Meredith v. City of Winter Haven, No. 42

• Court: United States Supreme Court
• Writing for the Court: STONE
• Citation: 88 L.Ed. 9,320 U.S. 228,64 S.Ct. 7
• Parties: MEREDITH et al. v. CITY OF WINTER HAVEN
• Docket Number: No. 42
• Decision Date: 08 November 1943

320 U.S. 228 64 S.Ct. 7 88 L.Ed. 9 MEREDITH et al.

v.

CITY OF WINTER HAVEN.

No. 42. Argued Oct. 22, 1943. Decided Nov. 8, 1943.

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Messrs. D. C. Hull and John L. Graham, both of Deland, Fla., for petitioners.

Mr. Giles J. Patterson, of Jacksonville, Fla., for respondent.

Mr. Chief Justice STONE delivered the opinion of the Court.

Petitioners sought a judgment granting equitable relief in the District Court below, whose jurisdiction rested solely on diversity of citizenship. The question is whether the Circuit Court of Appeals, on appeal from the judgment of the District Court, rightly declined to exercise its jurisdiction on the ground that decision of the case on the merits turned on questions of Florida constitutional and statutory law which the decisions of the Florida courts had left in a state of uncertainty.

Petitioners brought this suit in the District Court for Southern Florida, alleging by their bill of complaint that they are owners and holders of General Refunding Bonds issued in 1933 by respondent, the City of Winter Haven, Florida; that by their terms the bonds are callable by the city on any interest date on tender of their principal

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amount and accrued interest, including a specified amount (depending on the date of call) of the interest payable upon the deferred-interest coupons attached to the bonds; that the city is about to call and retire the bonds without providing for payment of the deferred-interest coupons. The bill of complaint prayed a declaration that this could not lawfully be done and an injunction restraining the city from doing it.

In the event that the court should determine that the obligation of the deferred-interest coupons is unenforceable, then it was prayed that the court declare that petitioners are entitled to enforce the obligation for payment, principal and interest, of the amount of the original bonded indebtedness of the city which was refunded by the General Refunding Bonds now held by petitioners, and that the court enjoin the city and its officials, respondents here, from failing or refusing to pay the interest due on such refunded bonds, as provided by the resolution of the city commissioners authorizing the issue and sale of the General Refunding Bonds in 1933.

The District Court granted respondents' motion to dismiss the complaint on the grounds that it failed to state a cause of action and that the questions of law involved had been determined adversely to petitioners by the Supreme Court of Florida. The Court of Appeals, without passing on the merits, reversed and directed that the cause be dismissed without prejudice to petitioners' right to proceed in the state courts to secure a determination of the questions of state law involved. 134 F.2d 202.

The Court of Appeals agreed with petitioners that the bill of complaint presented a justiciable controversy requiring determination, that they were entitled to a judgment declaring the law of Florida with respect to the validity of the deferred-interest coupons, and that if petitioners' contentions were sustained they were entitled

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to a declaration in their favor and an injunction implementing the declaration. But upon an examination of the Florida decisions the court concluded that the applicable law of Florida was not clearly settled and stable, but was quite the contrary, citing Sullivan v. City of Tampa, 101 Fla. 298, 134 So. 211; Commissioners of Columbia County v. King, 13 Fla. 451; 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, and Andrews v. City of Winter Haven, 148 Fla. 144, 3 So.2d 805. It expressed doubt as to what the Florida law, applicable to the facts presented, now is or will be declared to be, and in view of this uncertainty, since no federal question was presented and the jurisdiction was invoked solely on grounds of diversity of citizenship, it thought that petitioners should be required to proceed in the state courts.

Although the opinion below refers to the suit as one for a declaratory judgment, the declaration of rights prayed, as is usually the case in suits for an injunction, is an indispensable prerequisite to the award of one or the other of the forms of equitable relief which petitioners seek in the alternative. Hence, so far as we are concerned with the necessity and propriety of a determination by a federal court of questions of state law, the case does not differ from an ordinary equity suit in which, both before and since Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487, federal courts have been called upon to decide state questions in order to render a judgment.

The facts as presented by the amended bill of complaint and the motion to dismiss raise two issues of state law, one and possibly both of which must be decided if petitioners are to have the benefit which they seek of the jurisdiction conferred on district courts in diversity cases. The first question arises from the fact that the Refunding Bonds of

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1933 were issued without a referendum to the freehold voters of the city. Article IX, § 6 of the Florida constitution provides that municipalities 'shall have power to issue bonds only after the same shall have been approved by a majority of the votes cast in an election', in which a majority of the freeholders of the municipality shall participate, but dispenses with this requirement in the case of 'refunding' bonds. The question is whether, under the applicable decisions of the Florida courts, the provision for deferred-interest coupons could rightly be included in the obligation of the Refunding Bonds of 1933 without a referendum. If it be decided that the provision could not be included and that the coupons are invalid, the second question is whether petitioners, as holders of refunding bonds, are entitled, under § 20 of the resolution of the city commissioners authorizing the Refunding Bond issue,¹ to recover the principal and interest of an equivalent amount of the bonds refunded. This question, unlike the first, so far as appears, has not been passed upon by the Florida courts.

Several decisions of the Supreme Court of Florida have declared that where bonds to be refunded contain no provision for deferred-interest coupons, refunding bonds containing such coupons would impose 'new and additional or more burdensome terms' (Outman v. Cone, 141 Fla. 196, 199, 192 So. 611, 613) which may not be included in refunding bonds unless they are approved by referendum in accordance with Article IX, § 6. Outman v.

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Cone, supra; Taylor v. Williams, 142 Fla. 402, 195 So. 175; Andrews v. City of Winter Haven, supra.

As appears from the amended bill of complaint, after the present suit was begun the Supreme Court of Florida decided the case of Andrews v. City of Winter Haven, supra. This case involved the same issue of Refunding Bonds as are here in question. The Florida court held that the deferred interest coupons are invalid; that the purported obligation of the invalid coupons is severable from the obligations to pay the principal of the bonds and current interest on the other coupons, which obligations are valid and enforceable; and that the bonds are subject to call upon tender of the stipulated principal and interest without including any amount purporting to be payable...