Respondents Brief — Washington v. Maricopa County

In tpreme Court ofthe ules

FIL=ZD

1ited States MAR 18 1946

CHARLES ELMORE

vrOBER TerM, 1945

No. 878

cae 7

STATHINGTON and EQUITABLE LIFE

INSOMPANY OF IOWA,

Petitioners,

MARIINTY; JOHN A. FOOTE, ED.

OGlh PHIL ISLEY, Constituting the

Boavisors of Maricopa County, Arizona; >

SIDSBORN, Governor, ANA FROHMIL-

LElgitor, and WILLIAM T. BROOKS,

Stat, Constituting the Loan Commis-

sion State of Arizona; WILLIAM T.

BRG Treasurer, and ANA FROHMIL-

LEjitor of the State of Arizona,

Respondents.

ef for Respondents

In to Petition for Writ of Certiorari

JOHN L. SULLIVAN

Attorney General

Attorney for Respondents who

are State Officials

State Capitol, Phoenix, Ariz.

EDWIN BEAUCHAMP

County Attorney of Maricopa

County

County Court House, Phoenix, Ariz.

LESLIE C. HARDY

Special Counsel for Maricopa

County

Luhrs Tower, Phoenix, Ariz.

GEORGE HERRINGTON

ORRICK, DAHLQUIST, NEFF,

BROWN & HERRINGTON

GEORGE HE) 405 Montgomery Street,

LESLIE C. H, San Francisco 4, Calif.

Of Counse Attorneys for Respondents Mari-

copa County and the Officials

of Maricopa County

COMPANY, 845 SANSOME STREET, SAN FRANCISCO

-

Subject Index

IL. There Is No Merit in the First Specification of Error

Which Makes the Contention That the Federal Court

Should Disregard Decisions of the Highest Court of

a State Construing State Statutes in Force at the

Time the Contract Was Made, and Which Have Be-

come a Part Thereof

II. There Is No Merit in the Second Specification of

Error Which Makes the Contention—Contrary to the

Fact—That the Circuit Court of Appeals Failed to

Make an Independent Construction of the Bond

Contract Created Under the Then Existing Arizona

Statutes

III. There Is No Merit in the Third Specification of Error

Which Makes the Contention That Federal Courts

Have Jurisdiction to Disregard Decisions of the

Highest Court of a State Construing State Statutes

in Force at the Time When the Contract Was Made,

Upon the Mere Unsubstantiated Claim That Such De-

cisions Depart from the Rules of Interpretation Pre-

vailing in the State at the Time When the Contract

Was Made

(1) The Unsubstantiated Charge That the Bond Con-

tract Has Been Violated by a Subsequent Stat-

ute Does Not Raise a Federal Question, as Long

as No Subsequent Statute Is Pointed Out as

Causing Impairment ...

(2) The Claim that the Decisions of the Supreme

Court of Arizona in the Two Maricopa Cases De-

part from the Rules of Interpretation Prevail-

ing in the State When the Bonds Were Issued,

Does Not Raise a Federal Question

Page

Opinion of Court Below 1

Jurisdiction of Supreme Court 1

Question Presented 2

Statement of the Case 2

Summary of Argument 5

Argument ll

ll

16

25

25

27

VII.

Sussecr Inpex

Page

IV. There Is No Merit in the Fourth Specification of

Error Which Makes the Contention That the Resolu-

tions of the Board of Supervisors of Maricopa

County and of the Loan Commissioners of the State

of Arizona Providing for the Redemption of the

Bonds Held by Petitioners Are Laws Impairing the

Obligation of the Bond Contract

. There Is No Merit in the Fifth and Sixth Specifica-

tions of Error Which Make the Contention That the

Laws of the State of Arizona in Force 1919-1921

When the Bonds Were Issued (Rev. Stats. 1913,

Title LII, Ch. I, Sees. 5251-5265) Did Not Make the

Bonds Redeemable at the Option of the County...

(1) The Redemption Provisions Contained in Rev.

Code 1928 and Arizona Code 1939 Are Merely

Recodifications of the Same Provisions Originally

Set Forth in Rev. Stats. 1913

(2) The 1928 and 1939 Codes Made No Change What-

soever in the Character of Refunding Bonds to Be

Issued by the Loan Commissioners Under the

1913 Statute for the Purpose of Redeeming Out-

standing County Bonds

. There Is No Merit in the Seventh Specification of

Error Which Makes the Contention That Certain

Acts of the Arizona Legislature Ratifying the Bonds

Issued by Respondent County Constituted a Con-

tract Between Respondent County and the Petition-

ing Bondholders Which Has Been Impaired...................

There Is No Merit in the Eighth and Ninth Specifica-

tions of Error Which Make the Contention That

Respondent County Is Estopped from Redeeming the

Bonds

VIII. There Is No Merit in the Tenth Specification of Error

Conclusion

31

32

33

38

41

45

Table of Authorities Cited

Pages

CASES

Ackley School District v. Hall, 113 U.S. 185, 28 L.ed. 954,

5 S.Ct. 371 44

American Rio Grande Land & Trr. Co., In re (1937), 21

Fed. Supp. 492, p. 494 42

Arnett v. Clack (1921), 22 Ariz. 409, 198 P. 127... . 44

Bacon v. State of Texas, 163 U.S. 207, 41 L.ed. 133, 16 S.Ct.

Lee anne ee ene nnn 9, 37

Bexar County v. Sellers (1944), 142 Tex. 290, 178 S.W.(2d)

505 20

Board of Commissioners of Tlarmon County v. Rawards,

140 Oklahoma 247, 282 Pac. 1090. 20

Board of Regents of the University of Arizona v. Sullivan

(1935), 45 Ariz. 245, 42 P.(2d) 619. 40

Board of Supervisors v. Hawkins (1914), 16 Ariz. 16, 140

Pac. 821 28, 44

Bond & Goodwin v. DuPont, “254 App. Div. 543, 5 N.Y.S.

(2d) 423 .... 44

Boyce v. Pima County (1922), 24 Arts. 259, 208 Pac. 419... 40

Bravin v. Tombstone, 6 Ariz. 212, 66 Pac. ‘719__.._.__._-- 23, 28

Catholic Order of Foresters v. State of North Dakota

(1987), 67 N.D. 228, 271 N.W. 670 10, 20

City of Detroit v. Detroit United Ry. (1909), 156 Mich.

106, 120 N.W. 600 42

Cochran Co. v. Mann (1943), 141 Tex. 398, 172 S.W.(2d)

689 19

Coconino County v. Yavapai County, 5 Ariz. 385, 52 Pae.

, RESO ESR SP Se Oe AS A 42

Cross Lake Shooting and Fishing Club v. Louisiana (1912),

224 U.S. 632, 56 L.ed. 924, 32 S.Ct. 577... 15, 29

Dupont v. Mills, 39 Del. 42, 196 Atl. 168. 20

iv TaBLe OF AUTHORITIES CITED

Pages

Ennis Waterworks v. Ennis (1914), 233 U.S. 652, 58 L.ed.

1139, 34 S.Ct. 767 14

Erie Railroad Co. v. Tompkins, 304 U.S. 64, 82 L.ed. 1188,

58 S.Ct. 817 5

Evangeline Parish School Board v. Kansas City Life Insur-

ance Co. (C.C.A. 5, January 9, 1946, not yet officially re-

ported) 20, 24

Fullerton v. Spring (1854), 3 Wis. 588 35

Hale v. State Board (1937), 302 U.S. 95, pp. 102, 103, 82

L.ed. 72, 58 S.Ct. 102 8

Hawks v. Hamill (1932), 288 U.S. 52, 77 L.ed. 610, 53 Sup.

Ct. 240 41

Jones v. Brush, 143 F.(2d) 733 4

Kersh Lake Drainage District v. Johnson, 309 U.S. 485, 60

S.Ct. 640, 84 L.ed. 881, 128 A.L.R. 386 45

Knights Templars’ & M. Life Indemnity Co. v. Jarman

(1902), 187 U.S. 197, 47 L.ed. 139, 23 Sup.Ct. 108......... 9, 35, 36.

Lehigh Water Co. v. Easton (1887), 121 U.S. 388, 30 L.ed.

1059, 7 S.Ct. 916 15

Levy, Edgar A., Leasing Co. v. Siegel (1922), 258 U.S. 242,

66 L.ed. 595, 42 Sup.Ct. 289 35

Lewis v. Pima County, 155 U.S. 54, 39 L.ed. 67, 15 S.Ct. 22 27

Maricopa County v. Osborn (1942), 59 Ariz. 244, 125 P.

(2d) 703 4, 11, 12, 17, 18, 20, 22, 27, 29, 40

Maricopa County v. Osborn (1943), 60 Ariz. 290, 136 P.

(2d) 270 4, 11, 13, 19, 20, 27, 29

MeNair v. Knott (1937), 302 U.S. 369, 372, 82 L.ed. 307, 58

S.Ct. 245 42

Melendez v. Johns (1938), 51 Ariz. 331, 76 P.(2d) 1163... 33

Municipal Investors Ass’n v. Birmingham (1942), 316 U.S.

153, 86 L.ed. 1341, 62 S.Ct. 975 8

Murphy v. Utter, 186 U.S. 95, 46 L.ed. 1070, 22 S.Ct.

776 24, 28, 42

TaBLE OF AUTHORITIES CITED v

Pages

National Bank of Republie v. City of St. Joseph, 31 Fed.

216 20

Neighbors of Wooderaft v. Rupert, 51 Idaho 215, 4 Pace.

(2d) 360 20

New Orleans Water Co. v. Louisiana ( 1902), 185 U.S. 336... 15

New Orleans Waterworks v. Louisiana Sugar Co. (1888),

125 U.S. 18, 31 L.ed. 607, 8 Sup.Ct. 741 31

Oklahoma Packing Co. v. Oklahoma Gas and Electrie Co.

(1939), 309 U.S. 4, 84 L.ed. 537, 60 Santt. S16. 41

Oshkosh Waterworks Co. v. Oshkosh (1903), 187 U.S. 437, 47

L.ed. 249, 23 Sup.Ct. 234 15

Pacific Mail $.S. Co. v. Joliffe (1865), 69 U.S. 450, 17 L.ed.

805 35

People ex rel. Durham Realty Corporation v. La Fetra, 230

N.Y. 429, 130 N.E. 604 36

Peterson v. Central Arizona Light & Power Co. (1940), 56

Ariz. 231, 107 P.(2d) 206... 33

Pinney v. Nelson (1901), 183 U.S. 144, 46 L.ed. 125, 22

Sup.Ct. 52 15

Roberts & Co. v. Padueah, 95 Fed. 62 20

Sambor, et al. v. Philadelphia Rapid Transit Co. (1928),

27 Fed.(2d) 406, App. Dism. (1928), 278 U.S. 572, 73

L.ed. 513, 49 Sup. Ct. 93 15

Schuerman v. Territory of Arizona, 184 U.S. 342, 46 L.ed.

