Bolton v. Wharton, No. 13255.

CourtUnited States State Supreme Court of South Carolina
Writing for the CourtBLEASE
Citation161 S.E. 454
PartiesBOLTON et al. v. WHARTON, Mayor, et al.
Decision Date14 October 1931
Docket NumberNo. 13255.

161 S.E. 454

BOLTON et al.
v.
WHARTON, Mayor, et al.

No. 13255.

Supreme Court of South Carolina.

Oct. 14, 1931


[161 S.E. 454]

.

[161 S.E. 455]

COTHRAN, J., dissenting.

Appeal from Common Pleas Circuit Court of Union County; T. S. Sease, Judge.

Action by J. L. Bolton and others against L. C. Wharton, as Mayor of the City of Union, George H. Burr & Company, and others, with a cross-complaint by defendant last named. Decree for plaintiffs, and the cross-complainant appeals.

Affirmed.

The following is the order of Judge Sease in the court below:

Heretofore the plaintiffs, as citizens and taxpayers of the city of Union, S. C, instituted this action against the mayor and aldermen of the city of Union and the holder of four alleged obligations of such city in the form of notes, in the aggregate amount of $42,500, to enjoin and restrain such city officials from paying or renewing the said alleged obligations and to order the same delivered up for cancellation on the ground that such evidences of indebtedness were issued for no corporate purpose and in contravention of the Constitution and statutes of this state regulating the borrowing of money by municipalities in particulars set forth in the complaint. Upon the filing of the verified complaint, this court issued its injunction pendente lite, restraining the said city officials from paying or renewing the said alleged obligations.

Thereafter, George H. Burr & Company, the payee and holder of the said alleged evidences of indebtedness, entered a formal appearance, and filed an answer and cross-complaint, in which, upon information and belief, it denied the material allegations of the complaint, set up the rights of a bona fide holder for value without notice, and sought recovery against the city of Union on the very obligations, the payment of which the plaintiffs sought to enjoin; grounds alleged being that the same were valid obligations of the said city and on a cause of action for money had and received. The plaintiffs filed a reply to such answer and cross-complaint, in which they denied that the defendant George H. Burr & Company was a bona fide holder for value without notice, and further denied that said obligations were valid, and denied liability for money had and received, and alleged said obligations were null and void on grounds set forth in the complaint.

After the issues had thus been made by the pleadings, within due time the plaintiffs notified the defendants of a motion to frame issues for submission to a jury. Such motion came on to be heard before Honorable T. J. Mauldin, Presiding Circuit Judge, who referred the case to A. G. Kennedy, Esquire, Master for Union County, to take the testimony and to report the same to this court by its next term. Under the provisions of Judge Mauldin's order, the testimony was duly taken and has now been reported to this court by the aforesaid master. This matter now

[161 S.E. 456]

comes before me to be heard upon the pleadings and the testimony so reported.

It appears from the testimony that in the early part of the year 1927 one Sidney M. Edelstein was in the city of Union as an industrial promoter and was endeavoring to locate a silk mill in the said city. The matter of the city council assisting in the location of such mill was taken up with the said council several times by the said Edelstein, as shown by the minutes of such council in evidence; the said minutes going back as far as January 10, 1927. Finally, at a meeting on April 28, 1927, the council accepted the plan as outlined by Mr. Edelstein "that the City enter into a contract with him to execute notes for $45,000.00, payable at the expiration of twelve months in promotion of the aforesaid silk mill." About the 1st of May, 1927, Edelstein took up by letter with George H. Burr & Company, a note brokerage house in New York for which he had once worked, the matter of handling notes of the city of Union. It is admitted by the witnesses on behalf of Burr & Company that it was understood that Edelstein had no connection with the city of Union. After some correspondence by letter and wire between Edelstein and Burr & Company, it was agreed that the latter would handle the notes of the city. No communication had been had between the city and Burr & Company. Edelstein even forwarded the city's notes to Burr & Company, and all communications as to the notes were between him and that company. At first the notes submitted were not satisfactory to Burr & Company, as that company wired Edelstein it desired payment provided to be made at a certain bank and not at its office. Also, it was requested that Ed. B. Smith, the mayor, not sign as city attorney in addition to executing the notes as mayor, and that the purpose of notes be inserted. New notes were forwarded by Edelstein in compliance with instructions, and the purpose inserted was "for the purpose of paying current obligations." In all the correspondence no mention is made as to just what the notes covered. No inquiries were made and no explanation of the purpose was given. No tax anticipation notes were requested and no pledge of taxes asked. The city of Union received no stock in the silk mill, and the secretary of the corporation testified that no stock had ever been issued to it. The secretary also testified that if a block of $45,000 of stock came out of anybody's holding, it would have to come from that of Edel-stein, since he had $180,000 of stock and nobody else had as much as $45,000. This witness further stated that not one cent of the proceeds of the city's paper in the sum of $45,000 found its way into the treasury of the corporation.

