State v. Bank of Mineral Wells

• Decision Date: 21 April 1923
• Docket Number: (No. 9008.)
• Citation: 251 S.W. 1107
• Parties: STATE, for Use of DELTA COUNTY LEVEE IMPROVEMENT DIST. NO. 1, et al., v. BANK OF MINERAL WELLS et al.
• Court: Texas Court of Appeals

251 S.W. 1107

STATE, for Use of DELTA COUNTY LEVEE IMPROVEMENT DIST. NO. 1, et al., v. BANK OF MINERAL WELLS et al.

(No. 9008.)

Court of Civil Appeals of Texas. Dallas.

April 21, 1923.

Rehearing Denied June 2, 1923.

Appeal from District Court, Delta County; Newman Phillip, Judge.

Tax suit by the State of Texas for the use and benefit of Delta County Levee Improvement District No. 1 and others against the Bank of Mineral Wells and others. From the judgment rendered, plaintiffs appeal. Reversed and rendered in part and, as so modified, affirmed.

L. L. James and C. C. McKinney, both of Cooper, W. P. Dumas, of Dallas, Goree, Odell & Allen, of Fort Worth, Dial, Melson, Davidson & Brim, of Sulphur Springs, and Charles Claflin Allen, of St. Louis, Mo., for appellants.

Penix, Miller & Perkins, of Mineral Wells, and Long & Wortham, H. D. McDonald, and A. P. Park, all of Paris, for appellees.

HAMILTON, J.

Appellant Delta County Levee Improvement District No. 1 was organized in 1918 under the authority of article 16, § 59, of the Constitution of Texas, as it was amended in 1917, and in conformity with the provisions of chapter 25 of the Acts of the 4th Called Sess. of the 35th Legislature (Vernon's Ann. Civ. St. Supp. 1922, arts. 5107-267 to 5107-276), currently known as the "Canales Act," and also in conformity with the provisions of chapter 146 of the acts of the 34th Legislature enacted in 1915 (Vernon's Ann. Civ. St. Supp. 1918, art. 5530 et seq.), which latter act was enacted under the authority of article 3, § 52, of the Constitution. Article 16, § 59, of the Constitution, is an amendment adopted in 1917 for the specific purpose of authorizing the Legislature to make provision for improvement districts in conformity with the grant of power it contains.

The steps provided by law to be taken in the creation of levee districts were pursued in bringing into existence Delta County Levee Improvement District No. 1. The district having been created in conformity with the foregoing statutory provisions enacted under the authority of the above-mentioned terms of the Constitution, bonds were issued for the construction of levees in the district. The bonds were sold and, as provided by law, taxes were levied and assessed against all the property located in the district for the payment of the interest, and for the creation of a sinking fund against the bonds.

The Delta Farms Association, one of the appellees, owns approximately 2,400 acres of land in the district against which the assessment of taxes for the above-mentioned years was made to meet the interest and provide the sinking fund required by the terms of the bond issue.

Appellee Bank of Mineral Wells owned certain notes executed in 1912 and others executed in 1916 in part payment of the purchase price of the land, and to secure the payment of these notes a vendor's lien in each instance bearing coeval date with the notes exists.

The taxes levied and assessed, as above stated, were not paid and became delinquent. Suit was instituted in accordance with the provisions of the general tax laws against Delta Farms Association as the record owner of the land for the recovery of the taxes with penalties and interest, and for the foreclosure of the tax lien, and the Bank of Mineral Wells was made a party to the suit because it held the above-mentioned respective vendor's liens against the land to secure the purchase-money notes. The suit was not contested by the Delta Farms Association.

The Bank of Mineral Wells, alone, resisted the suit upon the claim that, as a matter of law and fact, the vendor's lien is superior to any lien to be asserted by virtue of the tax claimed in behalf of the bonds, and, among other numerous contentions presented in opposition to the claim asserted by appellant, relied primarily upon these specific ones: (1) That the levee district was never lawfully organized but was brought about and established altogether through fraud; (2) that the bonds were not lawfully created and do not constitute a legal charge against any property in the district; (3) that the taxes sought to be recovered were not legally levied and assessed; (4) that the amount represented by the bonds is far in excess of that allowed by the Constitution; (5) that the legislative enactment under which the attempt was made to organize the district is unconstitutional.

