City of Defiance v. Schmidt

• Decision Date: 19 May 1903
• Docket Number: 1,159,1,104
• Citation: 123 F. 1
• Parties: CITY OF DEFIANCE, OHIO, v. SCHMIDT et al. (two cases).
• Court: U.S. Court of Appeals — Sixth Circuit

123 F. 1

CITY OF DEFIANCE, OHIO, v. SCHMIDT et al. (two cases).

Nos. 1,104, 1,159

United States Court of Appeals, Sixth Circuit.

May 19, 1903

William H. Hubbard and Henry B. Harris, for plaintiff in error and appellant.

Alexander C. Ayres and John H. Doyle, for defendants in error and appellees.

In Error to and Appeal from the Circuit Court of the United States for the Northern District of Ohio.

For opinion below, see 117 F. 702.

Two cases are before us-- one at law, and the other in equity. Both were heard and decided by the court below, without the intervention of a jury, at the same time and upon substantially the same record. The action at law was brought originally upon the coupons of certain bonds, and later, by supplemental petition, upon the bonds themselves, issued by the city of Defiance, Ohio, in 1889, and held by the plaintiffs below as bona fide purchasers for value. The bonds recited that they were issued for the purpose of borrowing money to build a bridge over the Maumee river, in the said city, and purported to be signed by the mayor and clerk of the city, and to be sealed with its corporate seal.

In its answer the city set up a number of defenses: That the bonds purported to be issued under an act of the General Assembly of Ohio passed February 3, 1887, authorizing the council of the city of Defiance, Ohio to borrow money for the purpose of building a bridge, which was unconstitutional and void; that the resolutions and ordinances authorizing the issue of the bonds were passed without the question of issuing them having been submitted to the voters of the city, and hence, under the general statutes of Ohio, were unauthorized and void that the resolution for the sale of the bonds was not advertised according to law; that the recitals in the bonds in suit were not authorized by the ordinance directing their issue, and were therefore of no force and effect as against the city; that the bonds sued on were not sealed with the corporate seal, as required by law, but only with the seal of the city clerk; that there was no certificate by the city clerk that the money required for the contract to build the bridge was in the city treasury, as required by law; and that the bonds, while ostensibly for municipal bridge purposes were really issued to aid a railroad, in violation of the Constitution of Ohio.

While the action at law was pending, the plaintiff below filed a bill in equity, reciting the pendency of the law case, and the defense made of the want of a corporate seal, alleging that they were bona fide holders, that a mistake was made either to reform the bonds or enjoin the defendant from setting up this defense.

To this the defendant answered substantially as in the law suit, and afterwards filed a cross-bill, setting up all the facts, and praying the cancellation of the bonds.

Both cases were by agreement tried before the court below at the same time, a jury being expressly waived in the law case, but not by a written stipulation on file The court found in favor of the plaintiffs, and rendered judgment in the action at law for the amounts claimed, and a decree in the suit in equity enjoining the city from setting up the defense of a want of a corporate seal in any action upon the bonds or coupons.

Before SEVERENS and RICHARDS, Circuit Judges, and COCHRAN, District Judge.

RICHARDS Circuit Judge, having made the foregoing statement of the case, .

I. The record in the action at law contains numerous specifications of error, growing out of the admission or rejection of testimony, and based upon the rulings of the court in the progress of the trial. With respect to these, it is sufficient to point out that, although this case was tried and determined by the court without the intervention of a jury, there is nothing in the record to show that a stipulation in writing waiving a jury was filed with the clerk by the parties or their attorneys. This being the case, none of the rulings of the court in the progress of the trial, as presented by the bill of exceptions, can be re-examined and reviewed here. The only inquiry we can make is whether the judgment in favor of the plaintiffs below is sustained by the pleadings. Rev. St. U.S. Secs. 649, 700,(U.S.Comp.St. 1901, pp. 525, 570); Bond v. Dustin, 112 U.S. 604, 5 Sup.Ct. 296, 28 L.Ed. 835; Spalding v. Manasse, 131 U.S. 65, 9 Sup.Ct. 649, 33 L.Ed. 86; Shipman v. Ohio Coal Exchange, 17 C.C.A. 313, 70 F. 652.

