NATIONAL ASSOCIATION OF BOND LAWYERS
Voice from the Past
Chapter 8
I graduated from Northwestern Law School in the spring of
1950. Inflation was then
growing at a higher rate than I could earn on the money I'd saved
as a frugal young ensign,
so I decided to invest it in something lasting; rather than
spending the summer studying for
the bar examination, I went to Europe for a couple of months. On
returning I managed to
borrow the cram course materials from a classmate, to study them
for a week, and then to
take (and pass) the exam. I had neglected to focus on the fact
that others who graduated
from law school at the same time would have gotten most of the
jobs available. Fortunately,
one job was left -- with Chapman and Cutler.
At first I was put in the library doing research for whatever
lawyers wanted it done;
after about nine months of that, I was asked by Joseph Matter,
one of the partners in the
municipal bond department, if I'd like to transfer to his area of
practice. I didn't know
whether I'd like municipal bond law, but I knew that I did not
like the library.
While I had been in law school most of the other millions of men
who had been in the
service during World War II were busy procreating. Their
offspring are generally called
"baby boomers." All of these children would have to be educated,
so there was a great need
for new school construction all over the nation. Nearly every
one of these schools was
financed with bonds. Such bonds provided the major part of my
practice for the next decade
or two.
School bonds were general obligation bonds and were voted at
elections, very few of
which failed. Usually the ballot question merely showed the
purpose of the bonds to be
acquiring and constructing school buildings, but sometimes they
were more specific.
Occasionally, in the southern States, the ballot would refer to
white or colored schools. I was
uneasy about this, but found no legal reason to refuse to approve
such bonds. Then, in May
of 1954, the U.S. Supreme Court decided Brown v. Board of
Education, 347 U.S. 483,
holding that, "in the field of public education, the doctrine
of separate but equal' has no
place. Separate educational facilities are inherently unequal.
Therefore, we hold that the
plaintiffs .... are, by reason of the segregation complained of,
deprived of the equal protection
of the laws guaranteed by the Fourteenth Amendment."
From then on I advised clients that the ballot could not show
whether the schools to
be financed were for children of either race. One or two school
districts chose to refer to the
location of the school or schools to be constructed or improved
in expectation that the voters
would know which children were to be benefited, but that did not
lock in the facilities to
those of either race.
The reaction to that decision in some State legislatures was
strongly adverse. Georgia
passed a law declaring that no public money could be used for
integrated schools. Chapman
and Cutler then declined to approve school bonds in that State,
since there was no lawful
purpose for which the proceeds could be used. The money could not
be used for integrated
schools under State law and could not be used for segregated
schools under the U.S.
Constitution. I don't know how Georgia bond counsel reacted, but
the law was changed at
the next session.
* * *
In the decades before I started, the practice of municipal bond
law consisted in
examining transcripts of proceedings adopted by governing bodies
and sent to bond counsel
for approval after all such proceedings had been taken. If the
proceedings proved
satisfactory, we would then either prepare delivery papers or
review the signature
identification certificate and the treasurer's receipt prepared
by local counsel, and then issue a
preliminary opinion. When executed bond number one and the
executed delivery papers
came in, and were found satisfactory, we would then issue a
definitive opinion. This meant
that the bond dealer had to sit with an issue that he had bought
but could not re-deliver for
several days; the dealers got more and more unhappy with this
arrangement.
So we adopted the practice of escrowing our opinion with a local
bank, accompanied
by a letter saying that when the bank had an authorizing telegram
from us, when the bonds
had been delivered and paid for, and when the bank had a fully
executed treasurer's receipt in
the enclosed form, dated the date of delivery, available for
transmission to us, then it could
release our opinion. We would send the telegram when we found
the signature certificate and
bond number one satisfactory. Later we would usually examine the
executed bond and
signature certificate before escrowing the opinion and dispense
with the telegram. This
worked well with most local banks, but not when the bonds were
delivered in New York.
There it often would not be an officer of the bank who handled
the transaction but rather a
flunkey who felt that his job entailed only going through motions
and not accepting
responsibility. This could get scary when the treasurer's
receipt later showed that the issuer
was over the debt limit. Fortunately this seldom
happened.
By following this practice we seldom saw anyone from the client
issuer. We did not
have to travel and neither did the officers of the issuer in most
cases, as the bonds would be
delivered in or near the issuer's territory. Thus the expenses
of issuing bonds, (especially the
fee and expenses of bond counsel) could be kept very low, and we
could be in our office
working on other bond issues when we would otherwise be on a
train or an airplane or in a
hotel room. We were available by telephone in case of problems.
I still recall our standard
response when we received a telephone call on the date of sale of
a publicly advertised bond
issue: "If you are calling about a dispute over who has the
winning bid, don't tell me the
names of the bidders, just say one bidder' and the other
bidder.'" We hoped that this would
establish our impartiality and reduce the ill feelings of
whichever bidder we decided against.
The practice of working on bond issues long distance, with low
fees but no personal
contact, was phased out about the same time as Montgomery Ward's
catalogue business.
Manly W. Mumford