184 U.S. 302 (1902), 39, Waite v. Santa Cruz

Docket Nº:No. 39
Citation:184 U.S. 302, 22 S.Ct. 327, 46 L.Ed. 552
Party Name:Waite v. Santa Cruz
Case Date:February 24, 1902
Court:United States Supreme Court

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184 U.S. 302 (1902)

22 S.Ct. 327, 46 L.Ed. 552



Santa Cruz

No. 39

United States Supreme Court

February 24, 1902

Argued April 24-25, 1901




On the facts, as stated in the opinion of the Court, the City of Santa Cruz is estopped to dispute the truth of the recitals in the bonds in suit in this case, which stated that they were issued in pursuance of the act of California of 1893, as well as in conformity with the Constitution of California, authorizing it to incur indebtedness or liability with the assent of two-thirds of the qualified voters at an election held for that purpose, and that all acts, conditions and things required to be done precedent to issuing the bonds had been properly done and performed in due and lawful form as required by law.

The Circuit Court having correctly found that the parties who placed said bonds in the plaintiff's hands were bona fide purchasers, without notice

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of anything affecting the truth of the recitals in them, the city cannot escape liability by reason of the fact, disclosed by its ordinances, that the eighty-nine first mortgage bonds of the water Company assumed by the city were included in its refunding scheme.

As to the question whether the person who signed said bonds was or was not, at the time of the signature, the rightful Mayor of Santa Cruz, this Court holds -- (1) that the acts of a de facto officer are valid as to the public and third persons, although it is sometimes difficult to determine whether the evidence is such as to warrant a finding that a particular act or acts, the legality of which may be in issue, were those of a de facto officer; (2) that a de facto officer may be defined as one whose title is not good in law, but who is in fact in the unobstructed possession of an office and discharging its duties in full view of the public in such manner and under such circumstances as not to present the appearance of being an intruder or usurper; (3) that in such a case, third persons, having occasion to deal with him in his capacity as such officer, are not required to investigate his title, but may safely deal with him upon the assumption that he is a rightful officer; (4) that if they see him publicly exercising such authority, and if they ascertain that it is generally acquiesced in, they are entitled to treat him as such officer, and if they employ him as such, they ought not to be subjected to the danger of having his acts collaterally called in question.

As the plaintiff does not own the bonds or coupons in suit in this case, but holds them for collection only, the circuit court was without jurisdiction to render judgment upon such of the claims in suit, whether bonds or coupons, owned by a single person, firm, or corporation, and which, considered apart from the claims of other owners, could not have been separately sued on by the real owner by reason of the insufficiency of the amount of such claim or claims.

HARLAN, J., lead opinion

MR. JUSTICE HARLAN delivered the opinion of the Court.

This action was brought in the name of Waite, a citizen of Massachusetts, against the City of Santa Cruz, a municipal corporation of California of the fifth class to recover the principal and interest of certain negotiable bonds, nine in number, and

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certain negotiable coupons thereof, 282 in number, issued April 16, 1894, in the name of the defendant city.

Each bond, signed by "Wm. T. Jeter, Mayor of the City of Santa Cruz," and attested by "O. J. Lincoln, City Clerk," contained these recitals:

And for the payment of the principal sum [$1,000] herein named, and the interest accruing thereon, the said City of Santa Cruz is held and firmly bound, and its faith and credit and all the real and personal property of said city are hereby pledged, for the prompt payment of this bond and interest at maturity.

This bond is one of a series of bonds of like date, tenor, and effect issued by the said City of Santa Cruz for the purpose of refunding the bonded indebtedness of said city and issuing bonds therefor and providing for the payment of the same under and in pursuance of and in conformity with the provisions of an Act of the Legislature of the State of California entitled

An Act to Amend an Act Entitled "An Act Authorizing the Common Council, Board of Trustees, or Other Governing Body of any Incorporated City and Town, Other than Cities of the First Class, to Refund its Indebtedness, Issue Bonds Therefor, and Provide for the Payment of the Same" (approved March 15, 1883),

approved March 1, 1893.

