Hedges v. Dixon County
| Decision Date | 13 November 1893 |
| Docket Number | No. 62,62 |
| Citation | 37 L.Ed. 1044,14 S.Ct. 71,150 U.S. 182 |
| Parties | HEDGES et al. v. DIXON COUNTY |
| Court | U.S. Supreme Court |
J. M. Woolworth, for appellants.
John M. Thurston, for appellee.
The question presented by the record in this case is whether parties holding the greater part of a series of bonds issued by a county in excess of the limit fixed by the constitution of the state, and which for that reason are not enforceable at law, can invoke the aid of a court of equity to afford them relief, by first ascertaining the extent of such excess, or settling the amount of bonds which the county could lawfully have issued, and then proceeding to scale down the issue to the limit thus ascertained, and to declare such excess, only, to be void, and thereupon decree the residue of such bonds good and valid, and enforce payment of such residue, with interest, against the county. Or, in other words, can be holders of bonds issued by a county in excess of its authority, by an offer to surrender and cancel so much of such bonds as may, upon inquiry, be found to exceed the limit authorized by law, invest a court of equity with jurisdiction, not only to ascertain the amount of such excess, but to declare the residue of such bonds valid, and enforce the payment thereof against the county?
The appellants, being the holders of nearly the entire issue of $8,7000 in bonds of the county of Dixon, which were by that county issued and donated to the Covington, Columbus & Black Hills Railroad Company, January 1, 1876, filed their bill in May, 1888, in the circuit court of the United States for the district of Nebraska, setting forth, among other things, that by a vote of the electors of the county held on December 27, 1875, the bonds in question were authorized to be issued to the railroad company; that they became the holders thereof, relying upon recitals contained therein, and the certificates indorsed thereon, and believing them to be binding and valid obligations of the county; that, when the interest coupons matured, payment was refused by the county officials, who alleged that the bonds were invalid because they exceeded in amount 10 per cent. of the assessed valuation of the property of the county at the time of their issuance. The bill further alleges that complainants had offered to surrender up for cancellation such amounts of the bonds as exceeded 10 per cent. of the assessed valuation of the property of the county, each holder surrendering his proportionate share of such excess; that this offer was refused by the county, which, complainants insist, cured any infirmity in the bonds; and that the county was equitably bound to recognize as valid the residue thereof, because it and its citizens had received, in the construction of the railroad which the bonds were issued to promote, all the consideration that was intended to be secured thereby. The prayer of the bill was that an account might be taken to ascertain the excess of the issue over 10 per cent. of the assessed valuation of the property of the county; that such excess might be distributed among the holders of the bonds, or be applied to reduce the amount of each bond ratably, so as to bring the entire issue within the limit authorized by law; that the residue might be declared good and valid; and that the county might be decreed to pay the same, with interest at the rate of 10 per cent. from January 1, 1876, to the date of the decree.
The county demurred to the bill on the ground that the complainants had not, in and by their bill, stated such a case as to entitle them to the relief sought. This demurrer was sustained by the court, and, the defects being of such a character that they could not be remedied by amendment, a decree was entered dismissing the bill. 37 Fed. Rep. 304. From that decree the present appeal is prosecuted.
The bonds in question were made payable to the Covington, Columbus & Black Hills Railroad Company, or bearer, and were put in circulation by that company, with its indorsement thereon, guarantying to the holders the payment of the principal and interest of the bonds, according to the tenor thereof, at the place where, and as the same became, due and payable. The only consideration received by the county in the transaction was the incidental benefit derived from the construction of the railroad; the proceeds of the bonds, when negotiated, being received directly by the railroad company. The theory of the bill is that the bonds are void only to the extent that they exceed 10 per cent. of the assessed valuation of the property of the county at the time of their issuance, and upon the abatement of that excess the holders are entitled to have the residue thereof, which the county could have lawfully issued, treated as valid, because of the incidental benefits derived from the construction of the road, which was sought to be secured by the donation of bonds.
The complainants, by their bill and exhibits thereto, have presented the same state of facts which were considered in Dixon Co. v. Field, 111 U. S. 83, 4 Sup. Ct. Rep. 315, where the bonds in question were directly involved, and were held by this court to be void because they exceeded, in the aggregate, the sum of 10 per cent. of the assessed valuation of the property of the county at the time of their issue. This decision was based upon section 2, art. 12, of the constitution of the state of Nebraska, which provides as follows:
'No city, county, town, precinct, municipality, or other subdivision of the state, shall ever make donations to any railroad or other works of internal improvement, unless a proposition so to do shall have been first submitted to the qualified electors thereof, at an election by authority of law: provided, that such donations of a county, with the donations of such subdivisions, in the aggregate shall not exceed ten per cent. of the assessed valuation of such county.'
While the complainants concede that the issue of bonds was in excess of what the county was authorized to donate under this provision of the constitution, and for that reason were invalid at law, they insist that a promise to pay so much thereof as could have been lawfully issued should be implied, and enforced against the county, under the principle applied in Louisiana v. Wood, 102 U. S. 294, and in Read v. City of Plattsmouth, 107 U. S. 568, 2 Sup. Ct. Rep. 208. Those cases are clearly distinguishable from the present. In Louisiana v. Wood, by the act of the city, the bonds bore a false date, which apparently made them obligatory and binding. They were sold by the city, and purchased by the holder in good faith, and the money paid therefor went directly into the city's treasury. This court held that the city was in the market as a borrower, and received the money in that character, notwithstanding the transaction assumed the form of a sale of her securities, which, being defectively executed, a suit could not be maintained thereon, and that the holder was entitled to recover the money paid, with interest thereon from the time the obligation of the city to pay was denied.
In Read v. City of Plattsmouth the bonds were issued by a city for the purpose of raising money wherewith to construct a highschool building within her limits. The bonds were sold, and the proceeds applied to that purpose. The legislature subsequently legalized the proceedings of the city in the premises; but this act of the legislature was passed after the constitution of the state went into effect, declaring that the 'legislature shall pass no special act conferring corporate powers,' and that 'no bill shall contain more than one subject, which shall be clearly expressed in its title.' A purchaser of the bonds, for value, without notice of any infirmity in their issue, brought suit to recover the amount of the coupons then due and unpaid. It was held that as, by force of the transaction, the city was bound to refund the moneys paid it in consideration of its void bonds, and as the act, by confirming them, merely recognizes the existence of that obligation, and provides a medium for enforcing it according to the original intention of the parties, no new corporate powers were thereby conferred. In this case, as in Louisiana v. Wood, the city got the full pecuniary consideration for the bonds, and applied the money to the very purpose for which they were issued; and upon well-settled principles, if the securities given for the money so obtained proved invalid or defective for any reason, there was a clear legal, as well as moral, obligation to refund the money which had been so advanced to, and received by, the city. The circumstances and conditions which gave the holders of the bonds an equitable right, in those cases, to recover...
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