City of Fort Scott v. Hickman

Decision Date03 November 1884
Citation28 L.Ed. 636,5 S.Ct. 56,112 U.S. 150
PartiesCITY OF FORT SCOTT v. HICKMAN
CourtU.S. Supreme Court

J. D. McCleverty, for plaintiff in error.

S. E. Brown, for defendant in error.

BLATCHFORD, J.

This is an action brought by the defendant in error in the circuit court of the United States for the district of Kansas against the city of Fort Scott, in the state of Kansas, to recover the amount of principal and interest due on 27 bonds for $500 each, issued by that city, 12 of which became due on July 1, 1873, and 15 on July 1, 1874. The bonds are coupon bonds, with interest payable annually on the first of July at the rate of 10 per cent. per annum, and are dated July 1, 1871. Each bond contains the heading, 'Special Improvement Bond of the City of Fort Scott, Kansas,' and this statement: 'Issued in accordance with sections 16 and 17 of an act of the legislature of the state of Kansas, entitled 'An act relating to the powers and government of cities of the second class, and to repeal certain sections of chapter 19 of the General Statutes of 1868, approved March 8, 1871,' and in pursuance of an ordinance of the city of Fort Scott, entitled 'An ordinance ordering the grading and macadamizing, etc., of certain streets and parts of streets, approved May 19, 1871.' Countersigned by the city treasurer, this twentieth day of September, 1871.' The suit was commenced July 1, 1880, and was tried by the circuit court without a jury. As to 11 of the 12 bonds that court found that all the coupons on them had been paid on and before July 1, 1873, but no payment of principal or interest had been made upon any of them since that date, except as stated in its fourth finding. As to the 15 bonds it found that all the coupons on them were paid on and before May 16, 1875, but no payment of principal or interest had been made upon any of them since that date, except as stated in its fourth finding. The remaining findings were as follows:

4. The court further finds, that, as to the remaining bond sued on herein, being bond number 78, it became due, by its terms, July 1, 1873, and on and prior to that date all the interest coupons thereon had been paid; that, on November 8, 1875, a payment was made on said bond number 78, of the sum of $290, and the balance of said bond remained due and unpaid at the time of the commencement of this action; that said payment upon bond 78 was made by Donnell, Lawson & Co., fiscal agents of the state of Kansas, upon the authority of certain letters sent them by J. H. Randolph, city treasurer of the defendant, written by him in the usual routine of his official duties, but without any special instruction or knowledge on the part of the city council of said city; which said letters are as follows, to-wit.

'FORT SCOTT, KANSAS, June 10, 1875.

'Mess. Donnell, Lawson & Co., New York—DEAR SIRS: Yours of the second inst. at hand. The coupons of our special improvement bonds are all retired except bonds Nos. 97 and 107 to 113; the last coupon on these Nos. (all past due) is not yet in; will give you statement of am't and Nos. of these bonds due and unpaid by next mail. You may redeem any one of these bonds whenever this fund in your hands is sufficient to do so. My remittance of May 26th, of $245, was all to apply on coupons of bonds issued to the M., K. & T. R. R. Co., and not $70 of it for special im. fund, as you state you have credited, in your letter of June 1st. The Nos. of the bonds to which these coupons belong are 1 to 7, inclusive. You will please make the transfer of the $70 to your Fort Scott City coupon acc't. About what would our city funding bonds bring in your market, bonds running 10 years, int. payable s. a. at 10 per cent. p'r annum?

'Resp'y, yours,

J. H. RANDOLPH, City Treasurer.

'FORT SCOTT, KANSAS, August 6, 1875.

'Mess. Donnell, Lawson & Co., New York—GENTLEMEN: I give you below the Nos. of our special improvement bonds now unpaid. Nos. 6 to 15, 17 to 22, 24, 30 to 39, 53 to 58, 60 to 80, 83 to 85, 97, 98, 99, and 104 to 115, in all 70 bonds of $500 each, all past due. I will be in New York last of this month, and will call and explain to you the situation in regard to these bonds, so you may understand the reason why they are not paid, and that owners of the same may govern themselves accordingly.

'Very resp'y yours,

J. H. RANDOLPH, City Treasurer.

'FORT SCOTT, KANSAS, August 11, 1875.

'Mess. Donnell, Lawson & Co., New York—GENTLEMEN: I inclose you herewith d'ft for $500 to apply on interest, due on Fort Scott City special improvement bonds.

'If not convenient to apply on interest use to pay on bonds.

