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Evans v. Bankston

Supreme Court of Mississippi, In Banc
Jun 12, 1944
18 So. 2d 301 (Miss. 1944)

Summary

In Evans v. Bankston, 196 Miss. 533, 18 So.2d 301 (1944), the Mississippi Supreme Court stated, "These districts are, therefore, political subdivisions of the state — they are governmental agencies, as well as private enterprises."

Summary of this case from Lenoir v. Porters Creek Watershed Dist

Opinion

No. 35549.

May 22, 1944. Suggestion of Error Overruled June 12, 1944.

1. DRAINS.

Drainage districts are organized to reclaim wet and overflowed lands in order to promote agriculture, and to conserve the public health (Laws 1912, chap. 195, as amended).

2. DRAINS.

Drainage districts are political subdivisions of the state and are governmental agencies, as well as private enterprises.

3. BANKRUPTCY.

An insolvent drainage district organized under Mississippi laws is not subject to having its affairs administered by federal bankruptcy court under Bankruptcy Act amendment providing for composition of indebtedness of drainage districts since state's consent that district's affairs may be so administered is indispensable (Laws 1912, chap. 195, as amended; Bankr. Act, sec. 84 et seq., 11 U.S.C.A., sec. 401 et seq.).

4. BANKRUPTCY.

A plea in abatement to action by trustees appointed by federal bankruptcy court for drainage district on ground that federal bankruptcy proceeding was void was not a collateral attack where court was required to look only to face of proceeding, and absence of state statute consenting thereto, to determine whether proceeding was void (Laws 1912, chap. 195, as amended; Bankr. Act, sec. 84 et seq., 11 U.S.C.A., sec. 401 et seq.).

5. DRAINS.

Commissioners of insolvent drainage district were not precluded from maintaining proceeding for affixing delinquent taxes against landowners because commissioners failed to file certain reports required by statute (Code 1942, sec. 4723).

ON SUGGESTION OF ERROR.

PARTIES.

Where bankruptcy trustees for drainage district and drainage commissioners joined in proceeding for affixing delinquent taxes against landowners, and district was not subject to having its affairs administered by bankruptcy court, bankruptcy trustees were required to be eliminated as parties, and drainage commissioners were entitled to custody of funds sought to be collected, without necessity of instituting a new proceeding (Laws 1912, chap. 185, as amended; Bankr. Act, sec. 4 et seq., 11 U.S.C.A., sec. 401 et seq.).

APPEAL from the circuit court of Tunica county, HON. JOHN W. CRISLER, Judge.

E.C. Brewer, of Clarksdale, Dulaney Bell, of Tunica, and W.C. Rodgers, of Memphis, Tenn., for appellant.

The Pritchard Drainage District is a political subdivision of the state with governmental powers.

Pryor v. Goza, 172 Miss. 46, 159 So. 99.

A state can enact a bankruptcy or insolvency law applicable to its political subdivisions, if permitted by the state Constitution and public policy.

Faitoute Iron Steel Co. v. City of Asbury Park, 316 U.S. 502, 86 L.Ed. 1629.

In Mississippi such a state insolvency or bankruptcy law is prohibited by State Constitution and considerations of public policy announced by the Supreme Court.

Pryor v. Goza, supra.

The Congress, with its full jurisdiction over the subject of bankruptcy, cannot alone enact bankruptcy statutes applicable to political subdivisions of the state, since to do so would impinge upon state sovereignty.

United States v. Bekins, 304 U.S. 27, 58 S.Ct. 811, 82 L.Ed. 1137.

By cooperative effort, the Congress and the State Legislature may provide a plan of bankruptcy for political subdivisions of a state, the Congress exercising its bankruptcy powers and the state exercising its powers of sovereignty.

United States v. Bekins, supra.

The Congress has acted to the extent of its power to provide a plan of bankruptcy for political subdivisions of the states, and some states have made the plan applicable and effective through state legislation.

California Laws of 1934, Ex. Sess., Ch. 4; Texas Act of April 27, 1935; Arkansas Act of March, 1937; Idaho Laws of 1939.

In Mississippi the Federal plan has never become applicable or effective because the legislature has not seen fit to enact a statute making it so.

