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Reporter's Statement of the Case and effect until payment of or provision for the total amount of principal of and interest on all of the outstanding Bonds at that time held by the Government and the

public, and also the interest is made. Upon the happening of such event the Depositary shall cause the Escrow Bonds to be delivered to the City with all unmatured coupons thereto attached and ail matured and unpaid coupons attached to said Bonds and the City, upon receipt thereof, shall cancel the same and deliver to the Depositary a certificate to such effect.

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IN WITNESS WHEREOF, the City of Long Beach, New York, has caused this Agreement to be executed by its Mayor and its corporate seal to be hereunto affixed, the same to be attested by the signature of the City Clerk, and the National City Bank of Long Beach, as Depositary, has caused this Agreement to be signed in its corporate name in its capacity as Depositary, by its President or one of its Vice-Presidents and its corporate seal to be hereunto affixed and the same to be attested by the signature of its Cashier or Assistant Cashier, and the United States of America, acting by and through the Federal Emergency Administrator of Public Works has caused this Agreement to be executed on its behalf, all

as of the day and year first above written. 7. Interest on the so-called $400,000 "grant" bonds for the period November 1, 1935, date of the bonds, to April 1, 1938, date of the trust agreement, amounts to $38,666.67. Interest on $400,000 for the period of construction was $19,866.80, which interest was allowed and approved as part of the base for grant. The grant being 45 percent, the Government has paid plaintiff, by way of grant $8,940.06 interest on the grant block of $400,000. The interest on this block that had accrued March 20, 1936 (date of delivery of all bonds to the Government) amounted to $6,177.76 and was paid by the Government to the plaintiff. The two interest items of $8,940.06 and $6,177.76 aggregate $15,117.82, which, deducted from interest on the grant bonds of $38,666.67, November 1, 1935, to April 1, 1938, leaves a remainder of $23,548.85, which the plaintiff claims.

8. If the trust agreement had been prepared and executed shortly after the completion of the project only an inconsiderable amount of interest could have been the subject 94 C. Cls. Opinion of the Court of dispute. There is no evidence that the delay in executing the trust agreement was intentional on the part of the defendant or its officers, and the evidence, taken as a whole, fails to show that at the time the trust agreement was executed the officers or agents acting for the respective parties misunderstood the provisions of the trust agreement with reference to interest on the bonds which were deposited in escrow.

The court decided that the plaintiff was not entitled to recover.

GREEN, Judge, delivered the opinion of the court:

The plaintiff is a city and municipal corporation of the State of New York, located upon the ocean, and the evidence shows without conflict that the defendant made to this city an offer to aid in financing the construction of a beach and ocean front improvement through a loan and grant. This offer was made in writing and is set out in finding 2 of the preceding Findings of Fact. In this offer it was proposed that the defendant would make a grant to the plaintiff in the amount of 45 percent of the cost of the project upon completion, as determined by the Federal Emergency Administrator of Public Works, and by purchasing at the principal amount, plus accrued interest thereon, from the applicant, obligations of the description set forth in the offer in the aggregate principal amount of $1,352,000, including in the amount of such obligations bonds estimated at $400,000, which, to effect payment of any part of the 45 percent grant, might be purchased and held for ultimate cancellation, less the amount of such obligations, if any, as the plaintiff, with the consent of the said administrator, sold to purchasers other than the defendant.

The offer was conditioned on the issuance by plaintiff of obligations in the aggregate principal amount of at least 78 percent of the estimated total cost of the project, exclusive of the cost of the land, and the execution by the plaintiff of a trust agreement which should provide for the rights and priorities of the several owners of such obligations.

This offer was accepted by the plaintiff on October 19, 1935.

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Opinion of the Court Bonds of the plaintiff of the type described in the offer, in the principal amount of $1,352,000, drawing interest at the rate of 4 percent per annum, were delivered to the defendant March 20, 1936, the first interest thereon payable May 1, 1936, with such interest coupons as were unpaid attached to the bonds; and for this delivery the plaintiff received from the defendant $1,372,880.89, being the principal amount of the bonds, plus interest of $20,880.89.

On June 16, 1937, the project was completed and in accordance with the proposal the Federal Emergency Administration of Public Works caused an audit to be made in order to determine the amount of the grant. In allowable costs the auditor included interest during construction at the rate of 4 percent per annum upon the principal amount of $1,352,000. The total allowable net cost ascertained by the auditor was $1,647,805.19, forty-five percent of which is $741,512.34. When the audit was completed there had been paid by defendant to the plaintiff $315,550.00, leaving a balance due on the grant of $425,962.34. The Federal Emergency Administration of Public Works approved the audit and no objection was made to the audit by the plaintiff.

