Cummins v. District Township of Doon

• Decision Date: 06 May 1890
• Parties: CUMMINS v. DISTRICT TOWNSHIP OF DOON.
• Court: U.S. District Court — Northern District of Iowa

42 F. 644

CUMMINS v. DISTRICT TOWNSHIP OF DOON.

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

May 6, 1890

Davis &amp Gault, for plaintiff.

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

SHIRAS J.

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 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 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 such bonds for outstanding bonds, par for par; but the bonds hereby authorized shall be issued for no other purpose than the funding of outstanding bonded indebtedness. The actual cost of the engraving and printing of such bonds to be paid for out of the contingent fund of such district.

'Sec. 3. Said bonds shall run not more than ten years, and be payable at the pleasure of the district after five years from the date of their issue: provided, that, in order to stop interest on them, the treasurer shall give the owner of said bonds ninety days' written notice of the readiness of the district to pay, and the amount it desires to pay; said notice to be directed to the post-office address of the owner of the bonds: provided further, that the treasurer shall keep a record of the parties to whom he sells the bonds, and their post-office address, and notice sent to the address as shown by said record shall be sufficient.

'Sec. 4. Said bonds shall be in denominations of not less than one hundred dollars, and not more than one thousand dollars; and said bonds shall be given in the name of the independent district or district township, and signed by the president and countersigned by the secretary thereof; and the principal and interest may be made payable wherever the board of directors may by resolution determine.

'Sec. 5. When said bonds are delivered to the treasurer to be negotiated, the president shall take his receipt therefor, and the treasurer shall stand charged on his official bond with the amount of the bonds so delivered to him.

'Sec. 6. The tax for the payment of the principal and interest of said bonds shall be raised as provided in section 1823, c. 9, tit. 12, Code: provided that, if the district shall fail or neglect to so levy said tax, the board of supervisors of the county in which said district is located shall, upon application of the owner of said bonds, levy said tax.

'Sec. 7. All acts and parts of acts in conflict with this act are hereby repealed.

'Sec. 8. This act, being deemed of immediate importance, shall take effect and be in force from and after its publication in the Iowa State Register and Iowa State Leader, newspapers published at Des Moines, Iowa.

'Approved March 25, 1880.' '$1,000. IOWA SCHOOL BOND. No. 1.

'The school-district of Doon, Lyon county, Iowa, for value received, promises to pay to . . . or . . ., at the Bank of Rock Rapids, Iowa, on the 11th day of July, 1891, or at any time before that date, after the expiration of five years from date of issue, after ninety days' notice, at the pleasure of said district, the sum of one thousand dollars, with interest at the rate of seven per cent. per annum, said interest payable semi-annually on the 11th day of January and July in each year at the bank of Rock Rapids, on the presentation and surrender of the interest coupons hereto attached. This bond is executed and issued by the board of directors of said school-district in pursuance of and in accordance with chapter 132, Laws 18th Gen. Assem. iowa, is in accordance with the laws and constitution of the state of Iowa, and in conformity with a resolution of said board of directors passed in accordance with said chapter 132, at a meeting thereof held 9th day of July, 1881. In testimony whereof the said school-district, by its board of directors, have caused this bond to be signed by the president, and attested by the secretary, this 11th day of July, 1881.

'J. SHATSWELL, President. 'LON H. WAGNER, Secretary.'

'(Exhibit 7.)

'$35.00. The treasurer of the school-district of Doon, Lyon Co., Iowa, will pay to the bearer hereof, January 11, 1886, at Bank of Rock Rapids, thirty-five dollars, for interest on bond No. 7, dated July 11, 1881, issued under provisions of chapter 132, Laws of the 18th Gen'l Assembly.

'J. SHATSWELL, President. 'L. H. WAGNER, Secretary.'

(5) That B. L. Richards, named in the resolution of the directors of said district as the refunding agent to negotiate said bonds, sold on or about July 25, 1881, $10,000 of the bonds to plaintiff, who then resided at Lincoln, Ill., and on or about August 11, 1881, sold a further amount of $10,000 to said plaintiff, who paid in cash the par value of said bonds or in all the sum of $20,000 therefor. In making the purchase of said bonds the plaintiff relied upon the representations made to...