And in pursuance of and in conformity with the Constitution of the State of California, and the ordinances of the City of Santa Cruz, and in pursuance of and in conformity with a vote of more than two-thirds of all the qualified electors of said City of Santa Cruz, voting at a special election duly and legally called and held and conducted in said city as provided under said act, on Tuesday, the thirteenth day of March, 1894, notice thereof having been duly and legally given and published in the manner as required by law, and after the result of said election had been canvassed, found, and declared in the manner and as required by law.

And it is hereby certified and declared that all acts, conditions, and things required by law to be done precedent to and in the issue of said bonds have been properly done, happened, and performed in legal and due form, as required by law. This

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bond ceases to bear interest when due unless presented for payment.

The parties having by written stipulation waived a jury, the case was determined in the circuit court upon a special finding of [22 S.Ct. 328] facts. The result was a judgment against the city for the full amount of the bonds and coupons held by the plaintiff, except as to three coupons transferred to him by the Northern Counties Investment Trust Company. 89 F. 619. That judgment was reversed in the circuit court of appeals with directions to enter judgment for the city. 98 F. 387. The case is here upon writ of certiorari granted upon the application of the plaintiff Waite.

The propositions advanced on behalf of the city are numerous, but most of them are involved in the general contention that there was a want of power in the city to issue the bonds in question, and that nothing occurred that could estop it from disputing its liability even to those who may have purchased them in good faith and for value.

The circumstances under which the bonds were executed should be first set forth. That being done, we will take up such of the questions raised by the assignments of error as are necessary to be determined.

On the 16th day of September, 1889, the City of Santa Cruz entered into a contract with certain persons doing business under the name of Coffin & Stanton which recited that the former desired to acquire, and the latter desired to furnish, a waterworks system for the city, the city agreeing to grant to Coffin & Stanton a franchise for the construction of waterworks in Santa Cruz, and that firm agreeing to construct or cause to be constructed a waterworks system in conformity with specifications theretofore made by the city engineer. The city agreed to purchase the waterworks after they were constructed, and pay for them the sum of $320,000. It was also stipulated that Coffin & Stanton should cause to be organized a corporation to be known as the City Water Company of Santa Cruz, to which the above franchise should be assigned. It was further provided that the water company should execute a first mortgage upon all its properties, rights, titles, and franchises then owned or thereafter

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acquired, for the payment of bonds (not exceeding $400,000 in amount, except as provided in the contract) to be issued to Coffin & Stanton as the work of construction progressed, they to make all necessary cash advances. The contract provided:

And when said water company shall have fully completed said waterworks, then said water company shall convey absolutely to said City of Santa Cruz all its property, rights, titles, and franchises to have and to hold forever, subject only to the mortgage and to the deed of trust or escrow hereinbefore mentioned. . . . And said water company shall commence operation on the construction of said waterworks as soon as practicable, and shall have the whole completed within one year of such commencement.

Pursuant to the above agreement, the city, by ordinance, granted to Coffin & Stanton a franchise and right of way to construct the waterworks, and such franchise and rights were assigned by them to the City Water Company, incorporated September 27, 1889.

Under date of May 1, 1890, the water company, pursuant to that agreement, executed a mortgage or deed of trust to secure the payment of four hundred bonds of $1,000 each. That was done in order to obtain money for the construction of the proposed waterworks.

Subsequently, March 29, 1892, the water company executed a deed to the city which recited that the waterworks had been fully completed to the satisfaction of the city and had been accepted by it. By that deed, the water company conveyed its entire property, rights, power, privileges, and franchises to the city, to have and to hold the same,

subject, however, to said mortgage or deed of trust, and all the obligations thereby imposed, which bonds, mortgage, or deed of trust, and obligations, the party of the second part [the city] agrees to pay and perform.

When the Act of March 1, 1893, referred to in the bonds was passed, as well as at the time the bonds were issued, the Constitution of California provided that

no county, city, town, township, board of education, or school district shall incur any indebtedness or liability in any manner, or for any purpose, exceeding

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in any year the income and...

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