Hills v. Peekskill Sav. Bank

• Decision Date: 02 March 1886
• Parties: HILLS v. PEEKSKILL SAV. BANK.
• Court: New York Court of Appeals Court of Appeals

101 N.Y. 490

5 N.E. 327

HILLS

v.PEEKSKILL SAV. BANK.¹

Court of Appeals of New York.

Filed March 2, 1886.

Appeal from judgment of the general term of the supreme court, Second judicial department, entered at the February term, 1885.

Samuel Hand, for appellant.

William N. Cogswell, for respondent.

FINCH, J.

The whole argument of the courts below, ending in a cancellation of the bonds in controversy, rests upon the assumption that the original bonds of the town of Attica, which served as the cause and consideration of the refunding issue, were absolutely void as matter of law, although their invalidity had never been adjudged. The argument takes no note of the fact that there might be reasonable question about that pending an adjudication, and that enough of doubt attended the ultimate result to justify the legislature in authorizing, and the town in effecting, an amicable settlement and compromise, of which the new bonds were the fruit. There was debate and litigation over the validity of the original issue. Those bonds followed a proceeding initiated by a petition to the supreme court, drawn in supposed accordance with the provisions of the act of 1869, (chapter 907,) as amended by the act of 1871, (chapter 925.) That petition averred that its signers were a majority of the taxpayers of the town, but did not add the explanatory clause, ‘not including those taxed for dogs or highway tax only.’ The exiscence of this defect, it is said, we are bound, by a precedent of our own making, to declare, stripped the proceeding in the supreme court of jurisdiction, and left it absolutely void. People v. Smith, 55 N. Y. 135. That was a case in which the county judge to whom the petition had been presented refused the application, and the appeal reached this court in the proceeding itself; and there appears not to have been presented to the mind of the court a provision of the act of 1869, now brought to our attention, which bears strongly upon the inquiry involved. It is not necessary to say whether to that new consideration there is or is not a satisfactory answer. It is quite enough that the validity of the original bonds of the town of Attica has never been passed upon by this court, and its ultimate action was an event unsolved when the legislature and the town chose to avoid such solution, and act without dependence upon it. It is true that the bonds of another town in the county of Wyoming came before this court, (Metzger v. Attica & A. R. Co., 79 N. Y. 171,) but our determination went upon a conclusion not here existing, and settled only that, upon the admissions made of the invalidity of the bonds, the action was properly brought, and the relief justly granted.

We are referred to a suit commenced in the United States circuit court upon coupons of the original Attica bonds, in which the holders recovered, and the court adjudged, on a motion for a new trial, largely influenced by the new consideration now pressed upon us, that the tax-payers' petition was sufficient to confer jurisdiction, and the bonds were valid. While that decision does not bind us, the circumstance shows that, at least, there was room for a difference of judicial opinion upon the question of the sufficiency of the petition, and that in good faith the ultimate result may be deemed uncertain, and the controversy be settled by an amicable adjustment. In 1879 an action was begun in the federal court against the town by a holder of the original bonds, which has been tried, but in which judgment has not been rendered. That action was pending while the act of 1878, which authorized municipal corporations to refund their bonded indebtedness, was in force, but since it did not cover items of accrued and unpaid interest, a special act was passed in 1880, authorizing the towns of Attica and Java ‘to issue new bonds pursuant to the provisions of chapter 74 of the Laws of 1878’ and its amendments, ‘to the amount and extent of the bonded indebtedness as provided in said act, including interest accrued and unpaid.’ The town of Attica had no ‘bonded indebtedness' except the original bonds whose validity is now questioned.The defendants offered to prove that, while the action last above referred to was pending, it was compromised by an agreement to substitute the new bonds, drawing a lower rate of interest, for the bonds then in suit. This offer was refused by the court, and an exception taken. The situation on both sides is thus apparent. The town of Attica, acting in supposed accordance with a statutory authority, had issued its bonds, which had passed into the hands of innocent holders. Controversy arose as to their validity. The holders insisted upon that validity, and brought suits to enforce them in the United States courts, and both parties thus stood upon their precise legal rights.

Before an adjudication, and while its result was unknown and uncertain, the legislature, by a general act, authorized municipal corporations to refund their ‘bonded indebtedness' at lower rates of interest; and the first question presented is the meaning of that phrase. The respondents construe it to mean a legal and...