Meredith v. City of Winter Haven

• Decision Date: 24 May 1943
• Docket Number: No. 10402.,10402.
• Citation: 134 F.2d 202
• Parties: MEREDITH et al. v. CITY OF WINTER HAVEN et al.
• Court: U.S. Court of Appeals — Fifth Circuit

134 F.2d 202 (1943)

MEREDITH et al. v. CITY OF WINTER HAVEN et al.

No. 10402.

Circuit Court of Appeals, Fifth Circuit.

February 3, 1943.

Rehearing Denied March 12, 1943.

Writ of Certiorari Granted May 24, 1943.

D. C. Hull, Erskine W. Landis, John L. Graham, and J. Compton French, all of DeLand, Fla., for appellants.

Giles J. Patterson, of Jacksonville, Fla., and Harry E. King, of Winter Haven, Fla., for appellees.

Before SIBLEY, HUTCHESON, and McCORD, Circuit Judges.

Writ of Certiorari Granted May 24, 1943. See 63 S.Ct. 1175, 87 L.Ed. ___.

HUTCHESON, Circuit Judge.

Appellants are holders of City of Winter Haven general refunding bonds, issue of 1933. Alleging that the defendants were proposing to call the bonds for payment but refusing to pay the deferred or accumulated interest as provided for therein, they brought this suit for a declaratory decree adjudicating and determining that this may not be done, and an injunction restraining defendants from attempting to do so, and, in the alternative, if this relief may not be had, for a declaration that plaintiffs are entitled to be subrogated to, and assume, the position, as to principal and interest, of the holders of a like amount of the original indebtedness refunded by the bonds they hold. The defendants' motion to dismiss for failure of the complaint as amended¹ to state a claim for relief was granted on the authority of Outman v. Cone, 141 Fla. 196, 192 So. 611; Taylor v. Williams, 142 Fla. 402, 195 So. 175; State v. Special Tax School District No. 3 of Pinellas County, 143 Fla. 557, 197 So. 127; and Andrews v. Winter Haven, 148 Fla. 144, 3 So.2d 805, and plaintiffs have appealed. They make two contentions here. The first is that these decisions are contrary to the rule of law laid down in Sullivan v. Tampa, 101 Fla. 298, 134 So. 211, and represent a change in decision since plaintiffs' bonds were issued, that the district court, therefore, erred, in determining the validity of the called provisions in plaintiffs' bond contract, in not applying the rule of law laid down in the Sullivan case rather than the contrary rule laid down in the later cases. The second point is that if the district judge was right in holding the deferred interest provisions of plaintiffs' bond contract to be illegal and unenforcible, he erred in holding that the plaintiffs were not entitled under Section 20² of the bond resolution to assume the position of holders of a like amount of the original indebtedness refunded thereby and as such to enforce their claim for payment. On the first point, appellants urge upon us that it is the law both in the Federal Court³ and in Florida⁴ that where the highest court of a state has placed a given construction on the state constitution, and municipal bonds are thereafter issued in accordance with and accepted in reliance upon such construction, the contract will be governed by the law as announced at the time of its making rather than by the law announced in later decisions of the Supreme Court of the State. On its second point, appellants urge that if the call provisions of the bond contract are invalid and unenforcible, then plaintiffs are entitled both under the express provisions of Section 20 of the bond resolution and under general principles of equity to be subrogated both as to principal and unpaid interest to the position of the holders of the original bonds for which the refunding bonds were exchanged. Appellees, on their part, insist: that there is no conflict between the Sullivan case and the later Florida cases; that the Sullivan case did not deal with a contract of this kind; that the later cases relied on by the district judge, as well as the still later case of State v. City of New Smyrna Beach, 148 Fla. 482, 4 So. 2d 660, all distinguished the Sullivan case on its facts and expressly approved it; that the precise question here at issue, having been ruled by the Supreme Court of Florida in defendants' favor, the federal courts are bound to follow that ruling and may not, upon a finding of an apparent inconsistency between the earlier and later cases in the application to the facts of the controlling principle, enable a litigant in a federal court to obtain a result which he could not obtain in a state court. Appellees do not meet the second point head on with a denial of its correctness and an insistence that if the provisions for payment of the deferred or accumulated interest are held invalid, plaintiff would still not be entitled to subrogation to the original bonds. They do indeed insist that the second contention is unreasonable because if sustained it would give plaintiff considerably more accumulated or deferred interest than the refunding bonds themselves provide for and they do counter appellants' reliance upon the invoked provision of the second half of Section 20 by quoting the first half of it.⁵ But this is only arguendo. Their real position with reference to it is that it is not alleged that the city has denied or repudiated its liability upon the deferred interest coupons when they mature, and since they do not become payable until the maturity of the bonds, there can be no actual present controversy with reference to their validity, and, therefore, no right to a declaratory judgment with respect to it, and to plaintiffs' right to subrogation to the original bonds should these coupons be declared invalid. Appellants agree that the immediately present controversy between it and the city, which caused this suit to be filed, is in form not over what the city will do with respect to the deferred or accumulated interest coupons when the bonds mature but over what it will do with them when the bonds are called. But they point out that in substance the controversy concerns itself with the validity and enforcibility according to their terms, of provisions made in the bonds with respect to the deferred interest coupons, and of the provision of Section 20 for relief by subrogation, if the refunding bonds are held invalid in whole or in part. Arguing that if the city may call the bonds for payment without paying the coupons in accordance with the terms for their payment on call, it certainly will not, the bonds called and paid, be held to pay the coupons on the maturity date of the bonds, for they provide on their face for payment to the bearers on maturity of the bonds, "being the then enforcible, collectible and deferred interest * * * unless said bonds shall have been heretofore called for redemption" (italics supplied), they insist that their complaint presents an actual controversy with the city now ripe for determination and declaration, as to the validity of the deferred interest provisions of the bond, and as to the right of plaintiffs to subrogation if the coupons are held invalid.

