Davis v. City of San Antonio

• Decision Date: 12 November 1913
• Citation: 160 S.W. 1161
• Parties: DAVIS v. CITY OF SAN ANTONIO et al.
• Court: Texas Court of Appeals

160 S.W. 1161

DAVIS v. CITY OF SAN ANTONIO et al.

Court of Civil Appeals of Texas. San Antonio.

November 12, 1913.

Rehearing Denied December 10, 1913.

Appeal from District Court, Bexar County; W. F. Ezell, Judge.

Suit by Frank C. Davis against the City of San Antonio and others. Judgment for defendants, and complainant appeals. Affirmed.

George C. Altgelt, of San Antonio, for appellant. William Aubrey and George R. Gillette, both of San Antonio, for appellees.

FLY, C. J.

Appellant instituted this suit against the city of San Antonio, its mayor, Clinton G. Brown, and J. Frank Gallagher, its treasurer, to restrain the payment by the city of San Antonio to a certain bank of a commission of 1.99 per cent. for the sale of certain improvement bonds issued by the city in the sum of $3,450,000, and the payment of a fee of $3,000 to a firm of attorneys of New York City. It was alleged in the petition that the city council of San Antonio is authorized by section 53 of its charter to borrow money on the credit of the city, and to issue bonds for permanent public improvements, after being authorized so to do by the vote of the taxpaying voters of the city; that under section 108 of the charter the council has power to create special funds for special purposes, but does not have power to transfer money from one fund to another, except an excess in the general fund over current expenses, which may be transferred to any other special fund, and that the city treasurer shall not pay any draft on the permanent improvement fund, except in payment for such improvements provided for by ordinance; that on July 18, 1913, in pursuance of an ordinance passed on June 16, 1913, an election was held in the city of San Antonio on the question of the issuance of bonds in the sum of $3,450,000 for certain public improvements, distinctly specified in said ordinance, the sums to be expended on each improvement named, and the taxpaying voters declared in favor of such issuance; that advertisements were inserted in different newspapers for the sale of said bonds, and on October 4, 1913, one Allen Frake, claiming to represent certain parties, made the following proposition to the city council: "We agree to find purchasers for your proposed $3,450,000 of bonds issued for various purposes, offered for sale on October 2, 1913, bearing interest at the rate of 5 per cent. per annum, payable semiannually in New York or San Antonio at the option of the holder, of date, maturities and denominations as advertised, at a price of not less than par, and accrued interest to date of delivery of the bonds to us at the Continental & Commercial Trust & Savings Bank in Chicago, said bonds to be delivered to us as follows: $500,000 as soon as legality is established; $500,000 three months from that date; $500,000 six months from that date; the remainder of the issue to be delivered within six months thereafter. We are to have the option of having all or any part of the bonds delivered at any time earlier upon giving to the city of San Antonio, Texas, notice in writing 30 days beforehand. This bid is subject to the legality of the issue, and the sale of the bonds under the terms hereof being approved by Dillon, Thomson, and Clay, of New York City. In consideration of our acting as your agents in this matter, and placing the bonds at a price of not less than par and accrued interest, a commission of one and 99/100 per cent. (1.99%) to be paid us simultaneously as we take up the bonds. We tender herewith check for sixty-nine thousand dollars ($69,000) on the Lockwood National Bank of San Antonio, Texas, as evidence of our good faith, said check to be held by you uncashed pending the investigation of the legality of the bonds, and is to apply pro rata in payment as the various installments are delivered in the ratio of two per cent. (2%) of the bonds delivered under the terms hereof. If the bonds are not awarded us, or the legality of the issue is not approved by Dillon, Thomson, and Clay, or if the sale or delivery of these bonds are the subject of legal proceedings for an injunction, this check is to be immediately returned to the said Lockwood National Bank."

