City of Gladstone v. Throop

• Decision Date: 03 December 1895
• Docket Number: 273.
• Citation: 71 F. 341
• Parties: CITY OF GLADSTONE v. THROOP.
• Court: U.S. Court of Appeals — Sixth Circuit

71 F. 341

CITY OF GLADSTONE v. THROOP.

No. 273.

United States Court of Appeals, Sixth Circuit.

December 3, 1895

This was an action by Benjamin H. Throop against the city of Gladstone to recover the principal and interest on five bonds, each of which was of the form following:

'United States of America, State of Michigan, Village of Gladstone.

'No $2,000.00.

'One year after date, for value received, the village of Gladstone promises to pay to Exchange Bank, Gladstone, or bearer hereof, the sum of two thousand dollars, in lawful money of the United States, at the office of the village treasurer of the said village, with interest at the rate of seven per dent. per annum, payable semiannually, as shown by and upon the annexed coupons, as they severally become due. This bond is one of a series of five bonds of like tenor and date, issued for the purpose of raising money for the payment of local improvements, voted by the legal qualified voters of the said village, at the annual election of the said village, duly called and held on the 6th day of March, A.D. 1888, and in conformity with Act 62 of the General Laws of 1875. The faith and credit of the village of Gladstone are hereby pledged for the punctual payment of the principal and interest of this bond. In testimony whereof, the undersigned officers of the village duly authorized to execute this obligation in its behalf have hereunto set their signatures this first day of November, A.D. 1888.

'(The Village of Gladstone. Incorporated 1887. Delta Co., Mich.)

'Jas. J. Miller, Village President.

'Attest: Robert W. Davies, Village Clerk.'

Attached to each bond was a coupon for six months' interest. The defendant, the city of Gladstone, which had succeeded to the obligations of the village of the same name, made the defense that the bonds were void because issued without statutory authority and without the necessary vote of the people. The plaintiff had paid full value for the bonds before they fell due, without other notice of the circumstances of their issuance than what was contained in the recital of the bonds, and in the following certificate of the village clerk: 'Office of the Village Clerk.

'Gladstone, Mich., Nov. 1st, 1888.

'Certified copy of proceedings of the village council as to their authority and the regularity of issuance of bonds to pay for local improvements:

''Council Meeting, Feb. 13th, 1888.

"On motion the petition for paving both Delta and Minnesota avenues, signed by property owners, was adopted, and it was resolved that the question of bonding the village for the sum of ($15,000) fifteen thousand dollars for the purpose of raising funds for paving and curbing be submitted to a vote of the people as soon as may be, and in accordance with the laws of the state of Michigan. Said bonds to bear interest at the rate of seven (7%) per cent. per annum, payable semiannually, at the office of the village treasurer of Gladstone.'

''Council Meeting, March 6th, 1888.

"Result of election as to paving Delta and Minnesota avenues and issuing bonds to the amount of ($15,000) fifteen thousand dollars was presented, and same ordered filed. Vote standing: 'For bonds, 135; against bonds, 28."

"Council Meeting, March 19th, 1888.

"Moved by Trustee Wilson that the expense of paving Delta avenue be assessed to the abutting property by the assessor at the time of the regular assessment, and that the same be spread upon the tax roll and collected at the same time and manner as the general tax. Carried. Call of ayes and nays.'

''Council Meeting, Oct. 29th, 1888.

"Moved by Trustee Allen that the pavement of Delta avenue be accepted from D. J. Kennedy, contractor. Carried.'

''Council Meeting, Oct. 30th, 1888.

"On motion of Trustee Buchanan, the committee of five, of which the president is chairman, appointed to arrange for funds with which to pay D. J. Kennedy, contractor of Delta avenue pavement, is hereby authorized to issue ($10,000) ten thousand dollars of bonds, being five bonds of ($2,000) two thousand dollars each, payable in one year after November 1st, 1888, bearing interest at seven per cent. per annum, payable semiannually, same bonds to be signed by the village president, attested by the clerk, whose actions are hereby confirmed. Carried on call of ayes and nays.'

'I hereby certify that the foregoing is a true and correct copy of the proceedings of the village council as appears from the records.

'(Village Seal.) Robert W. Davies, Village Clerk.'

