Brief for the Respondents in Opposition — City of Harvey v. Getz

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TABLE OF CONTENTS.

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I. Respondent’s reply to petitioners’ proposition :

‘‘Respondent, John G. Getz, Jr., is not a bona

fide purchaser for value of the $243,000 par

value certificates of indebtedness of the City

of Harvey, the subject matter in this suit.”’.. 8

II. Respondent’s reply to petitioners’ proposition:

‘“‘There was a binding refunding contract. be-

tween the City of Harvey and A. C. Allyn &

Company.’’ | 14

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Conclusion

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FEEDER TEA ABATE EA OL REN SON Ree ate ae

ii

List or AuTHorities CITED.

Arnold v. Village of Ina, 244 Ill. App. 239, 249...... 12

Berman v. Board of Education, 360 Ill. 535, 541..... 13

Chicago v. Brede, 218 Ill. 528, 536.................. 13

City of Ottawa v. Hulse, 317 Ill. 276, 277.......... 10

City of Zion v. Christian Catholic Church, 286 Il.

Man: GE, TA, GR 5 ani o eae kid bcc cs pede e's ll

Crowell v. Benson, 52 S. Ct. Rep. 285, 298; 285 U. S.

BE errr ge er ree were eet nee eee Oe 3

Freiner v. Lane, 302 Ill. App. 248, 256............. 14

Inhabitants of Montclair v. Ramsdell, 2 S. Ct. Rep.

ee fe eke ee a Sree terror yy hye 9

Magnum Import Co. v. Coty, 43 S. Ct. Rep. 531, 532;

ee Bis ey ahs er sed oan Sankt ens av een

Roemheld v. Chicago, 231 Ill. 467, 470............... 12

Silverman v. Bullock, 96 Til, 11. ..........cccccccsses 14

U. S. v. Johnston, 45 S. Ct. Rep. 496, 497; 268 U. S.

«SERA e I iS Rime eee Peek eee Oo 2

Village of Bellwood v. Galt, 321 Ill. 504, 508, 509.... 12

Wolford v. Rusk, 145 Ill. App. 405......... Py ke a 14

Statutes CIrep.

PAGE

See. 22, Commission Form of Government Act, Ch. 24,

Par. 286, p. 397, Ill. Rev. Stats. 1937..... 5, 9, 10, 12, 13

See. 33, Commission Form of Government Act, Ch. 24,

Par. 298, p. 399, Ill. Rev. Stats. 1937..... 5, 10, 11, 12, 13

FT Re PN Area ate z _

IN THE

Supreme Court of the United States

Ocroser Trrau, A. D. 1940

No. 1038

JOHN G. GETZ, JR.,

Respondent

7411 vs.

?

CITY OF HARVEY,

a municipal corporation,

Petitioner.

BRIEF OF RESPONDENT IN OPPOSITION TO

PETITION FOR WRIT OF CERTIORARI.

To the Honorable Chief Justice and Associate

Justices of the Supreme Court of the United States:

| FOREWORD.

May Ir PLEASE THE Court:

The petition for writ of certiorari filed by the City of

Harvey, a municipal corporation in the County of Cook

and State of Illinois, and its officials, relates to the appeal

2

of John G. Getz v. City of Harvey, et al., No. 7411, in the

Circuit Court of Appeals for the Seventh Circuit.

Petitioners have limited their appeal to two questions:

(1) Whether John G. Getz, Jr., respondent, had notice of

the alleged agreement entered into between the City of

Harvey and Roy D. O’Brien; and (2) Whether or not

John G. Getz, Jr. was bound by latent equities, if any, in

favor of the city as against Roy D. O’Brien.

Jurisdiction in this court is claimed on the ground that

the decision of the Circuit Court of Appeals for the Sev-

enth Circuit is contrary to local decisions in similar ques-

tions. We submit that the cases of the Illinois Supreme

Court and the Illinois Appellate Court which the Circuit

Court of Appeals cited relating to the two questions now

raised by petitioners are specifically applicable to the

facts in the instant matter and are the established law

of the State of Illinois.

