Emmett Irrigation District v. McNish

T. BAILEY LEE, Commissioner. The Emmett Irrigation District, respondent, organized in 1910, issued and sold its six per cent interest coupon bonds in the principal sum of $898,600. Thereafter, an extended litigation over the validity of the issue was finally determined in its favor. But during the interim, no payments having been made, the original indebtedness had been increased to $1,208,200 by reason of overdue interest, judgments therefor, and legal interest on such judgments. To dispose of this accumulated burden, the district’s board of directors, pursuant to the provisions of C. S., see. 4375, on Nov. 3, 1921, duly adopted a resolution calling a special election of the district’s qualified voters to authorize the issuance of refunding bonds in such total sum. The election was regularly held, the issue authorized, the assessment had, the list of apportionment and distribution of benefits made, and a resolution passed by the board directing the issuance of such bonds in manner, condition and form: all in endeavored compliance with the provisions of C. S., art. 6, tit. 33. The resolution directed that the bonds “be issued in one or more series as may hereafter appear to be for the best interests of said district and the president and secretary of the district are hereby authorized, empowered and directed to ascertain forthwith whether said refunding bonds may be exchanged for the bonds and coupons to be refunded, and if such exchange can be effected then said refunding bonds shall be issued as one issue and as speedily as may be.” Subsequently, the directors filed in the district court of Gem county their petition praying the court’s confirmation of all of the aforesaid proceedings. To this petition the appellant, an occupying owner within the district, interposed his demurrer generally attacking the petition’s sufficiency. The demurrer was overruled, demurrant refused to plead further, findings and decree were entered in favor of respondent, and from this decree the demurrant has appealed. Six specifications of error are urged as follows: [244] 1. The district court erred in not holding and deciding that the refunding act of 1915 was unconstitutional because of an insufficient title under section 16 of art. 3 of the Idaho constitution. 2. The district court erred iu not holding and deciding that the said refunding act of 1915 was a law impairing the obligation of contracts in violation of the state and federal constitutions. 3. That the learned district court erred in holding and deciding that refunding bonds could be issued by an irrigation district to refund accrued interest upon the bonds of said district where the coupons in question had not been placed in judgment and more than five years had elapsed since the interest represented by such coupons 'became due. 4. That the court erred in holding and deciding that refunding bonds could be issued by an irrigation district to refund interest accrued upon judgments obtained on overdue interest coupons. 5. That the court erred in holding and deciding that refunding bonds could be issued by an irrigation district to refund obligations represented by judgments obtained on overdue interest coupons. 6. That the learned district court erred in holding and deciding that an irrigation district board could issue refunding bonds as a single issue and a single series, notwithstanding the fact that the bonds refunded matured serially. Inasmuch as the act of 1915 complained of in the first specification had at the time of the bond issue been incorporated in the state codes by legislative enactment, any defect in its title had become immaterial; and, irrespective of any title whatsoever, it had become a substantive part of the law of the land. In Anderson v. Great Northern Ry. Co., 25 Ida. 442, Ann. Cas. 1916C, 191, 138 Pac. 127, the court unequivocally announced that it is too late to question the sufficiency of the title of an original statute adopted prior to codification, when such statute has subsequently been incorporated in the general code of laws. Moreover, [245] tbe insufficiency urged is not apparent. The original act was captioned “An act to enable irrigation districts to refund their bonded indebtedness.” It then proceeded to specify the steps logically necessary to effect the declared purpose of the act itself. The bond election, assessment, apportionment and distribution of benefits, and the final resolution of the board provided for are all intimately and unavoidably related to the general object, and cannot be differentiated therefrom. (Pioneer Irr. Dist. v. Bradley, 8 Ida. 310, 101 Am. St. 201, 68 Pac. 295.) Neither does the act impair the obligation of any contract. It does not undertake to force the refunding bonds upon the holders of the bonds refunded; and, if it did, appellant is in no position to complain. He has no contract to be impaired. It is a matter wholly concerning the district and the original bondholders who may deal with each other as they please. (Board of Commrs. v. National Life Ins. Co., 90 Fed. 232, 32 C. C. A. 591.) Specifications 3, 4 and 5 may be discussed together: the question briefly stated by appellant being “whether or not an irrigation district under the refunding statute is authorized to issue refunding bonds to pay accrued interest which is in default because of the failure of the district board to levy the necessary assessments; and, in the event that such power is found, whether or not it extends to paying interest upon judgments as well as the judgments themselves.” This necessitates a definition of the term “bonded indebtedness” as contemplated by the framers of the statute. It is clear that as a prerequisite to the issuance of such refunding bonds, “there shall not he funds in the treasury of such district available for the payment and redemption of such bonds and the accrued and unpaid interest thereon.” Such language manifestly recognizes the debt in its totality, and admits no construction that would divorce the accrued interest from the principal. The original bonded debt by reason of accruing interest and legally imposed incidents simply grows into a larger debt. The fact that [246] a claim for accrued interest has been reduced to judgment creates no new or separate debt. Nor does the law imposing an interest rate on judgments establish a different or independent liability; they are all offspring of the same dam. At the time the act was passed, the legislators well knew that nonpayment of interest at maturity would in the usual sequence of business entail lawsuits resulting in interest-bearing judgments, and thus knowing that an original bonded indebtedness might through misfortune or neglect develop into a burden, the liquidation of which by direct assessments could prove disastrous, they formulated the act of 1915, with the evident purpose of enabling an embarrassed district to clean up its mess, bag and baggage, and make a fresh start. There is no merit in the last specification of error. The statute fully authorizes the resolution complained" of. No prejudice or confusion can flow from it; and it enables the board to effect a possible settlement with the bondholders without the expense of advertising and selling a multitudinous series of bonds. The judgment of the trial court should be affirmed. Budge, C. J., and McCarthy, Dunn and Wm. E. Lee, JJ., concur. PEE. CURIAM. — The above and foregoing opinion is hereby adopted as the opinion of the court. The judgment of the lower court is affirmed. Costs awarded to respondent.