State Life Ins. Co. v. Bd. of Educ. of Chicago

• Decision Date: 16 September 1946
• Docket Number: 29453.,Nos. 29452,s. 29452
• Citation: 68 N.E.2d 525,394 Ill. 301
• Parties: STATE LIFE INS. CO. et al. v. BOARD OF EDUCATION OF CITY OF CHICAGO et al. FIDELITY TRUST CO. v. SAME.
• Court: Illinois Supreme Court

394 Ill. 301

68 N.E.2d 525

STATE LIFE INS. CO. et al.

v.BOARD OF EDUCATION OF CITY OF CHICAGO et al.

FIDELITY TRUST CO.

v.SAME.

Nos. 29452, 29453.

Supreme Court of Illinois.

May 21, 1946.

Rehearing Denied Sept. 16, 1946.

Appeals from Superior Court, Cook County; Donald S. McKinlay, judge.

Class suit by the State Life Insurance Company and others against the Board of Education of the City of Chicago and others asking that an accounting be taken and that the Board of Education be decreed to distribute all funds on hand and thereafter collected applicable to payment of tax anticipation warrants pro rata to all warrant holders; and suit by Fidelity Trust Company, trustee, against the Board of Education of the City of Chicago and others for a writ of mandamus commanding the Board of Education to pay such warrants in numerical order. The Second National Bank of Monmouth intervened in second suit and filed an answer. The cases were heard together in the trial court. From a decree in the first case dismissing the complaint for want of equity, plaintiffs appeal, and from a judgment in the second awarding a writ of mandamus against the Board of Education, the intervener and others, being plaintiffs in the first case, appeal, and the cases are consolidated.

Decree in the first case reversed and causes remanded with directions, and judgment in the second case reversed.Poppenhusen, Johnston, Thompson & Raymond, of Chicago (Floyd E. Thompson and Albert E. Jenner, Jr., both of Chicago, of counsel), for appellant State Life Insurance Co. et al.

Howard B. Bryant and Leonard C. Mead, both of Chicago, for appellant Second Nat. Bank of Monmouth.

Richard S. Folsom, of Chicago (Frank S. Righeimer, Frank R. Schneberger, and James W. Coffey, all of Chicago, of counsel), for appellee Board of Education.

Henry O. Nickel and Alex Elson, both of Chicago, for appellee Fidelity Trust Co.

SMITH, Justice.

Cause No. 29452, is an appeal by the plaintiffs from a decree of the superior court of Cook county, dismissing their complaint for want of equity. Cause No. 29453, is an appeal by certain individuals and corporations from a judgment of the superior court of Cook county, awarding the writ of mandamus against the Board of Education of the city of Chicago. The appellants in cause No. 29453 were not parties to the suit. They describe themselves in their notice of appeal as persons whose interests are adversely affected by the judgment appealed from. Second National Bank of Monmouth also prosecuted a separate appeal from the judgment. The two cases were heard, considered and decided together by the trial court. They have been consolidated in this court. Both suits involve the question of the distribution of certain tax funds in the hands of the treasurer of the Board of Education of the city of Chicago, applicable to the payment of tax anticipation warrants issued by the Board of Education against taxes levied for educational, building and playground purposes, in the year 1929. A brief history of the anticipation warrants and the prior litigation concerning them, will be helpful to an understanding of the questions involved.

In the year 1929, after the Board of Education had made its tax levies, it issued and sold tax anticipation warrants against the taxes levied for educational purposes in the amount of $46,800,000; against the taxes levied for building purposes in the amount of $15,900,000, and against the taxes levied for playground purposes in the amount of $475,000. No question is raised as to the validity of the warrants so issued. After the levies were made and the anticipation warrants issued, the State Tax Commission ordered a reassessment of property in the city of Chicago, for the purpose of taxation. The reassessment was not completed until 1931. Because of the delay in completing the reassessment, the extension of the taxes was, necessarily, correspondingly delayed. A large amount of interest accrued on the outstanding warrants bfore the tax levies were finally extended and the taxes placed in collection.

All of the anticipation warrants issued were identical except for the taxes anticipated, the dates of the warrants, serial numbers, denominations and stated dates of payment. Of the warrants so issued, there remains outstanding and unpaid, $7,104,000, issued against the educational fund; $2,902,000 against the building fund, and $65,000 against the playground fund. As of June 20, 1945, there was in the treasury, $486,643.43 of funds applicable to the payment of warrants issued against taxes levied for the educational fund; $164,667.82, applicable to the payment of warrants issued against taxes levied for the building fund, and $4,955.93 applicable to the payment of warrants issued against taxes levied for the playground fund. There were also at that time substantial amounts of the taxes levied for the various funds, which were uncollected. All other funds collected from the 1929 tax levies, applicable to the payment of anticipation warrants, have been applied to the payment of such warrants, and are not here involved.

