Rowekamp v. Mercantile-Commerce Bank & Trust Co.

• Decision Date: 04 September 1934
• Docket Number: No. 9886.,9886.
• Citation: 72 F.2d 852
• Parties: ROWEKAMP et al. v. MERCANTILE-COMMERCE BANK & TRUST CO. et al.
• Court: U.S. Court of Appeals — Eighth Circuit

72 F.2d 852 (1934)

ROWEKAMP et al. v. MERCANTILE-COMMERCE BANK & TRUST CO. et al.

No. 9886.

Circuit Court of Appeals, Eighth Circuit.

September 4, 1934.

Henry Davis, of St. Louis, Mo. (Thomas S. McPheeters and Bryan, Williams, Cave & McPheeters, all of St. Louis, Mo., on the brief), for appellants Frank Rowekamp et al.

J. F. Loughborough, of Little Rock, Ark. (George B. Rose, D. H. Cantrell, A. W. Dobyns, and A. F. House, all of Little Rock, Ark., on the brief), for appellant Mercantile-Commerce Bank & Trust Co.

Truman Post Young, of St. Louis, Mo. (John M. Holmes and Thompson, Mitchell, Thompson & Young, all of St. Louis, Mo., on the brief), for appellees.

Before GARDNER, WOODROUGH, and VAN VALKENBURGH, Circuit Judges.

GARDNER, Circuit Judge.

In proceedings not here involved, the lower court, pursuant to statutory provision of the state of Arkansas, appointed a receiver for the Southeast Arkansas levee district, a public corporation organized and existing under the laws of Arkansas. The ground for the appointment of a receiver recognized by the Arkansas statutes was the default in payment of certain obligations of the district. The question of the liability of the district to the various owners and holders of bonds of the district was presented to the lower court by intervening petitions and cross-petitions.

There is in the hands of the receiver approximately $100,000 of money available for payment on these obligations, and the only question involved is that of priority. The facts giving rise to this controversy are as follows:

The Southeast Arkansas levee district was created by act of the Arkansas Legislature in 1917 (Acts 1917, p. 367). It absorbed and merged certain other then existing levee districts, each of which had been created by legislative enactment authorizing it to sue and to be sued, and to construct and maintain levees against the waters of the Arkansas and Mississippi rivers. This district as created included, not only the lands situated within the boundaries of its predecessor districts, but also other lands not theretofore included in any levee district. These districts were called the Chicot levee district, the Linwood and Auburn levee district, the Red Fork levee district, and the Desha levee district.

Prior to the creation of the Southeast Arkansas levee district, these predecessor districts had each issued bonds, and the Southeast Arkansas levee district, upon and subsequent to its creation, issued successive series of bonds. These bonded obligations may be classified as follows:

(1) Bonds issued by the predecessor levee districts prior to the creation of the Southeast Arkansas levee district by Act No. 83 of the 1917 Session Laws (page 367), which act absorbed and incorporated these prior districts into the Southeast Arkansas levee district. All of these predecessor levee districts, except the Desha levee district, had outstanding bonds that are now in default as to principal and interest. The acts relating to the Linwood and Auburn levee district and the Chicot levee district pledged the first revenues for payment of the bonds. The act creating the Red Fork levee district authorized the directors to pledge and collect the revenue, and an instrument of pledge was accordingly executed by that district. The tax levied in the Red Fork levee district was fixed at 2 per cent. of the assessed value; in the Linwood and Auburn levee district at not exceeding one-half of 1 per cent.; while in the Chicot levee district it was made the duty of the board of levee inspectors to vote and have levied annually a sufficient percentage of tax to pay the annual interest on the bonds, and to produce at least $4,000 annually in a sinking fund to pay the bonds at maturity.

(2) Bonds issued under Act No. 83, of 1917 (page 367), creating the Southeast Arkansas levee district. This act provided that the new district should assume and pay all the legal obligations of the four predecessor levee districts. Section 4. It contained the following pertinent provisions:

"Section 2. The object of this Act is the protection of the people, their land and personal property, railroads, tramroads, telephone, telegraph and electric light and power lines, and all other property from the overflow waters of the Mississippi and Arkansas rivers by a system of levee building, constructing and enlarging and maintaining the same along the banks of the Mississippi river and as far up and along the banks of the Arkansas river as is necessary to get the relief sought by this Act, and to this end the board of directors of the Southeast Arkansas Levee District as hereafter set out shall have such powers as are necessary to carry out the scheme of protection sought to be accomplished, in co-operation with the Mississippi River Commission and the Tensas Basin Levee Board of Louisiana."