580, 22 S.Ct. 406 28

Shriver v. Woodbine Savings Bank (1931), 285 U.S. 467, 76

L.ed. 884, 52 Sup.Ct. 430 41

Smyth v. United States (1937), 302 U.S. 329, 82 L.ed. 294,

58 Sup.Ct. 248 18

Sobey v. Molony (1940), 40 Cal. App.(2d) 381, 104 P.(2d)

868 35

State ex rel. Board of Fund Commissioners v. Smith (1936),

339 Mo. 204, 96 S.W.(2d) 348 22

State v. Prouty (1900), 115 Towa 657, 84 N.W. 670... 35

Stockholders of Peoples Banking Co. v. Sterling (1937), 300

U.S. 175, 81 L.ed. 586, 57 S.Ct. 386 26

vi Taste or AUTHORITIES CITED

Territory v. Vail, 10 Ariz. 138, 85 Pac. 652, at page 653......... 42

Tidal Oil Co. v. Flanagan (1924), 263 U.S. 444, 68 L.ed.

382, 44 S.Ct. 197 29

University v. People (1879), 99 U.S. 309, 25 L.ed. 3$87............. 15

Utter v. Franklin, 172 U.S. 416, 43 L.ed. 498, 19 S.Ct.

183 23, 27, 42

Walker v. Peoples Finance & Thrift Co. (1935), 46 Ariz.

224, 49 P.(2d) 1005 33

Wright v. Oakley (1848), 46 Mass. 400 35

Yavapai County v. McCord (1899), 6 Ariz. 423, 59 Pac.

99 23, 28, 42

CONSTITUTIONS

Ariz. Constitution :

§5 of Art. IX 40

Par, © Of Amt. ‘DO iccessccinccsssroscrccssessesooeeerccseessssccsssvnsoessrotemenseeensserensmnpsssveenssssusnsne 39

STaTUTES

Rev. Stats. Arizona, 1913:

§§5251-5265 a8, 11, 12, 26, 39, 45

§5252 ....... 4 17

§5258 17

§5260 3,17

Session Laws Arizona, 1883, pp. 4, 131, 139, 25D... nm 12

Session Laws Arizona, 1885, pp. 2, 66, 187, 206....ccccomssmnen 12

Session Laws Arizona, 1925, p. 106 33

Ariz. Stats of 1887, Chap. II, Title XXXI, §§2053-2067....... 12

Arizona Code, 1928, §2654 33, 38

Acts of Congress:

Act of June 25, 1890 (26 Stats. at Li. 175) n.cccnccccccnceneenenenn 22

Act of June 6, 1896 (29 Stats. at Ti. 262) cn ncesemmnmenen 27

—

TasLe or AuTuoRITIEs CITED vii

Pages

Judicial Code (28 U.S.C.A. 347(a)), §240(a) 1

Ariz. Code Annotated, 1939, Art. 4, Chap. 10, §§10-401-411 2,3

Text Books

6 McQuillin, Municipal Corporation (2nd Ed.), p. no 42

_

In the Supreme Court of the

United States

Ocroper Term, 1945

No. 878

ee ,

STATE OF WASHINGTON and EQUITABLE LIFE

INSURANCE COMPANY OF IOWA,

Petitioners,

vs.

MARICOPA COUNTY; JOHN A. FOOTE, ED.

OGLESBY and PHIL ISLEY, Constituting the

Board of Supervisors of Maricopa County, Arizona; .

SIDNEY P. OSBORN, Governor, ANA FROHMIL-

LER, State Auditor, and WILLIAM T. BROOKS,

State Treasurer, Constituting the Loan Commis-

sioners of the State of Arizona; WILLIAM T.

BROOKS, State Treasurer, and ANA FROHMIL-

LER, State Auditor of the State of Arizona,

Respondents. 7

Brief for Respondents

In Opposition to Petition for Writ of Certiorari

OPINION OF COURT BELOW

The opinion of the Cireuit Court of Appeals is reported

in 152 Fed. (2d) 556,

JURISDICTION OF SUPREME COURT

The jurisdiction of the Supreme Court is invoked by

petitioners pursuant to Sec. 240(a) of the Judicial Code

(28 U.S.C.A. 347(a)).

2

QUESTION PRESENTED

The question for decision is whether Article 4, Chapter

10, Sections 10-401 to 10-411, inclusive, of the Arizona

Code Annotated, 1939, (recodifying Chapter I, Title LII,

R.S. 1913, relating to the redemption of bonds) constitutes

subsequent legislation of the State of Arizona impairing

the obligation of the contract expressed in the county

highway bonds of Maricopa County which were issued

in 1919 and 1921 under Title LIT, Revised Statutes of

Arizona of 1913, Civil Code."

STATEMENT OF THE CASE

In 1919, Maricopa County, a county of the State of

Arizona, issued its bearer bonds in the total amount of

$4,000,000, in denominations of $1,000 each, maturing

serially from 1930 to 1949, and bearing interest at 514%

per annum (R. 525). In 1921 the county issued additional

bearer bonds in the total amount of $4,500,000, substan-

tially identical in terms and tenure with the 1919 issue

except that the bonds matured serially from 1930 to 1951

and bore interest at 6% per annum (R. 531-2). Each of

these bonds provided on its face that it was issued

*‘pursuant to and in strict compliance with the Consti-

tution of the State of Arizona, and the statutes there-

of, * * °° (R. 526, 532).

1, These sections of the 1939 Code and of the 1913 Revised Statutes

are set in parallel columns in the Appendix to this brief. Thus,

all of the statutory provisions are submitted in their entirety in

substitution for the partial and restricted quotations appearing

in the appendix to Petitioners’ Brief.

2. Emphasis added in all quotations throughout this brief

except where otherwise noted.

3

Ariz. Rev. Stats. 1913, Title LII, Ch. I, Secs. 5251-

5265," which were in force 1919-1921 when the bonds of

Maricopa County were issued, as above stated, provided

generally for the redemption of state bonds. Section

5260' specifically provided for the redemption of county

indebtedness, in substantially the same manner. Under

the statute such redemption is accomplished by the sale

of refunding bonds by the Loan Commissioners **when

the same can be issued at a lower rate of interest,’’ and

by the application of the funds derived from such sale of

refunding bonds issued by the Loan Commissioners to the

redemption of the outstanding county bonds.’ Upon such

sale of refunding bonds the Treasurer is required to pub-

lish notice of redemption of the indebtedness to be re-

deemed, and thereafter interest on all such indebtedness

‘*shall cease.’”*

In July, 1941, Maricopa County commenced proceed-

ings to redeem all of the then issued and outstanding

county highway bonds in accordance with the aforemen-

tioned provisions of Rev. Stats. 1913, which in the mean-

time had been recodified as Ariz. Code 1939, Ch, 10, Art.

4, Sees. 10-401-411 (R. 536-544). The refunding bonds were

authorized by the Loan Commissioners and sold (R. 544-

548), but their issuance and delivery was delayed by

litigation instituted in the Supreme Court of Arizona

3. The complete statute is set forth in the Appendix, pp. ii

to xxviii.

4. Appendix, pp. xviii and xx.

5. R. S. §5252; Appendix, p. ii

6. Appendix, p. xii.

4

(R. 548-551). That court held that the aforementioned

provisions of Rev. Stats. 1913 became a part of the bond

contract and made the bonds redeemable at the option

of the county in accordance with the procedure laid down

in the statutes in effect at the time the bonds were issued.’

Thereafter, a taxpayer’s suit was instituted by J. L.

Gust, one of the counsel for Petitioners in the instant

ease, seeking to restrain the delivery of the refunding

bonds (R. 551-552). This suit was decided against the

plaintiff by the Superior Court of Maricopa County; no

appeal was taken and the judgment of the Superior Court

has long since become final (Defendants’ Original Ex-

hibit B in evidence, R. 668). In addition, a suit was

filed in the United States District Court for the District

of Arizona entitled ‘‘Jones v. Brush,’’ which On appeal

to the Cireuit Court of Appeals was dismissed on July

6, 1944, for want of jurisdiction.* In the instant case

plaintiffs, Petitioners here, sought a declaratory judg-

ment to the effect that they are entitled to the pay-

ment by Maricopa County of interest on the bonds above

mentioned until the dates of maturity specified therein

notwithstanding the earlier redemption of the bonds by

the County (R. 6-69). The District Court after trial

rendered judgment in favor of the County (R. 514, 560),

and the Circuit Court of Appeals affirmed.

7. Maricopa County v. Osborn (1942) 59 Ariz. 244, 125 Pac.

(2d) 703 (hereinafter referred to as the ‘‘ First Maricopa Case’’) ;

Maricopa County v. Osborn (1943) 60 Ariz. 290, 186 Pac. (2d)

270 (hereinafter referred to as the ‘“‘Second Maricopa Case’’).

8. 143 Fed. (2d) 733.

5

There ayMMARY OF ARGUMENT

ew pecial or important reasons warranting

tions “ © case. A review of the ten specifica-

the decisi,ge by the Petitioners will show that

decides all a. .

: he Cireuit Court of Appeals correctly

laid down .

this C ns presented according to the law clearly

a ; ourt ntinuously followed in the decisions of

"1 is -e Supreme Court of the State of Arizona

ot Appe ee ° .

