The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1885-11-03
THE INTEREST MUST BE PAID
Judge Woods Decides that Evansville's
Bonds We're Legally Issued.
A Decision Involving the Payment by the City
of Nearly $1,SO0,000 of Bonds Which
We're About 10 Be Repudiated.


Gus bonds which have been issued during the
last fifteen years decisions were rendered in the
United States Court yesterday by Judge
Woods which will doubtless effectually put a
quietus upon the proposed effort of the city to
pudiate its indebtedness. The bondholders who
are plaintiffs in the three suits upon which
Judge Woods has ruled are the Portland Savings
Bank, W. II. Moulton, of Maine, and
Augustus T. Post, of New York. The bonds
held by the Portland Savings Bank aggregate
1906, 900, of which 800. 900 was issued May l,
1862 to raise money to pay the expenses OF i'm
provements on the city's wharves; $500, 600,
dated April !, 1876, issued for the redemption of
local improvement bonds; $4,000 issued May
Is, 1876: 800 00O dated June l, 1877; 500, 900,
dated April 10, 1873, and 00.000, dated Feb. l,
1881. The four last named were issued for the
redemption of local improvement bonds. Mr..
Moulton holds two bonds for $780, 900 EACH dated
May l, 1868. One of these was issued in aid of
the Evansville, Henderson & Nashville railway,
and the other upon a subscription to
che capital stock of the Evansville, Cairo 81
Paducah railway The bonds held by Mr.. Post
are for SIZE, 900. The aggregate amount held by
the three plaintiffs is 81. sos, 900, upon which
there is something less than $500, 600 of accrued
interest due, making the total amount involved
nearly 81, 800 900. Finding that it's bonded in
debtedness was greater than it could we'll carry.
the City Council of Evansville, in 1883, decided
to cease paying interest en- its bonds, and there
has since been much talk about reputation, the
course pursued by the city indicating that there
was such an intention. The suits by the
bondholders were brought for the purpose of en-
forcing the payment Of the interest due on the
bonds. In demurrer 10 the COMPLAINT OF the
plaintiffs, the citys attorneys. Mcdonald Butler
IL Mason, claimed that the bonds were not valid
obligations, because the city had no legal author
lty for issuing them.
In the decision on the Portland Savings Bank
suit, Judge Woods quotes the provisions of the
charter granted Evansville in l847, which give
the city authority to take stock in any char
tered company for making roads to said city. In
all cases where such stock is taken, the Common
Council shall have power to borrow money ami
levy and collect tax on all real estate for the
payment of said stock. To borrow
money for the use of said city"
The court thinks that there can be no question
of the authority of Evansville under its charter,
to execute the series of bonds involved in this
suit 1t is alleged, however, that these bonds
were delivered to the Merchants National Bank,
of Evansville, for seventy five cents on the dol
lar of their par value in exchange for the bonds
Of the city Heretofore issued in aid of the con-
struction of the Evansville Henderson g. Nash
vile railroad, the line of which did not run
through. to, or in said city, and that all these
facts were fully and plainly shown upon the
public records of the proceedings of the Common
Council prior to the delivery and exchange of
the bonds as stated. The court does not think
this good defense. The purchaser of the
coupons had right to rely upon the truth Of
the recital on the bonds in respect to tine
purpose for which they were made, and was not
bound to inquire whether or not there had been
cinyf fhotya 30 nCrA
of what the records of the Common Council
showed in that respect. 1t was not necessary to
demand the payment of the coupons out of
money derived from the wharf revenues pledged
for their payment. The promise of the city to
pay the bonds and coupons was absolute. and
was in no degree limited modified by the
pledge of special fund.
The force of the argument made against the
validity of the bonds consists largely, the Judge
thinks. in the assumption that redemption
fund requires the same authority for its execu-
ton as funding bond For reasons
indicated in the case OF Merritt VS..
Monticello (22 Fed. Rep, D. $500, there seems to
be manifest distinction. 1t may be conceded
though it by no means appears to be we'll set
tied, either upon authority or principle, that an
express and unrestricted power. such as was
given to Evansville to borrow money for munic-
ipal uses, does not include authority to enter
upon general funding scheme and to provide
the sinking fund indicated in such scheme; but
even when this concession is made. it involves no
inconsistency to say that such grant of power
embraces. not by implication, but by force of the
expression, the right of the city, whenever
the Common Council shall deem it
necessary and advantageous, to execute
new obligations In renewal re iemption of old
ones. or In order to obtain money to pay the old
ones If due, before their maturity if
thereby reduced rate of interest or other bene-
fit could be obtained. There can be no essential
difference between the reissued bonds and the
redemption bonds The name put upon them
and the rectals given in them. instead of show
ing reasons for discredit, constituted an assur-
ance to the purchaser that they were issued for
a lawful purpose.
In regard to the flour legislative enactments,
which the counsel for the defense claimed clearly
showed that the city did not prior to the enact
ment OF those statutes. possess power to issue
redemption and refunding bonds, the Judge
thinks that the number of these acts. perhaps,
detract from their force upon the exact point.
None of them contain restrictions in regard to
the rate of interest which the funded debt shall
bear. The Inference is fair that these enact
ments were intended to define rather than to de-
clare the power to refund
His answer to the suggestion that Evansville
mad ample taxing powers and consequently was
under no necessity to resort to an issue of this
kind of securities, the Judge says that while an
adequate power or taxation may, under some cir
cumstances. be enough TO forbid implication
of power to borrow. it affords no reason for put
ting a more restricted construction upon an ex-
press grant Alike the one under consideration
The power to both tax and borrow being granted.
it is a question of policy, to be decided by
the Common Council, whether in any instance
resort shall be had to or the ether and if
loan upon negotiable securities is made. the pur-
chaser of the bonds is protected accordingly.
The claim that the bonds called redemption
were issued and used for the purpose of paying
debts OF different kinds. the Judge thinks does
not touch the question of the power to make the
bonds or the rights of the holders
Some Inconsistencies are alleged between the
dates of the bonds and the dates required by the
resolutions authorizing their issue. These, and
like irregularities. however cannot affect the
right of innocent holders, especially as it is
shown that the city paid interest on the bonds
for years without question of their validity
For the reasons just given. the demurrer by
the attorneys for the plaintiffs, Baker Hord g.
Hendricks to each of the sixteen paragraphs in
the answer by the counsel for the city, to the