People ex rel. Board of Education v. Dakin

The amount the common council could lawfully borrow could not exceed $25,000. The amount the board of education could lawfully certify could not exceed the sum the common council could lawfully borrow, and was, therefore, limited to $25,000. The common council was empowered to secure the sum thus borrowed by issuing the bonds of the city bearing interest at the rate of not more than five per centum per annum. Bonds to the amount of $25,000, of principal bearing five per cent interest, were issued and sold, and a premium of $2,802.50 was realized over the principal sum. The *385act provides that. “ the moneys so borrowed on the sale of said bonds shall be paid to the city treasurer, and by him placed to the credit of the board of education,” etc. The certificate of the board of education called for the entire proceeds of the bonds.

Now “ the moneys so borrowed on the sale of said bonds ” was only the principal sum of $25,000. The city offered for sale $25,000 of bonds, bearing five per cent interest. The buyers bought them at such lower rate of interest as required them to pay to the city the sum of $2,802.50, to make good to the city the difference between the two rates. Because of its good credit the city has had this amount of interest which it has agreed to pay already returned to it. It is not money borrowed to build a school-house, but the excess of interest promised over and above the interest required. This construction makes the entire loan a lawful one; if not adopted, it would be difficult to justify the city in not stopping the sale of its bonds when the total of $25,000 was reached. The premium thus becomes the property of the city, as the incident or profit of a lawful transaction. (People v. Ingersoll, 58 N. Y., 1.) The certificate of the board of education could have no force except within the terms of the power to make it.

The order awarding the mandamus must be reversed, but without costs.

Order reversed and motion denied, without costs.