Others v. The Mayor & Council Oe Columbus

• Decision Date: 31 January 1856
• Docket Number: No. 87.,87.
• Court: Georgia Supreme Court
• Parties: Semmes and others, plaintiffs in error. vs. The Mayor & Council oe Columbus, defendants in error.

19 Ga. 471

Semmes and others, plaintiffs in error. vs. The Mayor & Council oe Columbus, defendants in error.

No. 87.

Supreme Court of the State of Georgia

JANUARY TERM, 1856.

In Equity, in Muscogee Superior Court. Decision by Judge Worrill, at Chambers.

The plaintiffs in error, on the 24th day of November, 1855, presented their bill in Chancery, praying an injunction against the defendants in error, which was, on that day sanctioned, at Chambers, by Judge Worrill, Judge of the Superior Courts of the Chattahoochee Circuit. The allegations in the bill are substantially, as follows: That complainants are property holders, and most of them citizens of Columbus; that the City of Columbus, in the year 184—, subscribed for stock in the Muscogee Rail Road, and issued city bonds for it, and owns 1, 800 shares and upwards. In April, 1855, a resolution was passed by the mayor and council, for the sale of stock, to raise funds to pay first instalment of city\'s subscription for the stock, provided it could be sold at a fair price, to be judged of by finance committee; and if said stock could not be sold for a fair price, then said council intended to provide other means to raise funds to pay said instalment; that Wiley Williams, mayor of the city, without authority and without consultation with the committee on finance, entered into a contract with Richard Patton and John L. Mustian, to sell to them 1, 800 shares of the said stock, being nearly all owned by the city, for the sum of One Hundred and Fiftyone Thousand Dollars; Twenty-six Thousand Dollars to be paid by the first day of January after the filing of the bill, and for the balance, $125,000, the purchasers were to pay the city bonds as they became due. This contract to sell, it is alleged, was made without informing the committee on finance, and without a resolution of council authorizing it; that the city council had to pay $25,000 only, as the instalment agreed to in the resolution; and to that extent only, was the mayor authorized to make sale of stock at a fair price, to be judged of by the finance committee; and there was no authority given, either to the mayor alone or to the mayor and finance committee, by any resolution of the council, to sell all, or nearly all, of the stock belonging to said city, or any more than was sufficient to pay the said instalment, amounting to about the said sum of $25,000; that thesaid sale was made privately, without public notice that the stock would be sold on a credit, and inviting bidders to make offers for the same; and that said sale was made at a price below the value of the stock, and less than would have been given for it if an opportunity had been given to others to offer for it, and less than other persons are now willing to give for it on the same terms; that said Wiley Williams, the mayor, made the contract without convening the committee on finance and submitting the matter to them, and without consulting them privately and separately, or even letting them know anything about it, until after he had made the contract on his own mere motion; and that they first heard of it as a matter of news and public talk; and that John J. McKendree, William A. Bedell and Henry T. Hall never had an opportunity, as a finance committee, to approve or reject said offer, until after the same had been signed by the said Williams as mayor, and the said Patton & Mustian; and not even then as a committee, but only as members of council, when the same was laid before said city council; that said contract was made on Saturday, and was, by Williams as mayor, and not by the finance committee, reported to council on Monday, and a majority of the council refused to postpone any action on it until the next ensuing meeting, although exertions were made to induce them to postpone it, and added Williams, the mayor, to the committee, and directed the committee to consummate the contract; that the finance committee have not yet consummated the contract, although the said Williams was urgent for them to do it; and although some of the members of said committee had been informed that other persons were ready and willing to give a larger price for said stock, and were willing to wait until the next meeting of the council; that the customary opportunity of reconsidering the proceedings in relation to the sale of said stock, may be afforded, and which is the established rule in the proceedings of said council; that the said Patton & Mustian, their associates and friends, are anxious to hurry thematter to a conclusion, because they confidently believe, if they do not know, that an inadequate price has been given for said stock, and that a larger price could readily be obtained; that a consummation of said sale would operate a great fraud upon the people and property holders of Columbus, to whom the said stock belongs. These are substantially the allegations in the bill. The bill prays for a subpoena, an injunction and general relief.

