Edward J. Berwind, Inc. v. Chicago Park Dist.

• Decision Date: 20 March 1946
• Docket Number: 28580.,Nos. 28579,s. 28579
• Citation: 393 Ill. 317,65 N.E.2d 785
• Parties: EDWARD J. BERWIND, Inc., et al., v. CHICAGO PARK DIST. et al. CAPITAL NAT. BANK et al. v. SAME.
• Court: Illinois Supreme Court

393 Ill. 317

65 N.E.2d 785

EDWARD J. BERWIND, Inc., et al.,

v.CHICAGO PARK DIST. et al.

CAPITAL NAT. BANK et al.

v.SAME.

Nos. 28579, 28580.

Supreme Court of Illinois.

March 20, 1946.

Appeals from Circuit Court, Cook County; Harry M. Fisher, judge.

Suits by Edward J. Berwind, Inc., and others and by the Capital National Bank and others, against the Chicago Park District and others, for accounting for tax anticipation warrants issued by West Chicago Park Commissioners to anticipate the collection of taxes levied for payment of ordinary and necessary expenses of the district and for payment of principal and interest of maturing bonds issued by the commissioners. From adverse decrees, plaintiffs appeal.

Reversed and remanded, with directions.

STONE, WILSON and MURPHY, JJ., dissenting.

Poppenhasen, Johnston, Thompson & Raymond, of Chicago (Floyd E. Thompson and Albert E. Jenner, Jr., both of Chicago, of counsel), for appellants.

Kirkland, Fleming, Green, Martin & Ellis and John O. Rees, all of Chicago (Joseph B. Fleming, Thomas B. Martineau, and Philip A. Lozowick, all of Chicago, of counsel), for appellees.

FULTON, Justice.

The two cases involved in this consolidated cause are appeals from separate decrees entered by the circuit court of Cook county. In the circuit court the cases were consolidated and heard as one cause. Separate decrees, however, were entered and a separate appeal was taken from each decree. The appeals have been consolidated here for hearing on the single record made in the consolidated cause in the circuit court. The two suits in equity were brought by appellants as unpaid tax anticipation warrant holders for an accounting against the Chicago Park District, as successor to West Chicago Park Commissioners. On the hearing of both suits in the circuit court, decrees were entered ordering distribution of the proceeds of collections of anticipated taxes then in the treasury of the Chicago Park District and denied appellants all other relief asked for in the complaints.

No. 28579, Edward J. Berwind, Inc., et al., v. Chicago Park District et al., is a suit for accounting by the holders of unpaid tax anticipation warrants issued in 1929 by West Chicago Park Commissioners to anticipate the collection of taxes levied for the payment of the ordinary and necessary expenses of said park district.

No. 28580, The Capital National Bank et al. v. Chicago Park District et al., is a suit by the holders of tax anticipation warrants issued in 1929 by West Chicago Park Commissioners to anticipate the collection of taxes levied for the payment of principal and interest of maturing bonds issued by West Chicago Park Commissioners. Chicago Park District and West Chicago Park Commissioners were named as defendants in both cases. Out of the stipulations and the mass of testimony and figures in the record, the following statement presentsthe facts as we understand them, most of which are not seriously in dispute.

West Chicago Park Commissioners was created as a municipal corporation under a special act of February 27, 1869. Under the act of 1933, Ill.Rev.Stat.1943, chap. 105, par. 333.1 et seq., Chicago Park District was created as the successor of all the park districts in Chicago, upon a referendum vote as provided in the act. Pursuant to this referendum vote, on May 1, 1934, West Chicago Park Commissioners was succeeded by Chicago Park District. All debts and obligations of West Chicago Park Commissioners were assumed by Chicago Park District under said act of 1933.

In cause No. 28579, the record shows that on July 18, 1929, West Chicago Park Commissioners adopted its tax levy resolution for that year. By that resolution a tax of 3.56 2/3 mills on each one dollar assessed valuation of property was levied for the payment of the ordinary and necessary expenses of the district. Pursuant to the statute, the taxes were levied by rate and not by amount. At the time this levy was made, the statute required that a certificate of the levy be filed in the office of the county clerk on or before August 1 of the year in which the levy was made. Such certificate was made and filed. At the time this tax levying resolution was passed, and at the time a copy thereof was required to be filed in the office of the county clerk, the assessed valuation of taxable property within the district, for the years 1928 and 1929, had not been completed, because of a reassessment ordered by the State Tax Commission. The 1929 assessment was not completed until March 16, 1931. The 1927 regular quadrennial assessment, which was the last assessment available, fixed the assessed valuation of the property in the area of West Chicago Park Commissioners at $880,526.526. Based on that valuation, the rate of taxes levied for the ordinary and necessary expenses of the district would produce $3,140,544.61 in taxes.

