Source: https://supreme.justia.com/cases/federal/us/309/485/
Timestamp: 2019-04-25 20:33:05+00:00

Document:
1. A decision by the highest court of a State as to the jurisdiction, under the state law, of an inferior court of the State is binding here. P. 309 U. S. 489.
2. In a suit in a state court of Arkansas brought by the commissioners of a drainage district of that State to collect drainage taxes, the suit having been instituted pursuant to a federal court decree compelling extension and collection of such taxes to satisfy certificates of indebtedness issued by the district, prior state chancery court decrees adjudging a landowner's drainage taxes fully paid and his lands free from any further liability therefor were treated as res judicata.
(1) Certificate holders were not deprived of their property without due process of law in violation of the Fourteenth Amendment, even though they were not parties to and had no notice of the chancery court proceedings. Pp. 309 U. S. 490-491.
The certificate holders were charged with notice of and bound by relevant statutes of the State in existence when the certificates were issued. Those statutes provided for determination of proportionate liabilities of lands in the district by chancery proceedings between the commissioners and landowners, with no requirement of notice to creditors of the district. The commissioners, as parties to the proceedings in the chancery court, had appropriately asserted the lien for benefit of the certificate holders, and the latter are bound by the decrees.
(2) Issues of fraud and collusion in this case raise no questions which the highest court of the State was not competent finally to decide, and the decision of that court that no fraud or collusion was shown is accepted here. P. 309 U. S. 492.
liability did not deny full faith and credit to such judgment. P. 309 U. S. 492.
198 Ark. 743, 131 S.W.2d 620, affirmed.
Certiorari, post, p. 642, to review the reversal of a decree against a landowner in a suit to enforce collection of drainage district taxes.
Kersh Lake Drainage District was organized, in 1912, under the general drainage law of Arkansas. [Footnote 1] An assessment of the value of benefits to accrue to each of the tracts of land embraced in the District was duly made, upon the basis of which annual levies were extended against each tract. And the District issued interest bearing certificates of indebtedness in payment of construction work done for it by contract.
Respondent Johnson, a landowner in the District, brought suit against the District and its Commissioners in the Lincoln Chancery Court of the Arkansas in order to establish that he had fully paid the share of benefit taxes apportioned to his land, and was therefore entitled under Arkansas law to have his land declared free from any further drainage tax liability. In 1931, that State court rendered its final decree to the effect that the lien of the District for such taxes had already been "fully satisfied and released," and enjoined further extension of drainage taxes against his lands. In 1932, the same State court rendered a like decree in favor of W. A. Fish and other named landowners of the District.
"if any property owners fail to pay their drainage tax the defendant, Kersh Lake Drainage District and its Commissioners be required to institute suit for the collection of the delinquent taxes, and to prosecute the same with due diligence to a conclusion, and to see that the delinquent lands are sold promptly under the decree of foreclosure. . . ."
"a large number of tracts of land in the District have fully paid the entire value of assessed benefits against said lands, and that said property owners obtained a decree in the Lincoln Chancery Court in the case of W. A. Fish, et al. v. Kersh Lake Drainage District on June 15, 1932, enjoining and restraining the Commissioners of the defendant District from levying or extending any tax against these lands the assessed benefits of which have been fully paid."
"Commissioners . . . be required to institute suits for the collection of all delinquent taxes of said District, and to prosecute the same forthwith to a conclusion, . . . ;"
First. The unappealed 1931 and 1932 Decrees of the Lincoln Chancery Court of the Arkansas.
is that these decrees were void because certificate holders were not made parties in, and had no notice of, the chancery proceedings. Therefore, they contend that, in giving effect to the State court decrees and treating them as res judicata in the present proceeding, the court below deprived certificate holders of their property without due process of law in violation of the Fourteenth Amendment. [Footnote 6] Petitioners also add the contention that the 1932 State court decree was "collusive as a matter of law."
Although the Drainage District was not, in terms, legislatively declared to be a corporation, its powers and limitations were similar to those of corporations, and its Commissioners were comparable to corporate directors. [Footnote 7] Among the duties of the Commissioners -- as provided by the very statute upon which the certificates involved here rest -- were those of protecting and enforcing creditors' rights on obligations issued by the District. [Footnote 8] And the Commissioners, in 1931 and 1932, litigated with the landowners the disputed question of proportionate amounts of taxes due the District by virtue of drainage benefits received by the particular tracts here in question.
When these certificates were issued, purchasers were charged with notice of and bound by Arkansas statutes in existence when, and pursuant to which, the debt was contracted and which provided for determination of the proportionate liabilities of lands in the District by chancery proceedings between the Commissioners and landowners with no requirement of notice to creditors of the District. [Footnote 9] Thus, the very statutory plan from which the certificate obligations sprang contemplated that the Commissioners should represent the collective and corporate interests of the District in litigation between the District and the landowner involving matters personal to the landowner.
