Common Council v. Schlich

Grant, J.

On February 18, 1887, a petition was presented by some of the inhabitants of the village of Cedar Springs to the common council, requesting it to take action to obtain from the Legislature a special act enabling the village to issue special improvement bonds in the sum of 85,000, the proceeds thereof to be used in inducing the railroad company to construct its road through the village. The prayer of 'the petition was granted. The council appointed an agent to proceed to Lansing for the purpose of procuring such action from ■the Legislature; and on February 22 the act (No. 357, Local Acts of 1887) in question was passed, entitled—

“An act to authorize the village of Cedar Springs, in the county of Kent, to borrow money to make public improvements in said village.”

The bill was introduced in the Legislature and passed *409 both Houses on the same day. The act authorized the common council to borrow the money, and issue bonds therefor, upon a vote of the majority of the qualified electors of said village, and provided that the money arising therefrom should be expended in making public improvements within said village.

Pursuant to the provisions of this act, the common council, on March 4, made due provision for submitting the question to the electors at the coming charter election in March. The vote stood 189 for and 6 against the issue of the bonds. On March 19 the council adopted a resolution reciting the act of the Legislature, the vote of the electors, and providing for the issue of the bonds, to be deposited with the treasurer to await the further orders of the council. Thereupon five bonds of $1,000 each were issued, and recited that they were issued in pursuance of the above act of the Legislature and of a vote of the electors, and for the purpose of public improvements in said village. On April 1 the common council adopted the following resolution:

“ Whereas, the Toledo, Saginaw & Muskegon Railroad Company propose running their road from Greenville to Muskegon, and should they do so, and make Cedar Springs a station on said road, it is the judgment of this council that it would be a public benefit and improvement to the village of Cedar Springs:

“ Therefore, be it resolved by the common council of the village of Cedar Springs that the bonds of said village, lately issued thereby, and numbered from one to five, inclusive, for the sum of $1,000 each, be disposed of, the proceeds of which shall be expended in ditching the land along the side of said road-bed, and in making the road-bed through said village of Cedar Springs, and in making a suitable depot therein, and in fixing the water-course on the Oldfield and Nickerson land, should the road run there; that said bonds be deposited with E. Middleton, of Greenville, Michigan, to be delivered to David Robinson, Jr., president of the said railroad company, for the purposes aforesaid, upon said Robinson *410 depositing with said Middleton first mortgage bonds of said railroad company, on said railroad, for the sum of $5,000, and the note of said company for the sum of $5,~ 000, as security that the proceeds of said bonds shall be expended as aforesaid, and said railroad be completed and ready for cars on or before January 1, 1888, from G-reenyille to Muskegon, Michigan, or the bonds or proceeds returned to the village, of Cedar Springs within said time; and the treasurer of the village of Cedar Springs is hereby instructed to forthwith deposit said bonds with E. Middleton as herein directed.”

These bonds were negotiated in Toledo, and were purchased by Spitzer & Co., of that city, about September 12, 1887, for the sum of $4,000. Prior to this purchase, there were submitted to Spitzer & Co. the following documents, duly certified:

1. A statement from the ¡^resident of the village, dated April 9, 1887, made for the purpose of selling the bonds, and giving the number of inhabitants, the assessed valuation .of the village, the amount of money then in the treasury, and stating that the village had no indebtedness except that represented by these bonds.

2. The resolution of submission to the vote of the electors.

3. The election notice, and the result of the election.

4. The resolution of the common council of March 19, above stated.

5. A certified copy of the act of the Legislature.

The resolution of April 1, above given in full, was not submitted to Spitzer & Co. Subsequently, and about January 11, 1888, Spitzer & Co. sold these bonds, through Mr. Verdier, cashier of the Kent County Savings Bank, Grand Rapids, Mich., to defendant Schlich, for $4,635.36.

On June 1, 1888, the common council passed a resolution refusing to pay the interest which had matured upon these bonds, and on July 7, 1888, filed the bill in this cause, praying that these bonds might be declared null and void, and for an injunction to prevent the defendant from negotiating the same. The defendant *411 Schlich answered under oath, claiming to be a bona fide purchaser for value without notice.

Courts of equity are designed to afford relief to those who have acted conscientiously, in good faith, and with an honest purpose, and where, under the circumstances, they have not an adequate remedy at law. These courts cannot be successfully invoked to assist parties in taking advantage of their own deliberate wrong and willful misconduct.

The complainant, the citizens of the village of Cedar Springs, and the defendant railroad company entered into the discreditable scheme of attempting to defeat the plain provisions of the Constitution as interpreted by the courts. They all endeavored to accomplish illegally, but under the forms of law, that which they knew could not be accomplished legally. They all knew that they had no power to create this debt without an act of the Legislature, and that such an act, if passed, would be absolutely void if the real object to be accomplished was expressed in the title and body of the act. They therefore falsely represented to the Legislature that they desired the power to raise $5,000 by bonds for the purpose of public improvements. As if fearing an investigation, and to prevent objection on the part of any citizen, the complainant sent an agent, who hurried the bill through the Legislature in one day. We have not before us the case of a tax-payer who opposed the accomplishment of so gross a wrong, and is therefore entitled to ask relief from the burden imposed, but we have one of the very parties who promoted and actively assisted in the transaction asking. relief in a court of equity from its own gross and willful misconduct. The maxim, “He that hath committed iniquity shall not have equity/-’ applies with singular force to the conduct of the complainant in this case. A court of equity will leave this *412 complainant, the people of the village, and the defendant railroad company in the bed they have deliberately made, and to such defense as a court of law may find they are entitled to.

If the defendant Schlich was a bona fide purchaser without notice of the real object for which these bonds were issued, the village is bound to pay them. This is the only question that can be involved in a suit brought to recover upon these bonds; for they would be void in the hands of those who knew the history of the transaction, and the purpose for which they were issued. It was evidently the design of the village authorities and of their agents, and of the officials of the railroad company, to keep the real facts from those to whom they desired to sell the bonds. They must have known that the bonds could not be negotiated if the truth were known. This fact whether or not Schlich is a bona fide purchaser should be determined in a court of law.

If the result of denying relief to the complainant should be that these bonds may be transferred by the defendant Schlich to some other person who may be a bona fide holder, it is only a result of the complainant's own wrongdoing, and it is entitled to no relief in this Court.

The decree of the court below must be reversed, with the costs of both courts, and a decree entered here dismissing the bill.

The other Justices concurred.