Hoehler v. W. B. Worthen Co.

• Decision Date: 03 July 1922
• Docket Number: 102
• Citation: 243 S.W. 822,154 Ark. 444
• Parties: HOEHLER v. W. B. WORTHEN CO
• Court: Arkansas Supreme Court

243 S.W. 822

154 Ark. 444

HOEHLER v. W. B. WORTHEN CO

No. 102

Supreme Court of Arkansas

July 3, 1922

Appeal from Pulaski Chancery Court; John E. Martineau, Chancellor affirmed.

Decree affirmed.

Alfred H. Burr and George H. Burr, for appellants.

1. Special act 402 contemplates and authorizes but a single issue of bonds. The first bonds issued are valid and the second issue of bonds is invalid as against appellants because unauthorized. This is the legislative intent as plainly appears upon the face of the act itself. See §§ 10, 12, 13, 15, 16, 18, 19, 21 of the act.

It cannot be doubted that the Legislature intended that the commissioners should borrow the entire amount of money required to construct the whole improvement in a single bond issue. This intention is made clearer by the provision in section 16, supra, that "all uncollected assessments are pledged for the repayment of such loan, and that negotiable bonds may be executed and issued therefor;" by the provision in section 18 that "for the payment of both principal and interest of the bonds to be issued under the provisions of this act, the entire revenues of the district arising from any and all sources and all real estate subject to taxation in the district, is by this act pledged, " and by the provision in section 19 that "all bonds issued under this act shall be secured by a lien on all lands and real property in the district." The bonds issued on October 1, 1914, in compliance with all requirements of the act, became the first valid and subsisting obligations of the district, and a first lien on all of its resources, not only because of the above pledges but also because the second bonds had not then been issued.

The fundamental rule in construing statutes is to ascertain and give effect to the legislative intent. 117 Ark. 606; 86 Id. 368, 385; 36 Cyc. 1106. Every part must be construed together. 102 Ark. 205; 11 Id. 44; 22 Id. 369. It must be considered as a whole. 115 Ark 194; 116 Ark. 538. Each word and phrase should be given effect. 99 Ark. 149.

2. The construction contended for by appellee involves the act in contradictory and impossible provisions. Section 16 of the act pledges all uncollected assessments for the payment of the first bonds, and, likewise, section 18 pledges the entire revenues of the district and all real estate for the payment of the first bonds, and these pledges were fulfilled from October 1, 1914, to May 10, 1915. If all uncollected assessments and the entire revenues and all real estate in the district, in truth and in fact be pledged by this act to the payment of the second bonds, the original pledge for the payment of the first bonds is destroyed, leaves the first bonds unsecured and the second bonds with all the security.

Appellee's contention is also inequitable and unreasonable. The first bonds met the original requirements of the district. The money was advanced upon the solemn pledges both of the district and of the act itself that the loan was secured by first lien on all the resources of the district and had undisputed priority of payment, and that the district would not thereafter do or suffer any act to be done that would impair or defeat such securities or priority. To give subsequent bonds equal priority in securities absolutely pledged for the first bonds eight months before the later bonds were issued would work an inequitable loss and hardship upon the first bondholders. Even if the equities were equal, the maxim "Qui prior est tempore potior est jure" should prevail in appellant's favor. 89 Ark. 378; 22 Id. 369; 104 Id. 583; 91 Id. 5; 35 Id. 56, 61; 10 Id. 516, 524; 130 N.E. 827; 129 N.E. 500; 105 S.E. 7; 185 N.Y.S. 267; 229 N.Y. 277. The construction contended for by appellee would impair, divert and destroy vested rights of the appellants. 203 Ala. 401.

James B. McDonough, for appellee.

1. If it is the law that the second issue of bonds has a prior right, then the purchasers of the first issue bought with knowledge that the prior right existed, and the purchasers of the second bonds bought with the understanding that they had the superior right. The statute itself does not in words attempt to create any priority between the two issues. The district was authorized to issue bonds up to $ 31,000, and the second issue is not made inferior to the first in any way. We think, however, that the second issue is prior in equity and in law to the first issue. It is a lien (the assessment of benefits), fixed by law,--not a contract lien. In all liens such as taxes and assessments created by law, the later lien is superior. 182 P. 422; 191 P. 954; 20 Cyc. 1202; 175 S.W. 972; 120 Minn. 172.

