Opinion
No. 34519.
February 10, 1941.
1. COUNTIES.
Every question going to validity of county bonds which have not been validated by chancery court remains open to taxpayer to raise in an appropriate suit by him at any time when he may be called upon to contribute to payment of the bonds, and his attack may question every step taken in issuance from original order through the intermediate orders to and including final order and any amendatory order (Code 1930, sec. 312 et seq.).
2. COUNTIES.
A decree validating a county bond issue forecloses every question which could have been raised by any taxpayer against legality of the issue (Code 1930, sec. 312 et seq.).
3. COUNTIES.
Where a board of county supervisors presents to the taxpayers for validation a certified record relating to a bond issue and gives them notice to come into court if they have any objection to what the record shows and proposes, the record after validation must remain unchanged in all particulars which otherwise would operate adversely to interests of the taxpayers (Code 1930, sec. 312 et seq.).
4. COUNTIES.
A purported amendment of final order for issuance of county bonds, by insertion of clause "without option of prior payment" after the bonds had been validated by a final decree of the chancery court, was invalid because operating to disadvantage of taxpayers who may have thus been led to forego objections which they might successfully have urged against validation (Code 1930, sec. 312 et seq.).
5. COUNTIES.
The objection that power to refund county bonds is exercisable only when there are no funds available in the ordinary management of the fiscal affairs of the county was not maintainable (Laws 1934, ch. 143, sec. 4).
6. COUNTIES.
Proceedings to validate county bonds are solely between the county as a governmental entity and the taxpayers of the county, and those who hold the bonds or other obligations which are to be paid or refunded are not "necessary parties" or even "proper parties" (Laws 1934, ch. 142, sec. 2; Code 1930, sec. 312 et seq.).
7. COUNTIES.
The validation of county bonds is wholly a statutory proceeding (Code 1930, sec. 312 et seq.).
8. COUNTIES.
In proceeding by county to validate refunding bonds, a taxpayer may appear and object that there are no bonds to be refunded or that none will be due or can be made to be due at the time the refunding bonds will be sold, but the issue thus raised for the court's decision is solely an issue between the board of supervisors and the taxpayers, and, if the questions involved are decided in favor of the bonds and the bonds are validated, the bonds become of unquestionable legality between the county, the taxpayers, and the purchasers of the refunding bonds (Laws 1934, ch. 142, sec. 2; Code 1930, sec. 312 et seq.).
9. COUNTIES.
Proceedings for validation of county refunding bonds would not preclude holders of original bonds, and should such holders elect not to surrender their bonds but to hold them and collect interest thereon, such holders would be met with the obstacle of stare decisis, but not with such defenses as res judicata or the law of the case (Laws 1934, ch. 142, sec. 2; Code 1930, sec. 312 et seq.).
APPEAL from the chancery court of Humphreys county, HON. J.L. WILLIAMS, Chancellor.
Creekmore Creekmore and C.E. Inman, all of Jackson, for appellant.
The bonds issued in 1934 could not be called for redemption prior to April 2, 1959.
The amended or corrected order speaks for itself and should control regardless of the fact that the bonds had been previously validated by the chancery court. The Board had the right if it so desired or saw fit to make the bonds non-callable, and we contend that this is exactly what they did when the order of August 6, 1934 was passed. The Board of Supervisors had authority to enter the order eliminating the call feature from the bonds and making them non-callable, since in so doing it was performing a legislative act.
Ordinarily, where the rights of third parties have not intervened, a county board may modify or repeal its ministerial and legislative acts, but may not set aside its judicial acts.
20 C.J.S. 872, Sec. 93.
Validation does not form a part of the proceedings whereby the issuance of bonds is authorized but merely submitted to the chancery court the proceedings already had for a decision upon their legality. The action of the court did not in any way add to or detract from the power of the Board to take such action as it deemed expedient with respect to the details of the bonds.
The Board had no power to issue the refunding bonds because of Section 4, Chapter 143 of the Laws of 1934.
State ex rel. Bd. of Fund Commissioners v. Smith, State Auditor, 96 S.W.2d 348, 339 Mo. 204.
The decree of validation of the 1940 bond issue is invalid because of failure to have jurisdiction over the holders of the outstanding bonds of the 1934 issue.
The notice given upon the validation proceeding in question was addressed only to the taxpayers of Humphreys County and no process, personal or by publication, was made for the bondholders of the 1934 issue. The holders and owners of the bonds of the 1934 issue were not in court, and their rights cannot be affected by the validation proceedings. The county should have made each and every bondholder a party to the suit.
V.B. Montgomery, of Belzoni, for appellee.
