St. Louis-San Francisco Ry. Co. v. Blake

• Decision Date: 09 December 1929
• Docket Number: No. 61.,61.
• Parties: ST. LOUIS-SAN FRANCISCO RY. CO. v. BLAKE, County Treasurer.
• Court: U.S. Court of Appeals — Tenth Circuit

36 F.2d 652 (1929)

ST. LOUIS-SAN FRANCISCO RY. CO. v. BLAKE, County Treasurer.

No. 61.

Circuit Court of Appeals, Tenth Circuit.

December 9, 1929.

M. K. Cruce and Ben Franklin, both of Oklahoma City, Okl. (E. T. Miller, of St. Louis, Mo., on the brief), for appellant.

Eugene Jordan, of Tulsa, Okl. (Lydick, McPherren & Jordan, of Oklahoma City, Okl., and W. F. Pardoe, of Sapulpa, Okl., on the brief), for appellee.

Before LEWIS, COTTERAL and PHILLIPS, Circuit Judges.

PHILLIPS, Circuit Judge.

The St. Louis-San Francisco Railway Company brought this action against Ralph H. Blake, as county treasurer of Creek county, Oklahoma, under the provisions of section 9971, C. O. S. 1921, to recover certain taxes assessed for the year 1925 in Creek county, Oklahoma, on the ground that the levies, upon which such taxes were based, were illegal. The original petition contained twenty causes of action. The railway company has appealed from a judgment in favor of the defendant upon the fifth, eleventh, fifteenth, sixteenth, nineteenth and twentieth causes of action.

The alleged illegality of the levies is predicated upon the contention that they were made to create a sinking fund for the payment of certain judgments, which were predicated upon debts and certain funding bonds which evidenced debts, attempted to be incurred by the town of Kiefer, Oklahoma, in violation of the limitations contained in section 26, art. 10, of the Oklahoma Constitution, which, in part, provides:

"No county, city, town, township, school district, or other political corporation, or subdivision of the State, shall be allowed to become indebted, in any manner, or for any purpose, to an amount exceeding, in any year, the income and revenue provided for such year, without the assent of three-fifths of the voters thereof, voting at an election, to be held for that purpose, nor in cases requiring such assent, shall any indebtedness be allowed to be incurred to an amount including existing indebtedness, in the aggregate exceeding five per centum of the valuation of the taxable property therein, to be ascertained from the last assessment for State and county purposes previous to the incurring of such indebtedness."

The railway company contends that the items of the original indebtedness were illegal because each of them exceeded the appropriation for the current year in which they were incurred; that the judgments based thereon are void because the court was without jurisdiction to render them; that the funding bond judgments, pursuant to which the funding bonds were issued, were void because the court was without jurisdiction to render them; that the funding bonds were not issued in lieu of any valid subsisting indebtedness, and, in issuing such funding bonds, the municipality attempted to incur or create a new indebtedness which was in excess of the 5 per cent. limitation of section 26, art. 10, supra, and that, therefore, the funding bonds are void.

Neither the bondholders nor the judgment creditors were made parties to the action and for that reason, at the very threshold of the case, we are called upon to determine whether there is an absence of necessary or indispensable parties defendant, without whose presence the court should not proceed to a consideration of the merits.

Section 28, art. 10, of the Oklahoma Constitution, in part, provides:

"Counties, townships, school districts, cities, and towns shall levy sufficient additional revenue to create a sinking fund to be used, first, for the payment of interest coupons as they fall due; second, for the payment of bonds as they fall due; third, for the payments of such parts of judgments as such municipality may, by law, be required to pay."

Each of the levies involved in causes of action five, eleven, fifteen, sixteen, nineteen and twenty were made for the specific purpose of paying the principal and interest of one of such judgments or funding bond issues, under the mandate of the provisions of the Oklahoma constitution last above quoted.

Section 9971, C. O. S. 1921, provides that, where the illegality of the tax is alleged to arise by reason of some action, from which the law provides no appeal, the aggrieved person shall pay the full amount of such tax and give notice to the collector showing the ground of complaint and that suit will be brought to recover such tax; that thereupon it shall be the duty of the collector, for a period of thirty days, to hold such tax separate from other taxes collected by him and if, within such period, summons is served upon him in such suit, then until the final determination of such suit; that in such suit, the court shall render judgment showing the correct and legal amount of tax due by such person and if such judgment shows that the tax paid is in excess of the legal and correct amount due, the collector shall refund to such person the excess.

Pursuant to this section, the railway company, under protest, paid the taxes based upon such levies. The taxes resulting from such levies, when paid, became a part of special funds, and if such levies were legal such funds, in equity, belong to the holders of such funding bonds and the owners of such judgments, and the city holds the legal title thereto in trust for such bondholders and judgment creditors. Vickery v. Sioux City (C. C.) 104 F. 164; Maenhaut v. New Orleans, 16 Fed. Cas. No. 8939, 2 Woods, 108. The treasurer is largely in the position of a stakeholder. If the levies were illegal, be should repay such taxes to the railway company. On the other hand, if the levies were legal, he should pay the same to the bondholders and judgment creditors. The real parties in interest are the railway company, a taxpayer, and the bondholders and judgment creditors. The title to the fund is the real issue in the case.

The railway company levels its attack directly at the bonds and judgments, and, as a foundation for the right to recover the taxes, seeks an adjudication declaring the bonds and judgments invalid and the levies made to pay them illegal; and seeks to recover back a fund to which a trust has attached in behalf of the bondholders and judgment creditors, if the bonds and judgments are valid and are enforceable.

Section 219, C. O. S. 1921, provides:

"Any person may be made a defendant who has or claims an interest in the controversy adverse to the plaintiff, or who is a necessary party to a complete determination or settlement of the question involved therein."

Section 224, C. O. S. 1921, provides:

"The court may determine any controversy between parties before it, when it can be done without prejudice to the rights of others, or by saving their rights; but when a determination of the controversy cannot be had without the presence of other parties, the court must order them to be brought in."

These, and similar provisions, carry into the Codes of Civil Procedure the equitable doctrine that a court cannot proceed to decree until all necessary parties are before it, and, even in the absence of due and timely objection, enjoin the court from rendering judgment in the absence of a party whose presence is essential to a determination of the controversy. Denison v. Jerome, 43 Colo. 456, 96 P. 166, 167, 168; Osterhoudt v. Board of Supervisors of the County of Ulster, 98 N. Y. 239; McDougald v. New Richmond Roller Mills Co., 125 Wis. 121, 103 N. W. 244, 247; Phœnix Mutual L. I. Co. v. Lincoln, 87 Neb. 626, 127 N. W. 1069; Haynes v. City Nat'l Bk., 30 Okl. 614, 121 P. 182, 184; Gerson v. Hanson, 34 Kan. 590, 9 P. 230, 231; Walrath v....