Miners and Merchants Bank v. Herron

• Decision Date: 02 July 1935
• Docket Number: Civil 3592
• Citation: 47 P.2d 430,46 Ariz. 71
• Parties: MINERS AND MERCHANTS BANK, a Corporation, Appellant, v. JAMES HERRON, Jr., GEORGE W. BURGESS and ENIS THURMAN, as Members of and Constituting the Board of Supervisors of the County of Pinal, State of Arizona, Appellees
• Court: Arizona Supreme Court

47 P.2d 430

46 Ariz. 71

MINERS AND MERCHANTS BANK, a Corporation, Appellant, v. JAMES HERRON, Jr., GEORGE W. BURGESS and ENIS THURMAN, as Members of and Constituting the Board of Supervisors of the County of Pinal, State of Arizona, Appellees

Civil No. 3592

Supreme Court of Arizona

July 2, 1935

APPEAL from a judgment of the Superior Court of the County of Pinal. Henry C. Kelly, Judge. Judgment reversed and cause remanded with directions.

Messrs Sutter & Gentry, for Appellant.

Mr Charles H. Reed, Special Attorney for Pinal County, for Appellees.

OPINION

ROSS, J.

This is a proceeding in mandamus. It appears from the plaintiff's complaint that in 1919 Pinal county issued and sold, under the provisions of chapter 2, title 52, Revised Statutes of Arizona 1913 (paragraphs 5266-5285) 1,000 "County of Pinal Road Bonds" for $1,000 each, bearing interest at 5 1/2 per cent. per annum as evidenced by attached coupons payable on May 1st and November 1st of each year; that beginning with May 1, 1930, and ending May 1, 1934, the county failed to pay interest coupons as they fell due in the sum of $39,517.50; that the plaintiff is the owner and holder of 45 of said bonds which matured November 1, 1933, and which had not been redeemed or paid; that there was available in the county "Interest Fund," for application in payment of interest coupons $23,641.90, leaving a deficit in the bond interest fund of some $18,000; that such deficit was the result of annual tax levies for the amount of interest coupons only and the failure of the defendants, and their predecessors, to make any allowance for tax delinquencies.

Plaintiff seeks to compel the defendants, constituting the board of supervisors of Pinal county, to make a tax levy for the tax year 1934-1935 on the property of the county, in addition to all other tax levies, including a tax for interest coupons due November 1, 1934, in the sum of $15,125, and May 1, 1935, in the sum of $13,750, sufficient to take up unpaid and overdue 1930, 1931, 1932 and 1933 interest coupons; also to pay interest at 6 per cent. per annum on such coupons from their due until paid; also to pay interest on the $45,000 (represented by the 45 past-due bonds) at the rate of 5 1/2 per cent. per annum. In other words, plaintiff seeks to compel the defendants to levy a tax sufficient to pay the balance of $39,517.50, past-due and unpaid interest coupons, after crediting it with "Interest Fund" on hand; also to levy a tax in the sum of $1,704.83 for interest upon said past-due interest coupons at 6 per cent. per annum, and a further tax levy in the sum of $1,870 for interest at the rate of 5 1/2 per cent. per annum on the defaulted road bonds owned by the plaintiff, from and after the date of their maturity.

Defendants filed a general demurrer to the complaint. The court sustained the demurrer and, plaintiff refusing to amend its complaint, dismissed the proceeding. Plaintiff has appealed.

The act authorizing the issuance and sale of these bonds is the measure of the rights of the holders and also the rights of the county. The act must be read into the contract between the bondholder and the county. The duty to pay, and the time, place and manner of payment must be found in the act. The method therein stated of procuring money with which to meet the interest coupons and the principal is exclusive.

Looking at the act, it seems to us that it provides quite adequately for the caring for the interest coupons as they fall due. We quote the pertinent part of paragraph 5278 (chapter 2, title 52, Revised Statutes Arizona 1913), as follows:

"5278. After said bonds or other evidences of indebtedness are issued, if such indebtedness is created by a county... and until all of said bonds or other evidences of indebtedness of such county are redeemed, the board of supervisors of such county where such indebtedness is created under the provisions of this chapter... is authorized and it shall be its duty to levy and cause to be collected a tax in addition to the amount of taxes which now or any hereafter be authorized by law for state and county purposes, at the same time and in the same manner as other taxes are levied and collected by such county... upon all taxable property in such county... sufficient to pay the interest on all bonds issued when such interest shall become due, and said tax when collected shall constitute a fund for the payment of the interest on said bonds or other evidences of indebtedness and shall be called 'Interest Fund.'"

