Kimes v. City of Gary, 28147.

• Citation: 224 Ind. 294,66 N.E.2d 888
• Decision Date: 31 May 1946
• Docket Number: No. 28147.,28147.
• Parties: KIMES et al. v. CITY OF GARY et al.
• Court: Supreme Court of Indiana

224 Ind. 294
66 N.E.2d 888

KIMES et al.
v.
CITY OF GARY et al.

No. 28147.

Supreme Court of Indiana.

May 31, 1946.

Action by Ruth Kimes, as administratrix of the estate of Henry Leffel, deceased, and others, on behalf of themselves and all others owning or having any interest in or right to any liens or moneys arising from special assessments to discharge matured and unpaid improvement bonds and interest coupons issued by the city of Gary, against such city and others for a declaratory judgment and accounting. Judgment for defendants, and plaintiffs appeal. Transferred from the Appellate Court under Burns' Ann.St. § 4-209.

Affirmed.

[66 N.E.2d 889]

Appeal from Lake Superior Court; Homer E. Sackett, Judge.
Arnold, Degnan, Goheen & Zimmerman, Don Gardner, and Walter R. Arnold, all of South Bend, for appellant.

Samuel S. Dubin and Albert H. Gavit, both of Gary, for appellee.

YOUNG, Judge.

This is a class action filed by appellants, three in number, in their own behalf as individuals ‘and on behalf of and for the benefit of all other persons, firms and corporations owning or having any interest in or right to any liens or moneys arising from special assessments to discharge bonds and coupons made, issued and created, by virtue of the establishment and performance of any work of construction and local improvement within the city of Gary, Indiana, which bonds matured after March 16, 1929, and on which there is unpaid any installment of principal or interest.’ A demurrer to an amended complaint was sustained and upon failure of appellants to plead over judgment was entered for appellee.

The amended complaint is entitled, ‘Amended Complaint for Declaratory Judgment and Accounting’ and alleges that from the year 1920 and including June 30, 1931, the city of Gary, pursuant to proper action under the Barrett Law, Burns' Ann.St § 48-2701 et seq., and according to a great number of resolutions, adopted at divers times, made various street, alley, sewer and other similar public improvements and issued special assessment bonds and interest coupons in connection therewith. At the end of the year 1937, there were outstanding more than $6,000,000, par value, of such Barrett Law bonds. These were bearer bonds and were owned by over a thousand different widely scattered holders and the identity of some of the owners is unknownn. All of the bonds and coupons held by plaintiff and those whom plaintiff represents have long since matured and an aggregate amount in excess of $250,000 is now in the hands of the city treasurer for application upon these bonds. The city treasurer and his predecessors up to the time of the decision of the case of Read et al. v. Beczkiewicz, 1938, 215 Ind. 365, 18 N.E.2d 789,19 N.E.2d 465, had continuously disregarded the rule of ‘year by year’ allocation of annual collections to bond maturities of the following year and had commingled collections and made payments to holders of bonds not entitled thereto. The city treasurer and his predecessors failed to collect penalties on delinquent assessments whereby $130,000 was lost to the special assessment delinquency and deficit fund and wrongfully used money collected on assessments, interest and penalties for payment of administrative expenses, and issued more bonds than there were waivers, and did not pay the difference or issue certificates for same, and failed to create an improvement sinking fund by levying a tax of 1 cent on each $100 taxable property for the benefit of that fund as provided by statute, by reason of which $1,250,000 has not become available for retirement of bonds that would have become available if such levy had been made as required by law.

The complaint further alleges in substance that all of the Barrett Law bonds outstanding are blanket lien bonds, each representing a lien and charge on all the property affected by the improvement, and none on any specific property. Many of the parcels of real estate constituting security for said bonds and coupons are of a value substantially less than the aggregate special assessment liens by which they are encumbered. Other parcels were

[66 N.E.2d 890]

worth more than bond encumbrance. The city accepted bonds in payment of liens upon more valuable tracts and left the remaining bonds to look to tracts worth less than their encumbrance and thereby, plaintiffs say, in excess of $680,000 in bonds have been wrongfully and preferentially redeemed without provision for corresponding payments to the holders of other bonds.

It is further alleged in the amended complaint that more than $3,245,000 has been diverted and misapplied in the ways stated and that the defendants should be required to account therefor and restore the same for use in payment of bonds and coupons held by plaintiffs and those whom they represent.

The prayer of the amended complaint is as follows:

‘1. That this court adjudge and declare the defendant liable for and responsible for the payment unto the Barrett Law Bond fund, for disbursement to plaintiffs and those whom plaintiffs represent, and unto the special assessment deficiency and deficit fund, the amount diverted from said fund to the payment of expenses of administering said Barrett Law Assessments and the deficiency of penalty collections as herein alleged;

‘2. That the said city be required to pay into the ‘Improvement Sinking Fund’ for said Barrett Law funds and special assessment delinquency and deficit fund, sufficient to restore all said funds in the status they would have been had the said defendant city made its one cent levy as required by law during the years 1931, to 1944, both inclusive, on each one hundred dollars of valuation of property in said city, and to declare the general fund of said city liable therefor, including amounts wrongfully credited to assessments by property owners' surrender of bonds.

‘3. That said defendant is liable for restoration to said funds, after appropriate re-audit and re-accounting, all monies illegally and wrongfully paid to bondholders (in preference and priority to the plaintiffs and those whom plaintiffs represent) to the extent that plaintiffs should lawfully receive said funds in preference to the bondholders who did receive the same, all as herein alleged; together with interest thereon from the date of such wrongful diversion; and

‘4. For all other proper relief.’

Only questions presented by the demurrer to the amended complaint are before us...