Opinion ID: 1727196
Heading Depth: 1
Heading Rank: 6

Heading: Alleged Errors of Fact In The Bond Transcript

Text: In preparation for the closing of any secured transaction, attorneys are commonly expected to ascertain that there is no threatened or pending litigation the final outcome of which might affect or upset the underlying obligation or the security. In the present context three no litigation certificates were issued, to-wit: (a) On September 2, 1982, Lynn Presley, Chancery Clerk of Jackson County, certified that there is no litigation now pending or threatened in any way involving the Gautier Utility District of Jackson County, Mississippi. (b) On April 12, 1983, Kenneth O. Smith, Secretary of the Board of Commissioners of the Gautier Utility District, issued a similar certificate to the effect that there was no pending or threatened litigation as of April 12, 1983. (c) On April 21, 1983, Arthur F. Jernigan, Jr., State Bond Attorney, filed his opinion which included a similar certificate. At the validation hearing the chancery court will necessarily consider whether in fact there is any pending or threatened litigation affecting the bond issue. Obviously, if the threat or pendency of any litigation is brought to the court's attention, validation will be withheld until the matter can be resolved or at least until it be made to appear that there is no cloud over the validity or security of the bonds. In this context, the no-litigation certificates form a part of the factual predicate for the chancery court's performance of its duties at the validation hearing. In many validation hearings, particularly where there is no contest, the certificates which have been made a part of the bond transcript filed as required by Section 31-13-5 will be all the evidence the chancellor has on the subject. Here more has been presented. Objectors charge that the certificates are false or were at best stale when presented at the May 30, 1983, hearing. The point escapes us. Objectors' remedy in case of falsity or staleness is the same as that of any other litigant when faced at trial with such proof from an adversary: to present proof of their own to demonstrate the error in the information contained in the no litigation certificates, and in the proceedings below Objectors did just that. Here the trial court and this court have been made aware of the pendency of an action in the United States District for the Southern District of Mississippi. In that action this same Objector, B.L. White, is one of the plaintiffs. There alleged are an assortment of supposed federal constitutional infirmities in the existence of the Gautier Utility District and its authority to issue this bond. Objectors have reserved such federal constitutional issues for litigation in the U.S. District Court, which in turn has stayed the matter pending the outcome of the instant proceedings. See, England v. Louisiana State Board of Medical Examiners, 375 U.S. 411, 84 S.Ct. 461, 11 L.Ed.2d 440 (1964). Those questions are not before us as no assignment of error has been predicated thereon. In short, we are wholly unable to understand how the staleness or inaccuracy of the no litigation certificates may be said to invalidate the bond. We now know of the pending federal litigation. Whether we learned of such through the certificates of counsel or otherwise is of no moment.
Objectors complain of other so-called errors of fact in the bond transcript, over and above the supposedly fatal falsity of the no litigation certificates. These include the charge that all of the conditions imposed by FmHA incident to its agreement to finance the project have not been met and the charge that the District has not hired an independent consulting engineer. These items amount to little more than foolishness if not harassment. Some of the conditions of the FmHA letter of August 30, 1982, cannot be met until these validation proceedings have been concluded. Others cannot be met until the District has acquired and is operating the combined utility system. In neither instance have Objectors pointed to any unfulfilled condition which would cast a cloud upon the validity and security of the bond. Objectors follow foolishness with nonsense. They complain that the firm of Barth and Associates employed as consulting engineers on April 12, 1983, is not independent because it has done work for the District in the past and at present in other contexts. It is difficult to understand how the failure to employ an independent engineer could impact on the validity of the bond or its security. Objectors point not to any rule of law but to Section 14 of the bond resolution, which provides: In order to insure the efficient and economical operation of the system and to insure the proper maintenance thereof in a sufficient operating order, the District covenants that it will employ an independent engineer or an engineering firm having a favorable reputation for skill and expertise in such work. Such engineer or engineering firm to act as a consulting engineer for the operation and maintenance of the system. All this language requires is the employment of an engineering firm which as a matter of law operates vis a vis the District as an independent contractor. Barth and Associates clearly qualify. Nothing said here should be construed as a holding that employment of an independent engineering firm is a requisite to validity of the bond. Objectors' claims regarding so-called fact errors in the bond transcript go downhill from here; they are sufficiently frivolous that no mention is required. Suffice it to say that Objectors' Assignment of Error predicated upon alleged errors of fact in the bond transcript is without merit and is denied.