PP a vith the decisions of other Cireuit Courts

whatsoeve .

vill be seen, moreover, that no warrant

the decisi: . oe

; for the suggestion of Petitioners that

kins (193¢ :

the decisi® Court in Erie Railroad Co. v. Tomp-

pS. 64, 82 L.ed. 1188, 58 S. Ct. 817 and

he Cireuit Court of Appeals have raised

pairing t whether investments in municipal bonds

of the ord against subsequent state statutes im-

ones wit} ation of the contract. The decision

long prioourt of Appeals merely holds in accord-

supra, thniform decisions of this Court rendered

bond condecision in Erie Railroad Co. v. Tompkins,

impair it@ Statutes in foree at the time of the

merely aire & part of said contract and do not

of the tridecison of the Cirenit Court of Appeals

The Dhe findings of fact and conclusions of law

of the At on this very point.

provisiorourt found that the pertinent provisions

cluded thd Code of 1939 are an adaptation of the

were conitle 52 of the 1913 statutes (R. 553); con-

the Codeprovisions of Title 52 of the 19138 statutes

in and constitute Article 4, Chapter 10 of

9, and that said provisions of the Code of

.

any doub

are still

6

1939 are an adaptation of the provisions of Title 52 of the

statutes of 1913 (R. 554); and adjudged that Article 4,

Chapter 10 of the Code of 1939 is not different in sub-

stance and effect from all of the provisions of Chapter 52

of the Revised Statutes of 1913 and ‘‘is an adaptation of

said Title 52’’ (R. 562). The District Court found and

concluded that the highway bonds of Maricopa County,

issued in 1919 and 1921, were issued under and subject to

all of the provisions of Title 52, Revised Statutes of Ari-

zona, 1913 (R. 552-553) and further concluded that

and

‘*All of the highway bonds of Maricopa County

issued in 1919 and 1921 and now outstanding, in-

cluding the bonds now held by Plaintiffs herein, are

subject to redemption as provided by Chapter 1, Title

52, Revised Statutes of Arizona of 1913, which was

in full force and effect at the time of the issuance of

said bonds and was incorporated in and constituted

a part of the obligation of each ‘of said bonds.” (R.

554)

in addition concluded that

‘‘The provisions of Chapter 1 of Title 52, Arizona

Revised Statutes of 1913 were incorporated in and

constitute a part of the terms and conditions of the

Highway Bonds of Maricopa County issued in 1919

and 1921 and now outstanding, including the bonds

now held by plaintiffs herein, and by the express

terms of said Chapter 1, Title 52, Revised Statutes

of Arizona, 1913, all of said bonds are subject to re-

demption prior to the respective dates of maturity

specified in said bonds in the manner and upon the

terms provided in said Chapter 1, Title 52, Revised

Statutes of Arizona, 1913; and said provisions of

Chapter 1, Title 52, Revised Statutes of Arizona,

—

7

1913, are now in full force and effect as Article 4,

Chapter 10, Arizona Code Annotated, 1939, which

Article 4, Chapter 10, Arizona Code Annotated, 1939,

is an adaptation of all of the provisions of Title 52,

Revised Statutes of Arizona, 1913, and does not con-

stitute a new or subsequent law of the State of Ari-

zona, and this Court takes judicial notice of the

statutes of said State of Arizona and by reason of

the terms and conditions of said bonds and the pro-

visions of Chapter 1, Title 52, Revised Statutes of

Arizona, 1913, said County of Maricopa is now au-

thorized by law to redeem said Highway Bonds prior

to the respective dates of maturity set forth in said

bonds.’’ (R. 554-555)

The District Court adjudged that the obligation of the

contracts expressed in the Maricopa County Highway

Bonds was fixed and determined by the provisions of the

Revised Statutes of 1913; that the obligation of the con-

tracts has not been impaired and will not be impaired by

any of the provisions of Article 4, Chapter 10 of the Code

of 1939 (R. 562-3); and further adjudged that thirty (30)

days after the first publication of notice of redemption of

the outstanding Maricopa County highway bonds interest

thereon would cease to accrue and that the holders would

be entitled to the payment of the face amount of such

bonds and the interest accrued up to the date of redemp-

tion, and that no further interest would accrue upon any

of said Maricopa County highway bonds from and after

thirty (30) days after the first publication of said notice

of redemption (R. 563-564).

The fundamental fallacy inherent in the Petition is the

claim—based upon mere assertion and contrary to the

8

findings of tle trial court—that the State of Arizona

by subsequent legislation has impaired the obligation of

the statutory ontract expressed in their bonds. Petition-

ers’ basic conention is that the county highway bonds of

Maricopa Couty are non-redeemable prior to their serial

maturity date. This argument assumes the existence of

a ‘‘non-redeetable obligation’? under the laws in effect

when the bonis were issued and thus begs the question—

the question king whether or not the bonds were subject

to call and rdemption under Rev. Stats. 1913. According

to all of the ourts of Arizona—from the Superior Court

of Maricopa ‘ounty to the Supreme Court of that State—

the ‘‘non-redemable obligation,’? which Petitioners say

has been impired, does not exist (Cf. Municipal Investors

Ass’n v. Birrvingham (1942) 316 U.S. 153, 86 L. ed, 1341

62 S. Ct. 975 ‘** * * a contract must exist before it can

be impaired’ * *’’). If it did not exist when the bonds

were issued, t could not be impaired by the mere continu-

ation of the Rev. Stats. 1913, into the Annotated Code of

1939, which constitutes nothing more than a mere re-

compilation £ the 1913 laws. A simple comparison of the

two statutes will demonstrate their identity.® (Cf. Car-

dozo, J., refrring to a similar recodification of the stat-

utes of Iowsin Hale v. State Board, (1937) 302 WF. 8. 95,

pp. 102, 103 82 L. ed. 72, 58 S. Ct. 102: ‘*True, in later

compilations of the statutes, the sections have been re-

arranged, tlough with substance unaffected. Cf. Code,

1935, $6953. In the Code of 1935, subdivision 1 of $1304

is subdivisin 5 of $6944; $1303 is §7171. There can, be

9. Compar the respective sections of each set opposite in

the Appendix

——

9

little doubt that the meaning remains what it was before.

United States v. Ryder, 110 U.S. 729, 740, 28 L. ed. 308,

312, 4 S. Ct. 196; United States v. Sischo, 262 U. S. 165,

168, 169, 67 L. ed. 925, 927, 928, 43 S. Ct. 511; Warner v.

Goltra, 293 U. S. 155, 161, 79 L. ed. 954, 258, 55 S. Ct. 46;

Davis v. Davis, 75 N. Y. 221, 225, 226; Fifth Ave. Bldg.

Co. v. Kernochan, 221 N. Y. 3870, 375, 117 N. E. 579;

Mitchell v. Simpson, L. R. 25 Q. B. Div. 183, 189, 9 Eng.

Rul. Cas. 558-C.A.’’) Nor is it material whether the

Annotated Code of 1939 be considered a mere recompila-

tion or a statutory re-enactment, since even a re-enact-

ment of the same statutory provisions accomplished noth-

ing more than to reinstate the parties to their original

contract under Rev. Stats. 1913. (Knights’ Templar & M.

L. Indemnity Co. v. Jarman (1902) 187 U. S. 197, 47 L.

ed. 139, 23 S. Ct. 108).

Petitioners find themselves on the horns of a dilemma.

They admit—as they must admit to support their claim

of impairment—that the Annotated Code of 1939 ex-

pressly provides for the redemption of county bonds.

That being conceded, it necessarily follows that the bonds

are likewise redeemable under Rev. Stats. 1913 if both

statutes are the same. That both statutes are identical

has been conclusively established by the Supreme Court

of Arizona, which based its decision on the Rev. Stats.

of 1913 and referred only incidentally to the language as

subsequently recodified (Bacon v. Texas (1896) 163 U. S.

207, 41 L. ed. 133, 16 S, Ct. 1023). Thus by their very

contention that their contracts have been impaired by the

1939 Code, Petitioners admit that they never held ‘‘non-

redeemable obligations.’’ On the contrary their bonds

10

were at all times subject to redemption under the identical

Rev. Stats. of 1913. These statutes are still in existence,

except for section numbers, and the usual changes in

phraseology which normally occur in any recodification.

Petitioners’ only real complaint is that their bonds did not

recite in their text—in so many words—that they were re-

deemable on thirty days’ published notice—a mere criticism

of draftsmanship which does not rise to the dignity of a

federal question (Catholic Order of Foresters v. North

Dakota (1937) 67 N. D. 228, 271 N. W. 670; cert. den. and

appeal dismissed 301 U. S. 665, 81 L.ed. 1331, 57 S. Ct.

796).

11

ARGUMENT

ai

THERE IS NO MERIT IN THE FIRST SPECIFICATION OF ERROR

WHICH MAKES THE CONTENTION THAT THE FEDERAL

COURT SHOULD DISREGARD DECISIONS OF THE HIGHEST

COURT OF A STATE CONSTRUING STATE STATUTES IN

FORCE AT THE TIME THE CONTRACT WAS MADE, AND

WHICH HAVE BECOME A PART THEREOF.

The First Specification of Error states that: ‘‘The

decision of the Cireuit Court of Appeals * * * is erroneous

for the reason that it is based upon the assumption that

the federal courts may be deprived of the jurisdiction * * *

to construe a contract entered into pursuant to a state

statute which is a part of said contract by decisions of the

Supreme Court of the state made after rights under the

contract have vested, construing such statute, and the con-

tract of which it is a part.”’

The bonds of respondent county presently held by

petitioners were issued in 1919 and 1921 respectively.

Each of them provided on its face that ‘‘This bond is

issued ** * pursuant to and in strict compliance with the

Constitution of the State of Arizona, and the statutes

thereof * * *’’ (R. 526, 532).

The statutes of the State of Arizona to which refer-

ence was thus made and which were in force 1919-1921

when the bonds were issued, included Rev. Stats. 1913,

Title LII, Ch. 1, Sees. 5251-5265." In the First and Second

Maricopa Cases the Supreme Court of Arizona construed

this statute to provide that bonds of Arizona counties

are redeemable at the option of the county in accordance

10. This statute is fully set forth in the Appendix.

12

with the procedure set forth in this statute."' In the First

Maricopa Case the Court said (125 Pac. (2d) 705):

“Tt is not questioned that paragraph 5252, supra,

made it the duty of the loan commission to issue the

negotiable coupon bonds of the state ‘for the purpose

of paying, redeeming, and refunding all or any part

of the principal and interest’ of the legal indebted-

ness of the state existing at the time that section

was enacted and also any that might thereafter be-

come due or be authorized by law, when such bonds

11. It will be shown in Paragraph III below that these decisions

were consistent with earlier decisions of the Supreme Court of Ari-

zona. It is noted here that throughout the history of the Territory

and the State of Arizona, counties were conceded the right to re-

deem their bonds prior to the dates of maturity stated therein.

Statutes to this effect similar to Rev. Stats. 1913, Title LII, Ch. 1,

Sees. 5251-5265, were enacted by the Territorial Legislature and by

Congress during the Territorial period. Among the early Terri-

torial statutes providing for the redeeming and refunding of county

bonds prior to the dates of maturity specified therein, are Session

Laws 1883, pp. 4, 131, 189, 251; 1885, pp. 2, 66, 187, 206.

