Cass Cnty. v. Green

• Decision Date: 31 October 1877
• Citation: 66 Mo. 498
• Parties: CASS COUNTY v. GREEN, Appellant,
• Court: Missouri Supreme Court

66 Mo. 498

CASS COUNTY

v.GREEN, Appellant,

Supreme Court of Missouri.

October Term, 1877.

[COPYRIGHT MATERIAL OMITTED]

Appeal from Jackson Special Law and Equity Court.--HON. R. E. COWAN, Judge.

This is an injunction to compel the cancellation of certain bonds of Cass county. The petition sets out that the bonds were issued in pursuance of an order of the county court of said county, which directed their issue for the purpose of funding the debt of the county on account of a subscription to the capital stock of the Missouri Pacific Railroad; that they were negotiable in form and transferable by delivery; that they purported on their face to be issued under the authority of the act of the General Assembly approved March 24th, 1868, entitled “An act to enable counties, cities and incorporated towns to fund their respective debts;” that none of them were due, being by their terms payable at periods of between fifteen and twenty years from the 22nd of February, 1872; that in truth and in fact, at the time of making the order, there was not any debt whatever of the county on account of a subscription to the capital stock of said company, but the bonds were issued without any consideration, fraudulently and illegally, by two of the justices of the court in execution of a conspiracy formed between the said justices and certain other persons, among whom was one Cline; that the fifty-five bonds in controversy were Cline's share of the plunder, and were sold by him to Mastin & Co., who were cognizant of the conspiracy and fraud, and were by them sold to defendant, who, likewise, had notice of the facts; that plaintiff had repeatedly demanded them of defendant, who refused to deliver them up, and refused to obey the orders of the courts made in divers actions at law brought against him to compel him to deliver them up, and had concealed them so that they could not be seized by process of law; that in the meantime he was annoying and harrassing the county by suits brought and prosecuted in the name of fictitious persons, and pretended holders, for the recovery of interest on them; that he, often falsely pretended that he had already transferred them; and that unless restrained from so doing, he would transfer them so as to render any decree in this case ineffectual.

The answer denies all the allegations of the petition charging fraud, conspiracy and illegality, and avers that long prior to the issue of the bonds the county had made a conditional subscription to a branch of the Tebo & Neosho Railroad, by which the county agreed to transfer to that company a subscription previously made to the Pacific Railroad, together with all interest accrued, if the bonds issued to the latter company were surrendered; that on the faith of said subscription, said road was built, and said bonds surrendered, and the bonds in controversy were issued to pay said subscription under the act of 1868, authorizing counties, cities and incorporated towns to fund their respective debts; and that the charges of fraud made in the petition were falsely and fraudulently made by the county to avoid its just liabilities, and, after obtaining a railroad on the faith of its promises, to defraud the company that built it, by false pretenses, murder and mob violence.

A reply was filed denying the new matter set up in the answer, and denying that the bonds were issued under the authority of the act of 1868, or of any law whatever.

A trial was had, and the court found that the bonds were fraudulently issued; that defendant purchased them under circumstances that ought to have excited his suspicions as a prudent and careful man, and caused him to make inquiry in regard to the making, executing and issuing of said bonds; that having failed to make such inquiry, he is chargeable with notice of all the facts he might have ascertained by proper inquiry; that at the time of the commencement of this suit the defendant had the possession, control and management of said bonds, and that they were negotiable; and decreed that the bonds be brought into court and delivered up by defendant and be cancelled.Cravens & Green for appellant.

1. The pleadings show upon their face that the plaintiff has a full and complete remedy at law, and that there is no equity in the case, in this, the reply to defendant's answer, denies that the bonds were issued under the act of the General Assembly of the State of Missouri, approved March 24th, 1868, or any other law, or that the county court had power or authority to issue said bonds, or that they are regular or valid on their face. If there was no power to issue the bonds, then they are void in the hands of any purchaser, and the plaintiff would have a complete defense to any suit upon them at law, and a court of equity has no jurisdiction, and the court should have sustained the objections of the defendant to the introduction of any evidence, and have dismissed the suit for want of equitable jurisdiction. A municipal corporation, obligors in a bond, cannot ask relief in equity that the obligee be enjoined from proceeding at law, and that the bond be surrendered, when its bill alleges that the bond was issued without authority and in violation of law and in fraud of the town, and that the obligee knew this when he took it. The rule is to dismiss plaintiff's bill if it appears to be grounded on a title merely legal and cognizable at law, notwithstanding the defendant has answered the bill. Grand Chute v. Winegar, 15 Wall. 355.

