Olmsted v. City of Superior

• Decision Date: 15 August 1907
• Docket Number: 90.
• Parties: OLMSTED v. CITY OF SUPERIOR et al.
• Court: U.S. District Court — Western District of Wisconsin

155 F. 172

OLMSTED v. CITY OF SUPERIOR et al.

No. 90.

United States Circuit Court, W.D. Wisconsin.

August 15, 1907

This is a suit in equity against the city of Superior and the county of Douglas, based upon certain street improvement bonds of the city of Superior. The bill has been twice amended, and the demurrers involve the sufficiency of the amended and supplemental bill of complaint. Briefly stated, the bill of complaint sets forth the following facts:

By section 30, c. 124, p. 796, Laws 1891, the common council of the defending city was authorized to lay out, make, open, and keep in repair all highways and streets. This charter provides a scheme of special assessments upon abutting property to defray the expense of improvement of highways or streets. Section 132 authorizes the common council to issue improvement bonds, leaving a wide discretion to the common council as to the terms of said bonds. Section 133 provides that such bonds shall be semiannual interest coupon bonds payable in annual installments, and shall draw interest at a rate not exceeding 6 per cent. Such bonds may be sold by the common council at not less than par, and the proceeds collected by the city treasurer shall be paid to the contractor when due to him, etc. Section 134 requires the city clerk to prepare a statement of the special assessment in which the bonds are issued, and record the same together with a copy of said bonds. Section 135 requires the city treasurer to pay the interest and principal of said bonds as the same become due, and charge the amount to the proper fund. Section 136 requires a special tax on said property benefited to be levied each year, sufficient to pay the installment and interest due on such bonds. Section 82 withdraws from the control of the common council the special fund for street improvement. Section 83 prohibits the city treasurer from encroaching upon said special fund, or diverting any part thereof to any other purpose.

By virtue of the provisions of this charter, the city undertook the improvement of Belknap street between Hammond avenue and West Seventh street in said city, and the necessary and proper steps required by the charter were taken to that effect. Special assessments were levied upon abutting property payable in equal annual installments during a period of five years. And thereupon the defending city caused to be executed and issued on the 1st day of September, 1891, bonds of said city for $54,739.80, comprising five equal series, designated as A, B, C, D, and E, each installment consisting of 11 bonds numbered from 1 to 11. Such bonds were sold in the market to provide the necessary funds to carry out such street improvement.

The following is a copy of one of such bonds, the others being the same except as to series and number:

'United States of America. Installment E.

··No 1.

$1,000.00

'States of Wisconsin, City of Superior, Street Improvement Bond

County of Douglas.

'Know all men by these presents that the city of Superior in the county of Douglas, and state of Wisconsin, for value received, hereby acknowledges itself indebted to and promises to pay the bearer hereof the sum of one thousand dollars lawful money of the United States of America, to be paid on the 1 day of September A.D. 1896, with interest thereon at the rate of six per centum per annum, payable semi-annually on the first days of March and September in each year as evidenced by the semi-annual interest coupons hereto attached. as they severally become due; both the interest and principal of this bond being payable at the National Bank of the Republic in the city and county of New York.

'This bond is issued under and by authority of chapter 13 of the amended charter of said city of Superior, being chapter 124 laws of Wisconsin for the year 1891, approved March 31st, 1891, and of a resolution duly passed, approved and published by the common council of said city, dated the 25 day of August A.D. 1891.

'This bond is one of an issue of annual installment bonds the aggregate amount of which is fifty-four thousand seven hundred thirty-nine 80/100 dollars of which this bond is number 1 of installment E, said issue being divided into five equal installments designated installments A, B, C, D, and E respectively. Each installment consists of 11 bonds numbered from 1 to 11 inclusive. Numbers 1 to 10 inclusive being of the denomination of one thousand dollars and numbers 11 of nine hundred forty-seven 96/100 dollars.

