Read v. Beczkiewicz

• Citation: 18 N.E.2d 789,215 Ind. 365
• Decision Date: 01 February 1939
• Docket Number: 27114.
• Parties: READ et al. v. BECZKIEWICZ, County Treasurer, et al. [*])
• Court: Indiana Supreme Court

18 N.E.2d 789

215 Ind. 365

READ et al. v. BECZKIEWICZ, County Treasurer, et al. ^[*])

No. 27114.

Supreme Court of Indiana

February 1, 1939

[Copyrighted Material Omitted]

Arnold Chipman & Degnan and Harry Brownstein, all of South Bend for appellants.

Charles W. Hahn, Edwin W. Hunter, Jones, Obenchain & Butler, Francis Jones, Farabaugh, Pettengill & Chapleau, Samuel Feiwell and Edmund A. Wills, all of South Bend, for appellees and cross-appellants.

FANSLER Judge.

This case arose out of the administration of the public improvement law, commonly known as the Barrett Law, in the City of South Bend. At the time the action was commenced there were bonds outstanding under 947 separate public improvement resolutions and corresponding assessment rolls. The unpaid bonds and coupons aggregate approximately $4,000,000. On February 21, 1938, the Treasurer of St. Joseph County, ex officio Treasurer of the City of South Bend, who was charged with the duty of making disbursements under the Barrett Law, had available for distribution approximately $300,000, and on that date mailed notices of distribution under a method which he assumed to be the statutory one. On that date this action was begun, seeking to enjoin a distribution of the funds as contemplated. The treasurer thereupon filed a cross-complaint, asking the court to determine certain controversies existing among the multitude of bondholders concerning the administration of the funds, and prayed the court's instructions and a determination of the rights and liabilities and duties of the several persons interested in the funds, and that the court retain continuous jurisdiction to direct the administration of the funds. All of the parties were brought in or appeared and filed pleadings on behalf of themselves and others similarly situated, and thus there was presented to the court a multitude of conflicting contentions.

Assessments on all but four of the assessment rolls were delinquent.

A comparatively small amount of the bonds outstanding were issued against specific property. The funds collected on account of the assessments responsible for these bonds had been segregated and earmarked. The transactions were identifiable, and the balances in the funds, together with the unpaid assessments under the specific lien rolls, were equal to the unpaid specific lien bonds.

All other bonds were issued under section 48-2713, Burns' Ann.St.1933, section 12529, Baldwin's Ind.St.1934, in series on each improvement, and the aggregate of such bonds issued under each improvement resolution is a lien upon the total of the property upon which assessments were waived under the resolution. Some of the bonds last referred to were issued before March 16, 1929, the effective date of chapter 211 of the Acts of 1929, Acts 1929, p. 705, and some between March 16, 1929, and June 30, 1931, the effective date of chapter 99 of the Acts of 1931, Acts 1931, p. 407, Burns' Ann.St.1933, § 48-4401 et seq., and the remainder between June 30, 1931, and November 29, 1932. The acts referred to are both amendatory to the Barrett Law.

Bonds in which prepaid assessments were invested at par were at the time of investment, and are now, worth less than par. Deposits in public depositories were lost. Money paid in on assessments was misapplied, or there was delay in application to the payment of bonds because of accounting errors. Funds collected under one assessment roll were applied to the redemption of bonds under another. There are overlapping assessments for different improvements on many of the items of property subject to lien. There was controversy as to the application of funds where it is apparent that the total funds available for distribution and the probable collections will not be sufficient to redeem all of the bonds outstanding on the particular project. Many other questions are presented.

The facts were found specially and at great length, and no complaint is made concerning the findings. There are 25 conclusions of law, most of which are subdivided into several sections, covering different aspects of the controversy, so that the actual conclusions number well over 100. Errors and cross-errors as to each conclusion of law are assigned by the appellants and appellees, but in the briefs only 44 items of the conclusions are attacked. The decree is in 25 paragraphs, many of them subdivided, and covers more than 25 single-spaced pages in the brief.