The trial court sustained various special exceptions to appellee's answer, interposing defenses of the nature of those above designated, and others, and thereby eliminated from the case all questions and issues except the question of whether or not taxes in the respective amounts claimed were due under the general tax law relating to delinquent taxes, and the question of whether or not the lien for the taxes provided under the levee district law was superior to the vendor's lien retained to secure the notes held by the appellee bank.

Having reduced the case to the confines of these issues, judgment upon them was entered against the Delta Farms Association for the amount of the taxes, interest, and penalties sued for, and for foreclosure of the tax lien, and the tax lien was decreed to be subordinate and inferior to the vendor's lien existing to secure the notes held by the appellee bank.

The various propositions of law advanced by appellant in the aggregate finally resolve themselves into the controlling question succinctly stated in appellant's brief, as follows: Is an annual ad valorem tax, assessed and levied by a levee district created under the Constitution and laws of the state of Texas for the purpose of paying the principal and interest of bonds lawfully issued by the district for the construction of levees therein, a charge upon land located within the district prior and superior to a vendor's lien or mortgagee's lien upon such property?

The disposition of this question necessarily involves the disposition of the propositions submitted by appellant and of the counter propositions submitted by appellee in antagonism to them.

Under cross-assignments of error numerous original propositions urged by appellee may be epitomized to the effect that the court erroneously excluded from consideration valid and proper defenses in sustaining special exceptions to various allegations of fraud pertaining to the organization of the district, including all the acts in connection with the election held to determine whether or not it should be formed, and all the acts done with reference to the issuance of the bonds, fraudulent conspiracy having been alleged both in the organization of the district and in the election for the issuance of the bonds; that at the time the bonds were issued the law provided that such bonds could not exceed in amount one-fourth of the valuation of the land in the district, while in fact the amount of the bonds transcended this limit; that they were not issued in conformity with the terms of the petition for the election and with the terms of the notices of the election, for which reason they were void; and that the court erred in sustaining exceptions to allegations to this effect; that the court erred in excluding a valid defense by sustaining exceptions to allegations of irregularities in the levy of the taxes, and of failure of the board of equalization to give lawful notice to owners and thereby providing them with an opportunity to be heard upon the levy and assessment of taxes and as to the valuation made the basis of the assessment and levy, as well as sustaining exceptions to allegations of the irregularities of levies and assessments for each of the years for which collection of the taxes is sought; and that the statute is void and unconstitutional because it expresses more than one subject in its title; because it fails to provide a means for equalizing taxes in the district or of assessing and levying them on the basis of benefits to accrue therefrom to the respective tracts of land taxed; that it provides only an arbitrary levy and assessment without giving notice to owners of land or affording any opportunity for them to be heard with reference to the question of benefits to flow from the levy and assessment; and that the method of assessment and levy of taxes provided by the act is arbitrary and in violation of both state and federal Constitutions, because it is a method which, in effect, provides for the taking of property without due compensation and without due process of law.

Reference to, and consideration of, different constitutional amendments expressing the fundamental law related to the question and application of the statutory provisions enacted pursuant to them will be made in determining the question of priority of liens above stated. Section 52 of article 3 of the Constitution adopted in 1904 contains an inhibition against the Legislature's authorizing political subdivisions of the state to lend their credit, but specifically makes the exception that such subdivisions or any defined district within the state, upon a vote of two-thirds majority of the resident property taxpayers who are qualified electors of such district to be affected thereby, may issue bonds, etc., in an amount not to exceed one-fourth of the assessed valuation of the real property contained in the district or territory. This constitutional provision provides for the levy and collection of taxes to pay the interest and create a sinking fund for the redemption of bonds thus issued under legislative authority for certain purposes, among which purposes is specified the improvement of rivers, creeks, and streams to prevent overflow.

Section 59 of article 16 of the Constitution, which was adopted in 1917, and which has been denominated the "Conservation Amendment" to the Constitution makes detailed provision for the conservation and development of the natural resources of the state with reference to the control, storing, preservation, and distribution of storm and flood waters of streams...