
    Hart v. Central City.
    Feb. 10, 1942.
    
      Newton Belcher for appellant.
    T. E. Sparks for appellee.
   Opinion op the Court by

Stanley, Commissioner

Affirming in part and reversing in part.

The appellant, Charles L. Hart, as the builder of certain streets in Central City in 1926, accepted in part payment improvement bonds secured by liens on property _ chargeable with the cost of construction and has continued to own them. In this suit against Central City, he seeks to recover certain sums representing the balance of the bonds he has not been able to collect by the enforcement of the liens. The case was decided upon the pleadings. The City confessed liability for $723.35 and judgment was rendered against it for that sum. The plaintiff appeals from the judgment denying him the entire prayer of his petition. We regret the City’s confidence in its favorable judgment has led it not to file a brief although time for doing so was extended.

In 1929 the City without the knowledge of the bondholders brought suit to enforce the street assessment lien on the property of Paul Wilcox. The amount of his delinquency is not disclosed, but it is alleged that the City purchased the property at the judicial sale for a sum much less than the lien. Shortly thereafter, on October 1, 1930, tbe City sold tbe property for $1,600 and placed tbe amount in its general fund. Out of tbe street improvement fund it paid on tbe bonds tbe equivalent of tbe assessments against tbe Wilcox property up to and including tbe year 1932. Eventually tbe City offered to pay tbe balance of tbe installments amounting to $723.35, but Hart declined to accept it in full satisfaction, claiming tbe right to ten percent penalty and interest, wbicb Section 3575 of tbe Statutes provides shall be collectible upon default in payment of any installment. In this suit he asserts be is entitled to have tbe entire $1,600 placed in tbe street improvement fund, wbicb would make it available for payment of all tbe bonds. Tbe court held, as we have indicated, that be was not entitled to that relief.

Formerly tbe statute made a city of tbe fourth class tbe agent of tbe bondholders not only to collect tbe assessments on tbe property as a tax and place tbe same in tbe street improvement fund, out of wbicb tbe particular bonds were payable, but also to bring suit and enforce tbe liens, including tbe recovery of ten percent penalty. Under the statute tbe city was liable to tbe bondholders if it failed to perform its duty in that respect. City of Catlettsburg v. Citizens’ National Bank, 234 Ky. 120, 27 S. W. (2d) 662; City of Catlettsburg v. Trapp, 261 Ky. 347, 87 S. W. (2d) 621. At tbe time these bonds were issued the statute bad been amended so that it then provided, as it now does, that failure of tbe city to collect any assessment when due shall not create a liability against tbe city, and that tbe bondholder or person entitled to tbe tax shall have tbe right to proceed to enforce tbe collection by suit to foreclose tbe lien and “may have tbe proceeds of tbe property applied in settlement thereof.” Section 3575, Kentucky Statutes. We have held that there is no liability of tbe city under tbe present law for not collecting tbe assessment. City of Irvine v. Wallace, 254 Ky. 564, 71 S. W. (2d) 974. It is obvious that tbe responsibility of tbe city for a failure to perform its former absolute duty rested upon its relation as tbe agent or trustee of tbe bondholder. It also seems clear that when a city does move to collect tbe same by suit — wbicb it has tbe right, though ordinarily not tbe duty, to do under tbe present law — it does so in tbe same capacity. Peters v. Horn, 209 Ky. 688, 273 S. W. 519. So tbe proceeds must go into tbe street improvement fund for tbe benefit of tbe principal, that is, tbe bondholder. We are aware of no statute that requires or authorizes a city to bid in the property at its sale. But whether it has that authority or not is beside the question here. The City did so in this instance, and it must be held to the same accountability as any other agent or trustee who, under general law, is never permitted to use his position to profit directly or indirectly by the execution of his powers, actual or assumed, without'the consent of his principal. Walker v. Carter, 208 Ky. 197, 270 S. W. 770; Blackburn’s Adm’x v. Union Bank & Trust Co., 269 Ky. 699, 108 S. W. (2d) 806. Particularly, a city cannot increase its general fund by street improvement assessments or taxes collected for the benefit of bondholders. Peters v. Horn, supra. We are of opinion, therefore, that it was the duty of Central City to place the net proceeds from the sale of the Wilcox property into the. street improvement fund in which there has remained a substantial deficit. The result of this conclusion will be to give the plaintiff all the money obtained from the enforcement of his lien on the property. It is not necessary, therefore, to say anything’ about whether he would otherwise have been entitled to the ten percent penalty.