On September 26, 1929, West Chicago Park Commissioners adopted a resolution authorizing the issuance of anticipation warrants in the sum of $3,000,000 to anticipate the collection of taxes levied for the payment of the ordinary and necessary expenses of the district. Thereafter, anticipation warrants were issued in the amount authorized by the resolution. Of the $3,000,000 of warrants authorized, $400,000 were delivered to a contractor to whom a balance of $392,371.48 was due on a contract for the construction of the Augusta boulevard improvement. There was also sold and delivered to various purchasers, $1,100,000. The remaining $1,500,000 of warrants were sold to Foreman National Corporation under its offer of purchase dated November 25, 1929. By that offer, it agreed to purchase warrants in the amount of $1,500,000, subject to the approval of attorneys designated by it. Under the terms of the offer, the warrants were to be delivered on or before December 1, 1929. Warrants issued under the authority of the resolution of September 26, in the amount of $1,500,000, were delivered to Foreman National Corporation in accordance with this offer of purchase. These warrants were payable to a payee therein named. They were accepted by Foreman National Corporation ‘with the understanding that they will be exchanged for negotiable notes aggregating the same amount, on or before December 10, 1929.’

With the delivery of the $1,500,000 of warrants to Foreman National Corporation on December 1, the issuance of which was authorized under the resolution of September 26, 1929, there were outstanding tax anticipation warrants issued under the authority of that resolution, in the sum of $3,000,000, of which $1,500,000 were held by Foreman National Corporation under the conditional delivery above referred to.

On December 2, 1929, the board adopted a resolution in which it referred to the resolution of September 26, authorizing the issuance of $3,000,000 of tax anticipation warrants. After reciting that $1,500,000 of said warrants had been issued and were outstanding, it treated the $1,500,000 delivered to Foreman National Corporation on December 1 as not then outstanding. The resolution then provided for the issuance of additional warrants in the amount of $800,000 against taxes levied for the ordinary and necessary expenses of the district. The resolution further provided that no further warrants under the authorization of September 26, 1929, should be issued. By a second resolution passed on the same day, the board of the district authorized the issuance of $700,000 of anticipation warrants to anticipate the collection of taxes levied for the purpose of paying maturing outstanding bonds and interest of the district.

On December 10, pursuant to the first resolution adopted on December 2, $800,000 of anticipation warrants were issued payableout of taxes levied for the ordinary and necessary expenses of the district, and $700,000 of warrants were issued payable out of taxes levied for the payment of bonds and interest, under the second resolution of December 2. These two issues of warrants aggregating $1,500,000 were, on December 10, 1929, delivered to Foreman National Corporation and that company surrendered the $1,500,000 of warrants delivered to it on December 1, which were cancelled by the district. Thus the total of outstanding tax anticipation warrants on December 10, 1929, issued to anticipate the collection of taxes levied for the ordinary and necessary expenses of the district, was $2,300,000. Warrants outstanding on the same date, issued to anticipate the collection of taxes levied for the payment of bonds and interest, were $700,000.

The $2,300,000, outstanding against taxes levied for the ordinary and necessary expenses of the district was less than 75 per cent of the taxes which would be produced by applying the rate levied of 3.56 2/3 mills to the valuation of property for tax purposes as fixed by the 1927 quadrennial assessment. The taxes levied for the payment of bonds and interest for the year 1929 were levied by amount and not by rate. The amount levied for the purpose of paying principal and interest on maturing bonds and interest was $1,268,892.50. The $700,000 of warrants issued against those taxes were, therefore, materially less than 75 per cent of the taxes levied.

The purpose of this suit was to obtain an accounting from West Chicago Park Commissioners and Chicago Park District, its successor, for taxes collected and received by the district, applicable to the payment of these tax anticipation warrants, and which were diverted by the district and used for its general corporate purposes.

The series of transactions relied upon as showing such diversion are as follows: The district at all times maintained a ‘General Fund’ account. Moneys received from various sources, including proceeds of the sale of tax anticipation warrants, annuity and benefit payroll deductions, the proceeds of taxes collected against which no anticipation warrants were outstanding, transfer of money from various other funds and miscellaneous income, were...