It was further alleged: "And that said proposition was afterwards, by an ordinance of said city council, passed and approved on Monday, October 13, 1913, ratified, approved, adopted, and accepted, and the same referred to as an original contract entered into on the 4th day of October, A. D. 1913, by and on behalf of the city of San Antonio, through the mayor and finance committee of the city council, with the Continental & Commercial Trust & Savings Bank, Kountz Bros., and C. W. McNear & Co., acting through their agent, Allen Frake, and that by said ordinance the said Continental & Commercial Trust & Savings Bank, Kountz Bros., and C. W. McNear & Co. were made, constituted, and appointed the agents of said city of San Antonio in the name, place, and stead of said city to find purchasers and negotiate a sale or sales of said bonds upon the terms and conditions stated in said contract, which is made a part of said ordinance, and the check for sixty-nine thousand dollars ($69,000) deposited by said parties shall be placed in the custody of the city treasurer, and by him held or applied in accordance with the terms of said contract." "That on the same day and at the same meeting of said city council said council passed an ordinance authorizing and directing the mayor of said city to employ Dillon, Thomson, and Clay, attorneys, to furnish to the city of San Antonio an opinion with reference to said bonds proposed to be issued and sold, said opinion to include and cover the legality of the issue and the sale of the bonds under the terms of said contract dated October 4, 1913, and said council at the same time appropriated the sum of three thousand ($3,000) dollars, or so much thereof as may be necessary out of the revenue for the current year, to provide for the payment of such fee in accordance with said ordinance and the proposition of said Dillon, Thomson, and Clay contained in their letter of September 15, 1913."

It was alleged that the ordinances were void, because, under the terms of the charter, the bonds could not be sold for less than par and accrued interest, and the commissions and attorney's fees could not be paid out of the money received for the bonds, and the city attorney alone is authorized to represent the city in all legal matters, and the Attorney General of Texas is required to pass upon the legality of all bonds, that appellant is a taxpaying citizen of San Antonio and a resident thereof, and he prayed that appellees be restrained from paying any part of the commission of 1.99 per cent. to any person, and be restrained from paying the attorney's fee or any part thereof to any one, and that a temporary restraining order be issued.

Appellees filed a general demurrer, and answered all the allegations as to the power of the council to issue bonds when authorized by the taxpaying voters, as to creating special funds, and that no funds can be transferred from one special fund to another, except as indicated, as to drawing warrants, as to the election on the issuance of bonds, as to the issue being authorized, and as to the advertisement for bidders and the proposition by Frake. It was further alleged that the first ordinance, passed on October 13, 1913, provided that the bonds should be sold according to the terms of the charter; that the commission was not a discount on the bonds; that the parties contracting for the commissions are not the purchasers of the bonds; that the employment of the attorneys was a customary and proper measure; that the payment for their legal opinion was properly a part of the current expenses of operating the affairs of the city for the current year; and that there were necessarily many items of expense incident to the bond issue which were proper and legitimate current expenses of the city.

It was further alleged that, after the passage of the ordinance of October 13, 1913, that is, on October 20, 1913, the said ordinance was amended, altered, and modified by another ordinance, which is as follows:

"Be it ordained by the city council of the city of San Antonio:

"Section 1. That the original contract attached hereto made and entered into on the 4th day of October, 1913, by and on behalf of the city through the mayor and the finance committee of the city council, with the Continental & Commercial Trust and Savings Bank, Kountz Brothers, and C. W. McNear & Company, acting through their agent Allen Frake, with reference to the sale of $3,450,000 bonds of the city of San Antonio, dated September 1st 1913, and in the above recitals more fully described, be and the same is hereby ratified and confirmed as the contract of the city of San Antonio and is made a part of this ordinance; provided however that the term `legality' shall be deemed to include, inter alia, the approving opinion of the Attorney General, the registration by the comptroller and the submission of the bonds to the option of the state board of education, all said measures being requirements of statute; and provided further that said bonds when sold shall net to the city not less than their par value, with accrued interest to the date of the payment of the proceeds into the city treasury; and subject to the provisions of this ordinance the said Continental and Commercial Trust and Savings Bank, Kountz Brothers and C. W. McNear & Company are hereby authorized and directed to proceed with the finding of purchasers for said bonds and to arrange a sale or sales therefor to the best advantage of the city in accordance with said contract and this ordinance, and subject to and conditioned upon the ratification and approval of the city council; and the check for said sixty-nine thousand ($69,000) deposited by said contracting parties shall be placed in the custody of the city treasurer and shall be by...