Counsel for petitioners has not set forth any evidence

to contradict the facts as set forth in the opinion of the

Cireuit Court of Appeals. The statement of the facts and

the law as set forth in the opinion appear in the tran-

script of the record at pages 932 to 934, inclusive.

In view of the fact that the issues decided by the Circuit

Court of Appeals are in strict conformity with the de-

cisions of the Illinois Supreme and Appellate Courts,

petitioners seek by certiorari to review and discuss only

specific facts to the exclusion of all the facts as estab-

lished by the evidence. Under such circumstances, this

court has held:

‘‘We do not grant a certiorari to review evidence

and discuss specific facts.’’

U. S. v. Johnston, 45 8S. Ct. Rep. 496, 497; 268

U. 8. 220.

EPL SILLS ARAL LIENS sonemenslll

3

‘“‘The writ of certiorari was not granted to review

the particular facts, but to pass upon the question

of principle.’’

Crowell v. Benson, 52 S. Ct. Rep. 285, 298; 285

U. S. 22, 65.

“The jurisdiction was not conferred upon this

court merely to give the defeated party in the Cireuit

Court of Appeals another hearing. Our experience

shows that 80 per cent. of those who petition for cer-

tiorari do not appreciate these necessary limitations

upon our issue of the writ.’’

Magnum Import Co. v. Coty, 43 S. Ct. Rep. 531,

532; 262 U. S. 159, 163.

REP IGE AL AL PINT RETA AE RO IY SE FEAT REY ON TE MOIRA IR SY RE THON TAI TINT LO Ey

SUMMARY OF ARGUMENT.

eS

I.

Respondent’s reply to petitioners’ proposition:

“‘Respondent, John G. Getz, Jr., is not a bona fide

purchaser for value of the $243,000 par value certifi-

cates of wmdebtedness of the City of Harvey, the

subject matter in this suit.’’

1. Petitioners’ own evidence established that C. S. Mott

purchased the 243,000 water fund certificates of in-

debtedness by paying $243,000 in cash.

(a) Mr. Getz purchased the certificates from Mr. Mott

and gave his note for the full amount and de-

posited the certificates as collateral security for

its payment.

(b) The statement made by counsel for petitioners

that Mr. Getz testified that his note was not a

good note failed to state all that Mr. Getz said.

Mr. Getz stated that he could not issue a note of

that magnitude unless it was secured by good col-

lateral and in his opinion the water fund certifi-

cates which were pledged as collateral were good.

(c) C. S. Mott having paid full value for said water

fund certificates it is immaterial to the petitioners

what the transaction was between Mr. Mott and

Mr. Getz.

Petitioners contend that the water fund certificates,

being non-negotiable instruments, respondent was un-

der duty to inquire of the maker the reason for the

default.

bo

PT RE eRe Ey

5

(a) The record in this case establishes that the de-

fault in the payment of principal and interest on

the water fund certificates was due to the diver-

sion of those funds by the City officials for other

purposes.

(b) The accounting in this suit first established those

facts.

. Respondent did not have any notice or knowledge of

the alleged agreement between O’Brien and the City

of Harvey.

(a) Under Section 22 of the Commission Form of

(b)

(ce)

Government Act it is mandatory that every mo-

tion, resolution and ordinance shall be reduced to

writing and read before vote is taken, and upon

every vote the ‘‘yeas’’ and ‘‘nays’’ shall be called

and recorded.

Under Section 33 of the Commission Form of

Government Act the making or authorizing of

any contract must be in writing, must remain on

file with the city or village clerk for public in-

spection complete in form in which it is finally

passed, at least one week before the final passage

or adoption thereof.

The Supreme Court of the State of Illinois has

construed the foregoing sections to be mandatory

and unless complied with the agreement is invalid.

. Neither the alleged agreement dated April 20, 1936,

nor

the alleged agreement dated September 8, 1936,

were acted upon by the city council as required by

Sections 22 and 33 of the Commission Form of Gov-

ernment Act.