We agree with appellants that their complaint presented an actual controversy and therefore justiciable issues requiring determination and entitling plaintiffs to a declaratory judgment as to the controlling law of Florida with respect to the coupons, and that if plaintiffs are right in their view, they are entitled to a declaration in their favor and an injunction in support of the declaration. We think it plain, however, that this determination should be sought in the state rather than in the federal courts. No federal question, constitutional or otherwise, is presented. The jurisdiction is invoked purely on grounds of diversity. Every question presented for decision, including: whether the Sullivan case, supra, authorized the deferred interest coupons and the provisions regarding them; whether if it does, the later decisions holding invalid the provisions for paying part of them on call, operate retrospectively⁶ to strike them down, or upon the "principle of reliance" do not do so; and whether if they do, plaintiffs are entitled to the subrogation they pray for; is a question of state cognizance to be determined under controlling state law. This being so, unless the jurisprudence of Florida, as it concerns these questions, has a settled cast both as to what has been decided and as to what is the state of permanence of the decided law, the federal court should hesitate to, indeed it should not, exercise the jurisdiction it undoubtedly has to proceed to determine them, but should decline it, leaving their decision to the state tribunals. Our examination of the state of the law in Florida on the matters in issue shows that it is not clear, settled and stable, but quite the contrary. In the Sullivan case, there was no question of deferred or accumulated interest coupons, none, therefore, of the proportion of them which could be paid in the event of call and redemption of the bonds before maturity, nor in the later cases which appellants claim are in conflict with it, was there any question as here of whether under Florida decisions, Columbia County Commissioners v. King, supra; State ex rel. Nuveen v. Greer, 88 Fla. 249, 102 So. 739, 37 A.L.R. 1298; Humphreys v. State ex rel. Palm Beach Co., 108 Fla. 92, 145 So. 858; Alta-Cliff Co. v. Spurway, 113 Fla. 633, 152 So. 731; Lee v. Bond-Howell Lumber Co., 123 Fla. 202, 166 So. 733, the coupons should be held valid under the Sullivan case, notwithstanding the later rulings. The Andrews case, supra, did involve this same issue of bonds and it did hold invalid the bond provision for payment on call of part of the deferred interest coupons, but the question of their validity under "the principle of reliance" upon the doctrine of the Sullivan case was not presented to or decided by the court, as it was not in any of the other cases appellees rely on. In addition, a careful reading of the Florida cases dealing with the validity of, contracts for refunding, and bonds refunded, without a vote of the people leaves us in considerable doubt as to what on these facts the law of Florida now is or will be declared to be. Cf. State v. City of Fort Myers, 145 Fla. 135, 198 So. 814.

Under the...