The so-called proceedings in bankruptcy and so-called judgment of the Federal Court attempting to appoint trustees are void and have no legal or binding force or efficacy for any purpose or at any place, and the situation is the same as if there had been no attempted proceedings or judgment.

Vallely v. Northern F. M. Ins. Co., 254 U.S. 348, 65 L.Ed. 297; 31 Am. Jur. 91, Sec. 430.

The persons who designated themselves as trustees, having no interest in the controversy and no right to any relief, were improperly joined as complaining parties.

Stephenson v. New Orleans N.E.R. Co., 180 Miss. 147, 177 So. 509; Chicot County Drainage District v. Baxter State Bank, 308 U.S. 371, 60 S.Ct. 317; Stoll v. Gottlieb, 305 U.S. 165, 83 L.Ed. 104; Noble v. Union River Logging Railroad Co., 147 U.S. 165, 37 L.Ed. 123; Griffith's Mississippi Chancery Practice, Sec. 102, and cases cited in Note 4.

The persons claiming to be trustees being improperly joined, the defendant made timely and proper objection by plea in abatement, which was properly sustained.

Aven v. Singleton, 132 Miss. 256, 96 So. 165; Afro-American Sons and Daughters v. Webster, 172 Miss. 602, 161 So. 318.

It was not necessary for the plea to be verified by oath because it referred to matters of record. If oath was required, or if there was any other defect in the plea, no timely objection was made and objection must be treated as waived.

Collins v. Union Farmer's Bank, 110 Miss. 506, 70 So. 581; Code of 1942, Sec. 1457.

The action of the board of supervisors presented alternatives to the complaining parties, (a) to amend their complaint, or (b) to seek by appeal to have the plea overruled and the cause reversed for hearing on the merits. If the board had overruled the plea, the alternatives would have been presented to the defendant, (a) to answer on the merits, or (b) to permit such order to be entered as the allegations of the complaint might require, and then appeal.

Code of 1942, Sec. 1457.

The appellees have demurred to the plea. This was done, not by filing a written demurrer, but by ignoring the plea and proceeding with proof before the board, where the demurrer was overruled, and by seeking and obtaining a final judgment on the appeal record in the circuit court, where the demurrer was sustained; and the statute prohibited such action of the court.

Craig v. Winston County, 175 Miss. 24, 166 So. 402; Code of 1942, Sec. 1492.

A reversal of the judgment of the circuit court is necessary and a judgment should be entered here affirming the action of the board of supervisors. Such a judgment, of course, having been rendered on a plea in abatement, would not preclude any of the appellees who consider that they have rights in connection with the subject matter of this litigation from seeking to enforce those rights in an appropriate proceeding. Questions as to such rights and defenses of the appellant on the merits are now involved. And on this appeal, questions as to the legality of the district organization and assessments, the validity of the assessments, the validity of the assessment roll, the amount of assessments unpaid, the effect of the issuance and sale of invalid bonds by the district, the effect of any illegal collection and disbursement of funds by the so-called trustees, the effect of the acquiescence of commissioners in any such illegal collections and disbursements, the question as to whether there are any outstanding valid obligations of the district, the effect of the discount admittedly given to certain of the landowners by the trustees, the effect of any agreements entered into between the commissioners and this appellant or other landowners or landowners generally, cannot finally he adjudicated. The contention of the appellees is in effect that when one has filed a plea in abatement he is thereafter precluded from making any other defense, although he was invited by summons issued at appellees' instance to plead, answer or demur.

We submit that there is no statute of the State of Mississippi authorizing a governmental unit of the State of Mississippi to invoke the aid of the Act of Congress commonly known as the Municipal Bankruptcy Act, and to surrender its fiscal powers and governmental functions to the so-called trustees appointed by the Federal District Court. Therefore, we submit that there has been a misjoinder of parties plaintiff when the drainage commissioners are joined with the so-called trustees in bankruptcy, and by reason of such misjoinder, the board of supervisors was correct in sustaining the plea filed by appellant which raised the issue of misjoinder, and that the issue was raised in the proper manner, namely by plea in abatement.