(a)

A secret meeting was held on April 21, 1936, in

a small room off the city clerk’s office.

6

(b) The city clerk testified that he had always kept

minutes of the proceedings of the city council

except the alleged meeting of April 21, 1986. No

meeting was called to consider the proposal of

September 8, 1936.

(c) Upon being questioned by the master why no

record was made of the meeting of April 21, 1936,

the city clerk testified that he was instructed by

the mayor not to keep the minutes because the

refinancing was something they wanted to keep as

quiet as possible and not give too much publicity

because ‘‘we were trying to get the certificates in

at as low a figure as possible.’’

(d) In view of the fact that no records were kept

of the O’Brien transactions obviously Mr. Getz

could not have obtained knowledge or notice from

the records either by inspection or by constructive

notice.

The City of Farvey has no power or right to purchase

outstanding water fund certificates. This has been

clearly established by the Illinois Supreme Court de-

cisions.

The Cireuit Court of Appeals found that Mr. Getz had

no knowledge of any dealings between the City of

Harvey or O’Brien and Allyn & Company; that if the

City of Harvey could claim any equity as a defense,

it would come within the well-established rule as laid

down by the Illinois Supreme and Appellate Courts

to the effect that latent equities between intermediate

parties cannot be set up as against a purchaser for

value after maturity.

II.

Respondent’s reply to petitioners’ proposition:

“There was a binding refunding contract between

the City of Harvey and A. C. Allyn & Company.’’

1. Counsel for petitioners’ contention that the O’Brien

contract was dependent upon O’Brien’s ability to ac-

quire sufficient certificates to ‘declare his plan work-

able’? and was not dependent upon his ability to

acquire all of the outstanding certificates is fallacious

in that unless Mr. O’Brien was able to acquire all

of the outstanding certificates it would have been im-

possible for him to declare the plan workable.

(a) The petitioners’ own evidence conclusively proved

from the records of A. C. Allyn & Company and

Stifel, Nicolaus & Company that $222,000 par

value of water fund certificates was the total num-

ber that A. C. Allyn & Company had ever been

able to acquire. The total number of certificates

to be refunded was $452,000.

(b) Mr. O’Brien testified that it was impossible to

acquire the balance needed to refund the two

issues.

2. The Cireuit Court of Appeals’ decision fully conforms

with the Illinois law.

REE SEM eee

8

ARGUMENT.

I.

Respondent’s reply to petitioners’ proposition:

**Respondent, John G. Getz, Jr., is not a bona fide

purchaser for value of the $243,000 par value certifi-

cates of indebtedness of the City of Harvey, the sub-

ject matter in this suitt.’’

The petitioners’ own evidence established that C. S.

Mott purchased the $243,000 water fund certificates of

indebtedness by paying $248,000 in cash. The Circuit

Court, in its opinion, referred to the various trades in

these securities among A. C. Allyn & Company, Stifel,

Nicolaus & Company, and others between October 15,

1936, and November 15, 1937, at prices ranging from 70c

to par. ‘‘Eventually on August 18, 1937, Stifel, Nicolaus

& Company sold to one Mott in Detroit, Michigan, $220,-

000 and on November 17, 1937, $21,000 in certificates, all

at par. Mott paid cash and entered into no arrangement

for repurchase by the seller. The securities were sold to

him without recourse and for cash. Thereafter Mott sold

them to plaintiff at par. Plaintiff executed his note for

the full amount and deposited the certificates as collat-

eral security for its payment.’’ (Tr. 932)

The statement made by counsel that Mr. Getz testified

that his note in that amount was not a good note failed

to state all that Mr. Getz said. What Mr. Getz stated in

response to a question by Mr. Dowdle is as follows:

‘‘T would say freely to you that my note in that

amount is not a good note except as the value of the

things I purchased with that are geod, which in my

9

opinion they are. * * * But, if what you are getting

at is that the amount of money that I may have earned

doesn’t warrant my issuing a note of this magnitude,

I say that’s perfectly true and admitted, except in so

far as what I purchased with the note is the value.’’

