid and binding obligation according to its tenor and terms, and, under the provisions of Article VI of Ch. 25, Compiled Statutes of Oklahoma 1921 (Sections 4283-4285), requiring the certificate of the bond commissioner of the State of Oklahoma thereon is incontestable in any court in the State of Oklahoma unless suit thereon shall be brought in a court having jurisdiction of the same within thirty days from the date of this approval of said bond appearing in the caption hereto."

On September 11, 1924, a contract was entered into for the construction of the waterworks, and the bonds were delivered to the contractor in payment therefor. The plaintiff and interveners thereafter acquired the bonds for value, without notice of any infirmity therein, or of any litigation challenging their validity, and in reliance upon the recitals in the bond and the certificate of the Attorney General. This finding of good faith, made by the trial court, is challenged as to the plaintiff and one of the interveners. The record amply supports the trial court's findings. The intervener Honnold was employed by the city to prepare the proceedings for the conduct of the election, and in 1926 contributed to the expense of counsel in an effort to procure a...

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