Judd v. City of St. Cloud

• Decision Date: 22 May 1936
• Docket Number: No. 30789.,30789.
• Citation: 198 Minn. 590,272 N.W. 577
• Parties: JUDD et al. v. CITY OF ST. CLOUD.
• Court: Minnesota Supreme Court

272 N.W. 577

198 Minn. 590

JUDD et al. v. CITY OF ST. CLOUD.

No. 30789.

Supreme Court of Minnesota.

May 22, 1936.

On Rehearing, April 16, 1937.

Appeal from District Court, Stearns County; Anton Thompson, Judge.

Suit by Ernest S. Judd and others against the City of St. Cloud. From an adverse judgment, plaintiffs appeal.

Affirmed.

Junell, Driscoll, Fletcher, Dorsey & Barker, Charles B. Howard, and Hugh H. Barber, all of Minneapolis, for appellants.

Allan A. Atwood, City Atty., Atwood & Quinlivan, and Phillips & Sherwood, all of St. Cloud, for respondent.

JULIUS J. OLSON, Justice.

Suit was brought by plaintiffs as a warrant-holders' committee on behalf of some 70 individuals who are owners of $287,800 of improvement revolving fund warrants issued by defendant city. The warrants involved are past due since October 1, 1929, and interest is unpaid since October 1, 1928.

Tried to the court, the findings were that the warrants are valid obligations and wholly unpaid; also that they are not general obligations of the city but payable solely out of special assessments for the particular improvement mentioned in each such warrant. Judgment in conformity with the findings was duly entered, and plaintiffs appeal.

Defendant is operating under a home rule charter adopted in 1911. The warrants involved were issued pursuant to chapter XII, § 178, of the charter entitled "Local Improvements and Special Assessments." As this section is of vital importance to the decision, the same will be found in the margin.¹

Plaintiffs in their brief say: "There is no important disagreement as to evidentiary matters since both sides rely on the books and records of the city. While error is assigned as to a number of the trial court's findings of fact, these assignments relate largely to statement of legal conclusions which the trial court inserted" therein. In view of this situation, it is necessary to recite rather fully the findings of the court.

The administrative body of defendant is composed of three members: The mayor, also known as commissioner of public affairs; the treasurer, also known as commissioner of finance; and the commissioner of streets and public improvements.

Prior to 1919 a large area within the westerly boundaries of defendant city had been and was then rapidly developing as an industrial and residential district, and comprised approximately one-third of the total area of the city. The land was flat and inadequately drained, and was wholly without storm or sanitary sewage facilities and without a water supply system. Because of an insistent demand on the part of owners and residents within that area, the city commissioners, by appropriate resolution, directed the city engineer to prepare plans, specifications, and an estimate of cost of the construction of a trunk-line sewer to be known as the "Stone Arch Sewer," to run in a generally westerly direction to the westerly boundary of the city, a distance of about three miles. Pursuant thereto the city engineer prepared and submitted to the commission plans and specifications for such sewer, together with an estimate of costs. These plans and specifications were duly approved by the commission on June 28 of that year and designated as "Improvement No. 368." In conformity with the quoted section of the charter, the commission by resolution determined that the entire cost of the new project should be assessed against the property benefited thereby. Some time thereafter the city appropriated $9,347.66 from its general fund toward the cost of the new improvement, that having been computed as the city's prorata share thereof. Appropriate assessments for benefits were duly made and confirmed by the commission and levied against benefited property in the aggregate amount of $435,845.63. A contract for the construction of the improvement was duly made; the cost thereof being $467,887.06. The contract was duly completed and the contractors paid on December 2, 1922. An additional assessment to cover the balance of the cost of the improvement, in conformity with the quoted section, was thereafter made and levied in the sum of $23,918.21.

Also in 1919 the commission determined to lay a water main in the same trench as the trunk-line sewer hereinbefore referred to as improvement No. 368. This was duly designated "Improvement No. 369." The cost of that project was $70,668.84. Pursuant to resolution, an assessment of $1 per front foot was levied against adjacent property amounting to $19,726.82. There was appropriated out of the waterworks fund of the city $49,123.88; that sum being determined as an appropriate and proper contribution to the cost of that particular improvement.

