Hartz v. Truckenmiller

• Decision Date: 06 August 1940
• Docket Number: 45051.
• Parties: HARTZ et al. v. TRUCKENMILLER et al.
• Court: Iowa Supreme Court

293 N.W. 568

228 Iowa 819

HARTZ et al. v. TRUCKENMILLER et al.

No. 45051.

Supreme Court of Iowa.

August 6, 1940

Appeal from District Court, Osceola County; R. G. Rodman, Judge.

Action in mandamus brought by drainage bondholders against Board of Supervisors to require additional levy for the benefit of the bonds and for the restoration of funds allegedly diverted from the bond fund and action against county treasurer on account of moneys allegedly wrongfully paid by him from the bond fund for the redemption of other bonds. From decree for defendants, plaintiffs appeal.

Affirmed.

Carl H. Lambach, of Davenport, and Cornwall & Cornwall, of Spencer, for appellants.

H. E Narey, of Spirit Lake, and Geo. E. Gill and E. F. Kennedy both of Sibley, for appellees.

OLIVER, Justice.

This action was instituted in 1935 by the holders of certain drainage bonds issued by Osceola County, for joint drainage District No. 3, Dickinson and Osceola Counties, Iowa. The defendants are the members of the Board of Supervisors, the auditor and the treasurer of Osceola County. The action is in equity, the principal relief demanded being a writ of mandamus to require the Board of Supervisors to make a new apportionment of drainage taxes and issue additional bonds thereon to cover shortages in the bond fund.

Drainage District No. 3 was established in 1916 by the joint boards of Dickinson and Osceola Counties. In 1918 the Board of Supervisors of Osceola County levied special assessments on lands of the district in Osceola County aggregating $158,525 for the payment of the proportionate share of the cost of the improvement located in said county. Part of that assessment appears to have been paid in cash. The balance, $130,434, was to be paid in installments. In 1919 the Board of Supervisors of Osceola County issued $130,400 of 5 3/4 percent bonds payable out of the proceeds of the $130,434 of special assessments. These bonds matured at the rate of about $13,000 per year from 1924 to 1933, inclusive. At the time of the trial $111,200 of the bonds and interest thereon had been paid and plaintiffs held the remaining $19,200, which had matured in 1932 and 1933, and on which interest had been paid to 1932 or 1933. Later $6,300 was paid to apply on the principal of $9,000 of these bonds leaving $12,900 principal of the original issue unpaid.

In 1921 there had been an additional 10 percent ($15,852) levy to cover deficit in cost of construction and also repairs and maintenance. Said levy was partly paid in cash, the deferred balance being represented by a second bond issue of $8,400 at 6 percent made in 1922, with maturities from 1927 to 1936, inclusive. $2,500 of this bond issue is unpaid. However, this bond issue is not directly involved in this suit.

All special assessments covering both issues of bonds have been paid in full, except those upon two certain tracts of land of 160 acres each, which, for convenience, will be here designated by the numbers of the respective sections in which the same were located, towit: 23 and 26. Both of these tracts were bid in by the board, in trust for the district at Scavenger Tax Sale for general taxes and unpaid installments of the drainage assessments and subsequently tax deeds were secured therefor.

Tract 23 was bid in at Scavenger Tax Sale in 1924 and tax deed was secured in 1927. On this tract the original assessment was $16,022.22, the second assessment $1,602.22. Apparently, the landowner paid no taxes or special assessments after 1918 or 1920. Consequently, there was a loss of the entire amount of the special assessments plus interest. The district also paid general taxes aggregating $2,567.67, and still holds this land which the parties have stipulated to be valued at $5,000.

Tract 26 was bid in at Scavenger Tax Sale in 1930, and tax deed secured in April, 1933. On this tract the landowner paid the first three installments of the original assessment, which fell due in 1924, 1925 and 1926. This left an unpaid balance of $6,281.80 on the original assessment and, apparently, the entire second assessment of $897.40. The district also paid general taxes of $938.42, and about $300 for expenses incurred in perfecting the title. Tract 26 was subsequently sold and the district eventually received $6,539.75 in principal and interest. The district collected rentals upon Tract 23 to the time of trial and upon Tract 26 during the period of ownership, aggregating $7,767.67.