It is not contradicted that at the time of the execution of the alleged notes on May 12, 1927, the tax ordinance levying taxes for the city of Union for the city's fiscal year May 1,

1927, to April 30, 1928, had already been passed and submitted in March, 1927, and no provision in such tax ordinance was made for the alleged notes involved in this action. In fact, according to testimony, no provision has ever been made in any tax ordinance of the city to pay these alleged notes, originals or renewals, either before or after their execution. It is also uncontradicted that no public notice was ever given by the authorities of the city of the issuance of these instruments, that at the time of their issuance they were not given as tax anticipation notes, and no taxes were pledged therefor, that at the time of their execution and delivery all taxes had been pledged for other obligations of the city, that the said alleged notes were issued for no corporate purpose, and that the city received no benefit therefrom. It is further testified that on May 12, 1927, the assessed value of the property of the city of Union for taxation was $2,050, 000, and there were already outstanding $391,000 in bonds of the city, exclusive of bonds for sewerage, etc., not counted in the limitation. One year later the assessment of property had increased to $2,700, 100, and the bonds remained the same.

The early part of May, 1928, just before the alleged notes were to become due on May 12,

1928, Burr & Company communicated with Mayor Smith of Union in reference to payment of these alleged obligations and at first declined to renew them. On May 11, 1928. Burr & Company wired Smith they had referred the matter to R. S. Dickson & Company who would get in touch with him as to renewals. On the same day Dickson & Company wired Smith they questioned the legality of the alleged notes and were not interested. Later, on the same day, Burr & Company made an engagement by wire to talk with Mayor Smith over long-distance phone on the following day. Smith's uncontradicted testimony is that Burr & Company in this conversation asked that the alleged notes be paid, and if payment could not be made, then tax anticipation renewal notes were demanded. Smith says he explained the transaction from its inception and told the Burr representative that they could get no tax money, as taxes had already been pledged and that no tax anticipation notes would be given. George M. Sharpies, a witness for Burr & Company, admitted having held this phone conversation with Smith, but could not recall the details. On May 14, 1928, Burr wired Smith that the notes had been received, but wanted tax anticipation notes payable to bearer with Burr's name left out. On same date Smith wired reply that he would sign only duplicates in form of the originals. On the next day Burr wrote Smith they were enclosing exact copies of originals, except for dates and interest, and on May 17, 1928, Smith wrote Burr he was forwarding the executed notes as dupli-

[161 S.E. 457]

cates of the original forms. These alleged renewal notes were dated May 12, 1928, and payable September 12, 1928.

On September 11, 1928, the plaintiffs as taxpayers of the city of Union instituted this action.

In the beginning, it should be observed that the obligations here involved were issued by the city of Union as renewals of six other obligations, with same payor and payee, in the aggregate amount of $45,000. As counsel for the defendant George HE. Burr & Company frankly admitted, the legality of the alleged indebtedness is to be determined by the validity of the original obligations, as it is a settled doctrine that an invalid municipal note or bond will not be translated into a valid obligation by a renewal thereof. The character of the debt is determined by the original notes or bonds. Luther v. Wheeler (1905) 73 S. C. 83, 101, 52 S. E. 874, 4 L. R. A. (N. S.) 746, 6 Ann. Cas. 754. We shall, therefore, direct our inquiry to the original evidences of indebtedness, since, if they were invalid, the renewals thereof are also invalid.

