Roswell Drainage Dist. v. Parker

• Decision Date: 21 November 1931
• Docket Number: No. 469.,469.
• Citation: 53 F.2d 793
• Parties: ROSWELL DRAINAGE DIST. v. PARKER et al.
• Court: U.S. Court of Appeals — Tenth Circuit

53 F.2d 793 (1931)

ROSWELL DRAINAGE DIST. v. PARKER et al.

No. 469.

Circuit Court of Appeals, Tenth Circuit.

November 21, 1931.

C. R. Brice, of Santa Fe, N. M., and J. M. Hervey, of Roswell, N. M. (Manuel A. Sanchez, of Santa Fe, N. M., on the brief), for appellant.

Harold Hurd and Herman R. Crile, both of Roswell, N. M. (Carlton P. Webb, of Roswell, N. M., on the brief), for appellees.

Before COTTERAL and PHILLIPS, Circuit Judges, and JOHNSON, District Judge.

PHILLIPS, Circuit Judge.

This is an action at law brought by Gerald Parker, Fred L. Dickey and J. Gist Search against the Roswell drainage district on certain negotiable bonds and interest coupons issued by it.

The district is a quasi-municipal corporation created under chapter 84, N. M. Sess. Laws 1912. This act has been amended in certain particulars not material here. The amended act appears as sections 40-101 to 40-187, N. M. Comp. St. 1929. The provisions of such act pertinent to this inquiry are set out in marginal note 1.

The trial court rendered a general judgment for plaintiffs for the principal of such bonds and coupons, and for interest thereon after maturity at 6%, the legal rate in New Mexico in the absence of a written contract fixing a different rate. Section 89-103, N. M. Comp. St. 1929.

The district has appealed.

Counsel for the district contend that the District Court of the United States for the District of New Mexico did not have jurisdiction over the subject-matter of this action. The district was created by a judicial action initiated in accordance with section 40-101, supra, in the district court of Chavez county, New Mexico. Counsel for the district assert that such action is still pending; that all proceedings concerning the affairs of the district are to be taken therein and are judicial in character, and that therefore all proceedings relative to the issuance of bonds, the making of assessments, and the payment of bonded debt and interest thereon are matters exclusively within the jurisdiction of the state court. They bottom this contention on In re Dexter-Greenfield Drainage Dist., 21 N. M. 286, 154 P. 382, 384, where the court said:

"The drainage law of New Mexico provides for a judicial proceeding from start to finish. It provides generally for filing in the district court a petition, and sets forth what the petition shall contain, the requisite number of signers, and the number of acres which must be represented. It provides for a judicial hearing after due and proper notice, upon the question of the sufficiency of the petition, the constitutionality of the law, and the jurisdiction of the court, and if the petition is found sufficient the court appoints three commissioners to make a preliminary investigation and report, and upon this report the court declares the district established, and orders the commissioners to cause a survey to be made to establish assessments to meet the cost of construction and make a report thereon, and upon the filing of this report, and the giving of notice as provided by the statute, the court considers the report of the commissioners as provided by the act, and particularly the question as to whether the benefits exceed the cost, and, after disposing of any remonstrances that may be filed, makes its order in the form of an ordinary decree, confirming or rejecting the report."

It will be noted that section 40-169, supra, authorizes the commissioners to create indebtedness in behalf of the district for preliminary expenses and for the construction or repair of any work, and to evidence the same by notes or bonds of the district bearing interest at not to exceed 8%.

It will be further noted that section 40-145, supra, authorizes the commissioners, with the approval of the state district court, to assess against the several tracts of land within the district their proportionate share of the cost of construction; and that section 40-165, supra, authorizes the commissioners, with like approval, to make additional assessments to complete the construction or to pay interest on lawful indebtedness.

Plaintiffs had independent and distinct causes of action against the district upon each of the several bonds and coupons, and sought to establish such causes of action by an independent proceeding at law in the United States District Court. The requisite diversity of citizenship and amount in controversy were alleged and proved. Plaintiffs' action is clearly an independent suit of a civil nature at common law between the citizens of different states, wherein the amount in controversy, exclusive of interest and costs, exceeds $3,000. The fact that application by plaintiffs may be made later for a writ of mandamus to compel the commissioners of the district to take the necessary steps to levy an assessment to pay plaintiffs' judgment, which will involve an application by such commissioners to the proper court for the approval of such assessment does not alter the situation. Assessment proceedings will be for the purpose of raising by the imposition of taxes the necessary funds to pay the judgment. They will deal with the assessment of taxes, not with the adjudication of plaintiffs' several causes of action. They will be separate from and not a part of this action.

Section 40-165, supra, provides for additional assessments to pay interest. Plaintiffs clearly had the right to establish their debt for interest in an action at law in the federal court in order to lay the foundation for the ancillary remedy of mandamus to compel the commissioners to take the necessary steps to levy such additional assessments.

Counsel for the district further contend that it may not be sued in an ordinary action at law. Section 40-142, supra, provides that, upon the entering of an order confirming the preliminary report, such district shall be organized as a drainage district and shall be a body corporate "with the right to sue and be sued, to adopt and use a seal, and to have perpetual succession."

A municipal corporation, having capacity to sue and be sued, may be sued both at law and in equity whenever a cause of action exists against it. Winslow v. Perquimans County Com'rs, 64 N. C. 218; Palatka Waterworks v. City of Palatka (C. C.) 127 F. 161; 44 C. J. pp. 1453-1455.

The fact that a creditor may not be able to obtain satisfaction of his judgment against a municipal corporation does not affect his right to sue and obtain a judgment. Slusser v. Burlington, 42 Iowa, 378.

Counsel for the district assert that the court erred in entering a general judgment against the district. They argue that the effect of such a judgment is to render all the property in the district subject to assessment to pay such judgment. This proposition is supported by United States ex rel. Ranger v. New Orleans, 98 U. S. 381, 25 L. Ed. 225, and Board of Commissioners of Pottawatomie County v. Municipal Securities Co. (C. C. A. 8) 1 F.(2d) 294, 297.

We are of the opinion that the lands within the district are only subject to such assessments as are expressly or impliedly authorized by the statute under which the district was created, and, in no event, for assessments in excess of the benefits respectively received and assessed against each "tract, lot and easement."

Counsel for the parties have stipulated in open court however that the judgment may be modified by adding, at the end of paragraph numbered four, the following:

"To be paid from funds provided or to be provided in accordance with the provisions of sections 40-101 to 40-187, N. M. Code 1929, in the due administration of the District's affairs."

Finally, counsel for the district maintain that the court erred in giving judgment for interest on the interest coupons from the dates they respectively became due and payable.

The bonds and coupons by their express terms are payable to bearer at the Continental & Commercial National Bank in Chicago, Illinois. Each of these coupons bears its own maturity date and contains its own obligation or promise to pay, and its attachment to the bond adds nothing to the completeness of such obligation. Each of such coupons is an independent obligation in writing for the payment of a sum certain on a day certain to the bearer. Hence they have all the qualities of commercial paper, are not mere incidents to the principal debt evidenced by the bond, but independent obligations in the nature of a principal debt, and bear interest after maturity as do other contracts for the payment of money. Hamilton v. Wheeling Public Service Co., 88 W. Va. 573, 107 S. E. 401, 21 A. L. R. 433; Kalman v. Treasure County, 84 Mont. 285, 275 P. 743, 746; Hughes County, S. D., v. Livingston (C. C. A.) 104 F. 306, 322; Cairo v. Zane, 149 U. S. 122, 143, 13 S. Ct. 803, 37 L. Ed. 673; Scotland...