Sebern v. Cobb

• Decision Date: 07 August 1925
• Citation: 41 Idaho 386,238 P. 1023
• Parties: O. V. SEBERN, EMIL JULLION and T. R. HARTLEY, as the Board of Commissioners of Drainage District No. 2 of Ada County, Idaho, Respondents and Cross-appellants, v. B. E. COBB, Appellant and Cross-respondent
• Court: Idaho Supreme Court

238 P. 1023

41 Idaho 386

O. V. SEBERN, EMIL JULLION and T. R. HARTLEY, as the Board of Commissioners of Drainage District No. 2 of Ada County, Idaho, Respondents and Cross-appellants, v. v. B. E. COBB, Appellant and Cross-respondent

Supreme Court of Idaho

August 7, 1925

MUNICIPAL CORPORATIONS - SECURITIES-REFUNDING BONDS-DRAINAGE DISTRICTS-BOARD OF COMMISSIONERS-RESOLUTION OF-CONTENTS-DENOMINATIONS OF BONDS - RATE OF INTEREST-CALLING OUTSTANDING BONDS - FUNDS ON HAND-CONTRACT OBLIGATION-IMPAIRMENT OF - ENCUMBRANCE - DUE PROCESS OF LAW - INTERIM BETWEEN ISSUANCE OF REFUNDING BONDS AND REDEMPTION OF OUTSTANDING BONDS.

1. A resolution of the board of commissioners of a drainage district authorizing the issuance of refunding bonds providing that the bonds shall be issued "in denominations of One Hundred, Five Hundred and One Thousand Dollars, in such proportion and amounts as may be most advantageous to said district and the sale of said bonds," and shall "bear interest at the lowest rate at which the same may be legally sold, and in no event to exceed interest at the rate of six per cent per annum," is a sufficient compliance with Sess. Laws 1925, c. 21, sec 3, which requires that such resolution designate the denomination or denominations of the refunding bonds, and fix the rate of interest which they shall bear.

2. A county treasurer may not call outstanding bonds of a drainage district under the provisions of C. S., title 34, c. 179, and Sess. Laws 1925, c. 21, unless he has on hand over $5,000 in the fund for payment of such bonds, nor call bonds in excess of the amount he is able to pay with the funds in his hands.

3. Bonds of a drainage district, which have not been outstanding and unpaid for more than three years, cannot be called by a county treasurer.

4. The calling of bonds of a drainage district which have been outstanding and unpaid for more than three years, in the manner provided by Sess. Laws 1925, c. 21, does not impair the contract obligation of a bondholder by depriving him of interest upon such bonds thirty days after the call.

5. The fact that refunding bonds, issued to redeem outstanding bonds of a drainage district, will be a lien and encumbrance against the property within the district for a greater length of time than the property will be encumbered by the outstanding issue does not deprive a holder of such real property of property without due process of law.

6. Outstanding bonds of a drainage district, which could not have been paid by funds raised by the assessments provided for in C. S., c. 179, cannot be called for refunding, even though they have been outstanding for three years, without impairing the contract obligation of such bonds.

7 Sess. Laws 1925, c. 21, and the issuance of refunding bonds thereunder, does not impair the obligation of the contract evidenced by the outstanding bonds and coupons, where said bonds have been outstanding for a period of five years.

8. A drainage district has two options in issuing refunding bonds. It may issue and sell bonds for the purpose of paying and redeeming outstanding bonds, and may call and pay such bonds or it may authorize the issue of sufficient bonds to pay and redeem the whole of such outstanding bonds, and issue and sell the same in such amounts, from year to year, as will pay and redeem the outstanding bonds falling due each year; and it is error for the court, upon a resolution exercising the first option, to enter judgment authorizing and directing the exercise of the second option instead.

9. There is no constitutional prohibition against the legislature's providing for the issuance and sale of refunding bonds to redeem outstanding bonds of a drainage district, even though there is an interim between the issuance and sale of the refunding bonds and the redemption of the outstanding bonds.

APPEAL from the District Court of the Third Judicial District, for Ada County. Hon. Dana E. Brinck, Judge.

Appeal from decree approving issuance of refunding bonds of drainage district. Reversed and remanded, with instructions.

Judgment reversed, with directions, No costs awarded.

Morgan & Smith, for Appellants and Cross-respondents.

The law creating a sinking fund for the payment of the principal and interest of bonds enters into and becomes a part of the contract whereby the bonded indebtedness is created, and to amend the law to the detriment of the bondholder is to impair the obligation of the contract in violation of art. 1, sec. 10 of the U. S. constitution, and art. 1, sec. 16 of the Idaho constitution. (C. S., secs. 4547, 4548; Sess. Laws 1925, chap. 21, p. 29; Abbott on Public Securities, p. 751, sec. 362; English v. Supervisors of Sacramento, 19 Cal. 172; Dillingham v. Hook, 32 Kan. 185, 4 P. 166; Board of Commrs. of Clark County v. Woodbury, 187 F. 412, 109 C. C. A. 244.)

