Norfolk & W. Ry. Co. v. Board of Education, 7101.

• Decision Date: 19 October 1940
• Docket Number: No. 7101.,7101.
• Citation: 114 F.2d 859
• Parties: NORFOLK & W. RY. CO. v. BOARD OF EDUCATION OF CITY OF CHICAGO.
• Court: U.S. Court of Appeals — Seventh Circuit

114 F.2d 859 (1940)

NORFOLK & W. RY. CO. v. BOARD OF EDUCATION OF CITY OF CHICAGO.

No. 7101.

Circuit Court of Appeals, Seventh Circuit.

June 25, 1940.

Rehearing Denied October 19, 1940.

Richard S. Folsom, of Chicago, Ill. (Ralph W. Condee, and James W. Coffey, both of Chicago, Ill., of counsel), for defendant-appellant.

Walter M. Fowler, Wm. A. Morrow, and Gardner, Foote, Morrow & Merrick, all of Chicago, Ill., for appellee.

Before SPARKS, and TREANOR, Circuit Judges, and LINDLEY, District Judge.

LINDLEY, District Judge.

Defendant appeals from a final decree of the District Court fixing its liability to plaintiff on accounting at $1,090,591.37, following the decision of this court in Board of Education of the City of Chicago v. Norfolk & Western Railway Company, 88 F.2d 462, and a modified decree entered in pursuance of our mandate. In the former litigation it was determined that defendant, by paying anticipation tax warrants in numerical order rather than by making pro rata application of available funds upon all outstanding warrants, including those of plaintiff, being in contemplation of law trustee of the funds, had become personally and generally liable to plaintiff for its pro rata portion of the moneys. We directed that defendant pay plaintiff such sums as should be shown upon an accounting it would have received upon a pro rata basis and that applicable funds thereafter collected be distributed in accord with the principles announced.

Defendant insists that the trial court erred, (1), in computing the pro rata share of plaintiff, in that, to procure a basis for such calculation, it deducted from the total amount of warrants issued such of them as had been received by the collector in satisfaction of taxes, as provided by statute, and, (2), in allowing interest at the statutory rate of five per cent on the amounts found due plaintiff from the dates when distribution should have been made. It is urged that, in these respects, the court exceeded its authority under our mandate.

The liability sought to be enforced, growing out of defendant's diversion of money rightfully due plaintiff, under the prior decision of this court, following Rothschild v. Village of Calumet Park, 350 Ill. 330, 183 N.E. 337; Conway v. City of Chicago, 237 Ill. 128, 86 N.E. 619, is one personal in character against the Board as such, as a corporate entity. It does not involve, except as a basis for calculation, the face amount of the warrants, which are mere assignments of the tax funds and payable out of them only. Leviton v. Board of Education, Ill.Sup., 30 N.E.2d 497. Consequently, the District Court did not transcend upon the limitations of the mandate of this court in excluding warrants retired by credit upon taxes. It was our intent that plaintiff, holder of interest bearing warrants, should share pro rata in the common, available funds with all others in the same class, namely, all those who held warrants remaining unsatisfied. This class did not include those who, holding warrants, had delivered them to the collector in satisfaction of taxes. Under the statute, the latter warrants were thereby satisfied in full. Their holders received credit for their face amount and the Board received, by the discharge of taxes, 100 per cent of so much of the levy as is represented by them. Therefore, when proper allocation of the trust funds was determined by the court, it quite properly gave no consideration to the warrants thus discharged. So far as plaintiff and all others in the same class are concerned, it is as if such satisfied warrants had never existed. Bearing in mind the principle that a decree is to be construed with reference to the issue it is meant to decide, (Vicksburg v. Henson, 231 U.S. 259, 34 S.Ct. 95, 58 L.Ed. 209) and that the intent of an adjudication is to be determined not from mere isolated parts of the opinion but from consideration of all issues submitted and intended to be disposed of, in other words, from what the decree is really designed to accomplish, it follows that the District Court did not misconstrue the mandate but interpreted it according to its true purport.

The master recommended that the decree should allow plaintiff the respective amounts that defendant should have distributed to it in accord with the prior decision, with interest thereon at the statutory rate of five per cent from the respective dates when such distributions should have been made. Defendant now insists that such a decree, in view of the fact that the warrants bear interest at the rate of six per cent per annum, is to require of defendant double payment of interest. But this is not the recommendation of the master, approved by the decree. Rather, the master said that the court should direct that the full amount to be paid under the decree, including interest allowed at the statutory rate, should be "applied first to the payment of interest which has accrued on the warrants and the balance, if any, on the principal." By such provision, he believed, the possibility of the Board being required ultimately to pay more interest than that specified in the warrants, would be entirely eliminated. He expressly attempted to avoid any result whereby plaintiff would be able to collect both the statutory and the warrant rate. The purport of this recommendation, approved by the District Court, is that plaintiff shall have only one satisfaction, that is, payment of the amount represented by its pro rata share of the funds collected and properly applicable to its warrants and interest.

But we doubt the efficacy of the language of the master's report approved by the court to prevent that which was feared, — double payment of interest, though the method of calculation actually employed indicates an intent to make proper application of the governing principles. The real situation is this: the face amount of each warrant, plus the accumulated interest at six per cent per annum, as is in the instrument provided, computed to the time when the distribution should have been made, is the basis for the determination of the pro rata share of each of the warrant holders. When, for the first specific distributive date, the pro rata share applicable upon each warrant is determined upon this basis, there should be credited thereon and deducted therefrom the amount, if any, actually received, whether for interest or for principal. The balance of the share then remaining unpaid represents the amount improperly diverted by the Board and, under the decree previously directed, for this sum the Board is liable in an action for money had and received with interest at five per cent per annum to the date of the decree, — a rate charge which attaches under the statute because of the wrongful diversion. But to determine the deficiency at the next distributive date, we must, in calculating the pro rata interest of each of the warrant holders, determine how much remains due upon the warrant after crediting upon the same the sum actually paid and the credit for the charge made against the Board for the amount of the distributive share improperly paid to others by the Board. Thus, at the second distributive period, plaintiff is entitled to have paid to it another pro rata distributive share, which should be computed by deducting from the total amount due at the date of the first distribution including interest at...