(Tr. 218)

In so far as petitioners are concerned, whether the

note which Mr. Getz gave to C. S. Mott is good or not is

immaterial. The fact still remains that Mr. Mott paid

$243,000 in cash for the water fund certificates and in

turn sold them to Mr. Getz.

“cw * * if any intermediate holder between the de-

fendant and the plaintiff gave valne for the bill, that

intervening consideration will sustain the plaintiff’s

title.’’

Inhabitants of Montclair v. Ramsdell, 2 S. Ct.

Rep. 391, 401; 107 U. S. 147, 156.

The second point argued by petitioners is to the effect

that the water fund certificates being non-negotiable in-

struments, respondent is under duty to inquire of the

maker the reason for the default. Obviously, from the

record in this case, the reason for the defaultinm payment—~ .

of principal and interest of the water fund certificates was

because the officials of the City of Harvey diverted the

funds for other purposes. Counsel, however, states that

if respondent had inquired into the reason for the default

he would have been informed of petitioners’ claims against

A. C. Allyn & Company.

In answer to this contention it is necessary to point out

to this court, as was pointed out in our briefs to the

Cireuit Court of Appeals, that the City of Harvey is

organized under what is known as the Commission Form

of Government Act of the State of Illinois. Section 22

of this Act is as follows:

“Every such city or village shall be governed by

a council, consisting of the mayor and four commis-

10

sioners, as provided in this Act, each of whom

shall have the right to vote on all questions coming

before the council. Three members of the council

shall constitute a quorum, and the affirmative vote of

three members shall be necessary to adopt any mo-

tion, resolution or ordinance, or pass any measure,

unless a greater number is provided for by this Act.

‘Upon every vote the ‘yeas’ and ‘nays’ shall be

called and recorded, and every motion, resolution or

ordinance shall be reduced to writing and read before

a vote is taken thereon, and all the commissioners,

including the mayor, present at any meeting shall

vote thereon.’’ (Italics ours.)

Chap. 24, Par. 286, p. 397, Ill. Rev. Stats. 1937.

Section 33 of the Commission Form of Government

Act specifically prescribes the following:

““* * * Every ordinance or resolution appropriat-

ing any money, * * * or making or authorizing the

making of any contract * * * shall remain on file with

the city or village clerk for public inspection, com-

plete in form in which it is finally passed, at least

one week before the final passage or adoption there-

of.’’ (Italies ours.)

Chap. 24, Par. 298, p. 399, Ill. Rev. Stats. 1937.

The foregoing sections have been construed by the TIli-

nois Supreme Court to be mandatory and that if any

action is taken or any contract is entered into which does

not strictly comply with these provisions the same is null

and void.

‘*Appellant objected to the confirmation of the as-

sessment on the ground that the ordinance is void

for the reason that it was not on file with the city

clerk for public inspection for one week before its

passage. * * * One of the necessary steps prescribed

by the Act regulating the passage of ordinances in

the city of Ottawa was omitted, and therefore the

ordinance was not legally passed. * * * The objection

challenging the validity of the ordinance should have

been sustained.”’

City of Ottawa v. Hulse, 317 Ill. 276, 277.

11

In the case of City of Zion v. Christian Catholic Church,

286 Ill. App. 449, the court held a lease invalid because

the city council had not let it lie over a week as required

by Section 33.

‘«* * * Tt therefore appears from this record that

at the final meeting of the city council prior to the

new council assuming office, the proposed form of

lease agreement was presented by appellants and

acted upon by the council contrary to sec. 33 of the

act. This section was before the Supreme Court in

the case of City of Ottawa v. Hulse, 317 Ill. 276. It

was there held that the provision of said section

requiring any such contract, etc., to remain on file

with the city or village clerk for public inspection, at

least one week before the final passage or adoption,

was mandatory and that a compliance with such pro-

vision was necessary to the validity of any ordinance

or official act of the council coming within its terms.

We are of the opinion that what was said in that case

is controlling in this ease.’’ (Italies ours.)