To construe chapter 21, Sess. Laws 1925; as authorizing the refunding of the bond issue here in question, so as to stop the accumulation of the interest on the bond owned by appellant and cross-respondent, and so as to encumber his land with a bonded indebtedness for a longer period than it was encumbered prior to the enactment of said chapter, is to deprive him of his property without due process of law in violation of the fourteenth amendment to the U. S. constitution and of art. 1, sec. 13 of the constitution of Idaho.

The resolution adopted by respondents as commissioners of said drainage district, providing for refunding the bonded indebtedness of the district, is insufficient and does not conform to the requirements of the law in this, that the denomination, or denominations, of the refunding bonds proposed to be issued is not therein designated, neither is the rate of interest said bonds are to bear fixed in said resolution. (Sess. Laws 1925, chap. 21, sec. 3, p. 30.)

The proceedings of respondents as commissioners of said Drainage District No. 2, wherein the refunding of bonded indebtedness amounting to $ 65,000, was authorized, evidenced by the bonds numbered from 1 to 130, inclusive, and dated August 1, 1922, should not have been approved or confirmed by the court, for the reason none of said bonds last above mentioned has been outstanding for a period of more than three years. (Sess. Laws 1925, chap. 21, sec. 2, p. 29.)

Reddoch & Hunter, for Respondents and Cross-appellants.

Under the statutes existing at the time of the issuance of the bonds sought to be refunded, and which have subsequently remained in effect, the commissioners of Drainage District No. 2, if they had exercised the limit of the authority conferred upon them to levy assessment, the entire issue dated August 1, 1920, and sixty per cent of the issue dated August 1, 1922, could have been paid off and retired by August 1, 1925, and under such circumstances it cannot be said that any right of a bondholder is affected by the district paying money at that time which it had the power to raise, even though the same is obtained from other sources than taxation. (C. S., secs. 4527, 4548, 4552, 4553.)

Contracts, such as that represented by a municipal bond when it, or the law under which it was issued, provides that it may be called and redeemed at the option of the municipality, or after the expiration of a designated period of time, are not impaired by calling and paying such obligation in the exercise of such right, even though the moneys obtained for such purpose are received from sources other than that contemplated in the law under which the obligation was issued. (C. S., sec. 4528; Abbott, Pub. Securities, p. 740, sec. 355; Territory v. Hopkins, 9 Okla. 133, 59 P. 976; Stewart v. Henry County, 66 F. 127; Nat. Bank of Republic v. City of St. Joseph, 31 F. 216.)

Mere changes in the form of a provision for the means of enforcement or payment of municipal obligations which do not prejudicially affect the rights of the holders of such obligations are valid. (12 C. J., p. 1014, sec. 640; Abbott, Pub. Securities, p. 857, sec. 433; Babcock v. Middleton, 20 Cal. 643; Thornton v. Hooper, 14 Cal. 9; People v. Bond, 10 Cal. 563; In re Assessment for Local Impr. Sewer Dist. No. 1, 84 Wash. 565, 147 P. 199.)

A contract cannot be said to be impaired by a change in the law which makes the remedy for its enforcement more efficient or more easy of application. (Black's Const. Law, pp. 746, 747; Bernheimer v. Converse, 206 U.S. 516, 27 S.Ct. 755, 51 L.Ed. 1163; Henley v. Meyers, 76 Kan. 723, 93 P. 168, 173, 17 L. R. A., N. S., 779; Bryson v. McCreary, 102 Ind. 1, 1 N.E. 55.)

Before it can be held that legislation impairs the obligation of a contract it must lessen the efficiency of the means whereby the holder of the obligation may receive his money or enforce his rights. (Highway Dist. No. 1 v. Fremont County, 32 Idaho 473, 185 P. 66; Hendrickson v. Apperson, 245 U.S. 105, 38 S.Ct. 44, 62 L.Ed. 178; Louisiana ex rel. Hubert v. New Orleans, 215 U.S. 170, 30 S.Ct. 40, 54 L.Ed. 144; Seibert v. United States, 122 U.S. 284, 7 S.Ct. 1190, 30 L.Ed. 1161; State of Louisiana v. City of New Orleans, 102 U.S. 203, 26 L.Ed. 132; Von Hoffman v. Quincy, 4 Wall. 535, 18 L.Ed. 403; Dodd v. Miller, 14 Ind. 433.)

The rate of interest is sufficiently prescribed and the resolution adopted by the drainage board complies with the law in this respect. (Gist v. Rackliffe-Gibson Const. Co., 224 Mo. 369, 123 S.W. 921; Cricket v. State, 18 Ohio St. 9, on p. 21; 2 Words & Phrases, 2d Series, pp. 575, 576; C. S., sec. 4543.)

TAYLOR, J. William A. Lee, C. J., and Givens, J., concur.

OPINION

TAYLOR, J.

This proceeding was instituted by the board of commissioners of Drainage District No. 2, by petition, under the provisions of Sess. Laws 1925, c. 21, p. 29, to procure the ratification approval and confirmation...