Bidwell v. Huff

SPEER, District Judge

(after stating tbe case as above). The important grounds of the demurrer are that the bill is multifarious, and that there is a total want of equity to sustain it.

With regard to the first ground, it is conceded by counsel for the defendants that a bill is not multifarious unless the matters involved are so dissimilar that the court will not be'justified in permitting them to be litigated in one proceeding. “It is true that no rule can be laid down as to what constitutes multifariousness, as an abstract proposition. Each case must depend on its own circumstances, and the court must exercise a sound discretion.” Mitf. Oh. PI. par. 181, note. “A demurrer of this kind will hold only where the plaintiff claims several. matters of different natures, but when one general right is claimed by the. bill, though defendants have separate and distinct rights,.a démurrer will not hold on this ground.” Id. The propér *369inquiry here is this: Is there any relief sought by this bill which is broad enough to comprehend the entire subject-matter of the averments, and are the defendants named necessary or proper parties thereto? This inquiry would seem necessarily to include the other question made by the demurrer, namely, is there equity in the bill?

The plaintiffs are judgment creditors. Their claims constitute liens recognized by a court of equity, which entitle them to relief therein, when a court of law does not afford a remedy in all respects as adequate and complete as that afforded by a court of equity. The controlling principle is stated by Mr. Justice Field in Jones v. Green, 1 Wall. 330, 17 L. Ed. 553, as follows:

“A court of equity exercises its jurisdiction in favor of a judgment creditor only when the remedy afforded him at law is ineffectual to reach the property of the debtor, or the enforcement of a legal remedy is obstructed by some incumbrance upon the debtor’s property, or some fraudulent transfer of it.”

It will be observed, in this authoritative statement of the law, that the jurisdiction in equity to enforce the rights of judgment creditors in such cases may rest upon all or either one of three grounds: Where the remedy at law is ineffectual, where it is obstructed by an incumbrance, or where it is obstructed by a fraudulent transfer. This case is an instance where all three of the grounds thus enumerated by the supreme court are discoverable. That the remedy at law is ineffectual to subject the property of the debtor to the payment of these debts is apparent from the failure or refusal of the levying officer to enforce the execution. This appears by his return of nulla bona. The execution is the concluding and supreme effort of the court at law. In the case of Jones v. Green, 1 Wall. 330, 17 L. Ed. 553, which was a bill filed by judgment creditors to subject property of their debtor held by a third party upon a secret trust for him, to the satisfaction of their judgment, the supreme court, speaking through Mr. Justice Field, used this language:

“The execution shows that the remedy afforded at law has been pursued, and is, of course, the highest evidence of the fact. The return shows whether the remedy has proved effectual or, not, and, from the embarrassments which would attend any other nile, the return is held conclusive.”

It is, however, said in support of the contention that the bill is without equity, that the complainants could have enforced their judgments; that the value of the property upon which they have special liens is ample to pay off the debts. And it is said that a court of equity will not take charge of the assets of the debtor unless the creditor has first utilized the property pledged for his debt, as far as it will go towards its satisfaction. A sufficient reply to this is also afforded by the return of nulla bona. In Jones v. Green, supra, the supreme court announces that “the court will not entertain inquiries as to the diligence of the officer in endeavoring to find property upon which to levy.” It is clear, then, that the remedy which the law affords these creditors has proven ineffectual. It is also true that the bill recites a number of incumbrances, such as tax sales on levies alleged to be grossly excessive, and tax sales and deeds alleged to be fraudulent, which constitute incumbrances upon the debtor’s property, and which obstruct the enforcement of legal remedies. *370The demurrer admits these averments to be true. It follows that the case complies in every essential with the requirements of a creditors’ bill, as these are defined by the supreme court of the United States.