'Resp'y yours,

J. H. RANDOLPH.'

On November 8, 1875, said fiscal agents paid bond 77 of this series, and said $290 on said bond 78, they being the only bonds presented to that date, which payments exhausted the funds in the hands of said fiscal agents. That the official accounts of the treasurer of said city contain the following entry of credit to himself: 'August 11, 1875. By Donnell, Lawson & Co., to pay interest on special improvement bonds, $500,' which was the moneys remitted by said treasurer in the letter of August 11, 1875. Said payments were reported by the city treasurer in his annual report and approved by the city council.

(5) The court further finds that in July, 1878, the defendant, the city of Fort Scott, Kansas, by its city council, referred the matter of its financial condition to the finance committee of said council, which committee made a report in writing to said council on the twenty-first day of August, 1878, which report was duly adopted and spread in full on the records of the minutes of said council and is as follows, to-wit:

'COUNCIL PROCEEDINGS, AUGUST 21, 1878.

'Adjourned regular meeting. Mayor Cohen in the chair. The report of the finance committee on the matter of the city indebtedness was read, and on motion adopted and ordered placed on file. It is as follows:

"To the Hon. Mayor and Councilmen of the City of Fort Scott, Kansas: We, your committee on city indebtedness, met with and consulted B. P. McDonald, D. P. Lowe, J. S. McCord, J. D. McCleverty, and also J. D. Hill, W. J. Bowden, W. A. Cormany, members of the board of education of this city, whom the committee thought should be invited; and, after careful consideration, the joint committee unanimously agreed on the plan of compromise set forth in the following circular letter, which we recommend be sent to each person holding city and school-district bonds, except Macadam bonds, about which latter we make no report:

"CITY CLERK'S OFFICE, FORT SCOTT, KANSAS, Sept. 3, 1878.

"DEAR SIR: The city council of Fort Scott address this to each person holding bonds of the city of Fort Scott, Kansas, with a view to bring about such an amicable adjustment of the indebtedness of our city, if possible, as will be fair to the bondholders in view of our circumstances, and at the same time be such an one as the city can reasonably expect to be able to meet. Nearly all of our county, city, and school-district indebtedness was incurred at or about the year 1870, which was what would be called our times flush, when money was plenty and property of ready sale at good figures. In 1870 the assessed valuation of all kinds of property in the city was $1,445,730, as shown by the tax-roll, while our assessed valuation for the year 1878 is only $814,457, being a decline in valuation of $631,273, or nearly one-half, a decline which cannot be accounted for upon the basis of the general decline in values, but is doubtless largely attributable to the excessive burden of our debt and taxation. For the year just past our levy for all funds in the city was 5.25 per cent., while, this year, had an adequate levy been made, it would have been nearly 7 per cent., and this, too, without making any levy for sinking-fund purposes to meet our railroad bonded indebtedness. A careful examination of our financial condition convinced us that to meet our indebtedness in its present form, including our share of the county and school-district indebtedness, would, within two or three years, require a levy of 10 per cent., and, should the extreme decline in our assessed valuation continue, the rate would exceed that figure. Our assessed valuation of all kinds of property in the city, beginning with the year 1870, as shown by the tax-roll, is as follows:

1870,................ $1,445,730

1871,................. 1,421,682

1872,................. 1,382,950

1873,................. 1,233,624

1874,................. 1,386,294

1875,................. 1,071,834

1876,................... 958,896

1877,................... 904,368

1878,................... 814,457

"The increase in valuation in 1874 is explained by the fact that nearly 250 acres of outlying additions were that year annexed to the city. In the face of this great decline in value our indebtedness is rapidly maturing, and is yet to be provided for. The indebtedness of our county in railroad bonds is $300,000, of which $150,000 are in litigation, and upon which there is nearly $40,000 of an accumulation of unpaid interest, and all may yet be adjudged a valid indebtedness. The assessed valuation of the county, including the city, this year is $3,509,164; the valuation of the city being about one-fourth of that, places one-fourth of the county's burden upon the city. A statement of our indebtedness, then, upon that basis is as follows:

One-fourth Co. debt,.......... $ 85,000

City railroad debt,............ 100,000

City school-district bonds,..... 37,500

City bridge and funding bonds,.. 41,500

City special improvement bonds and

accrued interest,............... 45,000

Other sundry indebtedness, about. 6,000

------------

Total,.............. $315,000

"From this statement it will be seen that the ratio of our total indebtedness to our assessed valuation is about 40 per cent. Of our indebtedness, our school-district, bridge, and funding bonds bear ten per cent. interest, and for these the...

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