Board of Com'rs of Kearny County, Kan, v. Irvine

• Decision Date: 23 November 1903
• Docket Number: 1,819,1,820.
• Citation: 126 F. 689
• Parties: BOARD OF COM'RS OF KEARNY COUNTY, KAN., v. IRVINE SAME v. COFFIN et al.
• Court: U.S. Court of Appeals — Eighth Circuit

126 F. 689

BOARD OF COM'RS OF KEARNY COUNTY, KAN., v. IRVINE

SAME v. COFFIN et al.

Nos. 1,819, 1,820.

United States Court of Appeals, Eighth Circuit.

November 23, 1903

These are two equity cases of a like character that were tried in the lower court at the same time, by the same counsel, upon substantially the same state of facts, and which present the same questions of law for determination on appeal. On August 14, 1893, the bill of complaint in case No. 1,820 was filed by Coffin, Stanton and Street, composing the firm of Coffin &amp Stanton, while the bill in case No. 1,819 appears to have been filed on September 28, 1893. For convenience, case No 1,820 will be termed the Coffin case, and case No. 1,819 the Irvine case.

In the Coffin case the allegations were, in substance, as follows That on August 1, 1888, one D. P. Doak was the holder and owner of some 65 county warrants, amounting to about $35,000 which had been theretofore issued by Kearny county, Kan., and that on said date the county, proceeding under the statute laws of the state of Kansas, undertook to refund its outstanding indebtedness; that it accordingly issued and delivered to said Doak 35 refunding bonds, each for the sum of $1,000,bearing interest at the rate of 6 per cent., and payable August 1, 1908; that in exchange for said bonds the said Doak surrendered and delivered to the county all of the county warrants aforesaid which he thus owned and held, and that the county, through its proper officers, caused said county warrants to be canceled; that the refunding bonds so received by Doak were thereafter sold and delivered to the Municipal Investment Company of the City of Chicago, which company thereafter, in January, 1889, in turn sold and delivered said bonds, for value, to the complainants, composing the firm of Coffin & Stanton; that said bonds, although they appeared upon their faces to be in all respects valid, were in fact void, having been issued without authority of law; and that they were adjudged to be invalid by this court in the case of Coffin v. Kearny County, 6 C.C.A. 288, 57 F. 137. In consequence of these facts the complainants averred that the consideration for the surrender and cancellation of the warrants had utterly failed, and they prayed that it might be decreed that they were entitled to be subrogated to all the rights, both at law and in equity, which were possessed by Doak at the time he surrendered his warrants and received therefor void bonds.

In the Irvine case the same allegations, in substance, were made, and the same relief was prayed for. In that case, however, the warrants which had been exchanged, as the bill charged, for void refunding bonds, amounted in the aggregate to $11,500, and bonds to that amount were issued in exchange therefor. In the Irvine case it was also charged that the warrants that had been exchanged for void bonds were issued in payment for necessary supplies furnished to the county, and that a part, if not all, of the warrants thus funded, were owned at the date of their surrender and cancellation by George W. Crane & Co. In all other respects the bills of complaint in the two cases were practically identical. Demurrers were filed in behalf of the defendant county to both of the bills, but the demurrers were overruled in August and September, 1896, by Foster, district judge for the District of Kansas, and thereafter answers were filed to the respective bills, setting up substantially the same defenses.

The answers to the respective bills contained the following pleas, in substance: First, that the Circuit Court of the United States for the District of Kansas, in which the bills were filed, had no jurisdiction of the controversy, because the warrants referred to in the bills of complaint were issued to persons who were at the time citizens and residents of the state of Kansas; second, that all of the warrants referred to in the bills of complaint were illegal and void because no account showing the items of service rendered or supplies furnished to the county, verified by affidavit, was filed and presented to the board of county commissioners prior to the issuance of the warrants, as ought to have been done, under the laws of Kansas; third, that the warrants referred to in the bills of complaint were illegal and void because prior to the issuance thereof the board of county commissioners had issued warrants for a greater amount than the total amount of taxes levied upon the property of the county to defray the current expenses of the county for the year 1888, during which year the warrants were alleged in the answers to have been issued; and, fourth, that the warrants referred to in the bills of complaint, if issued at all, were illegal and void because they were issued and made a charge against the county fund before there had been any assessment of the taxable property of the county for the purpose of taxation, and that the warrants were also issued for expenses of the county for the current year, which were largely in excess of 1 per cent. upon the taxable value of all county property, and that the value of all taxable property in the county, at the usual rate of assessment, during the year when the warrants were issued, did not exceed the sum of $934,160. Certain special defenses were also pleaded to some of the warrants referred to in the bills of complaint, which tended to show that such warrants had been fraudulently issued either without any consideration received by the county, or for an amount in excess of what was actually due from the county to the warrant holder.