We further submit that the board of supervisors was correct in sustaining the plea of appellant which stated in plain and unambiguous language that a proper defense to the petition could not be presented nor a proper determination of the issues be had until certain information in the hands of the commissioners be filed as required by law, and that the proper method of raising this objection was by plea in abatement; but if it be held that the trustees were not required to furnish such information, then the issue of misjoinder is additionally emphasized and the correctness of the decision of the board in sustaining the plea placed beyond question.

Pryor v. Goza, 172 Miss. 46, 159 So. 99; Aven v. Singleton, 132 Miss. 256, 96 So. 165; Ashton et al. v. Cameron County Water Measurement Imp. District, 298 U.S. 513, 56 S.Ct. 892, 80 L.Ed. 1309; United States v. Bekins, 304 U.S. 27, 58 S.Ct. 811, 82 L.Ed. 1137; Faitoute Iron Steel Co. et al. v. City of Asbury Park, New Jersey, 316 U.S. 502, 86 L.Ed. 1629; Code of 1942, Secs. 1195, 1457, 1476, 1478, 4723; Act of Congress, May 24, 1934, Ch. 9; Act of Congress, August 16, 1937, Ch. 10 (50 Stat. at L. 653, Ch. 657, 11 U.S.C.A. 401 et seq.).

We further respectfully submit that the board of supervisors entered the correct order when it sustained the plea of appellant, and such order of the board should have been affirmed by the circuit judge, and the only other order which the board of supervisors could have entered would have been an order overruling the plea in abatement and permitting the appellant to plead to the merits, as the board of supervisors would have had no authority to have entered final judgment granting the prayer of the petition if the plea in abatement had been by the board overruled.

Therefore, the order of the board of supervisors must be affirmed and the judgment of the circuit court reversed, and judgment here entered for the appellant on the issues presented by the petition and plea; but if it should be thought that we are mistaken on these propositions which to us appear to be entirely obvious and correct, the judgment of the circuit court granting the relief prayed for by the petition must be reversed and the cause remanded, with leave to the appellant to plead to the merits.

W.L. Bankston, of Tunica, and W.W. Venable, of Clarksdale, for appellees.

I think that it is well to notice just what the nature of the proceedings was before the board of supervisors. We call the court's attention to the fact that the assessment of benefits against the lands of defendant was made, approved and became final before the issuance and sale of the $90,000.00 worth of bonds, and the validity of this assessment could not be made invalid because, later, other lands were taken into the district, the benefits to which land would not sustain the later issue of $50,000.00 worth of bonds that were issued and sold by the drainage commissioners. We start then with the proposition of a valid assessment against the land of appellant, and this assessment has the force and effect of a judgment and constitutes a lien. We think this is well settled in this state, and that citation of authority is unnecessary.

What actually happened was that appellant, having received from the construction of the district benefits of the value of the amount of his assessments, refused to pay the annual installments which had become due during the time that the state owned the land. The lands were not relieved from drainage assessments by virtue of sales to the state of taxes and maturing of title therein, but only suspended, and as soon as the land was sold by the state the land became liable for the annual levies that had been made.

Waits v. Black Bayou Drainage Dist., 185 Miss. 626, 185 So. 577.

The board of supervisors of its own motion, or the sheriff of his own motion, without any proceeding before the board of supervisors should have proceeded to collect these taxes that were due the drainage district. They were due and they were owing by the appellant, and since they had escaped collection, the board of supervisors should have ordered the collection.

All that the petition filed by the appellees amounted to was the request by the board that they proceed to order the collection of this drainage assessment and if not paid order the land sold. The petitioners were not asking for any judgment against the defendant; the drainage district was not asking for any judgment against the defendant, it already had a judgment. It was simply asking that process issue for the collection of a judgment already entered by virtue of the assessment. Unless the defendant had some reason why such an execution of the sale of the lands should not be issued, since the lands of the appellant were liable, and since theoretically there might be some reason why the judgment of the assessment had been discharged, he was summoned into court to show cause why process against his land should not issue. He did appear to show cause, and we have before us what he says are the reasons why the judgment of the assessments, or betterments, should not be paid. He does not say that his land did not owe this judgment; he did not say that he did not get the benefits; he does not say that bonds were not issued, held by innocent purchasers and payable out of money which he has to pay, but all that he says is that the wrong people are asking him to do what is his own legal obligation to do. Bearing in mind the inherent nature of the proceedings, it seems to us obvious that anyone that had an interest in the question would have a right to petition the board to proceed for the collection of the assessments on the land.

