Waite v. City of Santa Cruz

• Decision Date: 29 September 1898
• Docket Number: 12,094.
• Citation: 89 F. 619
• Parties: WAITE v. CITY OF SANTA CRUZ.
• Court: U.S. District Court — Northern District of California

89 F. 619

WAITE v. CITY OF SANTA CRUZ.

No. 12,094.

United States Circuit Court, N.D. California.

September 29, 1898

Chickering Thomas & Gregory, for plaintiff.

James G. Maguire and Lindsay & Cassin, for defendant.

Frank J. Sullivan, amicus curiae.

DE HAVEN, District Judge.

This is an action at law to recover the sum of $23,100, claimed to be due on 9 refunding bonds and 282 interest coupons of $50 each, attached to the bonds sued on and other refunding bonds, alleged to have been issued by the defendant on the 16th day of April, 1894, payable on April 15, 1895. The action necessarily involves questions relating to the validity of 360 refunding bonds of $1,000 each, purporting to have been issued by the defendant on the 16th day of April 1894. The circumstances under which these bonds were issued may be briefly stated as follows: On February 26, 1894, the defendant, city of Santa Cruz, had an outstanding bonded indebtedness of $271,000, or thereabouts, and was also the owner of certain waterworks and necessary appurtenances thereto, including land, water rights, etc., theretofore purchased by it from the City Water Company of Santa Cruz, a private corporation. The waterworks and appurtenant property were subject to a mortgage, which had been placed thereon by the City Water Company of Santa Cruz for the purpose of securing an outstanding bonded indebtedness of that corporation in the sum of $89,000, and interest thereon; and on that day the common council of the defendant city, deeming it to be for the best interest of the defendant to refund its bonded indebtedness under the provisions of an act of the legislature of the state of California entitled 'An act to amend an act entitled 'An act to authorize the common council, board of trustees, or other governing body of any incorporated city or town, other than cities of the first class, to refund its indebtedness, issue bonds therefor, and provide for the payment of the same,' approved March 15 1883,' approved March 1, 1893 (St. 1893, p. 59), adopted an ordinance, which was duly approved by the mayor providing for a special election to be held in the city of Santa Cruz on the 13th day of March, 1894, at which there should be submitted to its qualified electors the question of refunding the outstanding bonded indebtedness of the defendant city. The indebtedness which it was thus proposed to refund was described in the ordinance as consisting not only of certain bonds of the city of Santa Cruz, amounting to the sum of $271,000, but also 'eighty-nine (89) first mortgage bonds (with interest thereon from November 1, 1893) of the corporation, the City Water Company of Santa Cruz heretofore issued by said corporation, the City Water Company of Santa Cruz, which bonds bear date May 1, 1890, and are of the denomination of one thousand (1,000) dollars each, and bear interest at the rate of six (6) per cent. per annum, payable semiannually, and are secured by a mortgage or deed of trust upon the property known as the 'City Waterworks of Santa Cruz' executed by the City Water Company of Santa Cruz, as party of the first part therein, to the Holland Trust Company of New York, as trustee, party of the second part therein; and which said bonds outstanding were, at the time of the conveyance by the City Water Company of Santa Cruz to the city of Santa Cruz, of the property known as the 'City Waterworks,' and now are, a valid lien and charge upon said property known as the 'City Waterworks,' and became thereby a part of the bonded indebtedness of the city of Santa Cruz. ' More than two-thirds of the qualified electors of the defendant voted at the special election thus called in favor of the proposition to refund the then outstanding bonded indebtedness of the defendant as described in the ordinance. Thereafter, on March 26, 1894, the common council of the defendant passed, and its mayor approved, an ordinance for the purpose of carrying into effect the will of the electors of the defendant, as expressed at such special election. This ordinance provided for the issuance of 360 interest-bearing bonds of the defendant of the denomination of $1,000 each, and also directed that such bonds should be signed by the mayor and city clerk, and that each should contain the following recitals:

'This bond is one of a series of bonds of like date, tenor, and effect issued by the said city of Santa Cruz for the purpose of refunding the bonded indebtedness of said city, and issuing bonds therefor, and providing for the payment of the same, under and in pursuance of and in conformity with the provisions of an act of the legislature of the state of California, 'An act to amend an act entitled 'An act authorizing the common council, board of trustees or other governing body of any incorporated city or town, other than cities of the first class, to refund its indebtedness, issue bonds therefor, and provide for the payment of the same,' approved March 15, 1883,' approved March 1, 1893, and in pursuance of and in conformity with the constitution of the state of California and the ordinance of the city of Santa Cruz, and in pursuance of and in conformity with a vote of more than two-thirds of all the qualified electors of said city of Santa Cruz voting at a special election duly and legally called and held and conducted in said city, as provided under said act, on Tuesday, the 13th day of March, 1894, notice thereof having been duly and legally given and published in the manner as required by law, and after the result of said election had been duly canvassed, found, and declared in the manner required by law; and it is hereby certified and declared that all acts, conditions, and things required by law to be done precedent to and in the issue of said bonds have been properly done, happened, and performed in legal and due form, and as required by law.' The ordinance further directed that such bonds should, after public notice inviting bids therefor, be sold to the highest bidder for not less than their face value in United States gold coin, to be paid on delivery of said bonds at the city treasurer's office in the city of Santa Cruz. The bonds were offered for sale, but there were no bidders for the same, and on April 16, 1894, the date to which the common council of the defendant had regularly adjourned, there were present William T. Jeter, assuming to act as mayor, and J. Howard Bailey, F. J. Hoffmann, E. G. Green, and F. W. Lucas, assuming to act as the common council of the defendant. At this meeting a proposition theretofore made by Coffin & Stanton to take all of said bonds was accepted upon condition that satisfactory security for its faithful performance by Coffin & Stanton should be furnished. This proposition was dated February 27, 1894, and was, in substance, one by which Coffin & Stanton proposed to purchase the refunding bonds at par value less 3 per cent., without the payment of any money at the time of their delivery, or giving any other consideration therefor than their promise to take up the outstanding bonds which were to be refunded, and to forward the same, 'from time to time, to the city for cancellation. ' On April 23, 1894, the said William T. Jeter, assuming to act as mayor, and the said Bailey, Hoffmann, Green, and Lucas, assuming to act as the common council of the defendant, publicly met pursuant to adjournment, and, without protest from any one, accepted and approved a bond presented by Coffin & Stanton for the faithful performance by them of the agreement contained in the foregoing proposition, and thereupon directed the city clerk of the city of Santa Cruz to deliver to that firm the entire issue of the refunding bonds referred to. The bonds were, in accordance with this direction, delivered to Walter Stanton, of the firm of Coffin & Stanton, on April 24, 1894, and thereafter Coffin & Stanton told the same to various parties, from some of whom the plaintiff derived title to the bonds and coupons sued on. The plaintiff is only the nominal owner of said bonds, the same having been assigned to him for the purpose of collection only. Coffin & Stanton never complied in whole or in part with the agreement under which the bonds were delivered to them, and the city of Santa Cruz never received any benefit whatever from their sale, the entire proceeds thereof having been appropriated to their own use by Coffin & Stanton, and that firm is insolvent. The bonds are under the seal of the defendant, contain the recitals above set out, and are signed: 'Wm. T. Jeter, Mayor of the City of Santa Cruz. Attest: O. J. Lincoln, City Clerk.'

Upon the foregoing facts, and others which will be stated in discussing the questions to which they particularly relate the defendant contends: First. That the court has no jurisdiction of the action. Second. That the act of the legislature under which the bonds were issued is in conflict with the constitution of the state of California. Third. That William T. Jeter was not mayor of the defendant city, either de jure nor de facto, at the time when a portion of the bonds were signed by him. Fourth. That Jeter and the other persons above mentioned, who, on April 16 and 23, 1894, assumed to act as the mayor and common council of the defendant city, and accepted the proposition of Coffin & Stanton for the purchase of the bonds, and directed their delivery to that firm, were not officers of the defendant, neither de jure nor de facto, and all of their acts in relation thereto are absolutely void. Fifth. That the bonds are void, because issued in part for the purpose of refunding the private indebtedness of the City Water Company of Santa Cruz, and also because they were delivered to Coffin & Stanton in violation of law and of the ordinances under which they were...