During that year the commission also determined to lay a trunk-line sewer extending in a southerly direction and at right angles to the sewer referred to in improvement No. 368. This was designated "Improvement No. 370." That work was completed in July, 1921, and the final payment upon the contract for its construction was made July 17, 1922. An assessment in the amount of $55,610.33 was levied against benefited property. As the city's portion of this particular improvement, $10,070 was appropriated from the general funds of the city. The total cost of this project was $66,099.40.

To finance these respective improvements the commission, by appropriate resolutions, issued warrants in anticipation of the collection of the assessments levied on account thereof. As to each improvement the warrants so issued did not exceed in amount the uncollected assessments theretofore levied.

The money market became more stringent in 1920 than it had been in 1919. To facilitate the raising of funds, and in conformity with the quoted section, the commission by resolution authorized the issuance of $52,000 and $250,000 in warrants bearing interest at 8 per cent. per annum, payable semiannually, expressly reserving to the city, however, the right to call and pay the same upon 30 days' notice "out of warrants to be hereafter issued, and without awaiting the collection of said assessments through the ordinary channels." The warrants issued under this resolution were to mature October 19, 1921. As time went on, interest rates became less oppressive; hence we find that warrants were later issued to take up these 8 per cent. warrants. Resolutions were passed from time to time calling for payment the outstanding high rate warrants, and new ones were issued in lieu thereof either to the holder of the old warrants or to any one else who might desire such investment, the lower rate warrants ranging from 7 to 5 per cent. as the money market permitted. Substantially the same procedure was followed respecting improvements Nos. 369 and 370.

Finding X of the trial court is highly important, and we quote the same in full:

"That all warrants were by their terms, as required by said Charter, callable on thirty days' notice. Upon the adoption of a resolution for the issuing of refundment warrants to replace outstanding warrants with lower interest bearing warrants, the City clerk wrote to the various warrant holders, directing them to bring in their warrants for payment. The letter stated that warrants at the new interest rate might be had in exchange for the called warrants, if desired. Pursuant to these letters, the called warrants were mailed in to the City clerk or delivered to him in person, whereupon the refundment was handled substantially as follows, in accordance with the established practice of the City. If the holder of a called warrant desired payment thereof, a check was issued to him, drawn on the City's bank account, said check being in the principal amount of the warrant with interest. A new warrant would then be issued to some other person. Frequently replacement warrants would not be issued until a number of warrants were taken up, and would then be issued in a block. If the warrant holder desired to accept a refundment warrant in lieu of the called warrant, he was given a check for the interest on the called warrant to the date when he delivered such warrant and a receipt for the warrant itself. A separate check was then drawn, payable to the warrant holder, for the principal amount of the called warrant.

This check, however, was not delivered to the warrant holder. The City treasurer stamped an endorsement thereon, `Pay to the order of City of St. Cloud, per assignment on file _____ City Treas.,' and signed his name in the blank space. The check thus endorsed would be delivered to the bank on which it was drawn and be credited and debited on its books. The City's cash was neither increased nor decreased, and no moneys were received or disbursed in the transaction. The check was recorded in the `Warrant Register' (check register) and shown therein as issued in payment of the called warrant, was debited and credited to the City treasurer's cash account and debited and credited to the permanent improvement revolving fund for the proper improvement account. The check was also recorded in the `Register of Receipts' as cash received for the warrant issued in lieu of the called warrant. In the `Register of Permanent Improvement Revolving Fund warrants, City of St. Cloud,' the called warrant was shown as paid and the new warrant as issued for cash, but no cash, except as to the interest paid on the called warrants, was disbursed or received on account of the transaction, and all book records of cash received or disbursed were mere bookkeeping liberties. In this manner refundments of matured warrants and the replacement of outstanding warrants by lower interest bearing warrants was effected, as authorized by the various resolutions hereinbefore referred to."

The court further found that after these respective assessments had been made and levied and warrants issued there was a financial breakdown, and the economic conditions became such that benefited property owners were not meeting their maturing installments for...