After the district bought the two properties at tax sale it apparently paid all the remaining installments of the assessments against said properties for the original bond issue. These payments were made by warrants drawn upon the consolidated fund of the district and since said payments were then credited to the same fund, the debit and credit items were equal and resulted in no actual change in the account. Some installments of assessments for the second issue of bonds were also thus paid but others were later cancelled, apparently in reliance upon Fergason v. Aitken, 220 Iowa 1154, 263 N.W. 850.

All the funds of the district were kept in one consolidated account in which was placed all moneys belonging to the district such as receipts from the sale of both issues of bonds and from the portion of the original assessments not included in the bonds, together with funds belonging to the bondholders such as principal and interest upon assessments pledged to said bonds. Payments of expenses of the construction and operation of the district, as well as principal and interest on bonds, were made from said fund. This consolidated account was necessarily complicated and plaintiffs secured an audit, which, among other things, purported to segregate the various accounts.

It is agreed that had the original assessment been collected in full it would have been sufficient to care for the bonds. Indeed, if we correctly interpret the audit, there was an excess of $4,763.08 in the interest spread, over the coupons issued. However, the computations of both sides indicate a net loss of considerably more than $20,000, on account of the failure of the owners to pay the assessments on the two tracts. This figure results from adding loss in principal, interest (apparently to 1933), expenses in connection with selling Tract 26 and general taxes on both tracts paid to 1938, and subtracting therefrom rents collected to 1938, the sale price received for Tract 26 and the $5,000 estimated value of Tract 23.

Plaintiffs have appealed from the decree of the trial court which denied the relief demanded and dismissed the petition.

I.

One question for solution is whether the board may be required to reassess the other lands in the district, which have paid their assessments in full, to pay the balance owing on the bonds resulting from the failure to collect the assessments levied upon the two tracts. Although there is no charge of fraud in the spreading of the assessments, appellants suggest that the assessments against the two tracts exceeded their actual value. It is sufficient to say it does not appear that at the time the assessments were spread and the bonds issued the values of the properties were not sufficient to support the assessments spread upon them. This court takes judicial notice of the great shrinkage of real estate values which occurred thereafter. Bankers Life Company v. City of Emmetsburg, 224 Iowa 1287, 278 N.W. 311.

Nor is it contended that the board proceeded illegally or improperly in securing the tax titles and handling the land. Its actions in this connection were legal and were indicative of due diligence and good faith. Section 7589, 7590, Code of 1939.

These drainage bonds were issued under the provisions of Chapter 2-A, Sections 1989-a1 to a60, of the 1913 Supplement to the Code of 1897. Section 1989-a27 provides that each bond shall show that it is to be paid only by a tax assessed, levied and collected on the land within the district. Obviously, such bonds are not general obligation bonds. The section also provides: " In no case shall the amount of bonds exceed the benefits assessed."

As above noted the amount of these bonds did not exceed the assessments.

Said section also provides in part, " Should the cost of such work exceed the estimate, or should the proceeds of the tax when collected be insufficient to pay the principal and interest of bonds sold, a new apportionment of the tax may be made and other bonds issued and sold * * * to meet such excess of cost or shortage in the proceeds of tax * * *." (Italics supplied.)

Apparently the cost of the work did exceed the estimate and the second issue of bonds was made in part to meet such excess of cost. That portion of the quoted provisions is not in question in this case.

It is the italicized portion of the statute that here concerns us. More particularly it is the interpretation of the clause " the proceeds of the tax when collected." If possible, this clause should be interpreted to give effect to all the language used. Presumably, the words " when collected" were used advisedly. The word " when" has been variously defined. It is frequently used as referring to time and meaning, at which time, or at the time. Williams v. Washington Life Insurance Company, 31 Iowa 541, 544. If this definition be adopted, the clause might be read " the proceeds of the tax at the time collected." However, the words " at the time collected" add nothing to the meaning of the clause. " The proceeds of the tax at the time...