_ A most important averment in the bill is that there has been a practical confiscation of the property to which plaintiffs’ liens attach, under the guise of unconstitutional assessments for paving purposes imposed by. the mayor and council of the city of Macon. The city is made a party to the bill, and an injunction prayed against it, not only to enjoin the collection of these paving assessments, but also to have a decree for the cancellation of deeds to the property of the debtor held by it, which deeds, it is alleged, as previously stated, were obtained in such fraudulent manner that a court of equity will declare them as of no effect, and which nevertheless obstruct the remedies at law. It appears from the averments of the bill that the city assessment against lot 4, on the corner of Cherry and Fourth streets, amounts to about one-fourth of the entire valué of the property. It further appears that this paving burden was not only in substantial excess of any special benefits accruing therefrom to the property, but was so far without any special benefit thereto that immediately after the assessment, although there has been no change whatever in the physical conditions, the city assessors estimated its value as precisely one-third less than the sum at which it was assessed before the burdens for paving were imposed thereon. This is evident from the .fact that the lot was estimated by the assessors as worth $15,000 before the paving assessments were made, and only $10,000 since then. The bill further alleges that neither the statute under which the assessment was made, nor the ordinances of the city, afford to the property holders any process of law by which the question of the extent of benefit, if any, to said property could be raised or judicially investigated. The property holders are simply assessed one-third the cost of grading, paving, constructing side drains,1 cross drains, crossings, and otherwise improving or repairing the street, on the real estate abutting on each side of the street improved; and these assessments on each side of the street paved are prorated between the property owners according to the frontage of each lot, whether it sustains the humble and profitless tenement of the poor, or structures of imposing and costly character, affording lucrative rentals to the prosperous. The effect of this assessment, if legal, is to create a lien upon the lot in question superior in dignity to the liens of plaintiffs, and therefore,, it is insisted, will deprive them of the security for their debts. Moreover, it will be seen upon examination that not only do the statute of the state authorizing the assessment, and the ordinance of the city, afford to the plaintiffs no right to have the constitutional question involved determined, but also that the appellate court of the state of last resort, namely, the supreme court of Georgia,-under similar facts, has denied to the citizen judicial relief from municipal exactions of this sort, even where no benefit inured to the property assesséd. In the case of Hayden v. City of Atlanta, 70 Ga. 817, that court held that special benefit to the property holder was not' regarded as essential to maintain a pavement assessment of this character, and that the *371whole question of benefit, whether general or special, is left to the legislative discretion; that the power resides in the state and the legislature to confer upon municipal corporations the right to assess property fronting on the streets; that there is no limit imposed by the constitution of the United States on this power; and that it rested upon the sound discretion of the legislature. This decision was followed and approved in other cases. These cases were decided before the learned and distinguished jurists composing the supreme court of Georgia could have enjoyed the light afforded by the decision of the supreme court of the United States in Village of Norwood v. Baker, 172 U. S. 269, 19 Sup. Ct. 186, 43 L. Ed. 443, decided in 1898. It is not to be doubted that since the question involves the construction and application of that provision of the fourteenth amendment to the constitution of the United States, which provides, “Nor shall any state deprive any person of life, liberty or property without due process of lav/, nor deny to any person within its jurisdiction the equal protection of the law,” and of that provision of the fifth amendment which provides, “nor shall private property be taken for public use without just compensation,” and since this paving assessment is made effective by the state, the supreme court of Georgia would1 now take pleasure in hastening to adopt as its own the decision of the supreme court of the United States prohibiting similar action by the state of Ohio. It is true, however, that the supreme court of the state has not as yet reconsidered its rulings on this important topic, and that we must be controlled by the supreme court of the nation. The rule as established in Norwood v. Baker is perhaps sufficiently stated in the syllabus, as follows:

“The principle underlying special assessments upon private property to meet the cost of public improvements is that the property upon which they are imposed is peculiarly benefited, and therefore that the owners do not in fact pay anything in excess of what they receive by reason of such improvements.”

And further:

“The exaction from the owner of private property of the cost of a public improvement in substantial excess of the special benefits accruing to him is, to the extent of such excess, a taking, under the guise of taxation, of private property for public use without compensation.”

The court, however, qualifies this principle by the following statement:

“But, unless such excess of cost over special benefit be of a material character, it ought not to be regarded by a court of equity, when its aid is invoked to restrain the- enforcement of a special assessment.”

