First Nat. Bank v. Obion County

• Decision Date: 28 October 1924
• Docket Number: No. 27.,27.
• Citation: 3 F.2d 623
• Parties: FIRST NAT. BANK OF COLUMBUS, OHIO, v. OBION COUNTY, TENN., et al.
• Court: U.S. District Court — Western District of Tennessee

3 F.2d 623 (1924)

FIRST NAT. BANK OF COLUMBUS, OHIO, v. OBION COUNTY, TENN., et al.

No. 27.

District Court, W. D. Tennessee, E. D.

October 28, 1924.

G. W. L. Smith, of Brewton, Ala., and Anderson, Rothrock & Carroll, of Jackson, Tenn., for plaintiff.

Pierce & Fry, W. M. Miles, and H. H. Lannom, all of Union City, Tenn., and Taylor & Adams, of Trenton, Tenn., for defendants.

ROSS, District Judge.

The plaintiff brought this bill in equity to recover on certain bonds called the bonds of Obion River drainage district No. 2, issued by certain officials of Obion county, Tenn. The amount sought to be recovered is the sum of $11,643.74 with interest. The total issue of such bonds held by plaintiff is the sum of $62,229 covering a period of time from 1913 to 1932.

Plaintiff is a duly organized national bank of Columbus, Ohio, and the particular defendants sued are: (1) Obion county, Tenn.; (2) the county court of said county, vested with power to create and govern said drainage district; (3) the county judge of Obion county, as chairman of the county court or governing body thereof; (4) the trustee of Obion county; (5) the board of directors of Obion River drainage district No. 2 of Obion county; (6) several individuals sued as the delinquent taxpayers as the owners of lands within the drainage district mentioned.

The bill contains the necessary allegations to show jurisdiction in this court and alleges in brief that there was created in Obion county, Tenn., a drainage district under the style of Obion River drainage district No. 2 in the year 1913; that bonds were issued by Obion county, Tenn., to the total amount as stated of $62,229, which went into the hands of plaintiff as a bona fide holder for value; that at the time of the filing of the bill the bonds maturing in the years 1921 and 1922, with interest coupons attached, amounted to the sum sued for. It is further alleged that the assessments on the lands within said drainage district for the years 1919, 1920, and 1921 were delinquent in the total sum of $12,856.56, upon which it is claimed plaintiff has a lien for the payment of the amount sued for; that said drainage district was regularly established under the laws of Tennessee, embraced within its bounds 4,030 acres; that the bonds were issued by Obion county by its proper officials; and that the duty rests upon the designated authorities of Obion county to collect the assessments against said lands and apply the same to the liquidation of the bonds issued for the construction of said drainage district.

By the prayer of the bill it is sought to have a decree against all the defendants, to have the amount of the decree declared a lien upon the lands within said drainage district and certain funds in the hands of the trustee collected as the amounts paid in by the owners of lands within the district, to have the amount held by the trustee applied on the judgment, and to have a decree against Obion county for the amount of the bonds issued with interest thereon and attorney's fees. A decree is further sought against each individual landowner for his pro rata share of the bonds with interest thereon and attorneys' fees and the costs of this proceeding, and against all purchasers of any of said lands, their heirs or assigns, for any and all other assessments which have been made, and for general relief.

Answers were filed by Obion county, the county officials, and certain of the individuals sued as such. In so far as it is necessary to here state, issues were presented denying any liability on the part of the county or the individual county officials and certain of the individuals sued. The creation and construction of the district is admitted, and it is further admitted that the district lies wholly within Obion county. The jurisdiction of this court is denied as to the right of the plaintiff to sue the individuals made defendants to the bill, and certain of the other defendants; but it is admitted that certain of the assessments claimed by plaintiff are delinquent and the bonds sued on are unpaid. However, the individuals answering as well as the officials deny the right of any individual recovery as to them respectively.

