Whitman v. Royal Oak Tp.

• Citation: 269 Mich. 146,256 N.W. 835
• Decision Date: 23 October 1934
• Docket Number: No. 95.,95.
• Parties: WHITMAN et al. v. ROYAL OAK TP. et al.
• Court: Michigan Supreme Court

269 Mich. 146

256 N.W. 835

WHITMAN et al.

v.ROYAL OAK TP. et al.

No. 95.

Supreme Court of Michigan.

Oct. 23, 1934.

Appeal from Circuit Court, Oakland County, in Chancery; Glenn C. Gillespie, Judge.

Suit by Charles F. Whitman and others against the Township of Royal Oak, a municipal corporation of Oakland County, Michigan, the Detroit Fidelity & Surety Company, and others, in which the second-named defendant filed a cross-bill. From an adverse decree, the second-named defendant appeals.

Reversed and remanded, with directions.

Argued before the Entire Bench.

Friedman, Meyers & Keys, of Detroit (Sylvan Rapaport, of Detroit, of counsel), for appellant.

Bulkley, Ledyard, Dickinson & Wright, of Detroit (Robert E. McKean and Robert W. Conder, both of Detroit, of counsel), for plaintiffs-appellees.

Sherman McDonald, of Royal Oak (Arthur E. Moore, of Royal Oak, of counsel), for Royal Oak Tp. and Hazen Race, treasurer of Royal Oak Tp.

EDWARD M. SHARPE, Justice.

In the month of October, 1926, the township of Royal Oak issued and sold its bonds for the purpose of paying for certain sewer and water improvements made in platted lands within the township as authorized by Act No. 116, P. A. 1923, as amended by Act No. 263, P. A. 1925. Section 1 of the act reads as follows: ‘In any township where there are platted lands, the plats of which have been duly approved and recorded, lying outside of the boundaries of incorporated villages, the township board shall have authority to make improvements by grading, curbing, graveling or cinderizing streets, laying storm sewers to care for surface waters in such streets and making extensions of water mains to provide water for fire protection and domestic uses in any such platted lands, and in unplatted lands contiguous thereto; to levy and collect special assessments to pay the cost thereof and to issue bonds in anticipation of the collection of said special assessments, subject to the terms and conditions hereinafter provided.’

Act No. 116, P. A. 1923, was further amended by Act No. 58, P. A. 1927, section 3 of which reads in part as follows: ‘If any such special assessment fund is insufficient to pay such bonds and interest thereon when due, the township board shall advance the amount necessary to pay such bonds, and shall be reimbursed from such assessments when collected, or by re-assessment of the deficiency if necessary.’

The above act was still further amended by Act No. 24, P. A. 1934, Extra Session, providing that the township board may (instead of shall) advance the amount of the bonds from its general funds. The operation of this amendment is restricted to those bonds issued subsequent to April 21, 1927. This amendment became effective March 28, 1934.

Each of the bonds here in question was secured by a pledge of collections from a particular assessment roll and contains provisions of which the following is typical: ‘Know all men by these presents, that the township of Royal Oak, County of Oakland, State of Michigan, acknowledges itself to owe, and for value received promises to pay the bearer the sum of One Thousand Dollars lawful money of the United States on the 1st day of October, 1931, with interest thereon from the date hereof at the rate of 6 per cent. per annum, payable semi-annually on the 1st day of April and the first day of October in each year on presentation and surrender of the annexed interest coupons as they severally become due. Both interest and principal are hereby made payable at the American State Bank of Detroit, Michigan, and for the prompt payment of this bond, both principal and interest, the collections from Special Assessment Roll No. 11, together with the full faith and credit of the Township of Royal Oak, are hereby irrevocably pledged.’

Each bond also contained a provision like the following except that the roll numbers differed: ‘This bond is payable out of Special Sewer Assessment Roll No. 11 funds.’

On the back of each bond was indorsed the following: ‘The prompt payment of the principal and interest on the within bond is guaranteed by the Detroit Fidelity and Surety Company of Detroit, Michigan, according to the terms of its bond issued in favor of the Guardian Trust Company of Detroit, Michigan, as trustee, for the benefit of the holder thereof.’ (Signed and sealed by agent of Detroit Fidelity and Surety Company.)

The surety bonds given by the Detroit Fidelity & Surety Company to the Guardian Trust Company, as trustee, each contained a condition as follows: ‘The Detroit Fidelity and Surety Company shall not be liable hereunder for the payment of any of said bonds or of the interest coupons attached thereto if the said bond issue is held by any court of competent jurisdiction to be illegal or void. Provided such order, judgment or decree is or shall become final and unappealable. Any payment by the Surety to await the final judgment.’

The township of Royal Oak paid principal and interest on the bonds as they matured until October 1, 1929. Other payments were made by the Detroit Fidelity & Surety Company. Default...