Hubbell v. Herring

• Decision Date: 18 July 1933
• Docket Number: No. 42176.,42176.
• Citation: 216 Iowa 728,249 N.W. 430
• Parties: HUBBELL et al. v. HERRING et al.
• Court: Iowa Supreme Court

216 Iowa 728

249 N.W. 430

HUBBELL et al.

v.HERRING et al.

No. 42176.

Supreme Court of Iowa.

July 18, 1933.

Appeal from District Court, Polk County; Loy Ladd, Judge.

Action in equity by resident citizens and taxpayers of the state of Iowa to enjoin the defendant executive council and the individual members thereof from carrying out the provisions of Senate File No. 487, chapter 138 of the Laws of the 45th General Assembly, with reference to the replacement of a certain fund and the issuance and sale of bonds for that purpose. The case is fully stated in the opinion. Decree and judgment in harmony with the prayer of the petition, and the defendants appeal.

Affirmed.E. L. O'Connor, Atty. Gen., Walter F. Maley, Asst. Atty. Gen., and Donald Evans and Wm. F. Riley, both of Des Moines, for appellants.

Phineas M. Henry, of Des Moines, for appellees.

STEVENS, Justice.

By an act of the 44th General Assembly, now chapter 352-D1 of the Code of 1931, the treasurer of state and each county officer having the custody of public funds, the treasurer of each city, town, and school corporation, and each township clerk and secretary of a school board are directed and required to deposit all of such public funds in such banks as are first approved by the executive council, board of supervisors, city or town council, board of directors or township trustees, as the case may be.

The act further provides for the payment of interest by such depository on all such deposits at the rate of not less than two per centum per annum on ninety per centum of the collected daily balances, payable at the end of each month.

It is further provided by chapter 352-A1 of the Code of 1931 that there be created in the office of the treasurer of state a separate fund to be known as the state sinking fund for public deposits. The purpose, as defined by the Legislature, of this fund, shall be “to secure the payment of their deposits to state, county, township, municipal, and school corporations having public funds deposited in any bank in this state, when such deposits have been made by authority of and in conformity with the direction of the local governing council or board which is by law charged with the duty of selecting depository banks for said funds.” (Section 7420-A2.)

All interest collected under the provisions of chapter 352-D1 is, by the provisions thereof, diverted from the general fund, or township fund, as the case may be, and shall be paid into the state treasury and kept in the aforesaid sinking fund.

The duties of the state treasurer in relation to said fund are fully defined and prescribed by the statute.

By the provisions of chapter 37, Laws of the 45th General Assembly, “all license fees and taxes collected by the treasurer of state * * * shall accrue to the state sinking fund for public deposits as created in chapter three hundred fifty-two-A one (352-A1) of the 1931 Code of Iowa.” (Section 36, subd. b.)

Numerous of the approved depository banks have become insolvent and their affairs placed in the hands of receivers, or, for some other reason, the sinking fund is unavailable and cannot be applied to the purposes for which it was created. The amount thus rendered unavailable is approximately $17,000,000.

By chapter 138, Laws of the 45th General Assembly, referred to in the record as Senate File No. 487, the Legislature sought to make suitable provision for securing sufficient cash to replace all necessary sums tied up in the state sinking fund. The provisions of this act material to this case are as follows:

“Section 1. That, for the purpose of securing funds to replace the moneys of the state of Iowa and all taxing subdivisions thereof which are now unavailable because of having been deposited in banks now closed or operating under senate file number 111 or deposits in banks unavailable because of the execution of waiver or other agreements with respect thereto, the executive council is hereby authorized to negotiate with the reconstruction finance corporation or any other governmental agency subsequently provided or authorized, or any other agency, for the purpose of obtaining from it funds for the purpose aforesaid and to perform any and all conditions imposed by the said reconstruction finance corporation or any other governmentalagency subsequently provided or authorized, or any other agency, in consideration of the advancement by it of an amount equal to the amount of public money now on deposit in banks which are either in the process of liquidation or operating under senate file number 111; also such public money deposited in any bank, but unavailable because of the execution of waiver or any agreement with respect thereto, or such lesser amount as in the judgment of the executive council shall be sufficient to relieve the present emergency resulting from the inability to use such funds.