Arizona Statutes 1887, p. 361 (Title 31, Ch. 2, Sections 2053-

2067) was the first comprehensive general statute authorizing the

redemption of County Bonds whenever the same could be done at a

lower rate of interest and by Ch. 1 of Title 31 of the same statute,

provision was made for the creation of the Loan Commission of

Arizona for the purpose of redeeming territorial debt. By the Act

of June 25, 1890, Congress provided for the redeeming and refund-

ing of county indebtedness by the Loan Commissioners of the Ter-

ritory subject to future Territorial legislation (26 Stats. at L. 175)

and accordingly consolidated in one statute the separate provisions

of Ch. 1 and Ch. 2 of Title 31 of Arizona Statutes of 1887. After

immaterial intervening amendments, this Act was finally amended

by Congress by Act of June 6, 1896 (29 Stat. at L. 262.) Upon the

admission of the State of Arizona into the United States, the sub-

stance of the Act of Congress of June 25, 1890 (consolidating Ter-

ritorial Statutes of 1887 Title 31 Chs. 1 and 2) was enacted as a

law of the State of Arizona by the First Special Session of the

First Legislature of the State on June 15, 1912 (Session Laws

1912, 1st Spee. Sess., p. 98) and with certain minor changes not

material here, made by the Second Special Session of the First

Legislature (see Rev. Stats. 1913, marginal notes) became Rev.

Stats. 1913, Title LII, Ch. 1, Sees. 5251-5265.

—

13

could be issued at a lower rate of interest than pre-

viously paid on state indebtedness and to the profit

and benefit of the state. This being true, any bonds

of Arizona, issued while this provision was a part of

its statutory law, to take care of the indebtedness

specified therein, were redeemable and refundable

whenever state bonds could be issued at a rate of in-

terest sufficiently lower than that previously paid to

render it profitable and beneficial to the state to

issue them. This portion of 5252, whether contained

in such bonds or not, becomes as much a part of them

when issued as it does if incorporated in them and

is binding upon the holders thereof as well as the

aa 7 or

This decision was confirmed by the Supreme Court of

Arizona in the Second Maricopa Case (136 Pace. (2d) 271).

Thus it appears that the highest court of the state has

twice determined that under the statutes of the state in

force at the time of the making of the bond contract and

which became a part of that contract, the bonds of re-

spondent county are redeemable at its option. These de-

cisions do not give effect to any provision of a statute or

of the constitution of the state enacted subsequent to the

time of the making of the bond contract.” Nor is it con-

tended in the First Specification of Error that there is a

state statute impairing the obligation of the bond contract

enacted subsequent to the time of the making of that con-

tract. On the contrary, the contention is that the state

12. In the words of the Circuit Court of Appeals ‘The court’s

references to the law as subsequently revised were incidental, the

references consisting variously of statements to the effect that the

1913 statutes were carried, in form or substance, into the 1939

code.’’ (R. 685).

14

statute pursuant to which the bond contract was made,

was ‘‘a part of said contract’’ or, as also stated by peti-

tioners’® was ‘‘a previously existing statute.’’ In the

absence of a subsequent statute, there can be no impair-

ment of the bond contract and no federal question is pre-

sented. The Circuit Court of Appeals, therefore, properly

agreed with the construction placed upon these statutes by

the decisions of the Supreme Court of the State of Ari-

zona. Healy, C. J. said:

***<<it is settled principle that where there is no

subsequent legislation there can be no impairment of

contract in the constitutional sense. Contracts are

* made with reference to existing law and can not be

impaired by it.’’ (R. 685) ‘** * * A study of the two

Maricopa opinions discloses that decision was reached

solely on consideration of the statutes as they existed

at the time the bonds were issued. Neither in terms

nor by necessary implication was effect given to the

provisions of the later cudes. ***’’ (R. 688)

This acceptance by the Cireuit Court of Appeals of

the settled construction by the State court of its own

statutes is supported by a long line of decisions of this

Court.

In Ennis Water Works vs. City of Emmis, (1914) 233

U. S. 652, 58 L.Ed. 1139; 34 Sup. Ct. 767; this court said:

‘‘Tt is insisted, however, that since it is our duty

when the assertion is made that contract rights are

impaired to determine for ourselves whether or not

there was a valid contract, we must hence now deter-

mine this controversy by resort to original reasoning

13. Pet. Br. p. 20.

——

15

without regard to the action of the court below in

applying the state rule. But while the premise upon

which this contention rests is well founded, the error

lies in the deduction which seeks to make it applicable

to this case. This is clearly the case, since the doc-

trine which the premise embodies is subject to this

qualification, that where a contract which is relied

upon arises from a state law or municipal ordinance

having the effect of such law, in interpreting for itself

such law or ordinance this court will not give to it a

meaning in conflict with the settled rule of the state

at the time the law was enacted or the ordinance

adopted. In other words, that where we come to con-

sider a contract arising from a state law or ordi-

nance, we will treat it as if there was embodied in

their text the settled rule of law which existed in the

state at the time the state action relied upon as a con-

tract was taken. ** ** ’’ (58 L.Ed. 1141)

Cross Lake Shooting & F. Club v. Louisiana (1912)

924 U.S. 632, 56 L.Ed. 924, 32 8S. Ct. 577;

New Orleans Waterworks v. Louisiana (1902) 185

U. 8. 336, 46 L.Ed. 936, 22 S. Ct. 691;

Lehigh Water Co. v. Easton (1887) 121 U. S. 388,

30 L.Ed. 1059, 7 S. Ct. 916;

University v. People (1879) 99 U.S. 309, 25 Law

Ed. 387; en

Oshkosh Waterworks Co. v. Oshkosh (1903) 187

U. S. 487, 47 L.Ed. 249, 23 S. Ct. 234;

Pinney v. Nelson (1901) 183 U. S. 144, 46 Law Ed.

125, 22 S. Ct. 52;

Sambor, et al v. Philadelphia Rapid Transit et al

97 F, (2d) 406. (Appeal dismissed 278 U.S. 572,

73 L.Ed. 513, 49 8. Ct. 93).

PF NLT ATA NN NEO AIF I FORTIER MTN Ti 0 CT

16

II.

THERE IS NO MERIT IN THE SECOND SPECIFICATION OF

ERROR WHICH MAKES THE CONTENTION—CONTRARY TO

THE FACT—THAT THE CIRCUIT COURT OF APPEALS

FAILED TO MAKE AN INDEPENDENT CONSTRUCTION OF

THE BOND CONTRACT CREATED UNDER THE THEN FX-

ISTING ARIZONA STATUTES.

The Second Specification of Error states that ‘‘The de-

cision of the Circuit Court of Appeals ** * is erroneous

for the reason that said court did not make its own, in-

dependent construction of .he contract created under the

Arizona statutes in existence at the time, by the issuance

of the bonds *** as it was required to do ***”’.

To this Second Specification of Error there are two

good and sufficient answers:

First: The Circuit Court of Appeals did make an inde-

pendent construction of the bond contract created under

the Arizona statutes in existence at the time the bonds

were issued.

—The Circuit Court of Appeals—as did also the trial

court—found that the Annotated Code of 1939 did not in-

troduce new legislation with respect to the redemption of

county bonds, saying:

‘‘We have, however, independently considered the

question, and are not persuaded that that later re-

Vision constituted new legislation on the subject.”

(R. 685)

This positive declaration by the Circuit Court of Appeals

of its own independent determination of the statute, e.g,

the bond contract, is a sufficient refutation of the claimed

error.

a

17

Second: Upon an independent construction of the bond

contract, it is clear that the state statutes specifically pro-

Vided that county bonds are redeemable on_thirty-days

published notice of redemption.

Section 5260" of the Revised Statutes of Arizona, 1913,

specifically authorizes the redemption of county bonds ‘‘in

the same manner as other state indebtedness.’’ The only

condition to the redemption of such indebtedness is that

the redemption shall be accomplished by the issuance and

sale of refunding bonds bearing ‘‘a lower rate of interest

than previously paid’’ (Section 5252).1° Upon the issuance

and sale of refunding bonds, the Treasurer is required to

apply the proceeds of sale to the redemption of the out-

standing bonds and to publish notice of redemption

thereof. Thereafter, interest on the outstanding indebted-

ness ‘‘shall cease’ (Section 5258)."* The Supreme Court

of Arizona held in the First Maricopa Case that this clear

and specific language of the laws in effect at the time the

Maricopa County bonds were issued clearly authorized

their redemption, stating:

“<*** Under this provision there is no difference

in the matter of refunding between the indebtedness

of the state and the indebtedness of the county which

includes ‘any indebtedness now allowed, or that may

be hereafter allowed by law,’ that is, any that has

been fixed or established, and not merely that which

has matured, or become redeemable at the option of

the board of supervisors upon the expiration of a

specified number of years. Clearly the purpose of

14. Appendix, p. xviii.

15. Appendix, p. xxii.

16. Appendix, p. xii.

18

paragraph 5260, supra, was to make it the duty of the

loan commission to refund a county’s indebtedness,

whether evidenced by bonds, or otherwise, when offi-

cially requested by the board of supervisors to do so

and the bonds of the state can be sold at a rate of

interest sufficiently lower than that the county was

theretofore paying to render it profitable and bene-

ficial to the county to issue them.’’ (125 P.(2d), at

p. 706)

The provisions of the Arizona statutes are similar to

the provisions of the laws authorizing the redemption of

Liberty Bonds. See Smyth v. United States (1937), 302

U.S. 329, 82 L.ed. 294, 58 Sup. Ct. 248.

The Supreme Court of Arizona, in the First Maricopa

Case, further stated: :

‘*Title LIT of the Revised Statutes of 1913, referred

to in the foregoing excerpt from the bond, is entitled

‘State, County, and Municipal Indebtedness’, and is

composed of two chapters, the first being denominated

‘Funding and Refunding’ and containing paragraphs

5251 to 5265, and the second being headed ‘County

and Municipal Indebtedness’ and containing para-

grephs 5266 to 5285. Both chapters were in full force

and effect when the bonds involved here were issued.

The provisions setting up the manner in which bonds

should be refunded are found in chapter I and in-

clude the bonds issved by counties, school districts

and municipalities as well as those issued by the

state. Chapter II deals with the original issuance of

county, school district and municipal bonds and makes

no reference to refunding them.’’ (125 P.(2d) at p.