In the case at bar, we have the trustees who have the legal title to the bonds, the agent for the bondholders and the commissioners of the drainage district petitioning the board to require the defendant's land to pay what was due. In this connection, it is said that the trustees should not be recognized because they were appointed by the district court in what is claimed to be a void procedure. It seems to us immaterial in this connection whether the proceedings in the district court were void, or valid. The fact remains that the bondholders have turned over their bonds to the trustees, and they have the right, as holders of the bonds, though they held them in trust, to petition the board to collect the assessment already imposed on the lands. They have as much right to do this as the commissioners of the drainage district. In fact, it is not a question of a cause of action being resident in certain people, it is not that kind of proceeding. It is simply a petition by those in interest calling upon the board of supervisors to do what is their duty under the law to do.

It is next said that the board had no right to proceed to collect the money because the drainage commissioners had not made certain reports. Frankly, we do not see how the making of these reports could effect either the duty of the defendant to pay what his land owed, or the rights of the bondholders to have this money; certainly, when bonds are sold to the public before looking to the assessments for their pay, their rights to have the assessments collected could not be annulled by something which the board of drainage commissioners did afterwards with respect to making reports, or not making reports. This is so obvious to our minds that to argue it appears superfluous.

It is next said that there is a misjoinder of parties. As we have pointed out, those holding the bonds and the representatives of the bondholders and the drainage commissioners were the ones who petitioned the board to proceed to collect the assessments due, and, as we have also pointed out, it is not a question of having a cause of action against anybody, but a question of petitioning the board to do something that was its duty to do, and we think that the holders of the bonds, and drainage commissioners and agent of the holders, who had an interest in the matter, certainly would have the right to petition the board. Nor is there a misjoinder because all had a like interest in asking the board to take action.

We allege that the plea in abatement is perfectly void because no written notice was given upon the filing of it, and no designation as aforesaid, of the parties misjoined, and no meritorious defense was alleged in any affidavit, as is required by law.

Afro-American Sons and Daughters v. Webster, 172 Miss. 602, 161 So. 318; Williams v. Home Ins. Co., 168 Miss. 443, 151 So. 728; Mayor and Aldermen of City of Vicksburg v. Crichlow, 196 Miss. 259, 16 So.2d 749; Riverside Development Co. v. Hartford Fire Ins. Co., 105 Miss. 184, 62 So. 169; Jackson v. Dunbar et al., 68 Miss. 288, 10 So. 38; Aven v. Singleton et al., 132 Miss. 256, 96 So. 165; Code of 1930, Sec. 514; Code of 1942, Secs. 1457, 1491.

Appellants filed a petition before the board asking the defendant to come in and show cause why his land should not be sold. We think a proper pleading would be an answer to this petition setting forth the reason why, if any, the lands should not be sold. We do not think technical pleading before the board of supervisors is a proper procedure.

Appellant contends that the composition proceedings in the Federal District Court were void, and therefore the appointment of the trustees was void, and therefore they had no right to request the board of supervisors to proceed to the collection of the assessments against the lands. We have endeavored to point out that whether the proceedings were valid, or void, would not affect the right of the trustees who hold the bonds to petition the board. In this connection, it is immaterial how they came in possession of the bonds; the material thing is that they have them.

However, we respectfully submit to the court that the proceedings in the Federal District Court were not void for lack of jurisdiction of subject matter as is contended. The Federal District Court is granted jurisdiction of composition proceedings of drainage districts by Federal statute and nothing is said in the statute about the consent of a state as a condition precedent to jurisdiction. In fact, the statute was passed to obviate such a necessity.

United States v. Bekins, 304 U.S. 27, 58 S.Ct. 811, 82 L.Ed. 1137; 11 U.S.C.A., Title Bankruptcy, Secs. 401, 403.