The original obligations were six in number, three being in the amount of $10,000 each and three in the amount of $5,000 each. All of these certificates of indebtedness were identical in form, varying only in amount.

From the testimony heretofore...

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17 practice notes
  • Judd v. City of St. Cloud, No. 30789.
    • United States
    • Supreme Court of Minnesota (US)
    • 16 de abril de 1937
    ...to in the recitals of a municipal obligation as the authority under which such obligation is issued.’ Bolton v. Wharton, 163 S.C. 242, 161 S.E. 454, 86 A.L.R. 1101, 1103. ‘Bonds issued without authority are void even in the hands of bona fide purchasers. Purchasers of municipal bonds are ch......
  • Judd v. City of St. Cloud, No. 30789.
    • United States
    • Supreme Court of Minnesota (US)
    • 22 de maio de 1936
    ...in the recitals of a municipal obligation as the authority under which such obligation is issued." Bolton v. Wharton, 163 S.C. 242, 161 S.E. 454, 86 A.L.R. 1101, 1103. "Bonds issued without authority are void even in the hands of bona fide purchasers. Purchasers of municipal bonds......
  • Smith v. Town of Guin, 6 Div. 575.
    • United States
    • Supreme Court of Alabama
    • 14 de junho de 1934
    ...N.D. 75, 228 N.W. 819; Kasch v. Miller, Superintendent of Public Works, 104 Ohio St. 281, 135 N.E. 813; Bolton v. Wharton, 163 S.C. 242, 161 S.E. 454, 86 A. L. R. 1101; Sowell et al. v. Griffith (Tex. Com. App.) 294 S.W. 521; Barnes v. Lehi City, 74 Utah, 321, 279 P. 878; Winston v. City of......
  • Girard v. Diefendorf, 6116
    • United States
    • United States State Supreme Court of Idaho
    • 26 de maio de 1934
    ...municipality supported by its full faith and credit, and is a substantial addition to the public debt. (Bolton v. Wharton, 163 S.C. 242, 161 S.E. 454, 86 A. L. R. 1101 (1931); Thomson v. Christopher, 141 S.C. 92, 139 S.E. 178; Barnwell v. Matthews, 132 S.C. 314, 128 S.E. 712; 1 W. & Ph.......
  • Request a trial to view additional results
17 cases
  • Judd v. City of St. Cloud, No. 30789.
    • United States
    • Supreme Court of Minnesota (US)
    • 16 de abril de 1937
    ...to in the recitals of a municipal obligation as the authority under which such obligation is issued.’ Bolton v. Wharton, 163 S.C. 242, 161 S.E. 454, 86 A.L.R. 1101, 1103. ‘Bonds issued without authority are void even in the hands of bona fide purchasers. Purchasers of municipal bonds are ch......
  • Judd v. City of St. Cloud, No. 30789.
    • United States
    • Supreme Court of Minnesota (US)
    • 22 de maio de 1936
    ...to in the recitals of a municipal obligation as the authority under which such obligation is issued." Bolton v. Wharton, 163 S.C. 242, 161 S.E. 454, 86 A.L.R. 1101, 1103. "Bonds issued without authority are void even in the hands of bona fide purchasers. Purchasers of municipal bonds are ch......
  • Smith v. Town of Guin, 6 Div. 575.
    • United States
    • Supreme Court of Alabama
    • 14 de junho de 1934
    ...N.D. 75, 228 N.W. 819; Kasch v. Miller, Superintendent of Public Works, 104 Ohio St. 281, 135 N.E. 813; Bolton v. Wharton, 163 S.C. 242, 161 S.E. 454, 86 A. L. R. 1101; Sowell et al. v. Griffith (Tex. Com. App.) 294 S.W. 521; Barnes v. Lehi City, 74 Utah, 321, 279 P. 878; Winston v. City of......
  • City of Florence v. Anderson, No. 4228.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (4th Circuit)
    • 5 de abril de 1938
    ...nor that the legal limit, i. e., the amount of the current taxes, was being exceeded. The case of Bolton v. Wharton, 163 S.C. 242, 161 S.E. 454, 459, 86 A.L.R. 1101, is also relied on; but the notes in that case were not issued as tax anticipation notes, and their issuance was clearly beyon......
  • Request a trial to view additional results

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