The San Francisco call., 1904-04-25
MIR. CRoTHERs' REASONS.

! ration of bill to be submitted TO the
California Legislature at its next reg
Ular session for adoption. If the Leg
islature shall take favorable action the
result will be, SO thinks Mr.. Crothers,
favorable to the public in several
ways. Mr.. Crothers admitted yester
day that ne will prepare bill. Con-
cerning the reasons therefor he said:
How can our new city bonds be made more
attractive to investors ard sold at higher
prices? The one great bugbear of investors in
city and other public bonds is the ever pres
ent fear that there is some hidden technical
defect in the proceedings leading UP to their
issuance, which may be disclosed at any time
at The instance of the corporation or OF any OF
its citizens In such event the municipality
is actually prohibited by law from meeting it's
moral obligations TO the investor whose money
IL has spent.
,rhe statutory and constitutional provisions
governing the issuance of bonds and the in
curing of d BITS are drawn with special view
TO prevent possible fraud and imposition upon
the municipality by it's own officials but they
entirely ignore the equities of innocent credi-
tors and the possible desire the part of the
public TO meet all moral obligations. For eX-
ample instead of making il felony for city
officials to incur obligations in any year IN
excess of TIE revenues for that year. the law
provides that the individuals who contract with
municipalities must run the risk OF losing their
deferred payments by the wrongful mourning
OF subsequent obligations in excess OF the
limit. Our charter attempts TO remedy
this particular abuse. When a public corpora
tion desires cancel an agreement it is not
even allowed to r turn the money received, as
any private quasi-public corporation would
be Obliged to do.
The provisions referred to are permanently
fixed in our State constitution The question
is how to absolutely assure purchasers of the
validity of the vast issues of bonds about to be
made without attemp'ing to modify the laws
The present method of testing such bonds is
tacking the issue. This is open to two objec-
/ tions. First if il should subsequently be
shown that the proceeding was collusive, any
I Judgment obtained would De set aside. sec
ondly, it determines only those questions
raised and the judgment does not stop subse-
hznany instances of protracted litigation over
! public bonds. but few are aware OF the great
number Of bond issues which have been de-
clared void after the municipalities have re-
ceived and spent the money of Innocent pur-
Z Nothing short of a proceeding in the nature
/ of action in rem. similar to that which has
/ termination Of the validity of irrigation dis
trict bonds, Will fully satisfy the requirements.
That act is unusual, but has been repeatedly
sustained by our Supreme Court as well as Dy
the FeGeral courts.
The act provided that The board of direct
ors OF a. irrigation district may COM
mence a special proceeding in and by which
the proceedings of said board and of said dis
trict providing for and authorizing the issue
and sale OF the bonds OF said dis
trict whether said bonds any Of
them have or have not then been Sold may be
iudicially examined approved and confirmed -
dressed in general terms TO and is binding
upon all parties interested in the the processing;
specifically controverted by the answer must,
for the purposes of said special proceeding be
taken as true and each person falling to an
! swer the petition shall be deemed to admit as
true all the material statements of the petit
ton
1t also provided. among other things.
that Upon the hearing of such special proceed
ing the court shall have power and jurisdiction
to examine and determine the legality and va
lidity of and approve and confirm each and all
of the proceedings for the organization Of said
district under the provisions of the said act
from and including the petition for the organ
ization of the district and all other proceeds ncs
which may affect the legality validity of
said bonds and the order for the sale and the
sale thereof