Ayer v. City of Bangor

The city of Bangor holds in trust a hundred thousand dollars, the income of which has been appropriated towards the support of a public library. The city now proposes to use the principal of the fund, or so much of it as may be needed, with which to erect a public city building, paying interest for the money so used at the rate Of four and one half per cent per annum.

The complainants (ten taxable inhabitants of Bangor) protest against such a use of the principal of the fund, and pray for an injunction restraining the city against making such a use of it.

It is insisted that such a use of the fund will violate the terms of Mr. Hersey’s will, through which the money has been received; that it will violate a contract between the city and the Bangor Mechanic Association; and, lastly, that it will violate that article of our State Constitution which limits the indebtedness of towns and cities.

*517It is the opinion of the court that no one of these objections can be sustained.

I. Mr. Hersey’s will contains no directions as to how the principal of this fund shall be invested. The will declares in general terms how the income shall be employed; but it is entirely silent as to how the principal shall be invested, so as to yield an income. Apparently the testator was willing to leave that matter entirely to the judgment and discretion of the city.

II. The objection that the use of this fund by the city will violate an agreement between the city and the Bangor Mechanic Association lacks support. An examination of that agreement fails to disclose any clause that would be violated by such a use of the principal of the fund. The city proposes to pay for the use of this fund an annual income of forty-five hundred dollars. This is a higher rate of interest than the wealthy and prosperous cities of this State are accustomed to pay at the present time; and at some future time, justice to the tax payers of Bangor may require the amount to be reduced. But that question is not now before us. It may not be improper to add, however, that the court has complete jurisdiction over this fund, and can establish the rate of interest which the city shall be required to pay, and that no action of the city council in relation thereto will be binding upon the court. See act, 1893, chap. 300.

III. The third and last objection urged against the use of this fund by the city is, that the city is now indebted beyond the amount allowed by the Constitution of the State, and, if the city uses the fund for municipal purposes, its liabilities will be thereby increased. We fail to see how any use that can be made of this fund will increase the city’s liability with respect to it. The city is now liable for this fund — liable absolutely — and if the city uses the fund, instead of otherwise investing it, we fail to see how its liability can be thereby increased or be made more than absolute.

The fact must not be overlooked that the liability of towns and cities for trust funds differs from that of ordinary trustees.. The latter are liable only for good faith and prudence. The for-*518mer are liable absolutely. If the fund is lost, good faith and prudence will be no defense. If a town or city uses a trust fund for municipal purposes, of course it is responsible for it. And if it does not use the fund, but otherwise invests it, still, its liability continues. The statute authorizing towns and cities to receive trust funds declares that such towns and cities shall be responsible for the safety of the funds. And this responsibility attaches, is absolute, and continues the same, whatever disposition is made of the fund. The assumption, therefore, that the use of this fund by the city of Bangor will increase its liabilities, is not well founded. So far as this fund is concerned, its liabilities will remain the same, whatever disposition may be made of it. E. S^, c. 3, § 52.

And there is another fact that must not be overlooked. That article of our State Constitution which limits the indebtedness of towns and cities does not apply to trust funds. (See Art. XXII of the Amendments.) That article expressly provides that it shall not be construed as applying to any fund received in trust by a city or town. Consequently, the liability or indebtedness of a town or city, occasioned by the reception or use of a trust fund, is not limited by the Constitution. The constitutional limitation does not apply to trust funds.

But if we look at the questions presented in a broader and less technical light, we fail to see any objection to the use which the city of Bangor proposes to make of the ITersey fund. It is admitted' that seventy-eight thousand dollars of the fund are now invested in bonds of the city of Bangor. Was not this a prudent and proper investment ? And if the city now uses and becomes indebted for the balance of the fund, paying a just and reasonable interest therefor, will not the investment be equally safe and equally proper ? Since the city is liable absolutely for the safety of the fund, what better investment can be made of it V No expressed intention of the testator will be thereby defeated. No wrong will be done to any beneficiary. No expressed intention of the legislature will be defeated. The statute declares that interest shall be allowed if the fund is used by the city ; but it does not forbid such a use. We think the *519language employed in the statute fairly implies that such a use may be made of the fund. The fact that such a use would be liable to be made of a trust fund was evidently before the legislative mind. It was not overlooked. .And if the .legislature had intended to forbid such a use, we can not resist the conviction that it would have said so in language unmistakable. We think the language employed implies license, not prohibition. The use of the fund for a needed municipal purpose, will not violate the limitation clause of the Constitution, for that clause expressly provides that it shall not be construed as applying to trust funds. And, viewed as a whole, we fail to perceive any reason, legal, equitable, or prudential, for granting the injunction prayed for.

Temporary injmiction dissolved and the bill dismissed.