It must be apparent that a discussion of each separate item of the conclusions involved would extend the opinion to unusual length, and it is unnecessary, since a consideration of the provisions of the statute and the principles involved will indicate this court's conclusion respecting the alleged errors.

By enactments, frequently changed by amendment and generally referred to as the Barrett Law, the Legislature has authorized cities to assess benefited property for the cost of local improvements. The levy of the assessments is an exercise of the power of taxation, and the assessments are a tax upon the property. Provision is made for the payment of assessments in installments. The property owner may take advantage of this privilege by signing a request, with a waiver of the right to contest the regularity of the proceedings, and agreeing to become personally liable for the amount of the assessment. When waivers are signed bonds are issued by the city and in the name of the city. By one method, separate bonds are issued against each item of property assessed for the amount of the assessment, and such bonds are a specific lien upon the particular item of property, and no other property. These bonds have coupons attached, maturing each six months for the ten-year period. One coupon each year represents an installment of one-tenth of the principal amount of the assessment with interest, and the alternating coupons call for six months' interest upon the balance of principal unmatured. There is another statutory method, under which most of the bonds here involved were issued, by which bonds in the aggregate amount of all deferred assessments are issued and become a lien upon the aggregate of all of the property involved in the improvement resolution upon which the privilege of deferred payments has been taken. No particular bond is a lien upon any specific item of the property, but all of the bonds are secured by a lien upon all of the property. The bonds were issued in conformity with the statute, which provides that: 'Such bonds shall be issued in denominations not exceeding five hundred dollars ($500) each and shall be issued in ten (10) equal series, one (1) series payable each year * * *.' Section 48-2713, Burns' Ann.St.1933, section 12529, Baldwin's Ind.St.1934, supra. Each bond has attached coupons evidencing semi-annual interest to maturity. Assessments with interest and penalties for delinquency are payable to the city, through its collecting officer; in this case, the county treasurer, who is ex officio city treasurer. Primarily these bonds are payable out of funds actually paid to and collected by the city on account of the assessments by reason of which the bonds were issued; and, by certain amendments to the statute, there are certain additional liabilities on the part of the city, but the bonds are not the general obligation of the municipality.

Under the provision of section 4, chapter 99 of the Acts of 1931, Acts 1931, p. 407, section 48-4404, Burns' Ann.St.1933, section 12534, Baldwin's Ind.St.1934, supra, any property owner, who has signed a waiver and secured the right to pay an improvement assessment upon his property in deferred payments, may at any time after the first year pay up his entire assessment and thus discharge the lien upon his property. The act provides that such prepaid assessments shall constitute a special fund, to be held in trust by the city for the owners of bonds issued against the assessments, and that the city shall promptly invest and reinvest such funds 'in bonds similar in kind and character at par, for the benefit of said city or town as trustee for the holders of the bonds and interest coupons upon which such prepayments were made, and the city or town shall become liable to such holders in the amount of the prepayment thereon made with the interest on the principal thereof.' It may be pointed out here that, although the fund is referred to as a trust fund to be held by the city as trustee, the relationship between the city and the bondholder is not that of trustee and cestui que, for the city becomes liable as principal for the payment of the amount of the prepaid assessment with interest, and not merely for the proceeds of the bonds in which the prepaid assessments are invested. In other parts of the statutes similar expressions are used, which, if isolated for the whole body of the law, would seem to indicate that, in collecting and holding funds paid upon assessments, the city acts as a trustee, and that the fund is a trust fund; and the trial court and most of the parties seem to have adopted that view. But, in the light of the provisions of the law as a whole, it is seen that there is no direct relationship between the holder of the bond and the owners of the assessed property in respect to assessments which are paid. These assessments, as pointed out above, are taxes, and payments are received by the city as payments of other taxes are received. When assessments are paid to the city, the lien upon the property is to that extent discharged, and the city becomes the principal obligor upon the bond to the extent of the payments of assessments received by it.

In City of Bloomington v. Citizens' National Bank, 1914, 56 Ind.App. 446, 105 N.E. 575, it was contended by the city that it was not liable for Barrett...