2. If the foregoing contention is not correct, then we contend that there is no priority, as in the statute authorizing the issuing of the bonds there is no priority. The only limit fixed by the Legislature as to the amount of bonds to be issued was the 30 per cent. of the value of the property referred to in the act. There is, in reality, no "first" and "second" bonds in the sense employed by appellants. The purchaser of the bonds dated October 1, 1914, knew that bonds were authorized up to $ 31,000. All the provisions of the act, including sections 16, 18 and 19, pledged all the revenues for the issue of bonds dated May 1, 1915.

If appellants are right in saying that the concluding portion of section 19 with reference to default in payment and proceedings upon the appointment of a receiver is a mere distribution clause and does not establish any equality among the bonds, then the junior bonds must be paid first, its past due interest and its past due bonds. If there is anything left after these bonds are paid, then the appellants' past due bond must be construed. If this is not the true construction of the act, then it means that all past due bonds must be paid pro rata. If the Legislature, knowing the rule as to priority between senior and junior bonds, had intended to apply a different rule, it would have expressed that intention in the act; hence it either intended that all past-due bonds should be paid pro rata, or that the rule of law on the subject as to priority of the junior bonds should be applied.

3. Upon the findings of the court in the motion and upon the presumptions arising on the record, appellee is entitled to a decree ordering its past-due bonds and coupons to be paid first.

Appellants introduced no testimony tending to show that they have any superior right or lien. The decree, therefore, against them on that point will be presumed to be correct. 141 Ark. 369; 146 Id. 232; 129 Id. 193; 139 Id. 408; 144 Id. 436.

4. This court has already upheld the validity of this statute. 112 Ark. 101. See also 92 Ark. 93; 102 Id. 553; 146 Id. 417.

N. F. Lamb and Chas. D. Frierson, representing certain drainage district bondholders, filed a brief as amici curiae, contending, in substance that priority in time gives priority in right among successive special assessment liens. 12 Wheat. 177; 6 L. ed. 592; 101 U.S. 837; 25 L. ed. 1081; 17 R. C. L., Liens, § 19, p. 610; 25 Cyc. 678; 2 Pom. Eq. Jur. 4th Ed. §§ 678-679. Counsel discuss the statutory provisions in chap. 109 C. & M. Digest, and cite further in support of the foregoing contention, 79 N.W. 77; 27 P. 52; 67 Pa.St. 345; 129 S.W. 1031; 83 So. 170; 2 Black 448; 67 U.S. 448; 17 L. ed. 327; 67 S.E. 294; 88 P. 722; 10 L. R. A. (N. S.) 110; 198 F. 557; 117 U.S. 657; 29 L. ed. 1026. Intention to establish priority of special assessments over other liens and of special assessments as between successive issues thereof may be gathered from the whole act, even though not expressly declared. 25 R. C. L. 188-189. See notes to 30 L. R. A. (N. S.) 767; 35 L. R. A. 372; Ann. Cases 1913-C, p. 1210.

Cockrill & Armistead and Charles Claflin Allen Jr., representing certain nonresident levee district bondholders, filed a brief as amici curiae.

Appellants' bonds contain a contractual pledge of a first lien, in apt and emphatic language, viz: "For the faithful performance of all covenants, recitals and stipulations herein contained, for the proper application of the proceeds of the tax assessment of benefits heretofore or hereafter levied, and for the faithful performance in due time and manner of every official act required and necessary for the prompt payment of the principal and interest of this bond as the same shall mature, the full faith, credit and resources of said road district are hereby irrevocably pledged." These bonds were then, necessarily, first mortgage bonds. The second bonds and pledge were executed seven months, and the pledge filed for record nearly three years, after the first, and recited the previous bond issue. Identical formal proceedings were had by the commissioners prior to the issuance both of the first and second bonds, authorizing the issuance of the bonds and pledge and levying an assessment of benefits, the only difference being a recital and recognition in the second proceedings, bonds and pledge of the first series of bonds. The recitals of the bonds make out a prima facie case of the truthfulness of the facts recited. 28 Cyc. 1627; 80 Ark. 462. The district thus issued a series of first bonds which became, by virtue of the act under which the district was formed, a first lien on the property and revenues of the district. This being true, no action of the district could subordinate the first lien of those bonds. 2 Black (U. S.) 448.

OPINION

MCCULLOCH, C. J.

Road Improvement District No. 5 of Pulaski County was formed under a special statute (Acts 1909, p. 1151) for the purpose of improving a certain road. The statute authorized a levy of special taxes on assessed benefits for the purpose of paying for the improvement, and also authorized...