Moore v. Howard

• Decision Date: 29 June 1933
• Docket Number: 8 Div. 512.
• Citation: 227 Ala. 219,149 So. 249
• Parties: MOORE v. HOWARD, City Clerk.
• Court: Alabama Supreme Court

149 So. 249

227 Ala. 219

MOORE v. HOWARD, City Clerk.

8 Div. 512.

Supreme Court of Alabama

June 29, 1933

Appeal from Circuit Court, Lauderdale County; J. Fred Johnson, Jr. Judge.

Bill for injunction by H. J. Moore against S. B. Howard, as City Clerk of the City of Florence. From a decree sustaining a demurrer to the bill, complainant appeals.

Reversed and remanded.

Atwell J. Brown, of Birmingham, for appellant.

W. H Mitchell, of Florence, for appellee.

Armbrecht Hand & Twitty, of Mobile, amici curiæ.

THOMAS Justice.

The suit is for injunction to prevent redemption and paying off of certain paving bonds out of the proceeds of collections of installments of assessments on abutting property, in preference to other bondholders of the city so secured by like liens on the same property. The trial court sustained demurrers to the original bill, and that ruling is assigned as error.

The facts averred are that petitioner and Drane are holders of like bonds on the same paving project and secured by assessments on abutting properties; that the bond issue was of date of March 3, 1925 (after the Code of 1923 became effective); that "the said City of Florence now has on hand as the proceeds of said installment payments, a sum in excess of Three Thousand Dollars ($3,000.00), and that under the provisions of section 2225 of the Code of Alabama for 1923, the said City of Florence has elected to pay off the three bonds owned by the said R. W. Drane, and has given notice of its intention to redeem and pay off the said bonds owned by the said R. W. Drane as provided for in said section 2225, and has authorized and directed the respondent to redeem and pay off the said three bonds owned by the said R W. Drane out of the proceeds of the collection of installments of said assessments levied on said property for said improvements, and that the said respondent will pay off said bonds unless restrained by the order of this Honorable Court. * * * That each of the owners of said bonds is equally entitled in proportion to the number of bonds held to the benefit of all assessments and of all payments thereon and avers that as the owner of one of said bonds, he is entitled to one-two hundred and sixty-third part of the collections of the installments now in the possession of said City of Florence, and which it is proposed to use to redeem and pay off the bonds of the said R. W. Drane. He avers that the City of Florence is in default in the payment of said bonds and that the payment of said bonds of said R. W. Drane will be of irreparable injury to this complainant. * * * That the proposed payment to the said R. W. Drane is in all respects in accordance with the provisions of section 2225 of the Code of Alabama for 1923, but he avers that said section is in conflict with section 22 and with section 95 of the Constitution of Alabama, and with section 10 of article 1 of the Constitution of the United States, in that section 2225 of the Code of 1923 impairs the obligation of the contract existing between the holders of said bonds described as Series P-3, in that it provides for the payment in full of such of said bonds as said City may designate out of a fund in which holders of the other of said bonds have an equal interest." (Italics supplied.) The averment of fact of the amount of the proceeds of collections of installments or of the original assessments pledged to the payment of these bonds would appear to be material. It is insisted that, if it is made to appear that assessments pledged to the payment of bonds are insufficient to retire all the bonds, a city may not redeem any one or more of the bonds out of funds pledged to the payment of all of the bonds.

The decisions of this and the federal courts on the impairing of the obligation of a contract are considered in Howard, City Clerk, v. State ex rel. McGarry (Ala. Sup.) 146 So. 414; and a phase of the question of taking property without due process, and the effect of the existing judicial construction of a statute which is considered to enter into a contract, were recently discussed in Great Northern Railway Company v. Sunburst Oil & Refining Company, 287 U.S. 358, 53 S.Ct. 145, 77 L.Ed. ---.

The respective bonds of petitioner and Drane were issued pursuant to the authority contained in sections 2174-2237 of the Code of 1923. These statutes, and the former constructions pertinent thereto, entered into the contract of the city, and those of other bondholders on that project or public improvement are considered as incorporated therein. Howard, City Clerk, v. State ex rel. McGarry, supra; Great Northern Railway Company v. Sunburst Oil & Refining Company, supra; Meyers et al. v. City of Idaho Falls (Idaho) 11 P.2d 626.

The provisions for redemption of municipal bonds contained in section 47 of the Act of 1927 (Acts 1927, p. 547), codified as section 2294(47) of the Code of 1928, and the Act of September 30, 1932 (Laws 1932, p. 55), amending section 2216 of the Code of 1923, may be laid out of the case; these being statutes enacted subsequent to the issue of these bonds.

What, then, is the rule of law with reference to which the parties contracted? Is this to be answered merely from the provisions of the Code of 1923, § 2225, containing the provision that: "The said bonds shall be payable ten years from their date, but any bond or bonds so issued and sold shall, at the option of the city or town, be payable at any interest period, but in the event the city or town should elect to pay off any such bond or bonds before maturity, it shall pay as a bonus to the holder thereof a sum equal to one-fourth the annual interest thereon, and the city or town shall give public notice of its intention to redeem said bond or bonds, describing the same by number and series, by publication once a week for three consecutive weeks in a newspaper published in said city or town or of general circulation therein." (Italics supplied.)

The case of Howard, City Clerk, v. State ex rel. McGarry (Ala. Sup.) 146 So. 414, 419, proceeded on the assumption and holding that such abutting property assessments constituted a trust fund for the benefit of all holders of bonds that were issued on that one issue, project, and improvement. It was there declared: "In the present case the lien of the bondholders (of date of June, 1923) is secured by a lien upon the special assessments, the proceeds of which assessments are a trust fund for the pro rata benefit of all of the holders of these bonds, and not for the benefit of any holder of one particular bond."

In City of Mobile v. Smith, 223 Ala. 480, 136 So. 851, 854, it was held the city is a statutory trustee for the collection, preservation, and application of paving bonds, and "stands as quasi surety for the payment of the indebtedness created for the betterment of the abutting property * * * and is entitled, in equity, to compel payment in discharge of its liability."

A court of equity would therefore consider and protect the rights of all bondholders equally interested in that fund (...