Uncas Nat. Bank v. City of Superior

• Decision Date: 21 October 1902
• Citation: 91 N.W. 1004,115 Wis. 340
• Parties: UNCAS NAT. BANK v. CITY OF SUPERIOR.
• Court: Wisconsin Supreme Court

115 Wis. 340

91 N.W. 1004

UNCAS NAT. BANK

v.CITY OF SUPERIOR.

Supreme Court of Wisconsin.

Oct. 21, 1902.

Appeal from circuit court, Douglas county; A. J. Vinje, Judge.

Action by the Uncas National Bank against the city of Superior. From a judgment for defendant, plaintiff appeals. Affirmed.

This action is to recover the amount of two bonds of $500 each and accrued interest, issued by the city of Superior under circumstances hereinafter stated. The following is a copy of one of said bonds: “United States of America, State of Wisconsin. No. 1,394. Dollars 500. 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, state of Wisconsin, for value received, hereby acknowledges itself indebted to and promises the bearer hereof the sum of five hundred dollars, lawful money of the United States of America, to be paid on the 2nd day of January, A. D. 1898, redeemable at the pleasure of the said city of Superior after the 2nd day of January, A. D. 1896, with interest thereon, payable semiannually on the 2nd days of July and January in each year, as evidenced by the semiannual coupons hereto attached, as they severally become due; both the principal and interest of this bond being payable at the National Bank of the Republic in the city and state of New York. This bond is issued by authority of chapter 16 of the charter of the city of Superior, approved March 23rd, 1889, and by a resolution duly passed, approved, and published in said city of Superior, and state of Wisconsin, bearing date the 28th day of May, 1891. This bond is one of thirty-two bonds numbered from 1,375 to 1,406, inclusive, the aggregate amount of which is fifteen thousand eight hundred dollars, and is issued for the purpose of defraying the cost of constructing the improvement on Lamborn avenue, between dock line on Howard's Pocket and North Third street, and on account of such assessment made upon the property abutting upon said avenue between said points for 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 abutting upon said avenue between said points, as evidenced by a statement and schedule of such special assessments 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 the acts, conditions, and things required to be done precedent to and in the issuing of this bond have fully happened and been performed in regular and due form as required by law. The full faith and credit of the city of Superior, Douglas county, and state of Wisconsin, is hereby irrevocably pledged for the prompt payment of this bond, both principal and interest. In testimony whereof, the said city of Superior, county of Douglas, and state of Wisconsin, has caused this bond to be signed by its mayor and city clerk, and the seal of said city to be hereto attached, this 2nd day of January, A. D. 1891. W. J. Darges, City Clerk. Martin Pattison, Mayor. Countersigned: Lewis Larson, Comptroller.” The city admitted the making of the bonds and default in payment of interest. It alleged that these bonds were issued in part payment of the cost of improving Lamborn avenue, under subchapter 16 of chapter 152, Laws 1889, as special improvement bonds, and that the city had no power to make such improvement, and make the cost a general city indebtedness, and the city had no power to issue general bonds of the city for such purpose. It was also alleged that the city did not provide for the collection of a direct annual tax, as required by section 3, art. 11, of the constitution, etc. A jury was waived, and the case was tried by the court. Findings of fact were duly made substantially as follows: The plaintiff was the owner of the bonds in question. About July 2, 1898, plaintiff and defendant entered into an agreement to extend the time of payment of said bonds until July 2, 1908, at a reduced rate of interest, to wit, 5 per cent., but, in case of failure to pay interest, the bond was to become due at the option of the holder. Defendant paid the interest until 1901, when it defaulted. Plaintiff declared its option to consider the whole amount due, and the sum of $1,000 and interest was due thereon. The court then traces the history of the issue of the bonds, and finds that the same were part of the issue of $15,800 of bonds for improvements made upon Lamborn avenue pursuant to the requirements of chapter 16 of the charter, and which was assessed against the abutting property, as was required thereby, and which proceedings were regular in accordance with the charter. The resolutions and notices were put and recorded in the proper books kept by the city, which were public records, and open to the inspection of all persons. The bonds so issued were 32 in number, each for $500, except the last, which was for $300, and were to mature absolutely on January 2, 1898, and were payable at the defendant's option after January 2, 1896, and bore 6 per cent. interest, payable semiannually, evidenced by regular coupons attached thereto. In the year 1891 the city extended on its tax roll a special improvement tax against the property benefited by the improvement, amounting to $3,160 principal, and interest on the entire issue at the agreed rate, and thereafter continued imposing and extending such tax from year to year thereafter as follows: 1891, principal, $3,160, interest on $15,800; 1892, principal, $3,160, interest on $12,640; 1893, principal, $3,160, interest on $9,840; 1894, principal, $3,160, interest on $6,320; 1895, principal, $3,160, interest on $3,160. The city has collected all of said tax except a small amount. March 18, 1898, the city paid two of said bonds out of its general fund. Such bonds were listed by the city officers as “City of Superior Special Bond Indebtedness.” The court further found that the plaintiff relied on the recitals in said bonds, and had no actual notice of any irregularities in the issue of the same. The court found as matters of law that the bonds sued upon were general bonds of the city; that the special assessment upon property benefited was not equivalent to the “direct annual tax” required by section 3, art. 11, of the constitution, because said special taxes were not sufficient to pay said bonds at maturity, and because they were not a direct annual tax within the meaning of the constitution, but a special tax upon a particular portion only of the taxable property of the municipality, and the bonds were therefore void when issued; that the recitals in the bonds did not estop the city from setting up as a defense noncompliance with the provisions of the constitution; that the act of the city in paying interest and obtaining an extension of time did not operate to validate said bonds by way of ratification, and that the bonds could not be enforced in this direct action upon them. Judgment was entered dismissing the action, from which plaintiff has taken this appeal.W. E. Pickering & E. F. McCausland, for appellant.

