25 Ohio C.C. (n.s.) 369 | Ohio Ct. App. | 1914
This cause was submitted on a motion made by the defendants for judgment in their favor upon the pleadings. The substance of the pleadings, so far as need be stated for the purposes of this opinion, is as follows: Newton D. Baker, Thomas Coughlin and William F. Thompson, as mayor, director of finance and president of the council, respectively, of the city of Cleveland, constitute the sinking fund commission of said city, and on the 22d day of October, 1914, said commission duly adopted the following resolution :
“Resolved, That for the purpose of accumulating funds to meet the obligations of the sinking fund, there be offered for sale bonds owned by the sinking fund commission, in the amount and of the description as follows:
“Five hundred thousand ($500,000) dollars 4% city of Cleveland electric light coupon bonds, issued September 4th, 1912, maturing April 1st, 1947, and drawing interest from October 1st, 1914, and numbered from 50236 to 50735, both numbers inclusive.
“And be it further Resolved, That the assistant secretary be and he is hereby authorized and directed to write various bond brokers and banks situated in the state of Ohio, as follows:
“Sealed bids will be received at the office of the sinking fund commission, room 507, city hall, Cleveland, Ohio, until 12 o’clock noon, eastern standard time, on Tuesday, October 27th, 1914, for the purchase of:
“Five hundred thousand ($500,000) dollars four (4) per cent, city of Cleveland electric light coupon bonds, issued September 4th. 1912, maturing April*70 1st, 1947, and drawing interest from October 1st, 1914.
“These bonds are owned by the sinking fund commission, Cleveland, Ohio, the principal and interest being payable at the American Exchange National Bank in New York City, interest payable semi-annually on April 1st and October 1st of each year.
“These bonds were purchased and paid for by the sinking fund commission on September 4th, 1912, and therefore are tax free in the state of Ohio.
“For the purpose of accumulating funds to meet the obligations of the sinking fund commission, Cleveland, Ohio, these bonds are being offered to the public. The validity of these bonds has been approved by the supreme court of the state of Ohio.
“A certified or cashier’s check drawn on some solvent bank, other than the one bidding, in the amount of 2% of the total amount bid for, and made payable to the order of the sinking fund commission, Cleveland, Ohio, must accompany each bid.
“The sinking fund commission reserves the right to accept any or reject all bids.
“Roll Call: Yeas, Baker, Coughlin, Thompson. Nays, None.”
Pursuant to the terms of this resolution bids were solicited from various bond brokers and banks situated in the state of Ohio, by a circular letter, and on October 27, 1914, the bids of the prospective purchasers were opened, and it was found by the sinking fund commission that the joint bid of the defendants, Hayden, Miller & Com
' “That the five hundred thousand dollar ($500,-000) four (4) per cent, electric light coupon bonds be sold and the same be awarded to Hayden, Miller & Company, C. E. Denison & Company and Otis & Company, at their bid of four hundred and eighty-nine thousand and fifty dollars ($489,050), plus accrued interest to the date of delivery.”
The plaintiffs allege that the bonds so ordered sold were originally acquired by the board of sinking fund trustees of the city of Cleveland, which was the predecessor of the sinking fund commission, on October 12, 1912, and that since that date said bonds have been held by the sinking fund trustees and the sinking fund commission as an investment of its funds as provided by law. It is averred that the proposed sale is illegal and void for the following reasons:
First: That the sinking fund commission has no authority or power to sell any bonds of the city of Cleveland purchased by such commission for the reason that the purchase of the bonds of the city of Cleveland by the sinking fund commission is in legal efifect a retirement of such bonds.
Second: That thirty days’ notice of the proposed sale by publication, as required by law, was not made.
Third: That the sinking fund commission exceeded its authority in attempting to authorize a sale of such bonds at a price less than their par value, to-wit, 97.81 per cent, of the par value.
It is alleged that if the proposed sale is made it will result in a loss to the sinking fund of the city of $10,950, and that the sale of the bonds at 97.81 cents on the dollar is in violation of the provisions of law with reference to the care and maintenance of the funds in the control of the commission, and further that such sale will tend to injure the good faith and credit of the city. Plaintiff asks that an injunction be granted restraining the defendants from ■ consummating the sale and transfer of the bonds, and for a decree declaring the agreement to sell and transfer such bonds to be void and of no effect.