City of Zion v. Christian Catholic Church, 286

Ill. App. 449, 451, 452.

We have set forth the foregoing sections of the Com-

mission Form of Government Act for the reason that the

alleged agreement between the City of Harvey and Roy

D. O’Brien was never acted upon by the city council as

required by those particular sections. The evidence estab-

lished that there was an alleged meeting held on the 21st

day of April, 1936, called for the purpose of considering

the O’Brien proposal dated April 20, 1936. This was a

special meeting held in a small room off the city clerk’s

office. No notice with reference to this special meeting

had been sent out in writing; the officers were called by

telephone on the same day as the meeting was held. (Tr.

435) In answer to the following questions Mr. Norton,

the City Clerk of the City of Harvey, testified as follows:

*“*. Now, as city clerk, you always keep minutes

12

of the proceedings, do you not? A. Not always. I

did not in this case.

Q. How many other cases besides this? A. None

to my knowledge. This is unusual.

Q. This is unusual? A. Unusual case. (Tr. 435)

*

* * *

Q. And after this meeting here, you made no memo-

randum, did you, regarding what was done there, in

writing? A.. No, sir.’’ (Tr. 437)

In replies to questions put by the Master, Mr. Norton

stated the following:

**. Can you explain why it was that no record

was made at that time of that proceeding? A. Yes,

sir.

Q. I would like to have you do so. A. I was in-

structed by Mr. Bruggeman [the mayor] not to keep

the minutes, because this refinancing was something

that they wanted to keep as quiet as possible, and not

give too much publicity because we were trying to

get the certificates in at as low a figure as possible.’’

(Tr. 437)

The foregoing testimony, which was corroborated by the

mayor and the commissioners, proved that no records

of the alleged transactions between Roy D. O’Brien and

the City of Harvey were ever made. Consequently, the

alleged agreement with Roy D. O’Brien dated April 20,

1936, was never made part of the records of the City of

Harvey as required by Sections 22 and 33 of the Com-

mission Form of Government Act, and therefore was not

only a matter not of record but also was not a legal con-

tract.

It has long been the rule in Illinois that a city or village

must keep a record of its proceedings; that such a record,

which is the only source of evidence by which official

action can be snown, which does not show any action

shows that none was taken. (Village of Bellwood v. Galt,

321 Til. 504, 508, 509; Roemheld v. Chicago, 231 Ill. 467,

470; Arnold v. Village of Ina, 244 Til. App. 239, 240.)

al

13

It is apparent that if Mr. Getz had sought to inquire

into the alleged transactions between Roy D. O’Brien

and the officials of the City of Harvey the records, which

would have been the only available source by which such

transactions could be established, would have shown noth-

ing regarding this matter. The entire transaction, as testi-

fied to by the city clerk, was to have been kept secret.

Furthermore, the city clerk testified that ‘‘We were try-

ing to get the certificates in at as low a figure as pos-

sible.’’? This indicates the motive that actuated the secrecy

of this transaction. The object, as disclosed by petition-

ers’ theory, was to purchase the water fund certificates

at a low figure. That the City of Harvey had no such

power or right is equally well established under the de-

cisions of the Illinois Supreme Court. (Chicago v. Brede,

218 Ill. 528, 536; Berman v. Board of Education, 360 Il.

535, 541.)

The alleged agreement with O’Brien dated September

8, 1936, was never acted upon by the city council as re-

quired by Sections 22 and 33 of the Commission Form of

Government Act or in any manner whatsoever. By its

terms it expired in 90 days from September 8, 1936. As

far as the evidence disclosed the agreement expired un-

der its own terms.