The city council answered the bill, admitting the subscription for stock in the Muscogee Rail Road, for the sum of $150,000, and the giving of bonds of the city for said amount, payable in annual instalments of $28,000 each, and setting forth the circumstances which led to the subscription. The bonds were negotiated by the city council for the purpose aforesaid, and are now in the hands of bona fide holders unpaid. The answer further states, that for these bonds and the interest paid on them by the city, the rail road company has issued to it stock to the amount of $180,000. The first instalment of $25,000 of the bonds, fell due 1st July, 1855. In order to provide for the payment of that instalment, it having been the general understanding, at the time of subscription, that the stock was to redeem and pay the bonds, the city council passed a resolution authorizing a sale of part of the stock. The only alternatives to raise the means of paying this instalment, was to borrow the money, tax the city or sell the stock, and the last the wisest resort. Not being able to sell enough of the stock at 80 cents in the dollar to pay the instalment due, the council was compelled to borrow $30,000 on a pledge of stock and at a high interest, for ninety days; and when that debt was about to mature, they were compelled to resort to another loan on a still heavier pledge of stock in the road, and which the answer alleges would be at the disposal of the lenders, unless payment is made or an extension is obtained.. The city council, for reasons stated in the answer, during the passed summer, informally, without a resolution, agreed to sell the stock, for the purpose of relieving the city from her liability on the bonds; and in pursuancethereof, an effort was made to sell it in Charleston for $150,000, the interest to be paid, and instalments, as they became due. The stock could not be sold in Charleston or elsewhere, on the terms stated, and it was then offered by the mayor to the defendants, Patton and Mustian, who agreed to take it on terms specified in exhibit (B) annexed to the complainant\'s bill. On the Monday night afterwards, at a regular meeting of council, reported what he had done, a copy of the report annexed to answer as exhibit (A).

The answer of the city council proceeds, further, to state that the action of the mayor was not without authority or in violation of his duty in the premises; that he was not acting under the resolution of April, but under the said informal understanding, and that he did not pretend, without the concurrence of council, to sell the stock, and that it was understood by the parties, that the council were to ratify the act; that the said Williams made no contract by which the stock of the city was sold; but on the contrary, he received and reported proposals for its sale; that the city council made, ratified and confirmed it; that it was their act and deed, and that the ratification was known to complainant, Paul J. Semmes, before the filing of the bill; that said stock was not sold below its value; that they could get no more for it from responsible parties; the council had tested the market, and the price at which it was sold to Patton and Mustian, was more than that offered by any one else; that complainants made no offer for it until after it was sold, though some of them knew that a part or all of it was for sale; that they made no offer before council had ratified the sale to Patton & Mustian, although they knew the terms on which it was to be sold to them; that individual stockholders had sold for less, and others had offered at 85 cents, and could not get it; that the stock was not sold at an inadequate price, but at the market value; that council submits, that if more had been offered by irresponsible parties, or by parties wanting in promptness or disposed to litigate, the interest of the city would have required a discrimination in favor of promptitudeand responsibility; that defendant is not prepared to declare what other parties might now be disposed to offer, but they believe that they would not offer such an advance as would authorize the repudiation of a contract fairly made, and after notice to some of the complaining parties; that there was no fraud in the sale, and that said sale will not operate as a fraud upon the city, but will be of great benefit to it and the citizens, and sets forth reasons; that they neither published the stock for sale in the newspapers, nor put it up at auction; that a prudent stockholder would never think of enhancing its value in the market by making known the necessity of a sale, nor would he put it up at auction without a minimum price to prevent combinations; that such a course would have deteriorated the price of the stock; and that if it had been pursued, no such price would have been obtained for it; that complainants live in the city, or have property therein, subject to taxation; but the council is of opinion that they would prefer to make...