In 1935, Norfolk & Western Railway Company commenced a suit in equity in the District Court of the United States for the Northern District of Illinois against the Board of Education. Up to that time the board had redeemed and paid anticipation warrants in their numerical order out of the funds collected from the taxes anticipated. By the decree in that case, the Board of ducation was enjoined from paying out any money received as the proceeds of taxes extended for educational and building purposes, levied in the year 1929, except upon a pro rata basis, to the holders of all outstanding warrants. Norfolk & Western R. Co. v. Board of Education, D.C., 14 Fed.Supp. 475. On appeal, the Circuit Court of Appeals for the Seventh Circuit, ordered the decree modified so as to also direct the issuance of a mandatory injunction directing the distribution of taxes collected and on hand, or thereafter collected, on a pro rata basis. Board of Education v. Norfolk & Western R. Co., 7 Cir., 88 F.2d 462. On May 19, 1937, the decree was modified by the district court, as directed. The decree, as modified, directed the distribution of the funds on hand and all funds thereafter received, applicable to the payment of the warrants, pro rata. It also enjoined the distribution of the funds in any other manner. By the decree an accounting was ordered. The cause was referred to a master to state the account. The suit is still pending on such reference. On July 13, 1937, a similar decree was entered by the District Court of the United States for the Northern District of Illinois, in a like suit filed by Union Trust Company against the Board of Education, 66 F.Supp. 88. Thereafter, the board, in compliance with these decrees, distributed the funds on hand pro rata to all of the warrant holders. The amounts distributed were received and accepted by all warrant holders as partial payments. The credits were endorsed upon the warrants at the time such payments were made.

From 1936 to 1939, seventeen other similar suits were brought by various warrant holders, in the circuit and superior courts of Cook county, against the Board of Education, praying for decrees against the board, directing distribution of the 1929 tax funds, applicable to the payment of anticipation warrants, pro rata. Such decrees were entered. The plaintiffs in the several cases, including those in the Federal Court, were the holders and owners of 96 per cent of all the outstanding building fund warrants, 95 per cent of the outstanding educational fund warrants, and 100 per cent of the playground warrants. By the decrees in those cases, the Board of Education was ordered to distribute the funds on hand, and all founds thereafter collected on a pro rata basis, to all warrant holders. The decrees entered by the Federal court and those entered by the State courts also entered money judgments against the Board of Education and in favor of the several plaintiffs, for the respective pro rata amounts which the plaintiffs would have received from the prior distribution of taxes collected, had such taxes been distributed on a pro rata basis.

The record shows that under these various decrees, and in compliance therewith, the Board of Education distributed pro rata to the various warrant holders, from the educational fund $2,290,916.88; from the building fund $768,346.85, and from the playground fund $31,127.95, in payments on the principal of the outstanding warrants. In addition to the above amounts, the board likewise distributed, in the same manner, and from the same funds, large sums for the payment of accumulated interest on the warrants. In so far as these decrees entered judgments against the Board of Education to be paid by taxation, we sustained a decree in a suit brought by a taxpayer enjoining the enforcement of such judgments. Leviton v. Board of Education. 385 Ill. 599, 53 N.E.2d 596. Subsequently we held that all of such decrees were, to that extent, void and unenforceable. Chicago City Bank & Trust Co. v. Board of Education, 386 Ill. 508, 54 N.E.2d 498;People ex rel. Reconstruction Finance Corp. v. Board of Education, 386 Ill. 522, 54 N.E.2d 508. No appeals were taken from that part of any of the decrees directing the Board of Education to distribute the funds pro rata. In this respect, such decrees are final and are still in full force and effect.

The order in which payment of anticipation warrants, issued against the same fund, may be lawfully made, was first passed upon by this court on January 17, 1945, in Lubezny v. Ball, 389 Ill. 263, 59 N.E.2d 645. It was there held that under the statute such warrants must be paid in the numerical order of the warrants and not pro rata.

The complaint in cause No. 29452, was filed in November, 1944, by The State Life Insurance Company, and more than one hundred other owners and holders of outstanding unpaid warrants...