In the last place, it is submitted that the decree of the District Court adjudicating the drainage district to be bankrupt and its procedure in execution of its decree cannot be attacked collaterally as is sought to be done in this case.

Chicot County Drainage District v. Baxter State Bank et al., 308 U.S. 371, 60 S.Ct. 317.

The contention that the Federal statute of bankruptcy could not be applied to a drainage district because it is a governmental agency of the state cannot be upheld. While a drainage district is a quasi-public corporation it is not a governmental agency or a political or civil division of a state.

The lower court held that there was only one thing material, and that was, did appellant's land owe the money? Since this was admitted, and it was likewise admitted that it had not been paid, the court held that he should pay the amount, or his lands should be sold. This was a right judgment.

Argued orally by J.W. Bell and J.W. Dulaney and E.C. Brewer, for appellant, and by W.W. Venable and W.L. Bankston, for appellees.


There are four of these appeals from the circuit court of Tunica County. They are, in addition to the one now under consideration, styled as follows: Bailey v. Bankston et al., Trustees, 196 Miss. 548, 18 So.2d 304; Reinhardt v. Bankston et al., Trustees, 196 Miss. 549, 18 So.2d 304; and Reinhardt v. Bankston et al., Trustees, 196 Miss. 549, 18 So.2d 304. All four of them are identical in all essential respects. The questions involved are the same; so the decision in one decides all of them.

The main question involved is whether or not a drainage district, organized under the laws of this state, and which has become insolvent, is subject to having its affairs administered and wound up by the Federal District Court under the act of Congress of August 16, 1937, 50 Stat. 653, amending the Bankruptcy Act by adding Chapter 10, 11 U.S.C.A., Sec. 401 et seq., providing for the composition of the indebtedness of taxing districts and other governmental agencies therein described, among which are drainage districts. There is a less important question which will be stated when reached.

The Pritchard Drainage District of Tunica County was organized under Chapter 195, Laws 1912, and amendments thereto. The lands therein, now owned by these appellants, were at different times forfeited to the state for the nonpayment of their state and county taxes. Not having been redeemed within the time prescribed by statute, they were later sold by the state and purchased by and patented to these appellants. The purchase, however, by appellants from the state was not joint, but each purchased a certain portion of such lands, which was patented to him.

The Drainage District became insolvent. Its bonded indebtedness was $266,919.43; its total assessed benefits $222,999.89; leaving an insolvency of $43,919.54. The drainage commissioners of the district, and all of the bondholders applied to the proper Federal District Court to have its affairs administered under the Federal Bankruptcy Statute above referred to. Their petition for that purpose was granted, and trustees appointed to carry out the scheme. Appellants' lands had necessarily escaped the drainage taxes during the period they were owned by the state. The statute provides that the drainage taxes shall continue to be a lien on the land until paid. Our court held in Waits v. Black Bayou Drainage Dist., 185 Miss. 626, 189 So. 103, that state lands were not discharged from their drainage taxes accruing during the time they were held by the state under tax sale; that the purchaser from the state took them subject to such drainage tax. Under the authority of that decision, the trustees in bankruptcy and the drainage commissioners joined in a petition before the board of supervisors of the county, asking that these landowners be brought before the board for the purpose of having the amounts of these delinquent taxes fixed, and after so doing they be required to pay them; and on failure, their land to be sold by the sheriff for that purpose who was authorized so to do.

The landowners appeared and filed a plea in abatement to the petition, setting up two grounds; (1) that the Federal bankruptcy proceedings were void, and therefore the trustees appointed by the bankruptcy court were without authority to join with the drainage commissioners; (2) that the petitioners were without right to institute and maintain the proceeding, because the drainage commissioners "have failed to file certain reports required by Section 4497, Code 1930, Section 4723, Code 1942, which reports should contain certain information necessary to a proper presentation of the defense of the said" (one of the landowners). We will consider these questions in the order stated.