These certificate holders were not entitled to be made parties in the Lincoln chancery proceedings, just as, in practice, creditors of a corporation are not, unless otherwise provided by statute, made parties in a suit between a stockholder and the corporation to determine liability on a stock subscription, between the corporation and a third person to recover corporate assets, or in a suit brought against the corporation by creditors, stockholders or officers. It has been held that bondholders are not necessary parties to, and are bound by, the decree -- even if adverse to their interests -- in litigation wherein an indenture trustee under a bond issue is a party and exercises, in good faith and without neglect, his contractual authority to represent and assert the lien securing the issue. [Footnote 10] And so are these petitioners bound by the decrees in the chancery suit in which the Commissioners, as parties, appropriately asserted the lien for benefit of certificate holders -- unless there was fraud or collusion.
"could only have been set aside on appeal or by direct action to annul them on the ground of fraud, and as we have said, no appeals were taken and no fraud on the court in which the decrees were rendered is reflected by this record. [Footnote 11]"
But petitioners nevertheless insist that the State court's chancery decrees cannot avail the landowners because of the subsequent judgments of the Federal District Court.
Second. The Judgments of the Federal District Court.
Petitioners pleaded the final judgments of the Federal District Court as conclusive adjudications of the issues raised by the landowners' defense based upon the chancery decrees. The refusal of the court below to accept the District Court's judgments as determinative of the individual landowners' liabilities constituted, petitioners claim, a denial of full faith and credit to those federal judgments. With this contention we do not agree.
"when the proportion [taxable against a particular tract] is ascertained and paid, it is no longer or further liable. It is discharged. The residue of the tax is to be obtained from other sources. [Footnote 15]"
that his property was not in fact included within the Drainage District. [Footnote 17] Cognate personal defenses, such as the one that a landowner's proportionate drainage tax liability has been declared by the judgment of a competent tribunal to have been "ascertained and paid," were not foreclosed by the Federal District Court's judgments.
The judgments of the federal court were not denied full faith and credit by the Supreme Court of Arkansas.
Acts of Ark. 1909, p. 829.
198 Ark. 743, 131 S.W.2d 620, 132 S.W.2d 658.
Cf. Protho v. Williams, 147 Ark. 535, 547, 229 S.W. 38.
Because of this and the further contention that the Supreme Court of Arkansas had denied full faith and credit to the judgments of the Federal District Court, certiorari was granted. 309 U.S. 642.
See, e.g., reference to "the board of directors," Acts of Ark.1909, p. 849.
The Act of 1909 set up detailed standards for creation and control of the District; provided for management of District affairs by a Board of Commissioners under outlined supervision by Arkansas Courts, and entrusted the Commissioners with the conduct and control of litigation for the collection and enforcement of unpaid benefits against lands in the District. Such litigation was required to be conducted in the State Chancery Court having jurisdiction in the County where the particular lands were located, and the lands covered by the 1931-1932 Lincoln Chancery Court decrees were located in Lincoln County. Arkansas Acts 1909, p. 829.
Rees v. City of Watertown, 19 Wall. 107, 86 U. S. 120; United States v. County Court of Macon, 99 U. S. 582, 99 U. S. 590.
Elwell v. Fosdick, 134 U. S. 500, 134 U. S. 512-513; Richter v. Jerome, 123 U. S. 233, 123 U. S. 246-247.
198 Ark. 743, 131 S.W.2d 620, 625, 132 S.W.2d 658.
Cf. Arkansas v. St. Louis-San Francisco Ry. Co., 269 U. S. 172, 269 U. S. 176; Chandler v. Peketz, 297 U. S. 609, 297 U. S. 611.
Petitioners rely upon Riggs v. Johnson County, 6 Wall. 166; United States v. Council of Keokuk, 6 Wall. 514; Davenport v. Lord, 9 Wall. 409; Washington County v. Durant, 9 Wall. 415; Hawley v. Fairbanks, 108 U. S. 543.
But see Erie R. Co. v. Tompkins, 304 U. S. 64, 304 U. S. 78, and Ruhlin v. New York Life Ins. Co., 304 U. S. 202, 304 U. S. 205.
Rees v. City of Watertown, supra, 86 U. S. 119-120.
Barkely v. Levee Commission, 93 U. S. 258, 93 U. S. 265-266.
Ocean Beach Heights v. Invest. Co., 302 U. S. 614. Cf. Normandy Beach Dev. Co. v. United States, 69 F.2d 105.

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