Thomas E. Lyons, for respondent.

BARDEEN, J. (after stating the facts).

The trial court was undoubtedly correct in finding that the bonds in suit were in form general bonds of the defendant city. Assuming that they are such, the question is raised whether the city, under its charter, had any power to issue general city obligations in payment of special improvements of the character mentioned in the statement. This question is not entirely free from embarrassment,as will be hereinafter noted. A correct answer can only be reached by a consideration and construction of the various charter provisions applicable to the situation. To reach such conclusion it is necessary at the outset to make a brief survey of the powers of the city and limitations contained in the charter with reference to bond issues, and with reference to the manner in which street improvements shall be made and paid for. The bonds in suit were issued under the charter of 1889, known as “Chapter 152.” By subchapter 13 all funds in the city treasury, except school funds, library funds, and funds collected on special assessments, shall be under the control of the common council. Section 92. The city treasurer is specifically prohibited from paying out any funds in his hands which shall be appropriated by law for any special purpose, except for the purposes for which said funds are specifically appropriated, any direction of the city counsel to the contrary notwithstanding. Section 93. No money shall be appropriated for any purpose whatever except such as is expressly authorized by the charter. Section 94. The council may designate the banks in which city funds shall be deposited, and the comptroller is authorized to advertise for bids for such deposits. Sections 98, 99. Sufficient portion of the moneys received from licenses of all kinds to pay all interest on the outstanding bonded indebtedness of the city and 5 per cent. of the principal shall be deposited in such banks as the council may contract with, the bank to pay interest at not less than 4 per cent. per annum. All moneys belonging to such sinking fund shall be paid into said bank as soon as collected, interest accruing to be added to the principal, and the bank is to pay the interest on bonds as fast as it becomes due. Section 102. Another important provision, and one of great significance in this litigation, is contained in section 103. It says: “The common council shall have authority to issue bonds for the following purposes only: (1) Building public buildings for the use of the city. (2) Purchase of apparatus for fire protection. (3) Construction of main sewers. (4) Waterworks. (5) Public parks. (6) Refunding municipal indebtedness. (7) Building bridges.” Turning now to subchapter 16 of the charter, we find specific grant of power...