704)

—

19

In the Second Maricopa Case, the Supreme Court of

Arizona stated:

“The first proposition advanced is that none of the

highway bonds are subject to redemption at the op-

tion of Maricopa County, or upon call of the loan

commissioners, prior to their fixed maturity date, and

if the State of Arizona refunding bonds were issued

at this time, long prior to the fixed maturity dates of

the county highway bonds, the taxpayers of Maricopa

County would be compelled to pay interest both on

the county hi, hway bonds and also on the refunding

bonds. If we cannot stop interest from running on

the outstanding county bonds, no benefit or profit will

result to the county from the issuance of the state

refunding bonds. This question is answered by the

opinion in the case of Maricopa County v. Osborn,

supra, wherein we said:

‘This being true, any bonds of Arizona, issued while

this provision was a part of its statutory law, to take

care of the indebtedness specified therein, were re-

deemable and refundable whenever state bonds could

be issued at a rate of interest sufficiently lower than

that previously paid to render it profitable and bene-

ficial to the state to issue them. This portion of 5252,

whether contained in such bonds or not, becomes as

much a part of them when issued as it does if incor-

porated in them and is binding upon the holders

thereot as well as the state. ***’”’ (136 P.2d 271-

272)

The decision of the Circuit Court of Appeals herein is

in strict accord with the decisions of every other court

which has considered a statute similar to the Arizona

statute.

See Cochran Co. v. Mann (1943), 141 Tex. 398, 172.

S.W.(2d) 689;

_ SER Eeetena cern

20

Catholic Order of Foresters v. State of North

Dakota (1937), 67 N.D. 228, 271 N.W. 670 (cert.

den. 301 U.S. 665, 81 L.ed. 1331, 57 Sup. Ct. 796);

Neighbors of Woodcraft v. Rupert (1931), 51 Idaho

215, 4 Pac.(2d) 360;

Roberts & Co. v. Paducah (1899), 95 Fed. 62;

National Bank of Republic v. City of St. Joseph

(1887), 31 Fed. 216;

Board of Commissioners of Harmon County v. Ed-

wards (1928), 140 Oklahoma 247, 282 Pac. 1090;

DuPont v. Mills (1937), 39 Del. 42, 196 Atl. 168;

Bexar County v. Sellers (1944), 142 Tex. 290, 178

S.W.(2d) 505.

The petitioners concede (Pet. Br. pp. 10, 17) that the

decision of the Circuit Court of Appeals rests upon an

independent interpretation of the bond contract and make

the contention that the interpretation of the bond con-

tract by the Circuit Court of Appeals is in conflict with

the decision of the Cireuit Court of Appeals of the

Fifth Circuit in Evangeline Parish School Board v. Kan-

sas City Life Insurance Co. (January 9, 1946, not yet

officially reported). The short answer is that the Arizona

statute construed in the two Maricopa Cases is funda-

mentally different from the Louisiana statute construed in

the Evangeline Parish Case. Arizona Rev. Stats. 1913,

Title LII, Ch. I, Sees. 5251-5265, made express provision

for the redemption of county bonds whereas the Louisiana

statute construed in the Evangeline Parish Case did not

provide for the redeeming of outstanding bonds but pro-

vided only for the issue of refunding bonds.

21

The Circuit Court of Appeals in the Evangeline Parish

Case said:

‘“These bonds were issued under authority of the

general bond law of the State of Louisiana. The right

to call them for redemption was not expressly _re-

served in the bonds, in the statutes, or in the Consti-

fution. Itis the contention of appellant that the bonds

which it seeks to refund are callable in advance of

their maturity dates, not because such right was ex-

pressly reserved anywhere, but because a section of

the state Constitution authorizes the issuance of

refunding bonds.’’ * * *

“Subsection (g) of said section 14 of the state Con-

stitution is not subject to the interpretation -here

sought to be placed upon it. The mischief to be reme-

died and the object to be attained by the amendment

of 1934 were the elimination of the necessity for an

election and the simplification of procedure for the

issuance of refunding bonds. It permits refunding

only where the bonds to be refunded are available

for cancellation either because of their voluntary sur-

render or by reason of their having become due. a

(West Publishing Co. advance print)

Arizona Rev. Stats. 1913 is a true redemption statute.

The provisions outlined above are the usual and customary

provisions found in similar redemption statutes, all of -

which have been held to authorize the call for redemption

of outstanding bonds. (Cf. Note 109 A.L.R. 988). The

Supreme Court of Missouri said with respect to a similar

statute creating a Board of Funding Commissioners which

was authorized to refund any part of the bonded indebted-

ness of the state when it could do so to the advantage of

the state:

22

‘«* * * Section 11500 standing alone might well be

construed in the manner suggested by relators, since

the use of the language ‘the board of fund com-

missioners are hereby authorized and empowered

to * * * refund any part of the bonded indebtedness

of the state, whenever they can do so to the advantage

of the state,’ is sufficiently broad to justify, if not

compel, the conclusion that any outstanding bond

might be refunded at any time the state would bene-

fit thereby * * *.’’

State ex rel. Board of Fund Commissioners v.

Smith (1936), 339 Mo. 204, 96 S.W. (2d) 348.

However, the Supreme Court of Missouri then found from

an examination of its own statutes that the former policy

of the State of Missouri called for a different interpreta-

tion insofar as outstanding serial honds were concerned.

The history of legislative action and administrative con-

struction in Arizona is quite different. Earlier statutes

in Arizona often contained similar provisions for call and

redemption and pointed out the manner in which this

should be done.’*? The general procedure under the Rev.

Stats. 1913 and its predecessor act, the Act of Congress

of June 25, 1890 (26 Stats. at L. 175) is identical and

referred to in the First Maricopa Case as follows (refer-

ring to Rev. Stats. 1913, Section 5260"*) :

‘“‘This provision, it will be observed, places on the

loan commission not merely the general duty of

providing for the ‘redeeming or refunding of the

county * * * indebtedness’ upon the official demand

17. See footnote 11, supra.

18. Appendix, pp. xviii and xx.

ww

23

of the board of supervisors of the county, but points

out specifically that it shall do this, by issuing ‘bonds

for any indebtedness now allowed, or that may be

hereafter allowed by law, to said county * * * upon

official demand by said authorities’, that is, the board

of supervisors in case of a county.’’ (125 P.(2d)

p. 706)

In short the procedure under the Arizona statute

for the redemption of county debt is: First—the board

of supervisors must make demand upon the Loan Com-

missioners to issue refunding bonds to raise funds for

the redemption of county bonds; Second—the Loan

Commissioners must determine whether refunding bonds

ean be sold at a lower rate of interest and if so must

sell the same at public sale; Third—the Treasurer must

publish notice of redemption of the county bonds; interest

thereafter ceases and the bonds must be paid from the

moneys received by the Treasurer. This has always

been the law of Arizona.

As stated by the Territorial Court in Yavapai County

v. McCord (1899), 6 Ariz. 423, 59 Pace. 99, quoting from

Bravin v. Tombstone (1899), 6 Ariz. 212, 56 Pac. 719:

«<* * * Ag the law stood, therefore, after March 19,

1891, it was the duty of the loan commissioners to

fund the outstanding indebtedness of municipalities—

First, upon the official demand of municipal authori-

ties; second, upon the application of the holders of

such outstanding bonds, warrants, and other evidences

of indebtedness as had not been funded.”’

This Court, in Utier v. Franklin, (1889) 172 U.S. 416,

43 L.ed. 498, 19 S.Ct. 183, held that the Loan Commis-

24

sioners were compelled to refund the outstanding bonds

of Pima County, Arizona, and stated:

“«<* * * The first section of the act requires the

funding of all outstanding obligations of said terri-

tory and its municipalities.

* + * *

‘‘We are therefore of opinion that it was made the

duty of the loan commissioners by these acts to fund

the bonds in question. * * *’’ (43 L.ed. at pp. 501,

502)

In Murphy v. Utter, (1902) 186 U.S. 95, 46 L.ed. 1070,

22 S.Ct. 776, this court reviewed the earlier Territorial

and Congressional Acts and held that a mandatory duty

was imposed upon the Loan Commissioners of Arizona

to refund county bonds. This Court further held that

an attempt by Arizona to repeal the act creating the

Loan Commissioners of the territory was void because

Congress had specially provided that the outstanding

bonds ‘‘shall be funded’? (46 L.ed. at pp. 1077-8).

There is no merit whatsoever in the contention of peti-

tioners that the decision of the Circuit Court of Appeals

in the instant case is in conflict with the decision of the

Cireuit Court of Appeals of the Fifth Circuit in the Evan-

geline Parish Case.”

19. Moreover, in the Evangeline Parish Case, unlike in the in-

stant case, the question whether the bonds were redeemable under

state law prior to the dates of maturity stated therein, had not been

settled by decisions of the state courts when that question was pre-

sented to the federal courts.

25

Ii.

THERE IS NO MERIT IN THE THIRD SPECIFICATION OF

ERROR WHICH MAKES THE CONTENTION THAT FED-

ERAL COURTS HAVE JURISDICTION TO DISREGARD DE-

CISIONS OF THE HIGHEST COURT OF A STATE CONSTRU-

ING STATE STATUTES IN FORCE AT THE TIME WHEN

THE CONTRACT WAS MADE, UPON THE MERE UNSUB-

STANTIATED CLAIM THAT SUCH DECISIONS DEPART

FROM THE RULES OF INTERPRETATION PREVAILING IN

THE STATE AT THE TIME WHEN THE CONTRACT WAS

MADE.

The Third Specification of Error states that ‘‘The de-

cision of the Circuit Court of Appeals * * * is erroneous

for the reason that it assumes that in a case brought by

bondholders *** charging that the contract created by

the bonds is being violated by a subsequent statute, it may

accept the interpretation of the state Supreme Court made

long after the bonds were issued as to the construction of

the statute which is a part of the contract * * * notwith-

standing that such subsequent decision of the state court

departs from the rules of interpretation that prevailed in

such state when such bonds were issued.”’

This specification of error is substantially identical with

the First Specification of Error except that the claim is

advanced, but not substantiated, that the state court de-

parted from its earlier decisions. This assignment points

to no subsequent statute by which impairment is claimed.

(1) The unsubstantiated charge that the bond contract has been

violated by a subsequent statute does not raise a federal ques-

tion, as long as no subsequent statute is pointed out as causing

impairment.

No statute enacted subsequent to the bond contract is

pointed out in the Third Specification of Error as impair-

26

ing the obligation thereof. The decision of the Circuit

Court of Appeals is attacked upon the ground that it

‘*aecept[s] the interpretation of the state Supreme Court

*** as to the construction of the statute which is a part

of the contract created by the issuance of the bonds,”’ ie.

Rev. Stats. 1913, Title LII, Ch. 1, Sees. 5251-5265. It has

been shown in answer to the First Specification of Error

that the Circuit Court of Appeals ‘‘independently consid-

ered’’ the question and agreed with the decision of the

state court on that point.

Such an agreement by the Federal court with the

rule of decision announced by the State court raises no

question under the Constitution of the United States.