The bonds issued in 1934 were properly called for redemption on April 2, 1941.
Morgan v. Falls City, 103 Neb. 795, 174 N.W. 421; Peery v. Los Angeles, 203 P. 992, 19 A.L.R. 1044.
The action of the Board of Supervisors was a post-legislative action after this bond issue had been submitted to the people by notice duly published in the paper and was an effort to make a substantial change in the terms of the bonds. After the proposal to issue the bonds had specified their terms and notice to the people had been published, based upon this proposal, then the Board of Supervisors could not thereafter make a material change in the terms of the bonds.
The Board had power to issue the refunding bonds under Section 4, Chapter 143 of the Laws of 1934.
The decree of validation of the 1940 bond issue is valid.
The lower court did have jurisdiction over all of the holders of outstanding bonds of the 1934 issue.
Chap. 10, Code 1930; Street v. Town of Ripley, 173 Miss. 225, 161 So. 855; Bacot v. Bd. of Sup'rs of Hinds County, 124 Miss. 231, 86 So. 765; Love v. Mayor and Bd. of Aldermen of Yazoo City, 162 Miss. 65, 138 So. 600; Jackson E. Ry. Co. v. Burns, 148 Miss. 7, 113 So. 908; Adams v. Colonial U.S. Mortgage Co., 34 So. 482, 82 Miss. 263, 17 L.R.A. (N.S.) 138, 100 Am. St. Rep. 633; State v. Wheatley, 74 So. 427, 113 Miss. 555; 102 A.L.R. 90-111; Sec. 314, Code 1930; Bank of Washington v. Arkansas, 20 How. 530, 15 L.Ed. 993; Beers v. State of Ark., 20 How. 527, 15 L.Ed. 991.
Bondholders other than Nash Love are not necessary parties.
S.D. v. N.C., 192 U.S. 286, 48 L.Ed. 448.
Chapter 142, Laws 1934, authorizes the issuance of county refunding bonds, and among its provisions is that "the resolution or order providing for the issuance of such bonds may reserve unto the board of supervisors the right to call in, pay and redeem such bonds, in the inverse order of their . . . maturities, prior to the maturity date or dates thereof and on any interest payment date. Provided, however, that whenever it is desired to exercise the aforesaid right, if reserved in such resolution or order, the board of supervisors shall cause written notice thereof to be delivered to the bank or office at which such bonds are payable, and such notice shall be so delivered not less than thirty (30) days prior to the interest payment date designated for the redemption of such bonds, [and] after date so designated no further interest shall accrue on the bonds so called for redemption." Section 2.
The Chapter further provides that before proceeding to issue the refunding bonds, the board of supervisors shall publish notice of their intention to do so, and if as many as twenty per cent. of the qualified electors file written protest against the bond issue, then an election on the question must be held and the bonds cannot be issued unless a majority of the participating qualified electors shall vote therefor.
Acting under the Chapter, the Board of Supervisors of Humphreys County entered an order at its regular April, 1934, Term reciting its intention to issue the refunding bonds of the county in the sum of $2,184,100, and that the right to call in and pay the bonds in the inverse order of their maturities, prior to their maturities, would be reserved, and that the written notice of the exercise of the reserved right would be given to the National City Bank in the City of New York, at which bank the bonds would be payable.
The notice in all respects as required by the statute was published in a newspaper of the county during four weekly issues of the paper beginning on April 12, 1934, the said published notice containing the entire aforesaid order of the board in haec verba, and containing as a consequence the provisions for the call and payment of the bonds prior to maturity, and as to the notice to be given at the bank where the bonds were payable as has been stated.
No protest was filed, and at its regular May, 1934 Term, and on the 7th day of May, 1934, the Board entered its final order for the issuance of the bonds, the said final order containing and repeating the provisions already mentioned, reserving the right to call in and pay the bonds prior to maturity and the provisions for the service of notice on the National City Bank. And thereupon immediate steps were taken to validate the bonds by a decree of the chancery court as provided by Chap. 10, sec. 312 et seq., Code 1930, and every step prescribed for the validation was taken, and no objections having been made by any taxpayer, the bonds were validated by a final decree of the chancery court made and entered on the 4th day of June, 1934. And every bond which has at any time been sold or exchanged under the proceedings aforesaid, as lithographed, signed and delivered, contained the express recital that the bond had been issued pursuant to and in accordance with the order of the Board of Supervisors of Humphreys County made and entered on May 7, 1934, and recorded in Minute Book 7, p. 156, of the said Board; and we have already stated the contents of that order so far as material to the present questions.
