Burlington Sav. Bank v. City of Clinton, Iowa

• Court: U.S. District Court — Northern District of Iowa
• Citation: Burlington Sav. Bank v. City of Clinton, Iowa, 106 F. 269 (N.D. Iowa 1901)
• Decision Date: 05 January 1901
• Parties: BURLINGTON SAV. BANK v. CITY OF CLINTON, IOWA.

106 F. 269

BURLINGTON SAV. BANK v. CITY OF CLINTON, IOWA.

United States Circuit Court, N.D. Iowa, Cedar Rapids Division.

January 5, 1901

Carr &amp Parker and Hayes & Schuyler, for complainant.

W. J McCoy and Ellis & Ellis, for defendant.

SHIRAS District Judge.

From the averments of the bill filed in this case it appears that under date of May 14, 1894, Lyons City, a municipal corporation created under the laws of the state of Iowa, executed, issued, and sold to the complainant corporation 66 coupon bonds, reading as follows:

'Lyons City Improvement Bond.

'District No. 3, Series No. 2.

'Lyons City, in the state of Iowa, for value received, promise to pay the bearer, on the 15th day of May, A.D. 1901, or at any time before that date, at the pleasure of the said Lyons City, the sum of five hundred dollars, with interest thereon at the rate of six per centum per annum, payable semi-annually on the 15th day of November and the 15th day of May, on the presentation and surrender of the interest coupons hereto attached as they respectively become due. Both principal and interest of this bond are payable at the National Park Bank, New York City, under and by virtue of chapter 14 of the Acts of the 23rd, and as amended by the 24th, General Assembly of the State of Iowa, and in accordance with an ordinance passed by the city council of said city on the 14th day of June A.D. 1892, and in pursuance of resolutions of said city council passed May 31st and October 31st, 1893. This bond is one of a series of sixty-six bonds of like tenor, date, and amount, numbered 83 to 148, inclusive, and issued for the purpose of providing for the payment of the cost of certain improvements in upon and along Sixth street of said Lyons City, which cost is assessable against and payable by abutting property and street railway benefited thereby, and is made by said law a lien on said abutting property and a street railway, and payable in seven annual installments, with interest on said deferred payments at the rate of six per cent. per annum; and it is hereby certified and recited that all of the acts, conditions, and things required to be done happened and performed in regular and due form as required by law, and for the payment hereof, both principal and interest, the full faith and credit of Lyons City is hereby irrevocably pledged, in accordance with said chapter 14 of the Acts of the 23rd, as amended by the 24th, General Assembly of Iowa, and the ordinance and resolution heretofore referred to. In witness whereof, Lyons City, by its city council, has caused this bond to be signed by its mayor, sealed by the corporate seal of this city, countersigned and registered by its city clerk, this 15th day of May, A.D. 1894.

'C. L. Root, Mayor of Lyons City.

'Countersigned:

'C. L. Root,

'Charles F. Nagel,

'Geo. T. Leedham,

'Chas. I. Parker,

'Committee on Paving.

'Countersigned and registered:

'I. N. Manville, City Clerk.'

