Commissioners of Sinking Fund v. Anderson
| Decision Date | 21 July 1937 |
| Docket Number | No. 705,700.,705 |
| Citation | 20 F. Supp. 217 |
| Parties | COMMISSIONERS OF SINKING FUND OF LOUISVILLE, KY. v. ANDERSON et al. AMERICAN BONDING CO. v. SAME. |
| Court | U.S. District Court — Western District of Kentucky |
Bruce & Bullitt, of Louisville, Ky., for American Bonding Co.
Rowan Hardin and Mark Beauchamp, both of Louisville, Ky., for Board of Sinking Fund Com'rs.
Nichols, Morrill, Wood, Marx & Gintner, of Cincinnati, Ohio, for receiver.
Blakey, Davis & Lewis, of Louisville, Ky., for Hartford Accident & Indemnity Co. and Union Indemnity Co.
The above cases, because of similarity of issues, have by agreement of parties been consolidated for hearing with separate judgments to be entered in each. Action No. 700 depends in a large measure on the outcome of No. 705, and this opinion is directed first to the matters in controversy in that action.
The city of Louisville is a municipal corporation of the first class, as provided under the Constitution of the commonwealth of Kentucky. As a part of its government, article 28, section 3010-1 to and including 3024a-10, Carroll's Kentucky Statutes 1936 Edition, provide for a sinking fund to pay the bonded debt of the city. A sinking fund commission is provided under this act, composed of the mayor, the president of the board of aldermen, and three additional members elected by ballot of the board. The commission thus created has corporate powers and is authorized to sue and be sued under the name of "The Commissioners of the Sinking Fund of the City of Louisville, Kentucky, a public corporation."
Section 3010-1 to and including section 3010-19 of this act comprise parts of the charter of the cities of the first class of the commonwealth of Kentucky. A part of this statute creates a sinking fund for cities of the first class to be applied on their bonded indebtedness respectively as it matures, and also for periodic payment of interest thereon. "The Commissioners of the Sinking Fund" is an administrative agency. Its duties are outlined in the statutes referred to, including what it may do with sums temporarily held by it for investment. Such funds may be deposited in a state or national bank located in the city of Louisville. As to these deposits, it is prescribed in section 3010-12 as follows:
As to investments, the act provides (section 3010-9) as follows:
The National Bank of Kentucky was a corporation created under the laws of the United States under the National Bank Act (12 U.S.C.A. § 21 et seq.). On November 15, 1930, it closed because of insolvency, and was placed in the hands of the comptroller of the currency for liquidation. Some time prior to its closing, it had been designated as a depositary by the commissioners of the sinking fund of the city of Louisville, and at that time the sinking fund had a balance on deposit of $858,952.48. This sum was distributed to the following accounts:
General Fund Account........... $166,275.99
Sewer Bonds 1907 Issue......... 58,930.91
Sewer Bonds 1920 Issue......... 140,220.56
School Bonds 1922 Issue........ 84,954.71
Memorial Bonds 1924 Issue...... 27,018.56
Sewer Bonds 1925 Issue......... 127,632.08
Grade Crossing Bonds........... 138,489.18
Sewer Bonds 1929 Issue......... 46,116.40
Hospital Bonds................. 41,002.36
Louisville Water Co. 1906 Issue 14,135.73
Louisville Water Co. 1910 Issue 14,176.00
_________
Total........................ $858,952.48
To protect the commissioner's deposits, the bank, with the American Bonding Company as surety, executed a bond to the sinking fund in the penal sum of $75,000 as of December 1, 1929, for the period to and including December 1, 1930, and on July 12, 1930, another bond for the same purpose in the penal sum of $25,000, expiring July 12, 1931.
