St. Louis Union Trust Co. v. Franklin-American Trust Co.

• Decision Date: 24 August 1931
• Docket Number: No. 9116.,9116.
• Citation: 52 F.2d 431,87 ALR 386
• Parties: ST. LOUIS UNION TRUST CO. et al. v. FRANKLIN-AMERICAN TRUST CO. et al.
• Court: U.S. Court of Appeals — Eighth Circuit

87 ALR 386, 52 F.2d 431 (1931)

ST. LOUIS UNION TRUST CO. et al. v. FRANKLIN-AMERICAN TRUST CO.^* et al.

No. 9116.

Circuit Court of Appeals, Eighth Circuit.

August 24, 1931.

Henry Davis, of St. Louis, Mo. (Thomas S. McPheeters, Rhodes E. Cave, and Bryan, Williams, Cave & McPheeters, all of St. Louis, Mo., on the brief), for appellant St. Louis Union Trust Co.

Walter G. Riddick, of Little Rock, Ark. (Charles T. Coleman, of Little Rock, Ark., on the brief), for appellant M. H. Rorick.

George B. Rose, of Little Rock, Ark. (D. H. Cantrell, J. F. Loughborough, A. W. Dobyns, and A. F. House, all of Little Rock, Ark., on the brief), for appellees.

Before STONE and GARDNER, Circuit Judges.

STONE, Circuit Judge.

The Cypress Creek drainage district issued four series of bonds. The first was issued under authority of two special acts of the Legislature of Arkansas, passed in 1911. The second issue was under a special act passed in 1915, and the last two issues were under two special acts passed in 1919 and 1921. The district came into default on all of these issues. Proceedings were begun by the trustees of the first and second issues to enforce the payment of the bonds and the issues in the case finally developed into a contest of rights of priority between the first issue, the second issue, and the third and fourth issues. M. H. Rorick, holder of bonds under the first issue, intervened, contending for the priority of the first issue. The second issue conceded the priority of the first issue, but claimed a priority over the third and fourth issues. The third and fourth issues claimed a parity of all four issues. The court made findings of fact and stated conclusions of law to the effect that all four issues were upon a parity without any rights of priority as to any one of them. From that determination, Rorick, representing the first issue, and the trustee under the second issue bring this appeal.

The matters presented upon this appeal have to do with certain stated conclusions of law and certain findings of fact of the court below, but, in the last analysis, all involve but one general question, which is the proper construction to be given the above special acts under which these several issues of bonds were made.

In 1911, the Legislature passed two special acts designated as Special Act No. 110 (page 260) and Special Act No. 455 (page 1227). The first act created this district. The second act amended the first act, and nothing was done until after the second act, so that we need concern ourselves only with Act No. 110, as amended by Act No. 455. Under these acts, the location and purpose and, generally speaking, the extent of the improvement contemplated to be brought about by the district are set forth as follows: "The intent and purpose of this Act being to open up and make a drainage canal from the Lincoln County line to Boggy Bayou, and of Boggy Bayou from the Government levee to Clay Bayou, in Chicot County, and the work from Boggy Bayou on down shall be completed before the Government is asked to move its Boggy Bayou levee. The board shall, as soon as practicable after the passage of this Act, employ a competent engineer and other employees and make a complete survey of said district from Lincoln County line to said bayou in Chicot County, and said engineer shall make all necessary maps, profiles, and furnish other information showing the size of the canal required for the purpose of this Act; said information to show the yardage of earth to be removed and other work required, and so complete in every detail to enable the board to advertise for bids. The work shall be let to the lowest responsible bidder, who shall give bond in such amount as the board may determine. The board shall make such rules and regulations as it may deem necessary for the speedy completion of said work. The board shall provide in like manner for the opening and constructing a ditch or canal from the Lincoln County line to Boggy Bayou. After the completion of the main ditches or canals, as above set forth, it may construct such general or main laterals as will be of general benefit to the community, out of the funds in its hands for the surplus sum, if there be a surplus." Act No. 455, § 2, Acts of Ark. for 1911, p. 1229.