From the recitals in the bonds it appears that they were issued in pursuance of the provisions of chapter 14 of the Acts of the 23d General Assembly of the State of Iowa, as amended by the Acts of the 24th General Assembly; and the bill contains a very full recital of the action of the city officials and council in connection with the ordering the street improvements, to pay for which the bonds were issued. It is further recited that the improvements provided for in the ordinance adopted by the city council were in fact made and completed; that the owners of the property abutting on the improvements made well knew that the work was being done, and made no objections thereto while the same was in progress, but that after the completion thereof certain of the owners of the property abutting on the street upon which the improvement was made joined in a bill in equity to restrain the city from levying a special tax for the payment of the cost of the work done, the bill being filed in the district court of Clinton county, Iowa, whence the case was carried to the supreme court, and is reported under the title of Osburn v. City of Lyons, 104 Iowa, 160, 73 N.W. 650, it being therein held that as the notice for bids for undertaking the work fixed the time for the completion thereof as being November 1, 1893, but the city council subsequently by resolution changed this date to August 1, 1894, without again advertising for bids upon the work to be done, the contract entered into between the city and the contractor was thereby rendered invalid, and the city could not impose a special tax upon the abutting owners to pay for the same under the provisions of the act of the 23d general assembly, as amended by the 24th general assembly of the state of Iowa. It is further recited in the bill that, since the rendition of the judgment and decree in the case just cited, Lyons City has not paid any portion of the bonds or coupons issued by it, there being now due thereon the sum of $9,980. It is further averred that the bonds sold to the complainant were issued in two series, one in the sum of $7,000, to cover the cost of paving the intersections of the streets and alleys, for which, under the statute, the city was primarily liable, and the other series, amounting to $33,000, to cover the cost of the improvements which, under the statute, were assessable against the owners of the abutting property and the street-railway company whose line ran along the street upon which the improvement was made. It is further averred in the bill that in the year 1895, by proceedings taken under the statutes of Iowa, Lyons City became annexed to and part of the city of Clinton, the city of Lyons then ceasing to exist as a separate municipality, and being without any city officials or separate existence; it being, however, further averred that one of the conditions of the contract of annexation is to the effect that:

'Each of said cities shall pay all of its own indebtedness and liabilities contracted or incurred prior to the time of the completion of such annexation, and neither of said cities shall be liable for or required to pay any of the indebtedness or liabilities of the other contracted or incurred prior to such time; but such indebtedness and liabilities shall remain to be paid by said Lyons City and said city of Clinton, respectively, the same as though no annexation had been made, and the necessary taxes shall be assessed and levied therefor accordingly.'

In substance, the prayer for relief is that the court will determine whether a special tax can be assessed against the owners of the property abutting on the improvements for which the bonds were issued; that, if it be held that for any reason such special tax cannot be levied and enforced, then it be decreed that a general tax be ordered to be assessed and collected from the taxable property embraced within the territorial limits of Lyons City, and that the city of Clinton, through its proper officers, be required to assess, levy, and collect such tax; and that such other relief may be decreed as may be necessary to enforce the payment of the amount due upon the bonds in question.

To this bill the defendant, the city of Clinton, has interposed a demurrer on the grounds that a court of equity will not take jurisdiction, because there is a speedy and adequate remedy at law open to complainant; that the bill is multifarious; that there is a lack of proper and necessary parties defendant, in that none of the citizens of Lyons City and none of the owners of the abutting property nor the street-railway company are made defendants; that the act of the state legislature making provision for the levy of a special tax upon the abutting property is in violation of the fourteenth amendment to the constitution of the United States; that the matters recited in the bill do not constitute any ground for an action against the city of Clinton; that the judgment and decree in the case of Osburn v. City of Lyons bars all further proceedings to enforce the levy and collection of a tax to pay the bonds sued on; and, finally, that the bill is without equity to support it.

It will probably conduce to a better understanding of the questions involved if the case be first considered as though it were pending against Lyons City, the municipality issuing the bonds in suit. Under the facts recited in the bill, it is made to appear that the bonds, in the hands of an innocent holder, are enforceable against Lyons City, the maker thereof. It cannot be questioned that the statutes of Iowa confer upon cities organized thereunder full power to issue negotiable bonds in order to raise funds to meet the expense caused by street improvements. It is, however, claimed on behalf of the defendant that the Acts of the 23d and 24th General Assembly of Iowa, under which the bonds in suit were issued, are in contravention of the fourteenth amendment to the federal constitution, and are therefore void, under the rule laid down by the supreme court in Norwood v Baker, 172 U.S. 269, 19 Sup.Ct. 187, 43 L.Ed. 443. In that case it was held that an ordinance of the village of Norwood, in Ohio, which provided for assessing the cost and expense of opening a street, including the compensation paid the owners for the land taken, and all other costs connected with the proceedings, per foot front, upon the property abutting on the street thus opened, was void, under the provisions of the fourteenth amendment, for the reason that under the statutes of the state of Ohio, as well as under the general principles governing special assessments, an assessment which imposes a charge upon the abutting property greater than the benefit derived from the improvement is, in effect, taking private property for a public use without making due...