After some of the bonds had been sold or exchanged for prior bonds, a bond attorney residing outside the state wrote to a party in Humphreys County, interested in these bonds, that the order of May 7, 1934, should be amended so as to make that order read "without option of prior payment," and without consulting its own attorney, the Board, at its regular August 1934 Term, and on the 6th day of August 1934, attempted to amend its order of May 7, 1934, so as to make it read as next hereinabove recited, and this is what has brought about the present trouble.
The bonds issued in 1934 were 4% bonds. They have been paid down to the extent that on the next interest date April 1, 1941, only a balance of $1,103,000 in principal will remain due. In this situation the Board has found that it can now call in and pay off the entire balance of the 1934 issue by a new issue at 3 1/2 per cent. It has therefore taken the proper steps under Chap. 143, Laws 1934, to do this, all the necessary and proper orders to that end having been made and entered at the November, 1940 Term of the Board; but when the hearing on the validation of the new issue came on before the chancellor appellant as a taxpayer and the holder of some of the bonds under the 1934 issue appeared and objected on three grounds:
(1) That by reason of the amendatory order dated August 6, 1934, the bonds of that issue are non-callable;
(2) That the power to refund bonds under Sec. 4, Chap. 143, Laws 1934, is exercisable only when there are no funds available in the ordinary management of the fiscal affairs of the county, and
(3) That the court has no jurisdiction over the bondholders of the 1934 issue, and therefore can make no order affecting their rights or interest.
The argument of appellant on the first ground is that in the issuance of bonds the Board acts in a legislative capacity, so long as it proceeds within the pertinent statutes, and that after the adjournment of the term at which its so-called final order is entered, and even after the decree of validation, the board may make amendatory orders, especially in mere matters of detail.
When there has been no validation by the chancery court of a bond issue, every question which may go to the validity of the bonds remains open to the taxpayer to raise in an appropriate suit by him at any time when he may be called upon to contribute to the payment of the bonds, and his attack may question every step taken in the issuance from the original order on through the intermediate orders to and including the final order and any amendatory order. But when there has been a validation decree that decree forecloses every question which could have been raised by any taxpayer against the legality of the issue; wherefore it follows that when the Board presents to the taxpayers a certified record for validation and gives them notice to come into court if they have any objection to what the record shows and proposes, that record must remain unchanged in all particulars which otherwise would operate adversely to the interest of the taxpayers, else the validation proceeding would become a means of entrapment by which the taxpayers would be lead to forego objections which they might successfully have urged against the validation, and then by a subsequent amendatory order suffer an increase in the burden or be deprived of some advantage as compared with the validated record.
The Board cannot present one record to the taxpayers for the validation of bonds and then present to them a more burdensome or less advantageous record when they are called on to pay, and since the rights of bondholders are based on what the Board has validly done, the bondholders cannot insist on any record which, as against the taxpayers, the Board had no right to make. The so-called amendatory order of August 6, 1934, because of its disadvantageous purpose, was of no valid effect, and the bonds of 1934 stand as if that order had never been made.
We are not certain that we have precisely interpreted the second contention of appellant, but we believe we have stated it broadly enough to cover anything that has been urged under that point. And however the contention may be stated it argues in a circle or else involves a construction of the statutes which would unduly narrow their meaning and effect, and we pursue the point no further than to say that it is not maintainable.
As to the third contention: Validation proceedings are solely between the county as a governmental entity and the taxpayers of the county — between the authority issuing the bonds and those who are to pay them. Those who hold the bonds or other obligations which are to be paid or refunded are not necessary parties, or even proper parties — there are no statutory provisions by which they may be made parties, and the validation of bonds is wholly a statutory proceeding. It is true that in a proceeding to validate refunding bonds, a taxpayer may appear and object that there are no bonds to be refunded, or that none will be due or can be made to be due at the time the refunding bonds will be sold, and that upon such objection the court will be obliged to decide that issue; but it is still an issue solely between the Board and the taxpayers, and if the questions involved be decided in favor of the bonds proposed to be issued and the bonds are validated, the bonds as validated become of unquestionable legality as between the county, the taxpayers, and the purchasers of the refunding bonds.
The validation proceedings for refunding bonds do not include or preclude the holders of the older bonds which are proposed to be refunded. They have not been parties to the refunding validation proceedings and should they elect not to surrender their bonds, but to hold them and seek to collect the interest thereon, and should sue therefor, they would be met with no more than what confronts litigants generally, that is to say, the obstacle of stare decisis, but not with any such defenses as res adjudicata or the law of the case.
The decree validating the refunding bond issue now before us was in all things correct, and the bonds in the hands of purchasers or takers will be beyond question as to their legality.
Affirmed.