Joy v. City of Terrell, 12846.

• Decision Date: 15 June 1940
• Docket Number: No. 12846.,12846.
• Citation: 143 S.W.2d 704
• Parties: JOY et al. v. CITY OF TERRELL.
• Court: Texas Court of Appeals

143 S.W.2d 704

JOY et al. v. CITY OF TERRELL.

No. 12846.

Court of Civil Appeals of Texas. Dallas.

June 15, 1940.

Rehearing Denied October 5, 1940.

Appeal from District Court, Kaufman County; G. O. Crisp, Judge.

Suit by the City of Terrell against M. A. Joy and others, as directors and stockholders of City Sewerage Company, a dissolved corporation, for the year 1936 taxes, wherein the State of Texas and county of Kaufman intervened on a similar claim. From judgment for plaintiff and interveners, the defendants appeal.

Reformed, and as reformed, affirmed.

Bailey & Hammerly, of Chickasha, Okl., Bond, Croft & Bond, of Terrell, and Fred T. Porter, of Kaufman, for appellants.

Morris Brin, M. F. Cate, and J. P. Coon, all of Terrell, and Ross Huffmaster, of Kaufman, for appellee.

YOUNG, Justice.

The City of Terrell sued the directors and stockholders of City Sewerage Company, a dissolved corporation, for the year 1936 taxes, in which the State of Texas and County of Kaufman intervened on a similar claim. In a trial to the court, judgments were rendered for the respective tax bodies, primarily against directors M. A. Joy, W. B. Joy, Robert L. Warren and D. M. Purvine; and secondarily, against remaining named stockholders, which action of the trial court has resulted in this appeal.

Detailed findings of fact were made upon request of defendants in said cause, from which the following statement is taken: Terrell is a municipal corporation, operating through a Commission of five members, under special charter granted by the 32d Legislature, Loc. and Spec.Acts 1911, c. 51, and amendments thereto, voted by the electorate, as authorized by Art. 1165, R.S. (Home Rule). City Sewerage Company, a private corporation of $100,000 capital stock, divided into 1,000 shares, had owned and operated a sewerage plant in said City under local franchise, granting to the municipality option to buy the same, which was exercised by a purchase of all Sewerage Company properties September 12, 1936, for $72,000 cash paid by the City of Terrell; a Resolution of the Company directors, preceding such sale, providing "that when said purchase price shall have been paid and the debts of said City Sewerage Company settled, that a pro rata distribution of the amount, which shall then remain, shall be made among the stockholders of this corporation"; that the sewerage concern owned its plant on January 1, 1936, and had voluntarily rendered its property for taxation to plaintiff City, through sworn inventory, with valuation of $37,525. In like manner, county and state tax valuations were rendered to the Kaufman County tax assessor-collector for such year. The findings were, further, that under the City ordinance fixing the tax rate, the sum of $750.50 was due for 1936 taxes, the total amount, plus interest and penalty, less credits, being $812.36; similarly, that the accrued county and state taxes were $544.85 at time of suit; that immediately upon sale of the sewerage system in September, 1936, the directors, by resolution, had wholly disbursed the $72,000 received for its properties by paying $32,000 on its obligations, and a 40% distribution to stockholders, without paying the aforesaid 1936 taxes; the Sewerage Company later filing papers of dissolution. Another finding was that, following said cash distribution, the corporation remained without assets or funds to pay the aforesaid taxes, resulting in personal liability of the directors named. Intervener, State and County, sought to establish a lien for its taxes on the sewerage plant and property acquired by the City of Terrell, which was denied; defendant directors being held primarily liable and the other stockholders secondarily so, in the proportion of money that each had received as dividend on his stock.

Appellants, by voluminous pleading in the trial court, and various assignments here, assail the validity of these tax judgments, but, preliminary to a discussion of said appeal on its merits, disposition will be made of their first three propositions: That intervener (State and County) was improperly permitted to become a party, because of no community of interest in the demands pleaded, or in the subject matter of the suit. Said intervener was, at least, a proper party to plaintiff's cause of action; sec. 28, Art. 30, City Charter; Art. 7345b, sec. 2, Vernon's Ann.Civ.St. A multiplicity of suits was avoided by such procedure, and the defenses urged to intervener's demand were, in all respects, similar to those asserted against plaintiff, i. e., a partial if not total invalidity of each assessment and judgment in fact and in law. No confusion or harmful effect seems to have resulted, or prejudice engendered by a joint trial of the tax demands in question, the hearing being before the court; Small-Lynch Co. v. Midwest & Gulf Co., Tex.Civ. App., 269 S.W. 163. Also to be noted in this connection was the claim of tax lien by the State and County upon the property acquired by the City from the Sewerage Company in September, 1936, for a municipal or public purpose. Intervener did not perfect an appeal from the judgment denying such relief, hence its cross-assignment complaining of error as against co-appellee City cannot be reviewed. Larson v. Middleton, Tex.Civ.App., 19 S.W.2d 120; Barnsdall Oil Co. v. Hubbard, 130 Tex. 476, 109 S.W.2d 960.

