New York Life Ins. Co. v. Board of Com'rs of Cuyahoga County, Ohio

• Decision Date: 27 January 1900
• Docket Number: 5,969,5,970.
• Citation: 99 F. 846
• Parties: NEW YORK LIFE INS. CO. v. BOARD OF COM'RS OF CUYAHOGA COUNTY, OHIO. NEW ENGLAND MUT. LIFE INS. CO. v. SAME.
• Court: U.S. District Court — Northern District of Ohio

99 F. 846

NEW YORK LIFE INS. CO. v. BOARD OF COM'RS OF CUYAHOGA COUNTY, OHIO.

NEW ENGLAND MUT. LIFE INS. CO. v. SAME.

Nos. 5,969, 5,970.

United States Circuit Court, N.D. Ohio, Eastern Division.

January 27, 1900

Garfield Garfield & Howe, for complainant New York Life Ins. Co.

Squire Sanders & Dempsey, for complainant New England Mut. Life Ins Co.

P. H Kaiser and F. L. Taft, for defendant.

DAY Circuit Judge.

Except as to the amount sued for, the petitions are substantially alike. Omitting formal parts, the allegations of the petitions, which, for the purposes of the demurrers, must be taken as true, are, in substance: That the board of commissioners of Cuyahoga county, on or about the 13th day of May, 1893, pursuant to a provision of an act of the legislature of Ohio passed April 27, 1893 (90 Ohio Laws, p. 115), entitled 'An act to authorize the commissioners of any county containing a city of the first class, second grade, to borrow money and issue bonds therefor, for the purposes of building and furnishing a central armory in any such city, for the use of the Ohio National Guard, and procuring a site therefor,' did, in accordance with the provisions of said act, and under the authority thereof, by resolution duly adopted and spread upon the minutes of the meeting then held, authorize and direct the issue and sale of the bonds of said Cuyahoga county in the sum of $225,000, for the purpose of raising money to erect and furnish an armory in the city of Cleveland for the use of the Ohio National Guard, and to procure a site therefor; said bonds to be dated July 1, 1893, to be in the sum of $1,000 each, payable in 25 years after date, and redeemable after 10 years from date, with interest thereon at the rate of 5 per centum per annum, payable semiannually upon presentation and surrender of interest coupons attached thereto, and to be denominated 'Central Armory Bonds.' That thereafter the defendant, pursuant to the authority given by section 2 of said act of April 27, 1893, duly issued, advertised, and sold all of said issue of bonds so authorized, in accordance with the said statute, and received therefor the sum of $227,065.05 in money, being par and accrued interest thereon from the date of said bonds to the date of their said sale, which said amount so received as the proceeds of said bonds was placed to the credit of the fund in the country treasury on account of which said bonds were issued and sold. That thereafter the said defendant, acting in pursuance of the act of the legislature under which the bonds were issued, and for the purposes contemplated in said act, and using the money for the purposes directed, purchased real estate in the city of Cleveland, in said county, taking legal title thereto in the name of said county, as a site for said proposed armory building, and erected thereon a building which has been substantially completed. That in the acquirement of said real estate and the construction of said building substantially all of the money from the issue and sale of said bonds has been expended. That the defendant, by such purchase, obtained and holds, in the name of the county, the legal title to said property so purchased and improved by the proceeds from said bonds, and has at all times and now does, exercise control and ownership over the same, and is in possession of said property and building, as well as of the moneys remaining, derived from the sale of said bonds. Plaintiffs further say that, after the issuing of said bonds, defendant, for the purpose of paying the interest thereon, and creating a sinking fund to redeem the same, did, in accordance with said act of April 27, 1893, cause to be levied a tax of one-tenth of one mill on each dollar of valuation of all of the property appearing upon the general tax duplicate of said county of Cuyahoga; that for a period of two years said tax was collected by the treasurer of said county, and the interest coupons attached to said bonds falling due on the 1st day of January and July in the years 1894 and 1895 were paid by the duly-authorized officials of said county. After the bonds had been so sold, and the proceeds expended for the purchase of said land, and after said building had been substantially completed, and after the said two years' coupons had been paid, legal proceedings were instituted by a taxpayer of said county of Cuyahoga, seeking to restrain the further levying of said tax and the payment of said bonds or the interest thereon, and thereafter such proceedings were had in such action that the act of the legislature of April 27, 1893, under which said bonds had been issued and said property so acquired, was, by the supreme court of Ohio, declared to be unconstitutional and by the judgment