Such agreement of judicial decisions proves only this—

the State court correctly and accurately interpreted its

own statutes. In Stockholders of Peoples Banking Co. v.

Sterling (1937), 300 U.S. 175, 81 L.ed. 586, 57 S.Ct. 386,

this Court said, with respect to a law of the State of

Maryland which provided an additional remedy to enforce

stockholders’ liability, which in the view of the state court

was the same under the new procedure as it had been

from the beginning:

‘‘Nor would it help the appellants anything to

assume in their behalf that the Constitution of the

State has been given a new meaning, if the new mean-

ing is not due to the compulsion of a statute. Change

by judicial construction of antecedent legislation does

not impair a contract, at least in the forbidden sense,

if it be granted arguendo that such a change

can be discovered. * * * The new meaning, if there

is any, is not ascribed to the Constitution because a

later statute has said it must be done. The new

_ —

27

meaning is the product of the independant judgment

of a court. So the state court has told us, and the

good faith of its declaration is not successfully im-

peached. Broad River Power Co. v. South Carolina,

981 U.S. 537, 540, 50 S.Ct. 401, 402, 74 L.ed., 1023. To

changes thus wrought the Constitution of the United

States does not offer an impediment.”’

(2) The claim that the decisions of the Supreme Court of Arizona

in the two Maricopa cases depart from the rules of interpreta-

tion prevailing in the state when the bonds were issued, does

not raise a federal question.

Decisions of the Arizona Supreme Court rendered

prior to the decisions in the two Maricopa Cases consist-

ently have construed the statutes of the state as author-

izing the redemption of county bonds at the option of

the county prior to the dates of maturity specified in said

bonds. In fact the prior decisions of this Court, as well as

those of the territorial courts, construing the antecedent

statutes upon which the Revised Statutes, 1913, were based,

are strictly in accord with the decisions in both the First

and Second Maricopa Cases.

| In Lewis v. Pima County (1894), 155 U.S. 54, 39 L.ed.

| 67, 15 S.Ct. 22, this Court held void certain bonds of Pima

County, Arizona, dated July 1, 1883. Their illegality was

subsequently cured by the special validating act passed by

Congress on June 6, 1896 (29 Stats. at L. 262). In Utter

v. Franklin (1899), 172 U.S. 416, 43 L.ed. 498, 19 S.Ct. 183,

this Court held that the Loan Commissioners were com-

pelled to refund these bonds, stating

“<* * * The first section of the act requires the fund-

ing of all outstanding obligations of said territory and

its municipalities.

* * * * . * ©

ee

‘“We are therefore of opinion that it was made

the duty of the loan commissioners by these acts to

fund the bonds in question. * * *’’ (43 L.ed. at pp.

501, 502)

Subsequently, in Schwerman v. Territory of Arizona

(1902), 184 U.S. 342, 46 L.ed. 580, 22 S.Ct. 406, and in Mur-

phy v. Utter (1902), 186 U.S. 95, 46 L.ed. 1070, 22 S.Ct. 776,

this Court held that a mandatory duty was imposed upon

the Loan Commissioner of Arizona to refund county bonds

upon demand of the bondholders themselves whenever the

County Board of Supervisors failed to act. This Court

further held that an attempt by Arizona to repeal the act

creating the Loan Commissioners of the territory was

void because Congress had specially provided that the

outstanding bonds ‘‘shall be funded’’ (46 L.ed. at pp.

1077-8).

Furthermore, as stated by the Territorial Court in

Yavapai County v. McCord (1899), 6 Ariz. 423, 59 Pac.

99, quoting from Bravin v. Tombstone (1899), 6 Ariz. 212,

56 Pac. 719:

««* * * As the law stood, therefore, after March 19,

1891, it was the duty of the loan commissioners to

fund the outstanding indebtedness of municipalities

—First, upon the official demand of municipal authori-

ties; second, upon the application of the holders of

such outstanding bonds, warrants, and other evidences

of indebtedness as had not been funded.’’

In Board of Supervisors v. Hawkins (May 16, 1914),

16 Ariz. 16, 140 Pac. £21, the Supreme Court of Arizona

said, five and seven years, respectively, prior to the issu-

ance of the bonds of 1919 and 1921:

—

29

«* * * This view finds support from the fact that

the Legislature has provided for a loan commission

authorized and empowered to fund and refund the

funded and outstanding indebtedness of counties and

other municipalities. Title 52, ¢. 1, R. S. 1913.”

Assuming, however, for the purpose of the argument,

that the Supreme Court of Arizona in deciding the two

Maricopa Cases departed from the rules of interpretation

prevailing in the State of Arizona at the time when the

contract was made, such departure would not constitute

an impairment of the bond contract, in the absence of a

subsequent statute. An impairment of the obligation of a

contract in the constitutional sense cannot be effected by

the judgment of a court.

Tidal Oil Co. v. Flanagan (1924) 263 U.S. 444, 68

L.ed. 382, 44 S. Ct. 197.

Cross Lake Shooting & F. Club v. Louisiana (1912)

294 U.S. 632, 56 L.ed. 924, 32 S. Ct. 577.

In Tidal Oil Co. v. Flanagan, supra, the Court said:

“Tt has been settled by a long line of decisions that

the provision of §10, Article 1, of the Federal Consti-

tution, protecting the obligation of contracts against

state action, is directed only against impairment by

legislation, and not by judgments of courts. The

language—‘ No state shall... pass any .. . law im-

pairing the obligation of contracts ’—plainly requires

such a conclusion.’’ (Italics in original text.)

In Cross Lake Shooting & F. Club v. Louisiana, supra,

the Court said: .

* * * ““when the state court, either expressly or by

necessary implication, gives effect to a subsequent

a

30

law of the state whereby the obligation of the con-

tract is alleged to be impaired, a Federal question is

presented. In such a case it becomes our duty to take

jurisdiction and to determine the existence and valid-

ity of the contract, what obligations arose from it,

and whether they are impaired by the subsequent law.

But if there be no such law, or if no effect be given

to it by the state court, we cannot take jurisdiction,

no matter how earnestly it may be insisted that that

court erred in its conclusion respecting the validity

or effect of the contract; and this is true even where

it is asserted, as it is here, that the judgment is not

in accord with prior decisions on the faith of which

the rights in question were acquired.”

The Circuit Court of Appeals in the instant case, there-

fore, properly held:

‘Contracts are made with reference to existing law

and can not be impaired by it, Cross Lake Club v.

Louisiana, 224 U.S. 632, 638-39, even if the law has

been given a changed construction by the state court,

Tidal Oil Co. v. Flanagan, 263 U.S. 444.”’ (R. 685)

In any event it is clear that the Circuit Court of Appeals

was bound to follow the construction of the bond contract

made by the Supreme Court of Arizona, for the essential

reason that the state court correctly interpreted Rev.

Stats., 1913. These statutes—and these statutes alone—

constitute the bond contract and they remain in full force

and effect as the Annotated Code of 1939.

31

IV.

THERE IS NO MERIT IN THE FOURTH SPECIFICATION OF

ERROR WHICH MAKES THE CONTENTION THAT THE

RESOLUTIONS OF THE BOARD OF SUPERVISORS OF MARI-

COPA COUNTY AND OF THE LOAN COMMISSIONERS OF

THE STATE OF ARIZONA PROVIDING FOR THE REDEMP-

TION OF THE BONDS HELD BY PETITIONERS ARE LAWS

IMPAIRING THE OBLIGATION OF THE BOND CONTRACT.

The Fourth Specification of Error states that ‘‘the de-

cision of the Circuit Court of Appeals is erroneous in con-

cluding that the resolutions adopted by the Board of

Supervisors and State Loan Commissioners, providing for

the issuance of refunding bonds, ete. *** are purely

ministerial in character and not subsequently enacted

legislation violating the contract created by the issuance

of the bonds.’’

There is no merit in this specification of error for the

following two reasons.

(1) The statutes in force 1919-1921 when the bonds of

respondent county were issued, entered into the bond con-

tract and vested in the county the right to redeem the

bonds at its option prior to the dates of maturity stated

therein. This right of redemption thus became an integral

part of the bond contract and the resolutions in question

were adopted in the exercise of that contract right and not

by way of impairment or repudiation of the contract.

(2) No impairment of the obligation of the bond con-

tract could be effected by said resolutions because they

were administrative and not legislative in character. As

this court has said in New Orleans Waterworks Company

v. Louisiana Sugar Co. (1888), 125 U.S. 18, 32, 31 Led.

607, 8 S.Ct. 741:

‘The rule was established by the legislature, and its

execution only committed to the municipal authorities.

32

The power conferred upon the city council was not

legislative, but administrative, and might equally well

have been vested by law in the mayor alone, or in any

other officer of the city.’’

V.

THERE IS NO MERIT IN THE FIFTH AND SIXTH SPECIFICA-

TIONS OF ERROR WHICH MAKE THE CONTENTION THAT

THE LAWS OF THE STATE OF ARIZONA IN FORCE 1919-

1921 WHEN THE BONDS WERE ISSUED (REV. STATS. 1913,

TITLE LII, CH. I, SECS. 5251-5265) DID NOT MAKE THE

BONDS REDEEMABLE AT THE OPTION OF THE COUNTY.

The Fifth and Sixth Specifications of Error are directed

to the point that Rev. Stats. 1913, Title LII, Ch. 1, Sees.

5251-5265, which were in force 1919-1921 when the bonds

were issued and which became a part of the bond contract,

were substantially changed by Rev. Code 1928 and Ari-

zona Code 1939 ‘‘so as to make the latter statute a subse-

quently enacted law impairing the obligation of the con-

tract created when the bonds were issued.’’

There is no merit in either of these specifications of error.

The redemption provisions in Rev. Code 1928 and Arizona

Code 1939 are but reenactments and codifications of the

identical provisions of Rev. Stats. 1913.

The opinion of the Circuit Court of Appeals properly

states:

‘“We have, however, independently considered the

question, and are not persuaded that that later revision

constituted new legislation on the subject. The pre-

sumption, certainly, is to the contrary, as will be evi-

dent from a reading of the appended note.’’ (R. 685-

686)

33

(1) The redemption provisions contained in Rev. Code 1928 and

Arizona Code 1939 are merely recodifications of the same pro-

visions originally set forth in Rev. Stats. 1913.

A short review of the history of the subsequent recodifi-

cations of the Rev. Stats. 1913 will serve as a complete

refutation of the claims advanced by Petitioners.

The 1913 statute was reenacted without substantial

change by Rev. Code 1928, Ch. 60, Art. 4, Sees. 2646-2656.