2. As to the defense of the lack of a corporate seal. The statutes of Ohio provide that municipal corporations shall 'have a common seal, and change or alter the same at pleasure' (section 1552); that the mayor 'shall be furnished by the council with the corporate seal of the corporation, in the center of which, shall be the words 'Mayor of the City of . . .'' (section 1745); and that the council shall cause to be provided for the clerk's office 'a seal in the center of which shall be the name of the corporation, and around the margin the words 'City Clerk" (section 1764).

It appears that the mayor had a seal in the center of which was the device of the seal of the state of Ohio, and around the margin the words 'Mayor of the City of Defiance. ' This seal did not, of course, comply with the requirements of section 1745. The seal upon the bonds was that provided for the city clerk, although it was defective inform, having the words 'City of Defiance' in the center, and around the margin the words 'City Clerk' and 'Ohio,' while, according to the form prescribed, the word 'Ohio' should have been in the center instead of in the margin.

The statutes of Ohio provide that all bonds issued by municipal corporations shall be signed by the mayor and clerk, and be sealed with the seal of the corporation. The ordinance providing for the issue of these bonds contained a similar provision. Both before and after these bonds were issued the mayor and clerk used the clerk's seal as the corporate seal in signing and sealing certain municipal bonds. Bonds of five or six different series, all sealed with the clerk's seal and signed by the mayor and clerk, were issued from 1884 to 1893, and were subsequently paid and canceled without any question of their legality. We are satisfied that when the mayor and the clerk placed the clerk's seal on these bonds in the space provided for the corporate seal, and affixed their signatures, attesting that the city of Defiance had thus caused its corporate name and seal to be set by the mayor and clerk, they intended to use the clerk's seal as the corporate seal. If the seal affixed was not the corporate seal, there was a mistake made which a court of equity should correct. The decree of the court below in the equity case was entirely proper under the circumstances. Bernards Tp. v. Stebbins, 109 U.S. 341, 3 Sup.Ct. 252, 27 L.Ed. 956.

3. The bonds sued upon contained, among other things, the following recital:

'This bond is issued under and pursuant to the laws of the state of Ohio, and of an act of the General Assembly of the state of Ohio, passed February 3, A.D. 1887 (Ohio Laws, Vol. 84, page 273), entitled, 'An Act to authorize the council of the city of Defiance, Ohio, to borrow money for the purpose of building a bridge."

The act referred to authorized the council of Defiance to issue bonds, not to exceed the sum of fifty thousand dollars, 'for the purpose of building over the Maumee river in said city a good and substantial bridge, with the necessary approaches thereto, and having on each side thereof a good and sufficient sidewalk,' and, 'for the purpose of providing for the payment of the bonds and the interest thereon,' to levy a tax in addition to the taxes otherwise authorized by law.

The Constitution of Ohio provides that the General Assembly shall pass no special act conferring corporate powers (article 13, Sec. 1); and that the General Assembly shall provide for the organization of cities and incorporated villages by general laws, and restrict their power of taxation, assessment, borrowing money, contracting debts, and loaning their credit so as to prevent the abuse of such power (article 13, Sec. 6). The general laws of Ohio, in 1889, limited the rate of taxation in cities of the grade and class of the city of Defiance (section 2682 and 2689a), and, while authorizing the levying of an additional tax (section 2683) and the issuing the bonds (section 2835) for the purpose of constructing bridges, required the question of levying the tax (section 2687) and of issuing the bonds (section 2837) to be submitted to the voters of the corporation; a majority of these voting on the proposition being required to authorize the additional tax levy, and two-thirds of those voting upon the question to authorize the bonds.

In view of these provisions, it is insisted that the act of February 3, 1887, authorizing the issue of the bonds and the levying of the additional tax, without submitting the matter to the electors, was in violation of the provisions of the Constitution quoted, and therefore void.

In reply to this, it is urged that the special act conferred no corporate powers because, under the general statutes, the council had the power to issue bonds 'for constructing bridges and culverts' (section 2835), and to levy an additional tax 'for constructing and maintaining bridges' (section 2683), subject to the condition that the question of issuing the bonds and levying the tax should be submitted to the voters of the corporation; and if, to support the constitutionality of the special act, it was necessary to submit the question to the electors, it is to be presumed the General Assembly intended that the provisions requiring this should be treated as incorporated into the special act, and the powers...