of said court the said defendant and the county authorities of said county of Cuyahoga were enjoined from levying further taxes to pay the interest and principal of said bonds, which said judgment and injunction are still in effect; that of the moneys so collected by the levy of one-tenth of one mill aforesaid there remains unexpended in the hands of said defendant, in the 'Central Armory Fund,' so called, a balance of $17,755.30. Plaintiffs further aver that, by reason of the ruling of the supreme court aforesaid, and by reason of said injunction issued by the supreme court as aforesaid, the said defendant and the said county of Cuyahoga cannot now pay its obligations as evidenced by said outstanding bonds and coupons in the form in which the said county, by the proceedings aforesaid, undertook and agreed to pay to the holders of said bonds and coupons. Plaintiff avers in the one case that it is the holder of 145 of said bonds, and in the other case that it is the holder of 50 of said bonds, each being in the sum of $1,000; that plaintiffs purchased the bonds in the open market in the ordinary course of business, paying more than par therefor, and long prior to the beginning of the legal proceedings hereinbefore recited, and by the determination of which said officials of said county were enjoined from paying said bonds and interest thereon; that plaintiffs purchased said bonds and paid therefor in good faith in the one case the sum of $155,495.10, and in the other case the sum of $53,660, without knowledge or notice of any defect or irregularity in the same, and that the defendant herein, in so issuing said bonds and acquiring said property, acted in good faith; that said defendant still holds said property, which is now available to said county for general county purposes, and which is now used for county purposes. Plaintiffs aver that it is unconscionable and inequitable that the defendant should retain and hold and apply to county purposes the proceeds of said bonds and the property and building so acquired therewith without fulfilling its moral and equitable obligation to reimburse the plaintiffs for the bonds so held by them. Plaintiffs further say that on or about the 27th day of February, 1899, acting in accordance with the statutes of Ohio in such case made and provided, it made written demand upon the defendant herein to provide, as by law it was authorized to do, for reimbursing these plaintiffs in amounts equal to the principal and interest which had accrued upon the bonds respectively held by them, and to pay to the plaintiffs an amount equal to the principal and interest due upon said bonds upon a surrender of the same to the county for the purpose of cancellation; and that on or about February 28, 1899, the said defendant refused such demands so made by these plaintiffs, and notified these plaintiffs that it would not take any proceedings for the reimbursement of the plaintiffs, or the payment to them of the amounts of principal and interest so due to them by reason of the premises; that more than six months has elapsed since these plaintiffs made such demand upon the defendant and its refusal to comply therewith. Plaintiffs bring the bonds by them held respectively into court for cancellation, and aver that by reason of the refusal of said defendant to make provision for the equitable and legal claims of the plaintiffs herein against the defendant, in accordance with the authority given by the statutes of the state of Ohio, particularly section 2834c of the Revised Statutes, rights of action have accrued to the plaintiffs to recover from defendant, as in an action for money had and received, an amount equal to the principal and interest represented by said bonds so owned and held by them respectively, and they pray judgment accordingly.

The act of the legislature of Ohio under cover of which these actions are brought (section 2834c of the Revised Statutes of Ohio) was passed April 21, 1898 (93 Ohio Laws, p. 172), and is as follows:

'Whenever the commissioners of any county, acting in accordance with an act of the legislature, have incurred obligations or have issued and sold bonds, and with the proceeds of such obligations or bonds have constructed an improvement or purchased land, and have wholly or partially completed a building thereon, and, after such proceeds have been so expended and the county thereby placed in the ownership and possession of such improvement or building, the statute under which such bonds were issued or obligations incurred has been, by the supreme court, declared unconstitutional and the county authorities enjoined from levying taxes to pay the interest and principal of such bonds or obligations, whereby the county has, with the proceeds of the bonds which it still retains, acquired such improvements or building, and, by reason of the unconstitutionality of the law under which it has acted, cannot pay its obligations outstanding in the form in which they were issued, such commissioners may, if they deem

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