On March 11, 1931, the American Bonding Company paid to the commissioner of the sinking fund $101,500, which included the full principal of its two bonds and $1,500 interest thereon. The National Bank of Kentucky was also designated as depositary by the commissioners for the calendar year 1928. On or about December 1, 1928, the bank executed to the commissioners its bond in the penal sum of $75,000 for a period of one year with the Hartford Accident & Indemnity Company and the Union Indemnity Company as sureties. Nothing has been paid to the city on this bond. On December 1, 1928, the commissioners of the sinking fund had on deposit with the National Bank of Kentucky $537,911.17. On November 13, 1929, it had $761,967.48 and on July 12, 1930, $936,887.27.
For a long time prior to the closing of the bank and at the time it closed, it owned the following bonds of the city of Louisville:
City of Louisville, 3½% 1903
Issue, maturity 1943............... $14,000.00
City of Louisville, Hospital
4½% 1911 Issue, maturity
1941............................... 20,000.00
City of Louisville, Refunding
3½% 1901 Issue, maturity
1941............................... 13,000.00
City of Louisville, Refunding
3½% 1901 Issue, J. D., maturity
1941............................... 53,000.00
City of Louisville, School
4½% 1913 Issue, maturity
1954............................... 10,000.00
City of Louisville, School Improvement
Bonds, 5% 1922
Issue, maturity.................... 5,200.00
City of Louisville, Sewer, 4%
1907 Issue, maturity 1947.......... 25,000.00
City of Louisville, Sewer and
Park, 3% 1901 Issue, maturity
1941............................... 29,000.00
____________
Total............................ $169,200.00
These bonds were carried in the investment ledger of the bank and were acquired by it from the National Bank of Commerce in 1919. During the pendency of these actions, by agreement of the parties, the receiver of the National Bank sold them, collected matured interest, and agreed to hold the proceeds of the respective bonds separately to be applied in accordance with the final judgment of the court as to setoffs.
After the closing of the bank, its receiver paid a dividend of 67 per cent. to the commissioners of the sinking fund on the following accounts:
Sewer Bonds, 1920 Issue............... $140,220.56
Memorial Bonds, 1924 Issue............ 27,018.56
Sewer Bonds, 1925 Issue............... 127,632.08
Grade Crossing Bonds.................. 138,489.18
Sewer Bonds, 1929 Issue............... 46,116.40
Louisville Water Company
1906 Issue........................... 14,135.73
Louisville Water Company,
1910 Issue........................... 14,176.00
____________
$507,788.51
At the time this dividend was paid, $119,000 was deducted from the general fund account by reason of plaintiff's claims of setoff, and a dividend of 67 per cent. paid on the balance of $47,275.99. There was also deducted at this time, for the same reason, from the school improvement 1922 issue $5,200, leaving a balance of $79,754.71, and a dividend of 67 per cent. was paid on this sum. There was also deducted from the sewer bond issue of 1907 account $25,000, leaving a balance of $33,954.71 and a dividend of 67 per cent. was paid on this sum.
There was deducted from the hospital bond account $20,000, leaving a balance of $21,002.36, and a dividend of 67 per cent. was paid on this sum.
The aggregate deductions ($169,200) on which the 67 per cent. dividend was not paid equaled the par value of the bonds owned by the bank, and were retained by the receiver by consent of the parties until the question of offset was decided. The dividend on deposits was accepted by the city without prejudice to its claims of preference or offset.
On the foregoing facts, the plaintiff, the commissioners of the sinking fund, in action 705, claims it is entitled to a preference in the liquidation of the bank to the extent of its deposit of $758,952.48. Its contention is based on the provisions of section 3010-12 of Carroll's Kentucky Statutes, 1936 Edition, which provides:
"The bank selected by the commissioners aforesaid shall give bond with good and sufficient security to secure the said commissioners the payment of all moneys and other things of value deposited by them with such bank."
The commissioners construe this statute to require the bank to furnish a bond for the aggregate total...
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Nissen v. Miller
...260 Ky. 219, 84 S.W.2d 30, 34.” Words and Phrases, Fifth Series, Vol. 5, Page 580. See also Commissioners of Sinking Fund of Louisville v. Anderson, D.C.Ky., 20 F. Supp. 217, 220. We agree with the appellees and the trial court that it is both permissible and reasonable to conclude that the......