2. It is necessary for the court to find that the banking house of Mastin & Co. purchased with notice of the alleged frauds, for if they were innocent purchasers for value, any purchaser from them, before maturity, would take them purged from the alleged frauds. This issue, which is the second made by the pleadings, and necessary to the determination of the case, is entirely ignored by the court in the decree, and it is not, in this respect, responsive to the issues. For this reason the decree should be reversed, and a decree rendered dismissing the plaintiff's suit with costs and damages.

3. Counsel argued at length that the evidence showed both Mastin & Co. and the defendant to be innocent purchasers.

James O. Broadhead, and Gage & Ladd for respondent.

1. The plaintiff is entitled to the relief granted, if the bonds were fraudulently issued and the defendant is not a bona fide holder thereof, for value, without notice of their invalidity. The bonds are valid on their face and are negotiable. Story's Eq. Jur., §§ 699, 710. The holder of negotiable securities, endorsed in the usual manner, if he has acquired them fraudulently, will be enjoined from negotiating them; because, if negotiated, the maker or endorser must pay them. Osborne v. U. S. Bank, 9 Wheat. 738, 848; Hilliard on Injunctions, Ch. 30; 1 Mad. 154-5; Hamilton v. Cummings, 1 Johns. Ch. 516; Reed v. Bank, 1 Paige Ch. 218; High on Injunctions, § 712; Hood v. Aston, 1 Russ. 412.

2. The failure of the defendant to deny or explain the material testimony of witnesses regarding his own acts and conversations, when it was in his power to do so, had such statements been false, or susceptible of explanation, is a confession on his part of their truth, and their obvious effect is to impeach the transaction. Adams v. Adams, 21 Wall. 185; Comm. v. Webster, 5 Cush. 295; People v. Wharton, 4 Barb. 438.

SHERWOOD, C. J.

Two questions of prominence present themselves: First, whether the evidence adduced suffices to support the allegations of the petition and warrant the decree rendered. Second, whether on the case made by the pleadings, the plaintiff has any standing in a court of equity. Defendant, seeking a reversal, holds in each instance the negative. As the pleadings are lengthy and the evidence voluminous, and as the substance of each is hereto prefixed, we will not discuss the evidence in detail, nor give more than an outline of the petition which seeks the surrender and cancellation of 55 funding bonds of Cass county, for $1,000 each, (dated February 22nd, but issued March 1st, 1872,) and an order restraining defendant from their negotiation. This relief is asked on the ground that the bonds were fraudulently issued, and that Mastin & Co., as well as defendant, are purchasers with notice.

I. Relative to the first point: A careful perusal of the evidence has fully satisfied us that a conspiracy was formed by the parties named in the petition to secure the issuance of the bonds of Cass county and their transfer to and distribution among the conspirators; that this conspiracy was successful and the conspirators smitten with sudden fear at their own iniquitous success seized their ill-gotten gains and, justly apprehensive of popular indignation commensurate with the fraud perpetrated, sought safety in flight and opportunities in the distance for the secret and secure division of their plunder. This division occurred March 2nd, 1872, in St. Louis, and was marked as was the entire affair from inception to termination with the secrecy, hurry and trepidation usually incident to larcenous operations. A large portion of the bonds taken across the river to East St. Louis, and there placed in the custody of an express company for safe keeping, were afterwards recovered by the county in an action of replevin. Cline, the county attorney of Cass county, received, as his share of the spoil, $55,000 in bonds, and left on the same day. So conspicuously conclusive is the evidence regarding the fraudulent issuance of the bonds, that defendant does not seriously controvert it, but relies on the defense of being an innocent purchaser. (It is worthy of parenthetic remark in this connection, as one of the anomalies incident to the transfer of railroad bonds, that a purchaser of a different description is seldom, or never seen.) Let us examine the facts and weigh the evidence, in the endeavor to ascertain whether the claim which defendant makes does indeed rest upon a substantial...