The defendants in their answers, admit the allegations of the petition, in so far as they refer to the acquiring by the sinking fund commission of the bonds in question and the several steps taken by the sinking fund commission to effect a sale of the bonds, and admit the proposal to sell the bonds as set forth in the petition. They deny the other alie
A motion for judgment on the pleadings being made by the defendants, the defendants cannot be helped by the denials in the answer or by affirmative allegations in the answer that are denied by the reply. ''
Section. 4514, General Code, requires the trustees of the sinking fund to invest the moneys received by them in bonds of the United States, the state of Ohio, or of' any ■ municipal corporation, school, township or county bonds, in such state, and to hold in reserve only such sums as may be needed to carry out the purposes of their trust.
Section 3922, General Code, directs that when a municipal corporation issues its bonds it shall first offer them at par and accrued interest to the trustees of the sinking fund, in their official capacity, and then it provides for offering them to- certain other officials in case the trustees of the sinking fund decline to take them. The statutory duty thus placed upon the municipality to first offer its bonds
Section 4517, General Code, requires the trustees of the sinking fund to have charge of and provide for the payment of all bonds issued by the corporation, the interest maturing thereon and the payment of all final judgments against the corporation, except in condemnation of property cases. This section imposes a clear and positive duty upon the. trustees of the sinking fund to be prepared to pay the obligations of the municipality, whether arising out of a previous issue of bonds or by reason of a final judgment against the city. Upon the faithful performance of this duty by such trustees depends the financial credit of the city. The same section which imposes this duty further provides that “for the satisfaction of any obligation under their supervision, the trustees of the sinking fund may sell or use any of the securities or money in their possession.” This clause of Section 4517 confers a very broad power and discretion upon the trustees, a power and discretion that should be sufficiently broad to enable them to faithfully perform the duty imposed upon the trustees by the first clause of the same section.
It is not contended by the plaintiffs that the sinking fund commission is precluded from selling in
The only authority of the sinking fund trustees to issue bonds is conferred by Section 4520, General Code, which provides that for the purpose of refunding, renewing or extending the bonded debt at a lower rate of interest, or for certain other special purposes, the trustees may issue bonds of the corporation as provided in that section. It is provided by Section 4522, General Code, that such bonds issued by the trustees of the sinking fund “shall be sold as provided by law for the sale of bonds by a municipal corporation.” The provisions of law for the sale of bonds by a municipal corporation are found in Sections 3923, 3924 and 3926, General Code, which sections provide, in substance, that such bonds shall not be sold for less than their par value and that they shall be sold to the highest and best bidder after thirty days’ notice in two newspapers, etc., as set forth in those sections.
It is alleged in the petition and argued that the commission has no authority to sell such bonds for less than their par value. Plaintiff claims that the last clause of Section 3923, General Code, which reads, “In no case shall the bonds of the corpora
We are unable to find that Section 3923, General Code, controls- or limits- the power conferred upon the sinking fund trustees by Section 4517, General Code, to use or .sell any of the securities in-their possession fop the satisfaction of any obligation
It follows from what has been said that the sinking fund commission is not required to publish notice of the sale of the .bonds for thirty days as re
It is said that this construction of the law would open the door to fraud; that if the city found it could not sell its bonds at par as required by law, they might be taken over by the sinking fund commission and by that commission sold below par. If such a state of facts could be .shown to exist it would indicate fraud and an attempt to circumvent the provisions of the law providing for the sale of bonds by a municipality.
Every officer is expected and required to perform his official duties with integrity. Section 3923, General Code, reading, “only after the refusal of all such officers to take all or any of such bonds at par and interest, bona fide for and to be held for the benefit of such corporation, sinking fund or debt,” etc., is a declaration that the sinking fund commission must act in good faith for the benefit of the city sinking fund in the purchase of the municipal bonds.
If facts were alleged showing an attempt on the part of this city and its sinking fund commission to circumvent the law in respect to the sale of bonds by the city, the power of a court of equity might be invoked to prevent the consummation of such a sale. No such facts are alleged to exist in the case under consideration.
It is alleged and argued that the recitation in the resolution adopted by the sinking fund commission on October 22, that for the .purpose of accumulating funds to meet the obligations of the sinking
The motion of the defendant is granted and -a decree will be entered accordingly.
Petition dismissed.