Town of Manitou v. First Nat. Bank of Colorado Springs

• Decision Date: 07 May 1906
• Citation: 86 P. 75,37 Colo. 344
• Parties: TOWN OF MANITOU et al. v. FIRST NAT. BANK OF COLORADO SPRINGS.
• Court: Colorado Supreme Court

86 P. 75

37 Colo. 344

TOWN OF MANITOU et al. v. FIRST NAT. BANK OF COLORADO SPRINGS.

Supreme Court of Colorado

May 7, 1906

Appeal from District Court, El Paso County; Morton I. Bailey, Judge.

Action by the First National Bank of Colorado Springs against the town of Manitou and another, as treasurer thereof. From a judgment in favor of plaintiff, defendants appeal. Affirmed.

Ira Harris and C.J. Perkins, for appellants.

Hall Babbit & Thayer and Frederic L. Sherwin, for appellee.

MAXWELL J.

There are no controverted facts in this case which have any bearing upon the questions to be decided. August 4, 1897, the town of Manitou, through its board of trustees, agreed in writing to pay M. A. Leddy $1,200 for his services in placing or selling at par an issue of its waterworks refunding bonds amounting to $40,000. An unsuccessful attempt to dispose of the bonds had been previously made. October 19, 1897, the board of trustees of the town allowed the bills of Mr. Leddy and ordered warrants drawn in his favor for $800, $91.90, and $400. The $800 and $400 warrants were in payment of his services in placing the bonds. The value of the services performed by Mr. Leddy is admitted. The $91.90 warrant was for expenses incurred by him in engraving and lithographing the bonds, and is not involved in this controversy. October 20, 1897, warrants of the town were drawn for the above amounts by the proper officers and issued to Mr. Leddy, who on the same date presented them to the treasurer of the town, who stamped them: 'Presented October 20, 1897. No funds'--and signed his name thereto. At the same time Mr. Leddy indorsed the warrants, delivered them to the town treasurer, receiving therefor a check of the town of Manitou, signed by its treasurer, drawn on the First National Bank of Colorado Springs for the sum of $1,291.90 which check was paid by the bank October 21, 1897. Shortly thereafter the warrants were deposited in the First National Bank by the treasurer of the town; the account of the town being credited with the face value of the warrants. This method of transacting the business of the town was pursuant to an arrangement made between the treasurer of the town and the bank. It appears that the credit of the town had been below par, there being no market for its warrants, which fact resulted in a loss to the town by reason of the warrants being sold at a discount. The treasurer of the town and other citizens presented the condition of affairs to the bank asked its assistance, represented that its warrants would be redeemed within 18 months, and that the outstanding warrants would not exceed $10,000. It was arranged that the town should transfer its account to the bank, and do all its business there, and that, when the treasurer of the town brought his deposits to the bank, the warrants of the town, properly indorsed, stamped, and deposited by him, should be received and carried as cash, or credited to the treasurer's account as cash, to an amount not exceeding $10,000. This arrangement was made in May, 1897, and continued in force until March, 1899. The town, through its treasurer, advertised a call of its warrants to be paid March 20, 1899, and on Amrch 17, 1899, notified the bank that the warrants held by it, amounting to $1,200, involved herein, would not be paid. On that day, the bank charged the account of the town with $1,436.89, the amount of the two warrants involved herein and the undisputed $91.90 warrant, with interest thereon to date, and on the same date transmitted the warrants by express to the treasurer of the town. This action was to recover of the bank $1,335.78, the amount of the $800 and $400 warrants and interest. Trial to the court resulted in a judgment in favor of the bank, to reverse which this appeal is prosecuted.

The appellant town relies upon three propositions for a reversal of the judgment: (1) The contract under which the warrants were issued was ultra vires and illegal, and therefore the warrants were void. (2) When the warrants came into the possession of the bank they had been canceled, their delivery to the bank was a reissue, which, being prohibited by law, rendered the warrants void, although they might have been valid in their inception. (3) The bank occupied the position of a purchaser, with notice of void warrants.