The trust agreement referred to in the offer was executed on April 1, 1938, by the plaintiff, the defendant, and the National City Bank of Long Beach as depositary. Under it the defendant delivered to the depositary, in escrow, the bonds (stamped nonnegotiable) of the plaintiff, in the aggregate principal amount of $400,000, with all unmatured coupons thereto attached, which were received by the depositary in behalf of the holders of the remaining bonds of the plaintiff issued and held by the defendant, for the purpose of creating a contingency fund in the "bond fund”, which was a special trust fund to assure the prompt payment of the interest and principal of the other bonds remaining outstanding. The interest on the escrow bonds becoming due, when paid was to be deposited in the bond fund and applied on any sum that was due on the other outstanding bonds which had been issued by the plaintiff. When these bonds and interest thereon had been paid the depositary was to

94 C. Cls.

Opinion of the Court

cancel and deliver to plaintiff all the escrow bonds and coupons attached.

Of the sum of $425,962.34 still due the plaintiff as a part of its grant at the time of the execution of the trust agreement, $400,000 was paid by delivery of that amount of the bonds to the depositary, and the balance was paid to plaintiff in cash.

The interest on the $400,000 "grant" bonds for the period from November 1, 1935, the date of the bonds, to April 1, 1938, the date of the trust agreement, amounted to $38,666.67. Interest on the $400,000 for the period of construction was $19,866.80, which interest was allowed and approved by the auditor as a part of the base for the grant. The grant being 45 percent, the Government paid plaintiff, by way of grant, $8,940.06 of this interest. The interest on this block of bonds that had accrued prior to March 20, 1936 (date of delivery of all bonds to the Government), was $6,177.76. This sum was also paid by the Government to plaintiff. The two interest items of $8,940.06 and $6,177.76, aggregate $15,117.82, which deducted from interest on the grant bonds of $38,666.67, for the period from November 1, 1935, to April 1, 1938, leaves a remainder of $23,548.85, which the plaintiff claims, alleg. ing that it had been collected by the defendant over and above the amount of interest paid or allowed by the defendant to the plaintiff as above stated.

The plaintiff makes in its petition a very extended prayer for relief asking (1) That it be decreed that the delay in the execution of the trust agreement be excused and that the trust agreement be reformed and deemed executed nunc pro tunc as of a day within a reasonable period after June 16, 1937, the date of the completion of the public works project; (2) That the defendant be not permitted to retain the said sum of $23,548.85; (3) That the defendant be compelled to return the sum of $23,548.85 to the plaintiff to be deposited by the latter in the "Beach Improvement Bond Account"; (4) That it be decreed that the sum of $23,548.85 is not lawfully or properly in the possession of the Treasurer of the United States; (5) That the court exercise its equitable powers to mete out justice to the plaintiff; and (6) That the

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Opinion of the Court plaintiff have such other further relief as this court may deem proper and just in the premises.

This widespread prayer for relief makes it difficult to determine what plaintiff regards as the main features of its case, and the issue raised is further complicated by the fact that the written contracts upon which the case depends are not clearly framed. There are, however, certain salient facts appearing in the case which we think are controlling. It appears that the defendant made an offer, in writing, to the plaintiff, of a loan and grant to be used in financing a public improvement, and part of the proposal was that defendant would purchase coupon bonds from the plaintiff, drawing interest at the rate of 4 percent, in the principal amount of $1,352,000, including bonds to the amount of $400,000, which were to be held by a depositary agreed upon under the terms of a trust agreement thereafter to be executed, as security for the payment of the bonds issued for the loan made to plaintiff. The controversy in the case arises over the interest which came due on the $400,000 in bonds which were delivered to defendant and eventually placed in escrow with the depositary in accordance with the trust agreement.

As previously stated the interest on the bonds which were deposited in escrow, from the date thereof to the date of the trust agreement, amounted to $38,666.67. The plaintiff paid the amount of the matured coupons to the defendant, less two deductions, one of which was $6,177.76 interest which had accrued on the $400,000 in bonds when they were delivered to the defendant, and the other deduction was $8,940.06, which is 45 percent of the interest on the $400,000 during the period of construction, which interest was treated by the auditor as part of the construction cost. The remainder of the interest, $23,548.85, the plaintiff says was wrongfully collected by the defendant, and the issue between the parties arises on this claim.

The plaintiff concedes that this interest was paid in accordance with the terms of the bonds which it issued and delivered to the defendant, and that in order to obtain any relief its contract with the defendant must be reformed. Plaintiff does not specify definitely what this reformation should be, but it is obvious that the bonds cannot be re

421221-42-CC—vol. 947

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