The matter is presented upon the pleadings and exhibits thereto and a stipulation of counsel filed in the case, wherein it is agreed in substance that the matters to be considered shall be the pleadings of the respective parties, the bonds sued on, the affidavit of G. W. L. Smith, counsel for plaintiff, the letter of the trustee of Obion county showing that he has in his hands $2,595.20, collected as assessments against the lands, which sum should be paid to plaintiff, a list of the delinquent taxpayers in said district, the drainage laws of Tennessee, and the agreement as to what would be the testimony of Geo. R. Kenney, former county judge of Obion county, and F. J. Smith, the attorney acting in the creation and organization of said drainage district with the exceptions of plaintiff to this testimony. There is further presented the draft of an order proposed for entry in the case agreed to in part by counsel representing plaintiff and counsel for Obion county. While this proposed decree is binding upon no one, it may be considered as the respective admissions of the parties agreeing thereto to the extent of such agreements. The respective contentions of the parties have been ably presented by oral arguments made and briefs filed in the case.

The question of the jurisdiction of this court may be disposed of without comment, for it is clear that plaintiff had a right to come into this court to determine the question of its right to recover on the bonds in the first instance, and inasmuch as the court has jurisdiction for that purpose, all matters incident to the proceedings and necessary to a determination of the rights of the parties or to secure such rights follow as a matter of law, as has been often decided.

The right of plaintiff to a judgment on the bonds in question against Obion River drainage district No. 2 is unquestioned and in fact conceded, as is the right of plaintiff to have applied thereon the funds collected from assessments against the lands within the drainage district and now in the hands of the trustee. In so far as judgments are sought against the individual owners of lands, plaintiff's right is limited to a judgment to the extent only of the assessments against the lands of that individual within the drainage district, and such judgment can be enforced against no other property of the individual than such land. That is to say, the individual landowner is liable only to the extent of the value of the land within the district, as it is specifically provided by statute that no other or further liability exists. Acts of Legislature of Tennessee of 1909, c. 185, §§ 24, 33, 34.

It seems to be conceded that the drainage district is a failure; that the canal which was dug for the purpose of draining the lands embraced within the district is inadequate and has failed to accomplish the objects sought. It appears that many of the owners of land within the district have abandoned their lands rather than pay the taxes or assessments imposed thereon, and that others agree that the lands may be sold for such assessments. It appears further from the statements of counsel that several of the various tracts are delinquent in the matter of state and county taxes, and that the lands embraced within the district are not worth the amount of the bonds issued. Therefore the principal contention in this case, and really that upon which plaintiff most earnestly insists, is as to whether there exists a right to a judgment against Obion county. In other words, are the bonds sued on the obligation of Obion county, Tenn., or is the plaintiff limited to the lands embraced within the drainage district as security or as the property out of which collection must be enforced? Whether or not the county of Obion is liable depends upon whether the county had authority to issue such bonds. Plaintiff insists that at the time the bonds were issued ample authority existed under the statutes of Tennessee to warrant the county in placing these bonds upon the market as the obligations of Obion county for the payment of which the entire resources of the county stood pledged. The contention of the county is that it had authority to issue bonds as it did through its proper officers, but that for the payment of such bonds plaintiff must look to the lands embraced within the drainage district, for the construction of which they were issued.

The right of a county in Tennessee to issue negotiable interest-bearing bonds or warrants must be found within the Constitution and statutes of the state. In the absence of such authority, no right whatsoever exists whereby a county can bind itself by time certificates, bonds, or warrants, nor has the county court or any county authority, in the absence of a statute expressly conferring such authority, the power to issue negotiable bonds of the county for any purpose whatsoever. This has been often determined and has been the settled law of Tennessee almost from the time of the adoption of the Constitution of the state in 1870. Colburn v. Railroad, 94 Tenn. 43, 49, 50, 28 S. W. 298; Burnett v. Maloney, 97 Tenn. 715, 37 S. W. 689, 34 L. R. A. 541; Richardson v. Marshall County, 100 Tenn. 349, 45 S. W. 440; Weil v. Newbern, 126 Tenn. 263, 148 S. W. 680, Ann. Cas. 1913E, 25. And the power to issue bonds and incur extraordinary debts can spring from no other source than the Constitution and laws of the state, and in Tennessee such powers are strictly construed. Pulaski v. Gilmore, 3 Shan. Cas. 115; Milan v. Railroad, 79 Tenn. (11 Lea) 334; Johnson City v. Railroad, 100 Tenn. 138, 44 S. W. 670; Burnett v. Maloney, supra; Richardson v. Marshall County, supra. Nor has a county a right to vary the bonds authorized by the statute. Burnett v. Maloney, supra. And bonds...