In support of the first proposition, section 4548b, 3 Mills' Ann. St., is relied upon. It is as follows: 'All such refunding bonds may be exchanged dollar for dollar for the bonds to be refunded, or they may be sold as directed by the city council or board of trustees of such city or town and the proceeds thereof shall be applied only to the purpose for which the bonds were issued, and the same shall not be sold at less than their face value, nor shall they be issued until the outstanding bonds to be refunded have been called in and canceled in an amount equal to or in excess of the bonds so issued; provided, however, that all accrued interest on any such bonds to be refunded shall be paid before such refunding bonds are issued.' The following extract from the minutes of a meeting of the board of trustees of the town held October 19, 1897, appears in the record: 'Trustee Creighton reported N. A. Leddy had sold the $40,000.00 refunding water bonds to N.W. Harris & Co., Chicago, and New York, at par. M. A. Leddy stated he had talked with Mr. Sutton, the cashier of the First National Bank, Colorado Springs. The bank would receive the bonds and transfer them to N.W. Harris & Co., N.Y., for the old bonds at exact cost of transfer. Moved by Trustee Creighton, seconded by Trustee French, the report be accepted; the bonds to be turned over to F. D. Fox, the town treasurer, he to deliver the bonds to the First National Bank of Colorado Springs. The bank to deliver the new bonds for the old bonds, bonds for bonds, to the Chemical National Bank of New York, for N.W. Harris & Co., at exact cost of transfer. Carried.' The foregoing shows that the bonds were exchanged for old bonds, pursuant to the terms of the statute above quoted. In passing, it may be well to note that the treasurer of the town kept one account only in the bank, to which account the warrants were charged by the bank. The complaint alleged that the $400 warrant was drawn on the warrant fund, the $800 warrant on the contingent fund. The warrants introduced in evidence show that the $800 warrant was drawn as alleged, and the $400 warrant 'on money in the treasury not otherwise appropriated.' We are in entire accord with counsel in so far as their statement of the law governing municipal corporations and their officers is concerned, and will therefore pass that portion of their argument.

In support of the proposition that the contract pursuant to which the warrants were issued was ultra vires and illegal it is contended that the bonds were sold for less than 'par net to the town,' counsel in their brief have misquoted the statute under which the bonds were issued. The quotation in the brief is: 'All such bonds shall be sold as directed by the city council or board of trustees of such city or town, and the proceeds thereof shall be applied only to the purpose for which the bonds were issued; but the same shall not be sold for less than par net to the town or city issuing them.' The statute is as quoted supra. With this statement we dismiss the argument of counsel based on the force and effect of the words 'par net to the town or city issuing them,' which are not found in the statute under consideration, but are found in the quotation of counsel. Our attention is called to the following authorities: Whelen's Appeal, 108 Pa. 162, 1 A. 88; Dillon on Municipal Corporations, § 89; Lawrence Co. App., 67 Pa. 87; County of Lawrence v. N.W. R. Co., 32 Pa. 144; State of Ill. v. Delafield, 8 Paige (N.Y.) 527; Village of Ft. Edwards v. Fish, 156 N.Y. 363, 50 N.E. 973--all of which have been carefully examined, and it is found that they all involve cases in which a commission or other consideration was allowed the purchaser of the bonds, against express provisions of statutes similar to the one under consideration here, and for this reason the above authorities are inapplicable, as it is not contended that Mr. Leddy was the purchaser of the bonds. In Village of Ft. Edward v. Fish, it is said, at page 372, of 156 N.Y., and page 975 of 50 N. E: 'Implied power can be inferred only from the general scope of the actual power, and the necessity of doing something essential to the efficient exercise thereof. The actual power was to borrow money by issuing and selling bonds at not less than par. The express power to issue bonds involved the implied power to pay for engraving, printing, and the like. The express power to sell bonds doubtless carried with it the implied power to pay counsel for an opinion as to the validity of the bonds, as was done in this case, and possibly to pay a commission to brokers for selling the bonds. These expenses were incidental to the duty imposed, and fairly came within the scope of the main power.' We believe that the above states the law to be applied to this case, and that under the facts disclosed by this record the contract made by the board of trustees with Mr. Leddy to pay him a commission for his services was within the implied powers of the municipal corporation; that the same...