In that case, as in this before the court, the assessment of the property was by the front foot bounding and abutting upon the improvement. In that case, as in this, the assessment was made a lien and charge against the abutting property owned by the plaintiff. There, as here, the plaintiffs proceeded upon the ground that the assessment in question was in violation of the fourteenth and fifth amendments to the constitution, above quoted. And it will therefore be profitless to attempt any elaboration of the doctrine so clearly announced hy the supreme court of the United States. We may say, *372however, that it does hot in any sense trespass upon the legitimate province of the state legislature. “But,” observes Justice Harlan, delivering the opinion of the court, “the power of the legislature in these matters is not unlimited. There is a point beyond which the legislative department, even, when exerting the power of taxation, may not go, consistently with the citizen’s right of property.” Then, stating the principle as announced in the syllabus, the learned justice continues: ' ■

“It is one thing for the legislature to prescribe it as a general rule that property abutting on the street opened by the public would be deemed to have been specially benefited by such improvement, and therefore should specially contribute to the cost incurred by the public. It is quite a different thing to lay it down as an absolute rule that such property, whether it is in fact benefited or not by the opening of the street, may be assessed by the front foot for a fixed "sum, representing the whole cost of the improvement, and without any right in the property owner to show, when an assessment of that kind is made or is about to be made, that the same was fixed in excess of the benefits received.”

It is difficult to perceive any “benefit received” by the owner of lot 4 in square 24, on the corner of Cherry and Fourth streets, in the city of Macon, when the special assessment, as we have seen, amounts to one-fourth of its entire value, and when the imposition of the assessment by the city results in an immediate reduction of one-third of its general taxable value. The city would seem estopped from denying these remarkable facts, for they were ascertained from the finding of its sworn .assessors. On the contrary, it not only cannot be denied with any semblance of reason that the excess of these paving charges over special benefits to the property holder are “of a material character,” but they are apparently so extravagantly excessive as to shock the mind accustomed to constitutional and rational methods of municipal government. What people in time of peace would tolerate the unconstitutional confiscation of one-fóurth of their holdings for general governmental purposes? It is true, however, that through long years of misgovernment, extortion, and oppression, the despairing taxpayer will sometimes all unresistingly submit to unlawful local exactions, which, if they were imposed by the general government, would likely result in revolution.

It is, moreover, urged that 'a court of equity will not intervene to restrain the collection of taxes, even though these may be illegal. This objection, it is true, is expressive of the general rule; and it is also true that a court of equity will not ordinarily relieve a party against an assessment for taxation unless he tenders or offers to-pay what he deems or what is seen to be due. There is, however, an established exception to this rule, and the case under consideration is clearly within its operation. It is this: That where a rule or system of valuation is adopted by those whose duty it is to make the assessments which is designed to.operate unequally and to violate a fundamental principle of the constitution, and when this rule is applied not solely to one individual, but to a large class of individuals or corporations, then equity, may properly interfere to restrain the operation of this unconstitutional exercise of power. Mr. High, in his work on Injunctions, declares that ho principle is more firmly established than that *373requiring that a taxpayer who seeks the aid of an injunction against the enforcement or collection of a tax has to pay or tender the amount which is conceded to be legally and properly due, or which is plainly seen to be due; but he also says:

“It is held, however, that the general rule requiring payment or tender of the amount actually due, as a condition to equitable relief against the illegal portion of the tax, has no application to the case where the entire tax fails by reason of an illegal assessment And in such case an injunction is proper, without payment or tender of any portion of the tax, since it is impossible for the court to determine what portion is actually due, there being no valid or legal tax assessed.”

See, also, Village of Norwood v. Baker, 172 U. S. 292, 293, 19 Sup. Ct. 186, 43 L. Ed. 443.

Since it is true that in this case the mayor and council of the city of Macon based their entire assessment upon frontage on the streets to be paved, without any regard to benefits to the property thus assessed, the entire tax must fail. It was practically a confiscation of the values thus exacted from the property holder, the proceeding was unconstitutional, the entire assessment is void, and it is proper for the court in this case to grant its injunction for the protection of the parties complaining. Indeed, it is conceded by the counsel for all the parties, save the city of Macon, that this paving assessment is null and void. To quote the language of Mr. Aqderson in his forcible argument for the defendants:

“Our contention is that the paving assessment, just as set up in this bill, is absolutely void and contrary to the constitution of the United States.”