Sec. 5260, Rev. Stats. 1913, was numbered Sec. 2654 in Rev.

Code 1928.2° That the two statutes are substantially iden-

tical appears from the following composite:

20. The legislative history of Rev. Code 1928 demonstrates

that it was merely a reenactment and codification of Rev.

Stats. 1913 and neither designed nor effective to introduce any

substantial change of the law. The legislature in appointing the

Code Commissioner (Session Laws 1925, p. 106) authorized him

only ‘‘to revise and codify the laws of the State of Arizona’’, but

expressly provided that he should ‘‘not * * * undertake to make

any change of existing laws’’ and ‘‘in no manner assume to exercise

legislative power.’’ Having acted upon this mandate of the legis-

Jature the Code Commissioner, in the preface to the official edi-

tion of Rev. Code 1928, stated that he had carried out ‘‘the pur-

pose and intent’’ of the legislature for a ‘‘revision and codifica-

tion of the statute law of the State’’. It has been recognized in a

number of Arizona decisions that the purpose of Rev. Code 1928

was merely to codify the law but not to change it, and that verbal

changes, if any, contained in the codification were not designed to

change the meaning of the law but merely to simplify the language.

Walker v. Peoples Finance and Thrift Co. (1935) 46 Ariz. 224, 49

Pac. (2d) 1005; Melendez v. Johns (1938) 51 Ariz. 331, 76 Pac.

(2d) 1163; Peterson v. Central Arizona Light & Power Co. (1940)

56 Ariz. 231, 107 Pac. (2d) 205.

a

34

Composite of Sec. 5260, Rev. Stat. 1913, and See-

tion 2654, Rev. Code 1928.

Note: Where the new section omits portions of the old, such

portions are bracketed and stricken out, thus [——]; where the

new section adds words, they are added in brackets, thus [ ].

[6260--——-—] [Par. 2654. County or municipal bonds by

state loan commissioners.] The board of supervisors of the

counties -——j [and] the municipal and school author-

ities, [are-hereby—autherized_and direeted+e] [shall] re-

port to the [state] loan commissioners [efthe-statetheit ]

[the] bonded and outstanding indebtedness [of the county,

municipality or school district], and [, upon the demand of

— authorities, te ee a eee

said-tean] commissioners shall provide for the redeeming

or refunding of [the-eeunty—munieitpatand sehoo! district ]

[such] indebtedness [, tpenthe-offetal demand-of-said-an-

therittes,] in the same manner as other state indebtedness,

and [they-shaH] issue bonds [of the state] for any indebted-

ness [now] allowed [, or-that-may-betereafter-atowed] by

law [to-sait] [to be incurred by such] county, municipality,

or school district [wporrofticrattemamdt by said authorities |.

[Such bonds shall be issued upon the faith and credit of

the state only to the extent that it will cause to be levied

and collected taxes for the payment of the principal and

interest of such bonds, and pay the same when such bonds

have been issued.] The county, municipality, or school dis-

trict shall pay into the state treasury, in addition to all

other taxes authorized by law, such amounts as may be

directed by the state board of equalization, or on their fail-

ure by the state auditor, to be levied for the payment of the

or = ere of such bonds issued [in—redemp-

ath : issuedte] [for] such

35

county, municipality, or school district, [as—herein—pre-

yided,] in the same manner as is herein provided for the

payment of the principal and interest of state indebtedness

bends].

Section 2654, Rev. Code 1928 (which had been See. 5260

Rev. Stats. 1913) became Sec. 10-409, Ariz. Code 1939,

without any change whatsoever. In short the Arizona stat-

utes have been twice recompiled since 1913. The first re-

codification in 1928, effected only verbal changes in the

1913 statute and the second recodification, in 1939, effected

no change whatsoever except in the section numbers.

The Cireuit Court of Appeals, therefore, was justified in

its conclusion that the pertinent provisions of Rev. Code

1928 and Ariz. Code 1939 are substantially identical with

and are but reenactments and codifications of the statutes

in force at the time of the bond contract. Therefore, Rev.

Code 1928 and Arizona Code 1939 do not impair the bond

contract for it is well established that a reenactment

and codification of the law in force at the time of the execu-

tion of the contract is not new legislation but merely con-

tinues the original statute in full force and effect (Pacific

Mail S.S. Co. v. Joliffe (1865) 69 U.S. 450, 17 L.ed. 805,

Wright v. Oakley (1843) 46 Mass. 400, Fullerton v. Spring

(1854) 3 Wis. 588, State v. Prouty (1900) 115 Iowa 657,

84 N.W. 670, Sobey v. Molony (1940) 40 Cal. App. (2d)

381, 104 Pac. (2d) 868, 870) and does not impair the obli-

gation of the contract (Edgar A. Levy Leasing Co. v. Siegel

(1922) 258 U.S. 242, 66 L.ed. 595, 42 S. Ct. 289; Knights

Templars’ & M. Life Indemnity Co. v. Jarman (1902)

187 U.S. 197, 47 L.ed. 139, 23 S. Ct. 108).

Edgar A. Levy Leasing Co. v. Siegel (1922) 258 U.S.

242, 66 Led. 595, 42 Sup. Ct. 289, was an action

36

by a landlord against his tenant for rent due as stipulated.

The defendant refused to pay, relying upon Chap. 136, New

York Laws of 1920, in effect when the lease was executed,

and providing that it should be a defense to an action for

rent that the rent was unjust and unreasonable. After

the lease was executed, Chap. 136 was reenacted as Chap.

944, and the plaintiff landlord contended that Chap. 944

impaired the obligation of its contract. The Court of Ap-

peals of New York (130 N.E. 923) held against this conten-

tion ‘‘on opinion of Pound, J., in People ex rel Durham

Realty Corporation v. La Fetra, 230 N.Y. 429, 130 N.E.

604,’’ to the effect that ‘‘The provision in chapter 944 above

quoted was first incorporated in chapter 136, Laws of 1920,

and applies at least to leases made after April 1, 1920.”

The United States Supreme Court (258 U.S. 248) affirmed,

as follows:

««* * * the defense sustained in this case, by the court

below, was provided for by chapter 136 of the Laws

of New York of 1920, in effect when the lease involved

was executed. The. provision was simply carried into

chapter 944 when that chapter was amended in Sep-

tember, 1920, and, of course, a lease made subsequent

to the enactment of a statute cannot be impaired by it.”’

Knights Templars’ & M. Life Indemnity Co, v. Jarman

(1902) 187 U.S. 197, 47 L. ed. 139, 23 S. Ct. 108, was an

action upon a policy of life insurance taken out in 1885 on

the life of plaintiff’s husband. The policy provided for its

voidance in case of suicide. A state statute, in foree when

the policy was written, provided that in suits on a policy of

life insurance, it should be no defense that the insured had

committed suicide. This statute was repealed in 1887 but

- 37

restored in 1897. In 1899 plaintiff’s husband committed

suicide. The defendant insurance company contended that

the statute of 1897, restoring the statute in force in 1885

voiding the suicide clause, impaired the obligation of the

contract. The Court held against this contention, saying:

‘‘The answer to this argument is not difficult. No

new contract was made, and no new rights were vested,

between the act of 1887, repealing the suicide statute,

and the act of 1897 restoring it. All that the latter act

purported to do was to reinstate the parties in their

original rights prior to the act of 1887, which rights

had not been affected by anything done during the ten

years between the two acts. Upon defendant’s theory,

if the act of 1887 had been in existence but a single day

the same result would have followed.”’

The Arizona statutes, as recompiled and recodified, show

on their face that no change was effected or intended

to be effected in the substantive provisions of Rev. Stats.

1913, which have been authoritatively construed by the

Supreme Court of Arizona. That Court correctly con-

strued its own laws.

In Bacon v. State of Texas, (1896) 163 U.S. 207, 41

L.ed. 133, 16 S.Ct. 1023, this Court said:

“«* * * The plaintiffs in error claim, however, that

the Revised Statutes were but a simple revision of

the laws of Texas, not meant to work any change

therein, and that the different language in which this

article is couched from that existing in the former

law, ought to be regarded as working no alteration in

the meaning of the law, and that it should be con-

strued in the same manner as the law whose place

it took. Whether this article in question was or was

38

not a mere revision and continuation of existing law,

and whether the changed phraseology properly called

for a change of construction were questions entirely

for the state court to determine.’’ (41 L.ed., p. 139)

(2) The 1928 and 1939 Codes made no change whatsoever in the

character of refunding bonds to be issued by the Loan Com-

missioners under the 1913 statute for the purpose of redeeming

outstanding county bonds.

Petitioners’ entire argument that Rev. Stats. 1913, Title

LI, Ch. 1, Secs. 5251-5265 were in any manner changed

by Rev. Code 1928 and Arizona Code 1939, rests on the

addition in the 1928 Code of the following sentence:

‘‘Such bonds shall be issued upon the faith and credit

of the state only to the extent that it will cause to be

levied and collected taxes for the payment of the prin-

cipal and interest of such bonds, and pay the same

when such bonds have been issued.’””*

The argument is fallacious and without foundation in

fact or in law:

First: The above quoted language was added in 1928,

for the sole reason that the Code Commissioner in the

same section of the recodification also added the words

‘<* * * issue bonds of the state for any indebtedness

aliowed by law to be incurred by such county’?

whereas the Rev. Stats. 1913 merely provided that the

Loan Commissioners should

«¢* * * issue bonds for any indebtedness now allowed,

or that may be hereafter allowed by law, to said

mle © & SO.

21. Appendix, p. xxi.

22. Appendix, p. xxi.

23. Appendix, p. xx.

>

39

Hence, by reason of the substitution of the words

‘“‘bonds of the state’’ for the word ‘‘bonds’’ it became

necessary to qualify the term ‘‘bonds of the state’’ to

speak the truth—namely that such bonds were issued

through an agency of the state but the county re-

mained the debtor. In short under the Rev. Stats.

1913 bonds issued by the Loan Commissioners to re-

deem county bonds remained county debts; bonds issued

to redeem school district bonds, remained school district

debts, and bonds issued to redeem city bonds remained

city debts. (Cf. Board of Supervisors v. Hawkins (May

16, 1914) 16 Ariz. 16, 140 Pac. 821) These bonds were

bonds issued by the Loan Commissioners of the State of

Arizona as the Rev. Stats. 1913 correctly stated. At no

time did they become bonds of the State of Arizona,

except when the Loan Commission issued bonds to

redeem outstanding bonds of the State itself; and except

when the bonds were issued in satisfaction of the State’s

obligation under paragraph Third of Section 20 of the

Enabling Act (Arizona Code Annotated 1939, Vol. 1, p.

