
    PURCHASES BY THE SINKING FUND TRUSTEES.
    Common Pleas Court of Butler County.
    Michael O. Burns, a Tax-Payer of the City of Hamilton, v. Clifford T. Kain, Mark Brillant, Harry S. Wonnell and Robert S. Woodruff, Trustees of the Sinking Fund of the City of Hamilton, et al.
    
    Decided, April 5, 1915.
    
      Municipal Corporations — SinJcing Fund Trustees Must Pay for Bonds Bought from the Municipality, Else no Title Passes — Section 3922.
    Bonds issued by a municipality must be first offered to the sinking fund trustees in their official capacity; if they have sufficient money on hand to purchase them and see fit so to do, they may take them, but if they have not money to pay for them it is their duty to decline them. A purchase of bonds from the municipality by the . sinking fund trustees without paying for them does not pass title and their surrender may be ordered.
    
      M. O. Burns and Andrevjs & Andrews, for plaintiff.
    
      B. F. Primmer and Giffen & Haines, contra.
    
      
      Affirmed by the Court of Appeals without opinion.
    
   Harlan, J.

This is a suit brought by the plaintiff as a tax-payer on behalf of the city of Hamilton, Ohio, to enjoin the sale by the sinking fund trustees of said city of $200,000 worth of bonds issued by the city for the purpose of building a city hall.

The facts necessary for a determination of the ease are as follows:

At an election held in said city in 1912, the question whether or not bonds in the sum of two hundred thousand dollars would be issued for the purpose of building a city hall was submitted to the voters, and at said election said proposition carried by the requisite number of votes.

Thereupon bonds were issued in said amount and were offered by the proper city authorities to the sinking fund trustees. The sinking fund trustees by resolution dated December 30, 3912, accepted said bonds. There was not sufficient money in the hands of the sinking fund trustees to pay for said bonds, nor has there ever been at any time sufficient money for said purpose. The bonds ever since their acceptance by the sinking fund trustees have been and still are in the custody of said sinking fund trustees.

Almost two years after they were accepted, to-wit, November 30, 1914, the sinking fund trustees adopted a resolution to advertise them for sale, not for the purpose of meeting any emergency that had arisen, but solely for the purpose of raising money to pay.for said bonds, and thus- supply the city with funds with which to construct the city hall.

They were advertised for sale and on the 23d day of December, 3914, the sinking fund trustees accepted the bid of Fields, Richards & Company for said bonds.

Thereupon the plaintiff brought this action alleging various grounds why said sale should be enjoined, but the case turns on the question: Have the sinking fund trustees authority to purchase bonds from the city without paying cash for them?

Tn determining this question the court is without the light of precedent, there being no reported case whore this question was raised.

In brief the claim of the plaintiff is that the sinking fund trustees are only authorized to invest the money received by them; that if they have no money to invest they must refuse the bonds when offered to them in their official capacity; that the word “invest” used in the statute presupposes that there is money on hand for the investment,. and does not contemplate a purchase on credit.

The defendants contend that when the bonds were offered to the sinking fund trustees and accepted by them and delivered to them, this constituted a valid sale and delivery of personal property ; that even if authority for such a purchase is not expressly given in the statute, there is nothing in the statute interdicting it.

The pertinent sections are as follows:

General Code, 4506 — “Municipal corporations having outstanding bonds or funded debts shall, through their councils, and in addition to all other taxes authorized by law, levy and collect annually a tax upon all the real and personal property in the corporation sufficient to pay the interest and provide a sinking fund for the extinguishment of all bonds and funded debts and for the payment of all judgments final except in condemnation of property cases, and the taxes so raised shall be used for no other purpose whatever.”

Then follow some sections which provide for the appointment of sinking fund trustees and their compensation, bond and organization, etc., down to Section 4514, which says:

“The trustees of the sinking fund shall invest all 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 hold in reserve only such sums as may be needed for affecting the terms of this title. All interest received by them shall be re-invested in like manner. ’ ’
General Code, 3922 — “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, or, in case there are no such trustees, to the officer or officers of such corporation having charge of its debts, in their official capacity. If such trustees or other officers of the sinking fund decline to take any or all of such bonds at par and accrued interest, the corporation shall offer to the board of commissioners of the sinking fund of the city school district such bonds or so many of them, at par and accrued interest and without competitive bidding as have not been taken by the trustees of the sinking fund, and the board of commissioners of the sinking fund of the ctiy school district may take such bonds or any part thereof. ”
General Code, 3923 — “Only after the refusal of all such officers to take all or any of such bonds at -par and accrued interest, bona fide for and to be held for the benefit of such corporation, sinking fund or debt, shall the bonds, or as many of them as remain, be advertised for public sale. In no case shall the bonds of the corporation be sold for less than their par value, nor shall such bonds when so held for the benefit of such sinking fund or debts, be sold, except when necessary to meet the requirements of such fund or debt.”