The Cireuit Court of Appeals, in considering these

two agreements, found that Mr. Getz had no knowledge

of any dealings between the City of Harvey and O’Brien

or Allyn & Company. (Tr. 932) Notwithstanding this, the

court pointed out that even were Mr. Getz bound by the

so-called proposal and negotiations between O’Brien and

Allyn & Company on the one hand, and the city on the

other, upon analysis of those transactions it was apparent

that no equity arose in favor of the city. However, even

if the City of Harvey were to claim any equity as a de-

TERE ALENT YARIS TONE EERE Ie SRS

14

fense, it would come within the rule cited by the Circuit

Court of Appeals to the effect that it was a latent equity

and one that would not be available as a defense against

the respondent herein. The case of Freiner v. Lane, 302

Ill. App. 248, is clearly in point. The facts in that case

bear a close analogy to the facts in the case at bar. In

that case the court applied the rule laid down in the

case of Silverman v. Bullock, 98 Ill. 11. On page 256 the

court said:

“It is well settled that latent equities between in-

termediate parties cannot be set up as against a

purchaser after maturity. Wolford v. Rusk, 145 Ill.

App. 405, Silverman v. Bullock, 98 Ill. 11.’’

Fremer v. Lane, 302 Ill. App. 248, 256.

Petition for leave to appeal to the Supreme Court was

denied in the Freier case so that the same can be

treated as final (302 Ill. App. xv). The Circuit Court of

Appeals correctly followed the Lllinois law.

Il.

Respondent’s reply to petitioners’ proposition:

‘There was a binding refunding contract between

the City of Harvey and A. C. Allyn & Company.’’

Counsel for petitioners under this point states that the

court overlooked the evidence in the record that shows

that the O’Brien contract was dependent upon his ability

to acquire sufficient certificates to ‘‘ ‘declare his plan

workable’ and was not dependent upon his ability to

acquire all of the outstanding certificates.’’ The fallacy

of this argument is that unless Mr. O’Brien was able to

acquire all of the outstanding certificates it would be im-

possible for him to declare the plan workable. Counsel

also states that the court misapprehended the evidence

15

and fails to note that in the contract of September 8,

1936, between the City of Harvey and Roy D. O’Brien

it is provided that the time limit of 90 days might be

extended, with the consent of the mayor and chairman

of Finance Committee of the City of Harvey. As we have

heretofore pointed out, this contract was never legally

authorized and there was no evidence that the contract

was extended. Mr. O’Brien testified that it was never

formally extended. (Tr. 362)

Counsel also complains about other acts which took

place after September 8, 1936. None of these acts dis-

prove the fact that the total number of water fund cer-

tificates that Mr. O’Brien was able to procure control

over were $243,000. (Tr. 362) The total certificates to

be refunded were $452,000. The balance of these bonds,

Mr. O’Brien testified, were impossible to obtain. (Tr.

363) Notwithstanding counsel’s statement to the effect

that the court overlooks the evidence of the record that

$429,000 or $430,000 par value outstanding certificates

of indebtedness were in the possession or under the con-

trol of A. C. Allyn & Company (Tr. 444), the fact is that

the evidence conclusively shows the total number of cer-

tificates in the possession and control of A. C. Allyn &

Company was, as proved by the City of Harvey, and as

pointed out by the court in its decision (Tr. 932), to have

been only $222,000. The fact that the Public Service Com-

pany had $129,000 in water fund certificates, the Recon-

struction Finance Corporation others, and that some were

in Joliet is not proof they were in the possession and con-

trol of A. C. Allyn & Company. Counsel for the City of

Harvey introduced in evidence the books and records of

A. C. Allyn & Company and Stifel, Nicolaus & Company.

Those records conclusively prove that $222,000 par value

water fund certificates were the total number that A. C.

Allyn & Company had ever been able to acquire.

16

CONCLUSION.

Respondent respectfully submits that the petition for

certiorari in this matter seeks only a rehearing of certain

specific facts relating to the Roy D. O’Brien transaction.

The facts involved in this matter have been carefully con-

sidered by the Cireuit Court of Appeals, and the court

has properly applied the law of the State of Illinois to

those facts.

Wherefore, respondent respectfully prays that the ap-

plication for the writ of certiorari be denied.

Respectfully submitted,

Henry O. NicKe,

Attorney for Respondent.

SamueL K. Markman,

Tuomas C. Donovan,

Joun P. Suttivan,

Of Counsel.