In considering the first question we should bear in mind the decisions of our court with reference to the character and purposes of such drainage districts. They are organized and conducted, not alone for the purpose of the reclamation of wet and overflowed lands in order to promote agriculture, but, in addition, to conserve the public health. Pryor et al., Com'rs of Sebougla Drainage District, v. Goza, 172 Miss. 46, 159 So. 99; Standard Oil Co. v. National Surety Co., 143 Miss. 841, 107 So. 559; Tallahatchie Drainage District v. Yocona-Tallahatchie Drainage Dist., 148 Miss. 182, 114 So. 264. Malarial mosquitoes, one of the outstanding menaces to the health of this state, breed in stagnant water — not running water. One of the objects of the drainage districts was to get rid of them. These districts are, therefore, political subdivisions of the state — they are governmental agencies, as well as private enterprises. By no act of the legislature has the state given its consent that the affairs of such districts becoming insolvent, may be administered, on their application, in the Federal Bankruptcy Courts, under the Federal Bankruptcy Statute above referred to. Such consent is indispensable. Otherwise the Federal Government could materially restrict the states in the control of their fiscal, as well as other governmental, affairs. Ashton v. Cameron County Water Measurement Imp. Dist., 298 U.S. 513, 56 S.Ct. 892, 80 L.Ed. 1309; United States v. Bekins, 304 U.S. 27, 58 S.Ct. 811, 82 L.Ed. 1137. There would be no stopping place. Why not insolvent municipalities, counties and other political subdivisions?

We conclude, therefore, that the Federal Bankruptcy Court was without jurisdiction; and this proceeding is not a collateral attack. We have to look alone to the face of the proceeding in the Federal Court, and the absence of any state statute consenting thereto, in order to determine whether it is void or not.

The other ground for abatement is without any merit whatever. It simply means that if the drainage commissioners had complied with the statute, section 4497, Code of 1930, section 4723, Code 1942, the appellants might have some defense to the proceeding to subject their lands to the drainage taxes. It presents purely a fishing scheme. Furthermore, any failure to comply with that statute could present no defense to this proceeding. The district was insolvent. That means that the collection of the entire assessed benefits was necessary, but insufficient to pay the bonded indebtedness.

The board of supervisors sustained the plea in abatement and dismissed the proceeding. The trustees and commissioners appealed therefrom to the circuit court on a bill of exceptions embodying the pleadings and the facts. The circuit court declined to pass on whether the bankruptcy proceedings in the Federal Court were valid or not; but held that the trustees in bankruptcy and the drainage commissioners should proceed to collect the delinquent taxes involved; and, in addition, held that there was no merit in the second ground of the plea in abatement.

The result of our holding is that the circuit judge should have held the bankruptcy proceedings void and directed the drainage commissioners alone to proceed to collect the delinquent taxes.

Affirmed in part and reversed and remanded in part.


ON SUGGESTION OF ERROR.


There are four of these cases, three in addition to this one, namely, Bailey v. Bankston et al., Trustees, 196 Miss. 548, 18 So.2d 304; Reinhardt v. Bankston et al., Trustees, 196 Miss. 549, 18 So.2d 304; and Reinhardt v. Bankston et al., Trustees, 196 Miss. 549, 18 So.2d 304. The suggestion of error is addressed to the opinion in all four of them.

Responding to the suggestion of error the opinion handed down means that these cases are to be proceeded with as if there had been no adjudication of bankruptcy in the Federal Court, the trustees in bankruptcy are to be eliminated as parties and the bankruptcy proceeding wholly disregarded. In other words, the trustees in bankruptcy have no right to the custody of the funds here sought to be collected, the Drainage Commissioners alone being entitled thereto without the necessity of instituting any new proceeding therefor.

Overruled.


Summaries of

Evans v. Bankston

Supreme Court of Mississippi, In Banc
Jun 12, 1944
18 So. 2d 301 (Miss. 1944)

In Evans v. Bankston, 196 Miss. 533, 18 So.2d 301 (1944), the Mississippi Supreme Court stated, "These districts are, therefore, political subdivisions of the state — they are governmental agencies, as well as private enterprises."

Summary of this case from Lenoir v. Porters Creek Watershed Dist
Case details for

Evans v. Bankston

Case Details

Full title:EVANS v. BANKSTON et al

Court:Supreme Court of Mississippi, In Banc

Date published: Jun 12, 1944

Citations

18 So. 2d 301 (Miss. 1944)
18 So. 2d 301

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