Bat he contends that it is so distinctly void — that its nullity is so apparent on its face — that it does not create a cloud upon their title or over their rights, which the plaintiffs need seek the aid of the court to remove. Now, it is clear that this tax, if valid, is a lien upon the land; and said Mr. Justice Brown, for the supreme court, in Ogden City v. Armstrong, 168 U. S. 236, 18 Sup. Ct. 103, 42 L. Ed. 452:

“If a tax is a lien upon lands, it may then constitute a cloud upon title; and one branch of equity jurisdiction is the removal of apparent clouds upon the title which may diminish the market value of the land, and possibly threaten a loss of it to the owner.” “It is doubtless true,” the court continues, “that it has been held by this and other courts that if the alleged tax has no semblance of legality, and if upon the face of the proceedings it is wholly unwarranted by law, or for any reason totally void, as disclosed by a mere inspection of the record, such a tax would not constitute a cloud, and that the jurisdiction which is exercised by courts of equity to relieve parties by removal of clouds upon their titles would not attach. But when the illegality or fatal defect does not appear on the face of the record, but must be shown by evidence aliunde, so that the record would make out a prima facie right in one who should become a purchaser, * * * or when a deed given on a sale of the land for the tax would be presumptive evidence of good title in the purchaser, so that the purchaser might rely upon the deed for recovery of the land until the irregularities were shown, courts of equity regard the case as coming within their jurisdiction, and have extended relief on the ground that a cloud on the title existed or was imminent.”

The case under consideration seems clearly within the scope of this authority. Proof aliunde must be made to show that no benefit resulted to the property from this pavement, and a tax deed given on a sale by the city would be presumptive evidence of good title in the purchaser; and, even should the purchaser take the advice of coun*374sel, he would find that the. supreme court of the state has sustained assessments conforming in all respects to that beforé the court. T think that it would be difficult to discover a more portentous cloud. The acts of the legislature authorizing such assessment are presumed' to be constitutional until they are held otherwise. That presumption' has been sustained by the supreme appellate tribunal of the state. That decision has not been in terms expressly' reversed, although in' principle, as we have seen, it is declared erroneous. The city legis-. lature has acted upon it, and has the physical power to sell the property,'to put the owner out, and put' the purchaser in possession, and to give him a deed which is prima facie' evidence of-his title. This is not a mere irregularity affecting a -particular individual, but it is an unconstitutional and most injurious wrong, affecting all the property of holders of a particular class, — a wrong so fundamental that the power which may redress it is conferred upon the courts of the United States. - In the present attitude of the state and municipal, governments, in a controversy where the constitutional rights of the-citizen are in issue it would be scarcely judicious for the courts of the United States to deny relief upon the ground that state action of the most energetic character is so plainly abhorrent to the fundamental law that it can with safety be ignored. It is usually safer to enjoin, than to tolerate violations of the constitution, resulting in the destruction of property rights. That it is necessary for the creditors to attack the lien of the city assessments is clear, from the fact that the act of the legislature gives them rank and priority of payment next in point of dignity to the liens in favor of the city of Macon for taxes due said city. Then their enforcement would preclude the rights of the complainants, for the city taxes rank in point of lien and priority next; to the taxes due the state and county, which are liens superior to all others.

The other equities of the complainants are scarcely less important. Although the defendant W. A. Huff was under the obligation to pay the taxes on the property pledged to secure these debts, this was not done, but many tax fi. fas. have been issued, levies grossly excessive have been made, deeds have been executed and recorded, and transfers under such sales have been made, it is alleged, for the benefit of the debtor. The unpaid taxes amount to many thousand dollars. Much of this accumulation was properly assessable upon other property of the defendant, distributed throughout the county. While this is true, it is alleged that an attempt has been made to subject the particular property pledged to secure the debts of the complainants to this entire burden of taxation. This, if true, is manifestly inequitable, and the demurrer admits it to .be' true. The taxation assessed upon all the values owned by W. A. Huff and his cestuis que trustent, where they are liable, ought equitably to be apportioned between the property held by them, or pledged to secure their debts, and not fastened upon a particular lot, só as to wipe out the security of particular creditors. It is the duty of the court to so marshal the assets and to' distribute these-burdens ’as to make each piece of property bear its own share .of the taxes. The liens of these numerous -tax'fi.-fas.,-irrespective- of the; paving-assess*375ment, if enforced exclusively upon it, would consume the property upon which these complainants have a special lien. The result would be destruction to their rights, while other creditors, and perhaps the debtor, would be proportionably benefited. Besides, the complainants have a general lien upon the equity of redemption of all the property owned by W. A. Huff, or by his children if the debt is against them. This property is alleged to be much greater in extent and much more valuable in character than the city property hereinbefore described. All of it is pledged, in one form or another. It is within the province of the court to so marshal the assets as to charge the outside property with its proportion of the accumulated taxes. This cannot be done at law, because the outside property has been conveyed by deed to particular creditors, who, it seems, have been favored throughout, even to the extent of exempting them from the payment of their due share of taxation. Since it is true, however, that this deed was given as a security for debt, it is competent for the court, through its receiver, under the circumstances, to take all of these properties in charge, set aside sales of the property which appear to be void, because of excessive and fraudulent levies, cancel the unconstitutional paving assessments, pay off debts to secure which deeds are made, and the judgments and mortgages, according to their equities and priorities, then settle with the general judgment creditors and other creditors according to the dignity of their claims, and restore the balance, if any, to the debtor.