'All bonds in installment A are payable on the 1 day of September A.D. 1892 and the remaining installments in the order in which they are above mentioned become payable annually thereafter on the 1 day of September in each year, so that the last installment, namely, installment E becomes due and payable on the 1 day of September A.D. 1896.

Said bonds are issued for the purpose of defraying the cost of constructing the improvement on Belknap street between the Hammond avenue and West Seventh street and on account of such assessment, made upon the property benefited by reason of such improvement, as the owners have not elected to pay. The payment of the principal and interest of this bond is made chargeable upon the property benefited by said improvement, as evidenced by a statement and schedule of such special improvement, on which the bonds are issued, as recorded in the office of the city clerk of said city of Superior. And it is hereby certified and recited that all acts, conditions and things required to be done precedent to and in the issuing of this bond have duly happened and been performed in regular and due form as required by law. The faith and credit of said city of Superior is hereby irrevocably pledged for the prompt payment of this bond, both principal and interest.

'In testimony whereof the said city of Superior in the county of Douglas, and state of Wisconsin, has caused this bond to be signed by its mayor and city clerk, and countersigned by its comptroller, and the seal of said city to be hereto attached this 1st day of September A.D. 1891.

'W. J. Dargis,

Martin Pattison,

'City Clerk.

Mayor.

'(Seal.) Countersigned: Lewis Larson, City Comptroller.'

Coupons representing installments of interest were attached, which are in the usual form.

That complainant purchased and now owns all the bonds of series 'E,' aggregating $10,947.96. That by mutual agreement between the complainant and the defending city the payment of the principal of said bonds was extended until 1898. That said city regularly paid the interest upon said bonds up to the 1st day of January, 1901. That all the bonds of this issue have been paid except series 'E,' which are the bonds in suit. That the city has collected a large part of the assessments pledged to the payment of these bonds from time to time, but has neglected and refused to pay the complainant's bonds or any part thereof, or any interest thereon, since the 1st day of January, 1901. That without the consent of the complainant the city has extended the payment of the special assessments on the property benefited by the improvement, and that two annual installments of such assessments amounting to $5,000 are still to become due. That said city has from time to time turned over to the county of Douglas these unpaid special assessments as delinquent taxes, in accordance with the laws of Wisconsin, which require the return of such delinquent special assessments at the same time and in the same manner as other taxes are returned. That said county of Douglas has from time to time collected considerable sums of money upon such special assessments so returned as delinquent, by sales of the property, by redemption thereof after sale, etc. That said county now has on hand in its treasury a considerable amount of money as the proceeds of such delinquent special assessments, which said county refuses to account for or pay over to the complainant in liquidation of said bonds. That the city of Superior has from time to time unlawfully and in fraud of the rights of this complainant encroached upon and appropriated the sinking fund which was created for the payment of the bonds in suit. That by resolution of the common council of said city such special assessment funds have been transferred to the general fund for various purposes. That by act of said common council said sinking fund so specially devoted to the payment of the complainant bonds has been rehypothecated for the payment of other improvement bonds, and that by various methods the city has dissipated and misapplied the fund which, by the terms of the bond in suit it undertook to keep and administer as a statutory trustee for the benefit of the complainant to pay the bonds in suit. That unless restrained said city will divert and misappropriate the balance of said fund still remaining in the city treasury, and the deferred payments of special assessments which are yet to become due. That when the city ceased the payment of interest on said bonds, the complainant elected, pursuant to the terms of said bond, to declare the same due and payable. That said bonds are in law a general obligation of said city, and that said city should be held in law to be a primary debtor as well as a statutory trustee. The bill sets up that before complainant purchased said bonds the Supreme Court of the state of Wisconsin had held said bonds to be a general obligation of the defendant city.

The complainant by his bill asks for an accounting to ascertain and determine the amount of money which the county of Douglas and the city of Superior have in their respective treasuries which ought to be applied to the payment of the bonds, and also the amount of such sinking fund that has been misappropriated; that the complainant...