39), which required that the debts of the counties should

be assumed and paid by Arizona upon admission to the

Union. This assumption of debt was specifically ratified

by Art. 20, paragraph Sixth, Arizona Constitution (Arizona

Code Annotated 1939, Vol. 1, p. 218) and refunding bonds

of the state issued for that purpose (R. 638).

Bonds issued by the Loan Commissioners to redeem

county bonds never became obligations of the state as the

county alone remained liable for the payment thereof.

The mere issuance of bonds by a state agency—where the

state has no liability thereunder—raises no question under

the Constitution of Arizona and such bonds are not barred

7

40

by Section 5 of Article IX of the Arizona Constitution.

Board of Regents of the University of Arizona v. Sul-

livan (1935) 45 Ariz. 245, 42 P.(2d) 619.

Second: The meaning and effect of Rev. Stats. 1913

have been twice adjudicated by the Supreme Court of

Arizona, once in 1922 and later in 1942. In both cases

the Supreme Court held the county remained the debtor

and obligated to pay the debt.

In Maricopa County v. Osborn, (1942) 59 Ariz. 244, 125

P.(2d) 703, the Supreme Court of Arizona said:

‘‘It will be observed that the state does not pledge

its full faith and credit to the payment of the refund-

ing bonds issued by the loan commission at the request

of the board of supervisors, but that the only obliga-

tions it is required to undertake regarding them are

to see that taxes for the payment of them, principal

and interest, are levied and collected by the county and

paid to the holders thereof by the state treasurer. In

this situation, the state becomes in effect merely the

agent of the bond holders to see that these acts are ac-

complished. ”’

In Boyce v. Pima County (1922) 24 Ariz. 259, 208 Pace.

419, the Supreme Court of Arizona said:

‘¢ «The fact that the territory of Arizona had taken up

such bonds and issued to the holders thereof territorial

bonds did not relieve the counties from the obliga-

tion to care for said indebtedness. As a matter of fact,

the different counties, as they had done before, after

the refunding, continued to levy and collect taxes, to

discharge the interest. The substitution of bonds of the

territory for bonds of the counties did not, in fact, sub-

stitute debtors. The counties were still the debtors, ob-

ligated to pay the debts.

, 99

41

These adjudications by the Supreme Court of Arizona

determine the state law in force at the time when the

county highway bonds of Maricopa County were issued.

Hawks v. Hamill (1932), 288 U.S. 52, 77 L.ed. 610,

53 Sup. Ct. 240;

Oklahoma Packing Co. v. Oklahoma Gas and Elec-

tric Co. (1939), 309 U.S. 4, 84 L.ed. 537, 60 Sup.

Ct. 215;

Shriver v. Woodbine Savings Bank (1931), 285 U.S.

467, 76 L.ed. 884, 52 Sup. Ct. 430.

VI.

THERE IS NO MERIT IN THE SEVENTH SPECIFICATION OF

ERROR WHICH MAKES THE CONTENTION THAT CER-

TAIN ACTS OF THE ARIZONA LEGISLATURE RATIFYING

THE BONDS ISSUED BY RESPONDENT COUNTY CONSTI-

TUTED A CONTRACT BETWEEN RESPONDENT COUNTY

AND THE PETITIONING BONDHOLDERS WHICH HAS

BEEN IMPAIRED.

The Seventh Specification of Error states that ‘‘the

decision of the Circuit Court of Appeals * * *

for the reason that it holds that the ratification acts did

is erroneous

not present a federal question.’’

It appears to be the theory of the petitioners that the

ratification acts created a contract between the respondent

and its bondholders varying from that created by the issue

of the bonds, 1919-21, under the statutes in force at that

time. On this theory it is claimed that the new contract

created by the ratification acts cancelled the right con-

ferred upon the county by the original contract to redeem

the bonds prior to the dates of maturity specified in said

bonds.

42

The ratification acts were designed to put at rest ques-

tions as to the validity of the bonds and to end certain

pending litigation. The effect of ratification acts of this

type is well known. A validating act operates only to cure

defective proceedings, not to change the rights of the tax-

payers or bondholders.

MeNair v. Knott (1937) 302 U.S. 369, 372, 82 L. ed.

307, 58 S. Ct. 245.

See, also:

In re American Rio Grande Land & Irr. Co. (1937)

21 Fed. Supp. 492, p. 494;

City of Detroit v. Detroit United Ry. (1909) 156

Mich. 106, 120 N.W. 600;

6 McQuillin, Municipal Corporations (Rev. 2nd Ed.)

p. 227.

There is no merit in the contention that the ratification

acts cancelled the right of redemption conferred upon the

county by the original bond contract.

Utter v. Franklin (1899) 172 U.S. 416, 43 L.ed. 498,

19 S. Ct. 183;

Murphy v. Utter (1902) 186 U.S. 95, 46 L.ed. 1070,

22 S. Ct. 776;

Yavapai County v. McCord (1899) 6 Ariz. 423, 59

Pac. 99;

Territory v. Vail (1906) 10 Ariz, 138, 85 Pac. 652;

Coconino County v. Yavapai County (1898) 5 Ariz.

385, 52 Pac. 1127.

The contention of the petitioners finds no support in the

decisions of the state court and was fully answered by

the Circuit Court of Appeals, as follows:

_

43

‘‘The purpose of the ratification was to end pending

litigation, and doubtless it was intended to remove

mooted questions as to the validity of the bonds. There

is nothing novel in remedial or curative statutes of this

nature, the aim or effect of which is merely to remove

legal obstacles that may be thought to exist. McNair v.

Knott, 302 U.S. 369, 372. Consult 6 McQuillin Municipal

Corporations §2469, p. 198. To say the most for it, the

claim that the 1921 legislation took away the existing

right to refund is far fetched. Such was not the purpose

of these special acts, and there is no good reason for

supposing that they had that effect. Compare Utter

v. Franklin, 172 U.S. 416, and Yavapai County v. Mc-

Cord, 6 Ariz. 423.’’ (R. 690-691)

VIL.

THERE IS NO MERIT IN THE EIGHTH AND NINTH SPECIFI-

CATIONS OF ERROR WHICH MAKE THE CONTENTION

THAT RESPONDENT COUNTY IS ESTOPPED FROM RE- .

DEEMING THE BONDS.

The Eighth Specification of Error states that ‘‘the de-

cision of the Cireuit Court of Appeals * * * is erroneous

in holding there is no estoppel against the county, for the

reason that * * * the right to refund claimed to exist in

this case is imported from an independent, previously

existing statute’’* and other related reasons. The Ninth

Specification of Error states that ‘‘the Circuit Court of

Appeals, in holding that no estoppel was created against

24. The statement that ‘‘the right to refund claimed to exist

in this case is imported from an independent, previously existing

statute,’’ concedes that the statute conferring upon respondent

county the right to redeem and refund its bonds, is a previously

existing statute and not a subsequent statute.

—

4h

the county * * * made a decision against the local law of

the State of Arizona.’’ These specifications of error are

evidently without merit.

The bonds on their face showed that they were issued

‘tin strict compliance with the Constitution of the State

of Arizona, and the statutes thereof, * * *’’ (R. 526, 532).

Any person interested in the legal effect of the bonds was

able by a cursory examination thereof and of the Constitu-

tion and the statutes of the State of Arizona referred to in

the bonds, particularly Rev. Stats. 1913, Title LI, Ch. I,

Sees. 5251-5265, to inform himself of the right of redemp-

tion vested in the county by the recitals in the bonds. That

Rev. Stats. 1913, Title LIT, Ch. I, Sees. 5251-5265 vested

the right of redemption in the county was well understood

in Arizona prior to and at the time of the issue of the

bonds in question.

Board of Supervisors v. Hawkins (1914) 16 Ariz. 16,

140 Pac. 821.

See, also:

Ackley School District v. Hall (1885), 113 U.S. 135,

28 L.ed. 954, 5 S. Ct. 371;

Bond & Goodwin v. DuPont (1938) 254 App. Div.

543, 5 N.Y.S. (2d) 423;

Arnett v. Clack (1921) 22 Ariz. 409, 198 Pac. 127.

45

VII.

THERE IS NO MERIT IN THE TENTH SPECIFICATION

OF ERROR.

The Tenth Specification of Error (which petitioners con-

cede ‘‘does not appear to be material’’) contends that Gust,

Rosenfeld, Divelbess, Robinette & Coolidge, counsel for

petitioner Equitable Life Insurance Company, did not rep-

resent said petitioner in the filing of amici curiae briefs in

one of the Maricopa Cases although it is conceded that, in

truth and in fact, such briefs were filed by Gust, Rosen-

feld, Divelbess, Robinette & Coolidge.

See:

Kersh Lake Drainage Dist. v. Johnson (1940), 309

U.S. 485, 60 S. Ct. 640, 84 L.ed. 881, 128 A. L. R.

386.

CONCLUSION

It is submitted that the decision of the Circuit Court of

Appeals correctly decides all questions presented accord-

ing to the law clearly laid down and continuously followed

by the decisions of this Court and the Supreme Court of

the State of Arizona and consistent with the decisions

of other Cireuit Courts of Appeals.” There is no merit in

25. The decisions of the Supreme Court of Arizona, the Su-

perior Court of Maricopa County, the District Court and the Cir-

cuit Court of Appeals were rendered in favor of respondents

without any dissent.

+6

any of the specifications of error advanced by the Petition-

ers and the petition for a writ of certiorari should be

denied.

Dated. Phoenix, Arizona, March 11, 1946.

Respectfully submitted

Joun L. SuLLIvAN

Attorney General

Capitol Building

Phoenix, Arizona

Attorney for Respondents Sidney P. Osborn,

Governor, Ana Frohmiller, State Auditor,

and William T. Brooks, State Treasurer,

constituting the Loan Commissioners of

the State of Arizona; William T. Brooks,

State Treasurer, and Ana Frohmiller,

State Auditor of the State of Arizona.

Epwin BeaucHAamMp

County Attorney of

Maricopa County

407 County Courthouse

Phoenix, Arizona

Lesiiz C. Harpy

Special Counsel for

Maricopa County

Luhrs Tower, Phoenix, Ariz.

and

Grorce HERRINGTON

Orrick, Dautauist, NEFF,

Brown & HerrineTon

405 Montgomery Street,

San Francisco 4, Calif.

Attorneys for Respondents Maricopa County,

John A. Foote, Ed Oglesby and Phil Isley,

constituting the Board of Supervisors of

Maricopa County, Arizona.

Lesuie C. Harpy,

Grorce HerrincTon,

Of Counsel.

(APPENDIX FOLLOWS)