Farson v. City of Sioux City

SHIRAS, District Judge. It is averred in the bill herein filed that the complainants are the owners of a. number of bonds, with coupons attached, issued by the city of Sioux City under the provisions of chapter 20, Acts 20th Gen. Assem. Iowa, which authorized cities of the first class to improve the streets and highways therein situated, to impose a special tax upon the abutting property to pay the expense of such improvements, and to issue negotiable bonds, and sell the same, in order to raise the money to pay for the improvements in the first instance. Under the provisions of this act, the city is authorized to levy a special assessment upon [279] the abutting property, which becomes a lien upon the property, and it is declared that the money derived from such special assessments shall constitute a sinking fund, to be used only in payment of the cost of the improvement upon the particular street or highway to defray the cost of which the'bonds are issued. When the city issued and sold bonds under the provisions of this act, then the duty was imposed upon the city oí making the proper special assessment, levying aDd collecting the tax thereby imposed upon the abutting property, thereby creating the sinking fund provided for in the act, and of pacing out this sinking fund to the beneficiaries thereof, to wit, the owners of the bonds previously issued by the city. It is charged in the bill that the city has in divers ways lulled to perform this duty, having failed to collect taxes sufficient to pay the amount due on the bonds, and having misappropriated a large part of the moneys collected from ihe taxes assessed, and an accounting is therefore prayed in order to ascertain the condition c£ the trust fund, as a basis for decreeing proper relief to the complainants. On behalf of the city, a. demurrer to the bill is interposed upon the grounds that the case is not one within the jurisdiction of a court of equity, the remedy at law being fully adequate, and that there is lack of proper parlies, in that the owners of the other bonds issued by the city are net made parlies to the litigation. It is clear that if the relation imposed upon the city with respect to the levying, collecting, and disbursement of the special taxes authorized by the act is that of a trustee, then the equitable jurisdiction cannot be queslioned, and it seems equally clear that the city is a trustee with respect to the fund necessary to be raised to pay the bonds in question, livery element necessary to create a trust relationship is found in the duty imposed upon tbe city, it haring chosen to undertake the improvement of its streets under the provisions of the act of the 20th general assembly, and having thereby obligated itself to impose, collect, and disburse the taxes provided for in the act for the benefit of persons purchasing the bonds. This being the fact then, as is ruled by the supreme court in Case v. Beauregard, 101 U. S. 688, 25 L. Ed. 1004, “it may bo said that whenever a. creditor has a trust in his favor, or a lien upon, properly for the debt due him, lie may go into equity without exhausting legal processes or remedies.” The averments of the bill show clearly that the case comes within the jurisdiction of equity, and that the remedy sought (ran only be reached through the process of a, court of equity. The other ground, of want of proper parties, urged in support of the demurrer, is equally without merit. It is not made to appear on the face of the bill that there are other parties whose interests will be injuriously affected by the relief sought, and therefore on demurrer the court cannot hold that the bill is defective. If, in the further progress of the suit, it becomes apparent that there are other parties interested who should be brought into the case, the court can then require complainants to make them parties; but, as the record now stands, it is not made apparent that necessity for so doing exists, and the demurrer of the city must be over [280] ruled on tliis as well as on tbe other ground urged in support thereof. The bill, as now framed, seeks to hold liable the city treasurer and the sureties on his official bonds for the alleged misappropriation of the funds derived from the special assessments. On behalf of these defendants demurrers are interposed on the gi-ound, among others, that there is an improper joinder of causes of action and of parties, in that the questions at issue between the bondholders and the city are wholly different from those attempted to be asserted against the city treasurer and his bondsmen. The question of the liability, if any, of the city treasurer and his sureties, certainly presents issues other and different from those involved in the case against the city, although it is true that they grow out of the same original transaction, and, viewing the matter as a question of expediency, it would seem best that it should not be attempted to deal with these differing issues in the one suit. The orders to be entered in the case therefore are: (1) That the demurrer interposed to the bill on behalf of the city of Sioux City is overruled, with leave to the city to file an answer by February 20th next; and (2) that the bill be dismissed so far as it affects the city treasurer and his sureties, without prejudice to the right of complainants to carry on or institute other proceedings against these parties.