Chelsea Sav. Bank v. City of Ironwood

Citations

• 130 F. 410
• 66 C.C.A. 230
• 1904 U.S. App. LEXIS 4173

Syllabus

<p>1. Municipal Corporations — Issue of Invalid Bonds — Liability fob Consideration Received.</p> <p>A city which issued and sold bonds for a lawful purpose,.and which were within its charter power, but were held invalid because such power was irregularly exercised, is bound, in equity, to return the consideration received.</p> <p>2. Same — Right of Recovery — Transfer of bonds by Purchaser.</p> <p>Where a city issued bonds which were subsequently adjudged invalid for irregularity in the manner of issuance, and sold the same to a firm which paid a part of the purchase price and resold them to others, the right to recover from the city the consideration received by it passed with the bonds to the holders, to the exclusion of a general receiver appointed for the original purchaser.</p> <p>3. Equity Jurisdiction — Grounds.</p> <p>A city issued and sold bonds which proved invalid, receiving part payment of the purchase price. The purchaser resold some of the bonds, and pledged others, after which a receiver was appointed for its property. In a suit by the city against the purchasing firm to recover the bonds, in which it tendered the amount received therefor, the receiver recovered a judgment for such amount, and instituted a new action in the federal court of the district in which the city was situated to enforce such judgment. Held, that a court of equity had jurisdiction of a suit by holders of the bonds against the city and receiver to enforce, in behalf of themselves and other holders, their equitable right to the amount due from the city, on either of the following grounds: First, that it sought to charge the receiver as a trustee holding the judgment for the benefit of the bondholders; second, that it sought to follow a fund which had been tendered by the city, and in which complainants claimed an equitable interest; third, because it appeared from the pleadings that there might be conflicting interests between the holders and pledgees of the bonds, which could o