Before the cases were tried the parties thereto entered into stipulations whereby the following facts were conceded to be true: In the Coffin case, that on August 27, 1888, the board of county commissioners of the county of Kearny, at a regular meeting of the board, adopted a resolution that the matured and maturing indebtedness of the county, as evidenced by warrants then outstanding, which were bearing interest at the rate of 7 per cent., be refunded into 6 per cent. bonds, pursuant to chapter 50 of the laws of Kansas for the year of 1879; that the chairman of the board and the county clerk be instructed to execute refunding bonds for the purpose aforesaid, and to cause them to be delivered to any person upon the surrender of an equal amount of county indebtedness; that the treasurer of the county, upon receipt of the evidence of such indebtedness, and upon delivery of refunding bonds, be directed to mark the evidence of such indebtedness as paid in full; that in pursuance of such resolution the chairman of the board and the county clerk executed refunding bonds of the county, which were dated August 1, 1888, to the amount of $35,000; that warrants of the county of Kearny, payable to the persons therein named or bearer, to the amount of $35,000, theretofore issued and outstanding, were surrendered to the county in exchange for the aforesaid bonds, and that upon receipt of such warrants they were duly marked 'Paid'; that the complainants, composing the firm of Coffin & Stanton, on January 10, 1889, bought the aforesaid refunding bonds to the amount of $35,000 in good faith, paying par therefor, and without notice of any irregularities or defects therein except such as might be imparted by the bonds themselves and the general laws of the state of Kansas.

In the Irvine case a similar stipulation was made and filed, but the resolution of the board of county commissioners, in pursuance of which the refunding bonds which figured in that case were issued, appears to have been adopted on October 1, 188, instead of August 27, 1888. The two resolutions, however, were identical in form, and it was stipulated in the Irvine case that warrants of the county to the amount of $11,500 had been exchanged for refunding bonds on October 1, 1888; that the warrants so exchanged, when received, were indorsed 'Paid'; and that on February 26, 1889, Louise M. Irvine, the complainant in case No. 1,819, had bought said refunding bonds to the amount of $11,500 in good faith, upon the open market, paying full value therefor, and without notice of any irregularities or defects in the bonds, save such as was imparted by the bonds themselves and the general laws of the state of Kansas.

The cases were tried below upon the aforesaid stipulations and other evidence which was adduced at the trial, and at the conclusion of the trial the court below entered decrees in favor of the complainants, granting them therelief prayed for, and in connection therewith filed an elaborate opinion. Vide 114 F. 518. The cases are before this court on appeals from those decrees.

Milton Brown (Wash Adams, on the brief), for appellant.

W. H. Rossington and Clifford Histed (Charles Blood Smith and F. P. Lindsay, on the brief), for appellees.

Before SANBORN, THAYER, and VAN DEVANTER, Circuit Judges.

THAYER Circuit Judge, after stating the case as above.

The first and one of the most important questions which arises in this case is whether the complainants below are entitled to be subrogated to the rights of the warrant holders who exchanged county warrants for the void bonds of Kearny county, which the complainants subsequently purchased on the market for value, believing them to be valid. In behalf of the county of Kearny it is strenuously urged that no such right of subrogation exists or can be enforced, and in support of this contention reliance is placed on the following cases: Aetna Life Ins. Co. v. Middleport, 124 U.S. 534, 8 Sup.Ct. 625, 31 L.Ed. 537; Litchfield v Ballou, 114 U.S. 190, 5 Sup.Ct. 820, 29 L.Ed. 132. But the cases cited do not appear to be fully in point. In the first of these cases (Aetna Life Ins. Co. v. Middleport) a village in Illinois had made...