Stitt v. State, Ex Rel. , 42 Ohio App. 441 ( 1931 )

This case comes into this court on error from the court of common pleas of Warren county, Ohio, wherein judgment was rendered in favor of the relator, the People's State Bank of Indianapolis, Indiana, in a proceeding in mandamus brought on the relation of the bank against Frank V. Stitt and others. Substantially the allegations of the petition in mandamus are as follows:

It is alleged that the relator is a banking corporation, whose existence and right to do business are authorized by the state of Indiana, and that it has authority to do a general banking business, including the right to buy, sell, and collect notes; that the respondents constitute the council of the village of Mason, the mayor, and the clerk thereof; that pursuant to certain necessary legislation for the improvement of certain streets in said village, through the construction of water mains, fire hydrants, gate valves, and all necessary appurtenances for installation of a distribution water system, the council of said village on the 29th day of July, 1929, passed an ordinance providing for the issuance of a series of six notes of said village, aggregating twenty-five thousand dollars, in anticipation of a levy of a special assessment for the improvement of the streets designated in said ordinance, and notes thereafter issued in pursuance of said ordinance, and in anticipation of the sale of bonds to be issued by said village in anticipation of the collection of such special assessments under and by virtue of said ordinance to pay the owners' portion of the cost of constructing said improvement, which ordinance provided that such notes should be issued and sold under the provisions of Section 2293-24, General Code of Ohio. It is alleged that said ordinance further provided that said notes should bear 5 1/2 per cent. interest per annum, payable semiannually, should be dated on the 29th day of August, 1929, executed by the mayor and clerk, bear the seal of the corporation, and be made payable at the office of the treasurer of the village of Mason, Ohio, at the time of their maturity; that the full faith, credit, and revenue of said village of Mason, Ohio, was pledged for the prompt payment of said notes at maturity; that said notes were issued and according to their terms were due February 14, 1930; and that said notes specified on their face that they were issued in anticipation of a levy of special assessments for the improvement of certain streets mentioned therein, and in anticipation of the sale of bonds to be issued by said village in anticipation of the collection of such special assessments under and by virtue of the ordinance authorizing the same.

The relator further states that relying on said ordinance, and the performance of said obligation, and the duty of said village officers to levy such special assessments and to issue said bonds in accordance with the provisions of said ordinance, it purchased said notes, is now the holder thereof; that no part of said notes has been paid, and that the council of the village has not levied any assessment to pay the property owners' proportion of said obligation, nor has said council issued or sold any of said notes in anticipation of such special assessments; that demand has been made for appropriate action on the part of the village to cause said notes to be paid; and that the village has failed and refused to pass the necessary ordinances for the payment of said notes.

The relator prays for a writ of mandamus, requiring the respondents to pass the necessary legislation and take such action as is necessary to procure the money to satisfy said obligation.

The answer of the respondents, with the exception of the admission that no action has been taken by the village to pay the notes, is in effect a specific denial of the allegations of the petition.

The evidence shows that the relator bank is the holder of six notes, signed by the mayor and clerk of the village of Mason, Warren county, Ohio, bearing the official seal of the village. Five of these notes bear date of August 20, 1929, and one the date of September 10, 1929; four are for $5,000 each, one for $2,000, and one for $3,000. These notes were signed by the officers of the village November 14, 1929, and except for the amounts and the dates are alike.

The evidence shows that the notes were purchased and paid for by the bank November 20, 1929; that they are due and unpaid; and that although demand has been made for payment, the village has taken no action to pay the same.

Immediately after the receipt of the purchase price of the notes by the village, the amount was deposited by the officers of the village in the bank as a trust fund to be paid out to Cole and Moore, the contractors, upon vouchers signed by the board of trustees of public affairs of the village. This fund has been paid out upon such vouchers.

Legislation was adopted by the village council April 23, 1929, by ordinance No. 202, providing for "a complete water works system for the Village of Mason, Warren County, Ohio, declaring the necessity therefor and declaring it necessary to construct a distribution system for said water works and to lease a pumping unit for the purpose of supplying water to said distribution system, thus providing a complete system for the purpose of supplying water to and for said Village and to the inhabitants thereof."

Thereafter separate ordinances were passed by the council, providing for the installation of the distribution system and the execution of a lease contract covering the pumping unit.

The record shows that the contract for the installation of the pipes, mains, and other appliances constituting the distribution system was performed and that the contractors have been paid in full for such labor and material.

No action seems to have been taken under the ordinance authorizing the leasing of a pumping unit.

The contentions that the bank was guilty of collusion and fraud with the contractors Cole and Moore, and that it was not a bonafide holder of the notes in due course, are wholly unsupported by evidence; there being no scintilla of evidence supporting such insinuation.

Counsel for the respondents were permitted the utmost freedom in cross-examination. A great amount of this was wholly without any justification. The court in its desire to be fair gave the respondents every opportunity to destroy the bona fide character of the transaction with the bank, if possible. In spite of such opportunity, the respondents completely failed to show anything indicating that the bank was other than a bona fide holder of the notes in due course, having paid full value for same.

A number of irregularities have been mentioned, none of which we consider sufficient to offset the definite certificates of the officials of the village that the procedure was in all respects regular.

It is unnecessary to cite the many authorities holding that such certificates are binding upon the municipality when the instruments of obligation are held by innocent holders for value.

In the instant case the village was paid in full for the notes and has received that for which the indebtedness was incurred.

We quote from the opinion of the Supreme Court in the case ofState, ex rel. Bowman, v. Board of Commrs. of the County ofAllen, 124 Ohio St. 174, at pages 199 and 200, 117 N.E. 271,279, decided June 17, 1931:

"It is contended by defendants, however, that above do not apply here because in the instant case the improvement is a purely private one. Many authorities have been cited on that proposition, but an examination of them will disclose that in every instance where the taxpayers have prevailed there was an attack upon the improvement itself, and not a defense made to the bonds after they were issued and purchased by innocent holders. It is believed that not a single respectable authority can be found where the purpose was avowedly a public one, and the improvement was completed, and the obligations of the taxing subdivision had been issued to, and were owned by, innocent holders. The only instances which have been brought to our notice where the taxpayers have successfully defended against bonds were those where the law itself which authorized the improvement was an unconstitutional exercise of legislative power.

"It is not seriously contended in the instant case that the proceedings leading up to the improvement and the issuing of bonds were irregular, or that the statutory provisions have not been faithfully met. If any procedural steps have been disregarded, they have been cured by the issuance of bonds containing the necessary recitals of the lawful purposes for which they have been issued, which bonds have therefore become incontestable by reason of the provisions of Section 2293-37 of the General Code."

In the instant case injunction proceedings were commenced against proceeding with the improvement, and a temporary restraining order was issued against executing the notes. After a hearing this order was dissolved, the record herein showing that the court found that the proceedings were in all respects regular. Immediately after the dissolution of the injunction, the notes were signed. We are not advised from the record why the injunction proceeding was not prosecuted further. State, ex rel.Huntington National Bank, v. Putnam, Mayor, 121 Ohio St. 109,167 N.E. 360, is authority for the relief sought.

We are compelled to hold that there is no valid reason why the writ should not issue. The judgment of the court of common pleas of Warren county is therefore affirmed.

Judgment affirmed.

HAMILTON and CUSHING, JJ., concur.