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.

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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