"Section 6. The said levee board shall have power, and it is hereby made their duty, to construct, enlarge and maintain levees along the Mississippi and Arkansas rivers in accordance with this Act, and to protect and maintain the same in such effective condition as honest, able and energetic effort on their part may attain. They shall have power to employ all agents necessary to the execution of their duty. They shall determine the crown, height, slopes and grades of the levees and make all needful regulations and do all acts in their opinion necessary to secure the district from overflow by the waters of the Mississippi and Arkansas rivers."

"Section 10. The taxes herein levied shall constitute a lien, and are a lien, on all of the property in said levee district, against which they are assessed, and said taxes shall be collected by the collector of State and county taxes in the various counties in said levee district, and payment thereof enforced in the same manner as taxes for State and county purposes, except as hereinbefore provided, provided, that said taxes shall be payable in lawful money of the United States. * * *

"Section 11. For the purposes of constructing, maintaining and repairing the levees heretofore mentioned, said board shall have the power to borrow money from time to time as temporary loans, at a rate of interest not exceeding 6% per annum, and may direct the president and secretary to issue the necessary evidence of indebtedness for that purpose. Said board may also issue interest-bearing certificates for a term of not exceeding three years, and bearing a like rate of interest.

"For the purpose of funding each such outstanding notes or certificates, and for the purposes of funding and meeting the obligations incurred by the Chicot Levee District, the Desha Levee District, the Red Fork Levee District, and the Linwood and Auburn Levee District, and now outstanding, and for the purpose of constructing, maintaining, enlarging and repairing the levees within said district, the Southeast Arkansas Levee District is hereby authorized to issue its negotiable bonds to the amount of and not exceeding one million two hundred thousand dollars, interest payable semi-annually, at a rate of not exceeding 6% per annum, payable in lawful money of the United States, at such places and times as said board in said district may deem best. Said bonds shall not be sold at less than par.

"All notes, certificates and bonds shall be signed by the president and countersigned by the secretary, and the seal of the district attached thereto. The board is hereby required to set aside annually from the first revenue collected from any source whatever, a sufficient sum to pay the interest for the year on all outstanding notes, certificates and bonds, and any notes, certificates and installments of bonds that may become due in the year, and for the purpose of securing the payment of said notes, certificates and bonds, and interest, a lien is hereby charged on all lands, lots, railroad embankments and tramways, and all other property in said district subject to levee tax paramount to all other liens. For the purpose of paying said notes, certificates and bonds and interest, said board may execute an instrument of pledge in due form of law.

"Section 12. If any note, certificate, bond or interest coupon, or any other evidence of indebtedness, issued by said board is not paid within the thirty days after its maturity, it shall be the duty of the chancery court to which application is made, in any county in the district, on the application of any holder of indebtedness, so past due, to appoint a receiver for said district, and all collectors shall thereafter pay all levee taxes collected to said receiver, and said receiver shall apply the same to the payment of all such past due notes, certificates, bonds and coupons, and other evidences of indebtedness, until all are paid, including all cost, when said receivership shall cease and said receiver shall under order of said chancery court deliver all of his records, papers and unexpended funds to the secretary of said district."

"Section 27. When the levees on the Mississippi and Arkansas rivers are up to standard in every respect and it is found that more revenue is produced by the taxes herein levied than is required for maintenance, expenses and maturing indebtedness, said board of directors shall reduce the tax pro rata to actual requirements for maintenance, expenses and maturing indebtedness."

On January 1, 1918, $600,000 of bonds were issued by the district, of which $342,000 were outstanding at the time of trial.

The act (section 8, p. 376) provided that benefited property within the district should be taxed annually to pay the obligations, as follows: (1) Agricultural lands, 10 cents per acre; (2) town real estate, 10 mills on the dollar of the assessed value as assessed for state and county taxes; (3) railroad rights of way and roadbeds, $125 per mile; (4) tramways, $25 per mile; (5) telephone, telegraph, and electric light and power lines and pipe lines, 10 mills on the assessed value...