St. Paul Fire & Marine Ins. Co. v. TOWN OF MONONGAH, W. VA.

• Decision Date: 01 June 1962
• Docket Number: 1045-W-a.,Civ. A. No. 674-F
• Citation: 209 F. Supp. 514
• Court: U.S. District Court — Northern District of West Virginia
• Parties: ST. PAUL FIRE AND MARINE INSURANCE COMPANY, a corporation, Plaintiff, v. TOWN OF MONONGAH, WEST VIRGINIA, a West Virginia municipal corporation; Robert Nichols, Mayor of the Town of Monongah; Betty Efaw, Recorder of the Town of Monongah; William O. Johnson, Treasurer of the Town of Monongah; and Grover C. Cochran, Marion Mathews, Andy Stevenski, Elmer Rauer and Junior Nick Jacobin, Members of the Council of the Town of Monongah, Defendants.

209 F. Supp. 514

ST. PAUL FIRE AND MARINE INSURANCE COMPANY, a corporation, Plaintiff, v. TOWN OF MONONGAH, WEST VIRGINIA, a West Virginia municipal corporation; Robert Nichols, Mayor of the Town of Monongah; Betty Efaw, Recorder of the Town of Monongah; William O. Johnson, Treasurer of the Town of Monongah; and Grover C. Cochran, Marion Mathews, Andy Stevenski, Elmer Rauer and Junior Nick Jacobin, Members of the Council of the Town of Monongah, Defendants.

Civ. A. Nos. 674-F, 1045-W-a.

United States District Court N. D. West Virginia, at Wheeling.

June 1, 1962.

James M. Guiher and Oscar J. Andre, Clarksburg, W. Va. (Steptoe & Johnson, Clarksburg, W. Va., of counsel), for plaintiff.

Frank C. Mascara, Fairmont, W. Va., for defendants.

CHARLES F. PAUL, District Judge.

This action is brought by the plaintiff, as the owner and holder of 84 bonds, each in the principal amount of $1,000.00, dated November 1, 1958, and entitled "Town of Monongah, Waterworks Revenue Bond, Fourth Series", and maturing at various dates beginning May 1, 1970, and ending May 1, 1983. There has been no default in the payment of interest, but plaintiff alleges that there has been a default in the full performance of obligations assumed by the issuer in the terms of the bonds and the bond ordinance with reference to sinking fund requirements, and that further defaults in this respect are threatened. The plaintiff seeks a declaratory judgment that the bonds in its hands are valid and subsisting obligations of the issuer, according to their tenor, including the sinking fund requirements, and for an order of enforcement in accordance with the declaratory judgment.

The case is submitted upon plaintiff's motion for summary judgment, based upon the pleadings and their exhibits, affidavits filed in support of the motion, and a photocopy, supplied by counsel, of the minutes and an order of Public Service Commission of West Virginia entered March 31, 1960, and now ordered filed as part of the record in this case.

The entire issue of the Fourth Series bonds is in the principal amount of $115,000.00, and, of this amount, the plaintiff purchased its 84 bonds from an independent bond-marketing concern on or about May 6, 1959, in good faith and for full value, and without any knowledge or notice of any infirmity in the bonds or in the proceedings or conditions surrounding their issue, either antecedent or subsequent thereto.

Pertinent provisions printed on the face of the bonds are as follows:

"This bond is one of a series authorized to be issued for the purpose of financing the cost, not otherwise provided, of betterments and improvements to the municipal waterworks of said Town under and in full compliance with the Constitution and Statutes of the State of West Virginia, including particularly Article 12 of Chapter 8 of the West Virginia Code. This bond and the series of which it forms a part are payable on a parity with each other but only from a fixed amount of the revenues to be derived from the operation of said waterworks, which amount shall be sufficient to pay the principal of and interest on said bonds as and when the same become due and payable, subject, however, to the priorities and vested rights in favor of the security and payment of the presently outstanding Waterworks Revenue Bonds dated May 1, 1947; Waterworks Revenue Bonds, Series 1950, dated May 1, 1950; and Waterworks Revenue Bonds, Third Series, dated November 1, 1950. Provision has been made for setting aside as a special account, identified as `Waterworks Bond and Interest Redemption Account,' a sufficient portion of said revenues to pay all of said bonds, subject to the priorities and vested rights aforesaid. * * *

* * * * * *

"It is hereby certified, recited and declared that all acts, conditions and things required to exist, happen and be performed precedent to and in the issuance of this bond do exist, have happened and have been performed in the manner and form required by law, that said Town will continuously operate its waterworks and that a sufficient amount of the revenues derived from the operation thereof has been pledged to and will be set aside into a special account for the purpose of paying the principal of and interest on this bond and all other bonds which by their terms are payable therefrom and that the amount of this bond, together with all other obligations of said Town, does not exceed any limit prescribed by the Constitution or Statutes of the State of West Virginia."

Other provisions on the face of the bond purport to make the bonds a lien on the municipal waterworks, as provided in Article 12 of Chapter 8 of the West Virginia Code, and show that the bonds are not general obligations of the Town.

In accordance with Chapter 8, Article 12, Section 11 of the West Virginia Code, the defendant Town, in its bond ordinance authorizing the Fourth Series bonds, adopted March 24, 1959, among other things, provided as follows:

"* * * from and after the issuance of any of the bonds hereby authorized the amounts of the revenues to be paid into the special fund identified as the `Waterworks Bond and Interest Redemption Account', (hereinafter called the `sinking fund') each month during the respective fiscal years, shall be increased over the amounts as otherwise provided by the respective ordinances authorizing the issuance of said presently outstanding bonds by the sum of $845.00. The aggregate amounts to be so set aside and paid into said sinking fund shall be sufficient to pay the interest on and principal of all bonds which by their terms are secured by and payable from said sinking fund as the same become due, * * *."

In accordance with the ordinance, and the obligations assumed by the terms of the bond issue and the relevant statutes, the defendant Town paid such monthly sum of $845.00 from its water revenues into the "sinking fund" for each of the months subsequent to the marketing of the bonds until the...