An offer to sell personal property on one side and acceptance on the other accompanied with a delivery of the property, would constitute as between individuals a valid contract of sale.

However, there is a marked distinction between the powers of an individual to. contract and the powers of a municipality. In dealing with a municipality it is not sufficient to say the law does not prohibit a contract or a particular course of procedure, but authority must be shown justifying it. The. power of a municipality is limited. Tt has that which is expressly given or clearly implied, and no other; doubtful claims to power are resolved against it. And I assume the same principle applies in construing the power of a municipal officer or officers.

The language of the statute is:

‘ ‘ The trustees of the sinking fund shall invest all moneys received by them in bonds of the United States, the state of Ohio, or of any municipal corporation,” etc.

The Standard Dictionary defines “invest”:

“To use money for any purpose from which profit is expected ; to lay out money or capital in the purchase of property.”

Did the sinking fund trustees “use” or “lay out” money in the purchase of said bonds ? They did not have and never have had sufficient money to use or lay out in their purchase.. They simply promised to pay for them, hoping and expecting to realize sufficient money from the sale of said bonfls to pay for them.

In construing a statute it is proper to consider the purpose of it, and the results which will follow its enforcement.

Let us suppose the sinking fund trustees were not able to realize enough to pay for the bonds, or that they were not able to sell the bonds at all. What redress would the city have? A money judgment would be vain. The sinking fund trustees would have no money, or at least not sufficient money to pay it.

In a proper case a court of equity will decree specific performance of a contract for a sale of personal property. If such a remedy existed in such a case it would be equally vain. Under such conditions all the city council could do would be to repossess itself of the bonds.

Or, again, if the sinking fund, trustees have authority to accept one issue of bonds without paying cash for them, they have authority to accept another, and .another, etc.

Then suppose the bond market is such that none of them can be sold, certainly a chaotic condition would result, the wheels of progress would be blocked, the city could not meet its obligations and its financial credit would be impaired or ruined.

The logical result of the contention of the defendants is to make the sinking fund trustees a brokerage house or selling agents for the city’s bonds. Such is not the intent of the statute. While the sinking fund trustees constitute a branch or arm of the etiy government, and while, as was decided by the Court of Appeals of Cuyahoga County, in the unreported case of City of Cleveland, by John N. Stockwell, v. Newton D. Baker et al, the intent of the statute is to encourage the investment of money in the hands of the sinking fund trustees in the bonds of that municipality, yet such investment is discretionary with said trustees. If they see fit they may. decline the bonds of the city, even though they have funds to invest, and may invest them in other securities permitted by statute. They are not selling agents; they stand upon the same footing as other purchasers.

It is further contended that the word “debt” of General Code, 2923, which states that the bonds shall be held for the benefit of ‘ ‘ such corporations, sinking fund or debt, ’ ’ means the debt for which the bonds were issued, which it is .argued in this case will be evidenced by the investment in the city hall.

The meaning of the language in question is not as clear as it might be as counsel frankly state, but the court can not agree with the above construction. The court is of the opinion that if the word “debt” is not mere surplusage, it means any valid debt of the city.

It is also contended that the sinking fund trustees have very broad powers, as held in Cleveland v. Baker et al, supra.

That ease doe's hold they have broad powers in disposing of the securities in their possession; that they may sell them without advertisement and below par. They are given this broad power to protect the faith and credit of the city.

It might be disastrous to the financial standing of a city which has an obligation to meet, tcrwait until bonds are advertised or until par or higher can be obtained fon them. That case is not in point here, because the power of the trustees in acquiring bonds was not before the court.

The court thinks that a proper construction of all the sections of the statute bearing on the subject is, that the bonds of a city must be offered to the sinking fund trustees in their official capacity; if they have sufficient money in hand to invest, in them, and see fit to do so, they may take the bonds. If they have not sufficient money to invest in them, it is then their duty to decline them. If they and all the other officers designated by statute refuse the bonds, it then becomes the duty of the city council to advertise them for public sale.

For the foregoing reasons the court is of the opinion the sinking fund trustees never obtained title to said bonds and are not entitled to their possession. The city council is entitled to their possession to proceed with them in accordance with the statute.

The injunction will be made perpetual.  