42 F. 644 (N.D.Iowa 1890), Cummins v. District Township of Doon

Citation:42 F. 644
Case Date:May 06, 1890
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit

Page 644

42 F. 644 (N.D.Iowa 1890)




United States Circuit Court, N.D. Iowa, Western Division.

May 6, 1890

Davis & Gault, for plaintiff.

Van Wagener & McMillan and Kaufmann & Guernsey, for defendant.


This action is based upon certain interest coupons attached to a series of bonds for the sum of $20,000, issued by the defendant, a school district in the county of Lyon, in this state. The defense

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is that the bonds were issued without consideration, without authority of law, and in violation of section 3, art. 11, of the constitution of Iowa, which provides that no municipal or political corporation within the state shall be allowed to become indebted in a sum exceeding 5 per cent. of the assessed valuation of the taxable property within the limits of the corporation, as shown by the last preceding state and county tax-lists. By written stipulation a jury was waived, and the cause submitted to the court upon the evidence taken in writing, and after full and able arguments by counsel upon the legal questions involved. From the evidence submitted, I find the following facts:

(1) The defendant, the district township of Doon, is a school-district in Lyon county, Iowa, created under the provisions of the laws of the state of Iowa, having power to contract in its corporate name, to issue negotiable bonds, and to sue and be sued in its corporate name. As originally constituted, the district included six congressional townships of land. From time to time other districts have been set off therefrom, until it now includes only two congressional townships.

(2) That the affairs of the district township from the date of its organization have been badly managed, and, through fraud and incompetency on part of the officers of the district, indebtedness to a very large extent has been created against the district, part of which was evidenced by bonds of the district, part by judgments against the district, and part by warrants or orders drawn on the different funds.

(3) That on or about the 14th day of June, 1881, the then officers of the district determined to undertake the refunding of the outstanding bonded indebtedness of the district, and to that end the board of directors of said district, on the 9th day of July, 1881, adopted the following resolution by an unanimous vote:

'JULY 9th, 81.

'Be it hereby resolved that the resolution of the board passed June 14, 1881, at a special session, be hereby set aside and declared void, and the following resolution be passed: That as there is a large bonded judgment debt upon the district of Doon, and as the records fail to show the total amount of said bonds outstanding and unpaid, and as we deem it for the best interest of the district that all of this debt should be under one form, and that the full amount may be known, and the rate of interest lowered, be it resolved, that we issue bonds for the purpose of funding the outstanding bonded indebtedness of the district to an amount not exceeding twenty-five thousand dollars, and, in the event of a less amount being needed, then only such an amount shall be issued as shall be required to take up all said debt, said bonds to be issued as authorized by chapter 132 of the acts of the 18th General Assembly of the state of Iowa, authorizing the funding of outstanding bonded indebtedness of school-districts. That said bonds shall bear seven per cent. interest, payable semi-annually, said interest payable at bank of Rock Rapids, Iowa. Said bonds shall run for ten years, payable after five years, at the pleasure of the district. That the treasurer shall keep a record of the bonds issued, in numbers and amounts, and the name of the parties to whom sold, with their post-office address. That B. L. Richards, cashier, is hereby appointed refunding agent to negotiate said bonds. That a-l indebtedness of the district before mentioned shall be taken up by said Richards, only upon order from the treasurer of the district. That all of the said indebtedness

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shall be paid by said Richards, and he shall render a statement itemized of said operations, and surrender vouchers, whenever demanded by the school board of this district. On motion of Claflin above motion unanimously adopted.'

(4) That, in pursuance of said resolution, negotiable bonds, with interest coupons attached, were prepared and duly signed by the proper officers of the district; said bonds having printed thereon chapter 132 of the Acts of the 18th General Assembly of the state of Iowa. The following is a copy of the statute, and of the bonds and coupons:

'Be it enacted by the general assembly of the state of Iowa: Section 1. That any independent school-district or district township, now or hereafter having a bonded indebtedness outstanding, is hereby authorized to issue negotiable bonds at any rate of interest not exceeding seven per cent. per annum, payable semi-annually, for the purpose of funding said indebtedness; said bonds to be issued upon a resolution of the board of directors of said district: provided, that said resolution shall not be valid unless adopted by a two-thirds vote of said directors.

'Sec. 2. The treasurer of such district is hereby authorized to sell the bonds provided for in this act at not less than their par value, and apply the proceeds thereof to the payment of the outstanding bonded indebtedness of the district, or he may exchange...

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