Section 12 of the same acts (page 1240) provided for the issuance of bonds, as follows: "For the purpose of constructing, completing and maintaining the drains, ditches and canals contemplated by the act, and in order to enable the board of directors to further carry out the purposes of this Act, the said board shall have power to borrow money from time to time at a rate of interest not exceeding six per cent per annum, and to that end may issue negotiable bonds of said district, to an amount not exceeding $300,000.00, payable in lawful money of the United States, at such time and place, and in such denominations as the board may prescribe. Said bonds so issued by said board shall be signed by the president, and countersigned by the clerk, and the seal of the district attached thereto. The board is hereby required to set aside annually from the first revenues collected from any source whatever, a sufficient sum to pay the interest for that year on all outstanding bonds, and any installment of principal that may become due in that year, and for the purpose of securing the payment of said bonds and interest, a lien is hereby charged on all lands, lots, railroad embankments and tramways in said district, paramount to all other liens except other taxes."

A portion of section 13 (page 1240) provided as follows: "For the prompt payment of bonds and coupons the entire revenues of the district arising from any and all sources are pledged, and for the purpose of paying said bonds and coupons, said board may execute an instrument of pledge in due form of law."

Section 14 (page 1243) provided as follows: "The duties prescribed by this Act may be enforced by mandamus, and in the event any bond or interest coupon is not paid when due, the holder thereof, or the trustee in any instrument of pledge executed to secure the same, shall have the right to apply to any chancery court having jurisdiction in any part of the district, for the appointment of a receiver to collect said assessment, and apply the same on said bond or interest coupon, and in the event of the appointment of any such receiver, all suits for collection of delinquent assessments shall be instituted in his name as receiver of the board, and as long as said receivership is in force all assessments collected shall be paid by the collector to said receiver, instead of to the treasurer or depository of the board. Said receivership shall exist until all the past due bonds and interest coupons have been paid in full."

It was under the above provisions that the district executed its first pledge, and the first issue of bonds in the full amount authorized was sold to bona fide purchasers.

In 1915, Special Act No. 80 (page 297) was passed as an amendatory act to those passed in 1911. Section 12 of that act amended the existing section 12 of the prior acts so that it read as follows: "For the purpose of constructing, completing and maintaining the drains, ditches, canals, levees and dams contemplated by this Act, and in order to enable the Board of Directors to further carry out the purposes of this Act, the said board shall have power to borrow money from time to time at the rate of interest not to exceed six per cent per annum, and to that end may issue and sell at not less than par negotiable bonds of said district, to an amount not exceeding $1,000,000.00, payable in lawful money of the United States, at such time and place, and in such denominations as the board may prescribe. Said bonds so issued by said board shall be signed by the president and countersigned by the clerk, and the seal of the district attached thereto. The board is hereby required to set aside annually from the first revenues collected from any source whatever, a sufficient sum to pay the interest for that year on all outstanding bonds, and any installment of principal that may become due in that year, and for the purpose of securing the payment of said bonds and interest, a lien is hereby charged on all lands, lots, railroad embankments and tramways, in said district, paramount to all other liens except the liens of bonds heretofore issued."

Other sections of the act of 1915 bear directly upon the improvement to be made and clearly show a changed and extended plan of improvement (see section 3). This act contained the same pledge of revenues as section 13 of the 1911 acts, above quoted, and the same method of enforcement as in section 14 of the 1911 acts, above quoted. Under the authority of this act, the district executed its pledge, and the second issue of bonds ($700,000) was put out and sold to bona fide purchasers.

In 1919, Special Act No. 454 (page 581) was passed. It was entitled: "An Act to Enable the Board of Directors of the Cypress Drainage District in Desha and Chicot Counties to Expedite the Construction of and Final Completion of the Work Apthorized by Act No. 80 of the Acts of the General Assembly of the State of Arkansas in the Year 1915, and for Other Purposes." No bonds were sold under this act until after it had been amended by the act of 1921.

In 1921, Special Act No. 260 (page 495) was passed, entitled: "An Act in Aid of Cypress Creek Drainage District, in Desha and Chicot Counties." After reciting that the district had exhausted its funds, but had not made any issue of bonds authorized by the act of 1919, the act amended section 2 of the 1919 act to read that: "For the purpose of expediting the construction and final completion of the improvements authorized by Act No. 80 of the Acts of the General Assembly of the State of Arkansas for the year 1915," the district was authorized to issue bonds not exceeding $800,000 and that:

"Said board may levy upon the...