Sec. 2. To carry out the provisions of any agreement or undertaking entered into between the executive council and the reconstruction finance corporation or other governmental agency, or any other agency, for the restoration or replenishment of the state sinking fund for public deposits, the treasurer of state is authorized to sell, assign, pledge, transfer, and convey any or all of the assets held by him in trust for the said state sinking fund, including claims against defunct banks and trust companies, and anticipated income.

Sec. 5. The executive council is hereby authorized to annually levy a tax of not to exceed one mill on all taxable property within the state to pay interest on such funds as may be obtained from the reconstruction finance corporation, or such other governmental agency, or any other agency or source, and to provide a fund to retire such installments of the principal sum as may be required by the said finance corporation or agency. In computing the amount of mills to be levied as aforesaid, the executive council shall take into consideration such an amount of the state sinking fund provided by chapter 352-A1 of the code of 1931, as in its judgment may be available for application upon the interest and/or principal required in any year to be paid to the reconstruction finance corporation or governmental agency, or any other agency.”

In pursuance of the authority conferred upon it by the foregoing act, the appellant executive council adopted a resolution providing for, and authorizing, the issuance and sale of bonds to be known as public fund bonds in the aggregate principal sum of $20,000,000 to be dated June 1, 1933, in denominations of $1,000, maturing as provided in the resolution of the executive council, the last on December 1, 1943.

The resolution further provides that each of said bonds shall bear interest at the rate of five per centum per annum, payable semiannually, to be evidenced by coupons; that “both principal and interest shall be payable from the proceeds of an annual special tax and out of the fund hereinafter referred to, at the office of the Treasurer of the State of Iowa, or at the option of the holder, at the office of the Commercial National Bank and Trust Company of New York, in the city of New York, New York, in such medium of funds as are at the time of such respective payments legal tender for the payment of debts due to the United States.”

A form of bond is included in and made a part of said resolution. Each bond recites “that the state of Iowa, by its executive council, for value received, but subject to provisions hereinafter provided, hereby promises to pay to bearer, * * *” the sum of $1,000 at maturity. “Both principal and interest of this bond are payable solely from the proceeds of an annual special tax and out of the fund hereinafter referred to, at the office of the Treasurer of the state of Iowa, or at the option of the holder, at the office of the Commercial National Bank and Trust Company of New York, in the City of New York, New York, in such medium of funds as are at the time of such respective payments legal tender for the payment of debts due to the United States.

This bond is issued in evidence of funds advanced for restoration and replenishment of the State Sinking Fund for public deposits pursuant to the provisions of Senate File Number 487 of the Acts of the 45th General Assembly of Iowa, effective May 5, 1933, and in conformity with a resolution duly adopted by the Executive Council of the State of Iowa. Both principal and interest of this bond are payable solely from the State Sinking Fund created in accordance with the provisions of chapter 352-A1 of the Code of Iowa, 1931, consisting of (1) interest on public funds on deposit in operating banks, (2) liquidating dividends received in the distribution of the assets of the closed banks representing the public deposits therein which have been restored and replenished from the proceeds of this bond and the issue of which it forms a part, and (3) the proceeds of license fees and taxes collected by the State of Iowa on the sale of beer, all of which have been pledged to and will be used for such payment, and from the proceeds of an annual special tax which has been irrevocably levied on all the taxable property within said State for each of the years 1933 and 1934 and thereafter to the extent necessary and as may be permitted by law, all in accordance with the provisions of said Senate File Number 487.”

It is further provided in said bond “that this bond does not constitute an indebtedness of the State of Iowa within the meaning of any of the provisions of Article VII of the Constitution of the State of Iowa, and that the total obligation of said State, including this bond, does not exceed any constitutional or statutory provisions or limitations whatsoever.”

The resolution of the executive council further recites

“This Executive Council hereby orders and directs that pursuant to the provisions of said Senate File Number 487, and so long as any of said bonds remain outstanding and unpaid, there shall be...