Next logically to be considered are defendants' propositions 9 and 16 as to intervener, that the 1936 tax roll relating to the City Sewerage Company was not verified as required by Art. 7222; and as to plaintiff, that the City tax roll was not certified to by the assessor-collector, precluding both instruments from being competent evidence in a tax suit to establish liability for the amount of taxes alleged to be due. Together with the introduction of the county tax roll, this further evidence appears: (1) Order of Kaufman County Commissioners, fixing and levying the tax rate for 1936. (2) Certificate of the County Judge and Commissioners, constituting the Board of Equalization, of date October 1, 1936, approving the current tax roll as being correct. (3) Certificate of Mrs. Walter Beard, Tax Assessor-Collector (presumably under Art. 7222), recited as being sworn to and subscribed by affiant before Mattie Kincaid, Notary Public (such affidavit, however, not showing the signature of Mrs. Beard). (4) Sworn inventory of property rendered for assessment the same year by the City Sewerage Company; (5) that the taxes assessed against the Company were due and unpaid; all above testimony being developed through the witness Mr. Yates, deputy County Assessor. Conceding the absence of signature to the certificate, called for by Art. 7222, we still think the particular tax roll was sufficiently authenticated as to be admissible, and that a prima facie case of valid assessment and tax liability was shown. George v. Dean, 47 Tex. 73, 89; Crocker v. Santo Consol. Independent School Dist., Tex.Civ. App., 116 S.W.2d 750. The decisions relied on by appellant are, Clayton v. Rehm, 67 Tex. 52, 2 S.W. 45; Taber v. State, 38 Tex. Civ.App. 235, 85 S.W. 835; Friedner v. Galveston, Tex.Civ.App., 229 S.W. 950, but their inapplicability to the present facts is sufficiently discussed by Judge Funderburk in the Crocker case, supra.

Neither was the City tax roll rendered inadmissible by lack of affidavit, being authenticated by the City Secretary and Assessor, Mr. Riley, upon the witness stand. He identified the rolls in connection with the inventory made by the taxpayer and the original assessment lists; testifying that said rolls were regularly prepared and had been used in the collection of all taxes; that they were correct, and that the particular amount was due and unpaid. The ordinance fixing the 1936 tax rate and levy was introduced. Plaintiff's charter does not require a compliance with Art. 7222, or the state statutes relative to collection of delinquent taxes; and sec. 16, Art. 30, of said charter providing for the certificate of the city assessor, is applicable where the rolls alone are relied on for a prima facie case. Otherwise, we find no provision therein making it compulsory for the City Secretary to certify his rolls, and even the roll itself is not essential to a valid levy or assessment. Crocker v. Independent School Dist., supra.

As to propositions complaining of error in the court's rendition of personal judgment against appellant directors, we think they are clearly liable to such extent under the present facts for all valid taxes due by the City Sewerage Company. Their corporation had voluntarily rendered its property to the respective tax authorities, which both Boards of Equalization had not disturbed. Such Company, by its ownership on January 1, 1936, became bound for the taxes of the year, though the property be sold before the amount thereof has been ascertained and before the payments became due. Carswell & Co. v. Habberzettle, 39 Tex.Civ.App. 493, 87 S.W. 911, City Charter, sec. 15, Art. 30. These amounts were positive obligations to the City, County and State, which the directors were required to discharge before liquidation, i. e., the distribution of all corporate assets, pro rata among stockholders; and appellant directors cannot deny that the surrender of their city franchise and transfer of all Company assets was a virtual corporate disintegration. Such was reflected in the resolutions of said directors at the time, where provision was made for ascertainment of the concern's obligations, payment thereof, and for said cash distribution. There was nothing thereafter for the corporation to do, except take the statutory steps leading to dissolution (Art. 1388). Appellants, therefore, by their affirmative acts, having diverted the Company properties from the payment of these taxes, would be personally liable to the extent of the assets thus lost to creditors. Love v. Gamer, Tex.Civ.App., 64 S.W.2d 393; Waggoner v. Herring-Showers Lbr. Co., ...