The bill is not multifarious. It is a scheme to subjects assets of W. A. Huff and others who are jointly indebted with him to the valid liens of their creditors. It is impossible to leave out his children, because he is holding undivided interests with them and some of them are partly indebted with him, and to others transfers alleged to be illegal have been made.

ISTor does it matter that some of the creditors have judgments which do not exceed $2,000, exclusive of interest and cost. At least one of the judgments exceeds this jurisdictional limit. With this other creditors holding liens of the same general character may unite or they may intervene. The law upon this subject is established.

“For the purpose of preventing a multiplicity of suits, a court of equity will entertain a bill filed by several creditors for the purpose of reaching the property of a common debtor, where such creditors have recovered judgments or decrees.” Smith, Eq. Rem. Cred. § 72.

Again:

“Two or more persons unconnected with each other may be properly joined as defendants, as where the title to several pieces of property is in several defendants, and all have been concerned in acts tending to the same illegal result, forming the issue. In the same proceeding some of the defendants may be grantees in alleged fraudulent conveyances, some of them plaintiffs in whose favor judgments have been confessed, and some fraudulent mortgagees. The plaintiff’s injury grows out of the fraud of the defendant, in which several parties may unite.” Smith, Eq. Rem. Cred. § 74. “A bill filed by a creditor for himself and for the use of other creditors, and when the entire fund is taken possession of by the court for the benefit of all creditors, and an order is made for all to present their claims, entitles all creditors to present their claims, whether they are named in the bill or not, and whether they are judgment, specialty, or simple-contract creditors.” Id. f? 76.

*376It is said, however, that the complainant Bidwell cannot sue here, because his judgment was obtained in a state court; and Walker v. Powers, 104 U. S. 245, 26 L. Ed. 729, is cited in support of that proposition.. It is sufficient to point out that that was a proceeding by an assignee of a judgment, when the assignor and the judgment debtors were both citizens of the same state, and since, in the outset, the court could not have entertained a suit to obtain the judgment, it could not exercise jurisdiction to enforce it. That is not the case here. Bidwell, holding a judgment for a sum exceeding the jurisdictional amount of the court, is a citizen of another state, and was entitled to bring an original suit in this court to enforce his judgment, and may therefore proceed here now. The rule is stated in 'Smith, Eq. Rem. Ored. § 178, as follows:

“The better doctrine, and one supported by reason and the trend of modern judicial decisions, is, that a judgment of a United States court may properly be made the basis of a suit in equity in a state court to attack and set aside a fraudulent conveyance. And so a judgment in a state court is a good foundation for a creditors’ bill in the federal court.”

And Mr. Justice Story, in his great work on the Constitution (volume 2, par. 1313), states that, if a judgment is conclusive in the state where it is pronounced, it is equally conclusive everywhere; citing Mills v. Duryee, 7 Cranch, 481, 3 L. Ed. 411; Hampton v. McConnel, 3 Wheat. 234, 4 L. Ed. 378; and 1 Kent, Comm. 243, 244. These and other authorities are cited and followed in the recent case of Alkire Co. v. Richeson (C. C.) 91 Fed. 79. For the reasons stated, and for others which might be gathered from the elaborate and carefully drawn bill, the demurrer must be overruled.