It appears that the bondholder had proceeded against other property — according to the pleadings had been diligent in doing so — and yet there remained a deficit in the improvement fund of $1,966. It is claimed in this suit that the City must make up that deficiency out of its general fund. In the main the appellant’s argument rests upon the fairness and wisdom of such a conclusion and upon the proposition that the amendment of Section 3575 of the Statutes, giving bondholders the right to enforce their liens in their own name, did not relieve the city of liability for failing to act. It is contended that the bondholder as the beneficiary of a trust could always have maintained the suit under Section 21 of the Civil Code of Practice.

The opinion that a city was liable for dereliction in duty in respect to the enforcement of the liens on the property rested in part upon the construction of the word “may” in the former statute, which provided that “the assessment may be collected like other taxes,” as meaning “shall.” Kentucky Statutes 1915, Section 3575. City of Covington v. Patterson, 191 Ky. 370, 230 S. W. 542. The current statute provides, ‘ ‘ Should there be any deficit, the council may provide for the payment of same out of the general fund.” The appellant insists that “may” in this connection should also be construed as “shall,” relying upon the Patterson case and the general rule of interpretation stated in the dissenting opinion of Douglass v. Cline, 75 Ky. 608, 12 Bush 608, 649, in which it is said that where a statute directs the doing of a thing for the sake of justice to the public or third persons, the word “may” should be regarded as “shall.” The decision, however, was that “may,” used in Section 329 (now 299) of the Civil Code of Practice, in respect to the court appointing a receiver, vested a discretionary authority. The dissenting opinion, however, well states the general rule of interpretation- of the word (Lewis’ Sutherland on Statutory Construction, Section 640) except there should be added that “the construction of mandatory words as directory and directory words as mandatory should not be lightly adopted.” Crawford, Statutory Construction, Section 262. It is always a question of legislative intent. And in ascertaining that intent the entire statute must be considered. The whole scheme established by this statute is to require the improvements to be made at the expense of abutting property, with certain exceptions. The liability of the City for the cost where those excepted conditions exist is made manifest by the use of the word ‘ ‘ shall. ” It is provided that if the assessment against any particular lot exceeds one-half its value, the City Council “shall provide for the payment of any such excess out of the general fund.” It also provided that the city “shall pay the cost” of improving the street intersections, and shall pay for the streets abutting on its and other public property. Section 3563, Kentucky Statutes. The former statute provided that the city could establish a sinking fund to meet a possible deficit in the street improvement fund, and if any part should not be needed it went into the general fund. Section 3575, Kentucky Statutes, 1915 edition. The present statute provides that if the assessment shall prove to be more than sufficient to pay the bonds issued in anticipation of collection, the council shall make a ratable deduction in the last installments collectible from the property. Then follows the provision: “Should there be any deficit, the council may provide for payment of same out of the general fund.” Section 3577, Kentucky Statutes, expressly declares that the bonds “shall be payable exclusively out of funds actually paid to and collected by tbe city on account of tbe improvement taxes in anticipation of which tbe bonds are issued, and except as provided in this section, tbe city shall in no event be liable on any such bond except to tbe extent of funds actually paid to it as above set out. ’ ’

Inasmuch as tbe statute uses tbe word “shall” in relation to tbe city’s liability in other particulars, and expressly provides that there shall be no liability for a failure to collect any assessment — tbe right being expressly given tbe bondholder to enforce tbe liens — we cannot say that “may” in tbe provision imports mandatory action. We think “may” was used in this relation in its ordinary sense of permission or of vesting discretion. Tbe City in its discretion could make up the deficit in tbe fund which bad been established for tbe satisfaction of tbe bonds, but it cannot be compelled to do so. Tbe court correctly ruled there was no legal liability of tbe City to pay tbe deficiency.

Tbe judgment is reversed to tbe extent that it refused to make tbe City liable for tbe proceeds of tbe Wilcox property and is affirmed in other respects.  