The facts shown by the village records were as follows: The village of Gladstone was incorporated in November, 1887, under the general provisions of chapter 82 of Howell's Annotated Statutes, which was enacted in 1857 and entitled 'An act for the organization and incorporation of villages. ' In February, 1888, a petition of property owners was filed with the council asking that Delta avenue be paved. The petition was accepted, and an ordinance for paving the street was passed. In March, council passed a resolution assessing the expense of paving Delta avenue to the abutting property holders, same to be spread on tax roll and collected at same time and manner as general tax roll. Bids were advertised for, and the bid of Kennedy was accepted. The contract was made accordingly in May. In July the assessment roll was approved and placed in hands of marshal for collection. An additional assessment of two dollars was imposed on lots abutting on Delta avenue. The work was done and accepted on October 29th. On October 30th, at a meeting of council where all members but one were present, a committee was appointed to arrange to secure funds to pay contractor, and authority was given to issue the five bonds of $2,000 each here in suit. The bonds were sold to one McKinney, who was cashier of Exchange Bank, and also treasurer of the board, with an agreement to pay him 5 per cent. commission, which never was in fact paid. The money for the bonds was paid: $4,000, November 23, 1888; $2,000, January 1, 1889; $2,000, February 1, 1889; $2,000, February 28, 1889. There were collected from assessments: In December, about $10,000: in January, 1889, about $300; and in February, about $6,000. The total of assessments and proceeds from bonds amounted to $27,448.84. After paying the contractor what was due, there was left a balance of $6,069.43. This sum was devoted by the city council to take up $6,500, face value, of village bonds issued to pay for paving the street intersections on Delta avenue. These were a different series of bonds from that here in suit, and the circumstances of their issue were as follows: In February, when a petition from the property holders was filed in council praying for the improvement of Minnesota and Delta avenues, the committee to whom it was referred recommended that it be granted, subject to the action of the voters of the village in authorizing the issue of bonds to pay for the paving of the street intersections on both avenues. Accordingly the council granted the petition, and also resolved 'that the question of bonding the village to the amount of fifteen thousand dollars for the purpose of raising funds for paving and curbing the street intersections in Delta and Minnesota avenues * * * be submitted to a vote of the village as soon as may be, and in accordance with the laws of Michigan. * * * ' The council passed a resolution in favor of bonding the village for this purpose. The election was held on March 6, 1888, and resulted in a vote of 135 for the bonds and 28 against bonds. On June 4, 1888, the council passed the following resolution: 'Whereas, it appears that the $15,000.00 of bonds authorized to be issued by this board by its resolution of February 13, 1888, is in excess of the amount allowed by the statute of this state: Therefore be it resolved, that instead of said amount there be issued bonds under the authority of the election held March 6, 1888, to the amount of $6,500 in lieu of the amount previously voted. ' The theory upon which this correction was made was that the power of the village in such a case was limited to an issue of bonds to be paid by general taxation, not to exceed 2 per cent. of the total assessed valuation of the property in the village, which was $379,800. These bonds were issued, and the proceeds were used to pay the amount due from the village to the contractor for intersections on Delta avenue. When they fell due, as already stated, instead of paying them by levying a general tax, as provided by law, the council ordered the treasurer to take them up with the $6,069.43 surplus in the Delta avenue paving fund created by the issue of the $10,000 of bonds here in suit. The certificate of the village clerk exhibited to the plaintiff was, therefore, incorrect, in the statement that the issuance of the $10,000 of bonds here in suit was voted for by the people. The vote was only upon the question of issuing intersection bonds. The learned judge at the circuit, at the close of the evidence, directed the jury to return a verdict for the plaintiff, on the ground that the council had authority to issue the bonds without a vote of the people, and that, even if the statutory requirements had not all been fulfilled to render the bonds valid as such, the village, and its successor, the defendant city, were liable for money had and received to its benefit from plaintiff's assignee.

Alfred P. Smith, for plaintiff in error.

Bowen, Douglas & Whiting, for defendant in error.

Before TAFT and LURTON, Circuit Judges, and SEVERENS, District Judge.

TAFT Circuit Judge (after stating the facts).

It is first necessary to determine which of the statutes of Michigan conferred and prescribed the powers of the village of Gladstone when the bonds here...