"Other taxes" are levied annually on the third Monday in August in each year, paragraph 4844, Revised Statutes Arizona 1913 (now section 3100, Rev. Code 1928), and are due and payable one-half on the first Monday in September and one-half on the first Monday in March of each tax year. Section 3110, Rev. Code 1928.

It appears that the defendants duly made the levy annually, when other taxes were levied, to pay the interest coupons as they fell due, and that if all the taxpayers had paid their taxes the county would have had sufficient funds to pay the coupons on their due dates. It was because some of the taxpayers failed to pay their taxes that the county was not able to pay the interest coupons. It also appears from the complaint that the annual levies made by the defendants, and their predecessors, to meet interest coupons had been, over a number of years, at a rate to raise the amount of the taxes and no more, and that the collections thereunder had been sufficient to care for interest coupons up to 1930; that of those due in 1930 only seven were unredeemed and of those of 1931 only four. The principal deficits in the "Interest Fund" were in the tax years 1932 and 1933 and, as indicated above, resulted because of the delinquencies of many of the taxpayers.

The defendants contend that mandamus does not lie to compel them to make a levy on the property of the county to pay the coupons due in 1933 and prior thereto, because the law does not impose upon them that duty; that the law imposes upon them the duty to levy and collect for the tax year 1934-1935, and every tax year, a tax "sufficient to pay the interest on all bonds... when such interest shall be come due," and that this language means that the tax must be levied and collected before the interest becomes due, and not afterwards. In other words, that paragraph 5278, supra, does not expressly authorize the board of supervisors in any tax year to levy and collect any sum or amount for the "Interest Fund" over and above "sufficient" to meet the interest coupons falling due that year, and that any levy for interest coupons for previous years is unauthorized and illegal. To sustain this contention they cite Board of Commissioners of Grand County v. King, (C.C.A.) 67 F. 202, reading at page 205, as follows:

"Under our system of government, therefore, the power to tax is a legislative function exclusively, and cannot be exercised except in pursuance of legislative authority. There is no connection between the power to contract debts and the power to levy taxes. The power to contract a debt does not imply the power to levy a tax to pay it. A county may lawfully contract debts which it has no power to lavy a tax to pay. And a court may have jurisdiction to render judgment against a county without having the power to coerce the county authorities to levy a tax to pay it. A court has no taxing powers, and can impart none to the county authorities. It has no jurisdiction to coerce the levy of a tax except where the law has made it the clear and absolute duty of the proper authorities of the county to levy such tax."

They also cite to this contention Supervisors of Carroll County v. United States, 18 Wall. 71, 77, 21 L.Ed. 771, 733:

"It is very plain that a mandamus will not be awarded to compel county officers of a State to do any act which they are not authorized to do by the laws of the State from which they derive their powers. Such officers are the creatures of the statute law. brought into existence, for public purposes, and having no authority beyond that conferred upon them by the author of their being. And it may be observed that the office of a writ of mandamus is not to create duties, but to compel the discharge of those already existing. A relator must always have a clear right to the performance of a duty resting on the defendant before the writ can be invoked."

These statements of the law are doubtless correct. They not only have the sanction of years, but the approval of many courts of the country, and are in accord with sound reasoning. But the question is, Are they applicable to the facts in this case? The language of paragraph 5278, supra, seems to imply that the interest on bonds is segregated into annual units and is a matter to be finally disposed of during the year, yet the creation of an "Interest Fund" would tend to refute that idea and convey the thought that this is a permanent fund into which should be paid all levies and collections for interest, whether during the current year or previous years. It is a fund or account that is to have permanent existence until all interest is paid. In other words, the "Interest Fund" "shall constitute a fund for the payment of the interest on said bonds. ... " The "Interest Fund" is coexistent in time and purpose with the interest debt. We think it was the purpose of the law-making body, as collected from said paragraph 5278, supra, to make it the duty of the board of supervisors to levy and collect a sufficient amount of taxes to liquidate the interest coupons past due and falling due, and that such duty is a continuing one until fully performed, and that its performance may in a proper case be compelled by mandamus. City of Austin v. Cahill, 99 Tex. 172...