In re Manistee Watch Co.

Citations

• 197 F. 455
• 1912 U.S. Dist. LEXIS 1439

Syllabus

<p>1. Municipal Corporations (§ 894*) — Recovery of Money Wrongfully Paid.</p> <p>Where money of a municipality has been paid out on a contract for an indebtedness which the municipality had no authority to make, it may be recovered back.</p> <p>[Ed. Note. — For other cases, see Municipal Corporations, Cent. Dig. §§ 1877, 1878, 2188; Dec. Dig. § 894.*]</p> <p>2. Municipal Corporations (§ 894*) — Preferred Claims — Unlawful Diversion of Municipal Funds.</p> <p>Where the funds of a municipality have been unlawfully diverted and can be traced into the property of an insolvent, they may be reclaimed as a trust fund by the municipality before any distribution is made to the general creditors of the insolvent.</p> <p>[Ed. Note.' — For other cases, see Municipal Corporations, Cent. Dig. §§ 1877, 1878, 2188; Dec. Dig. § 894.*]</p> <p>3. Municipal Corporations (§ 948*) — Bonds—Bona Fide Purchaser.</p> <p>A purchaser of municipal bonds must, at his peril, 'ascertain that the municipality had the power to issue the bonds, and that the authority assumed by its officers issuing them had been conferred and had not been exceeded, and, where either the power of the municipality or the authority of its officers to issue bonds is lacking, a holder of the bonds is not a bona fide holder.</p> <p>[Ed. Note. — For other cases, see Municipal Corporations, Cent. Dig. §§ 1982-1990; Dec. Dig. § 948.*]</p> <p>4. Bankruptcy (§ 345*) — Municipal Corporations — Priorities — Bonds — ■ Bona Fide Purchaser.</p> <p>A city issuing bonds to procure, beautify, and ornament suitable ground for a public park turned ovéis bonds to an industrial corporation establishing a factory in the city, and mortgaging its property to the c-ity. The corporation sold the bonds and became a bankrupt. Held that, though the city was liable on the bonds in the hands of innocent purchasers, it was not entitled to a priority over the claims of other creditors of the corporation, in the absence of making the bondholders parti