City of Florence v. Anderson

Decision Date05 April 1938
Docket NumberNo. 4228.,4228.
Citation95 F.2d 777
PartiesCITY OF FLORENCE v. ANDERSON et al.
CourtU.S. Court of Appeals — Fourth Circuit

William H. Smith, of Florence, S. C. (J. D. Gilland, of Florence, S. C., on the brief), for appellant.

Lanneau D. Lide, of Marion, S. C. (Lide & Schoolfield, of Marion, S. C., on the brief), for appellees.

Before PARKER, NORTHCOTT, and SOPER, Circuit Judges.

PARKER, Circuit Judge.

This is an appeal from a judgment for the balance due on four negotiable promissory notes of $10,000 each issued in the year 1931 by the City of Florence, S. C. The notes were payable to bearer, and pledged the faith and credit of the city to their payment. They were issued pursuant to resolutions of the city council directing that the taxes of that year be pledged for their payment, and contained recitals to the effect that they were issued pursuant to resolution of the council, that all conditions precedent to their issuance had been performed in strict compliance with the Constitution and laws of the state, and that they were within "every debt and other limit prescribed by law." They were acquired by a national bank and were pledged by it before maturity with the state treasurer to secure a deposit of state funds. Upon the failure of the bank they were sold to enforce the rights of the pledgee, were acquired upon the sale by plaintiff Anderson, and were pledged by him as collateral security to his coplaintiff, the Wilmington Savings & Trust Company. It was shown upon the hearing that at least three of the notes were issued to pay off pre-existing indebtedness of the city which matured during the year 1931, and that the total of tax anticipation notes issued during that year was $333,000, or more than double the amount of the current taxes. It was not shown, however, that the bank or any subsequent holder of the notes had knowledge of these facts; and there is no contention that when the state treasurer took the notes in pledge he did not acquire them in good faith and for value.

The case was heard by the court below without a jury. The city contended that the notes were payable only out of taxes for the current year, and that they were invalid because issued, not for current expenses, but to pay a pre-existing indebtedness, and also because the aggregate of the notes issued during the year exceeded the year's taxes. These points were saved by motion for judgment on the ground of the alleged insufficiency of the evidence and by exceptions to the exclusion of testimony offered.

The first question to be determined is whether the notes sued on are negotiable instruments pledging the general credit of the city, or whether they are mere nonnegotiable certificates of indebtedness payable only out of the taxes of the current year. This is the same question which we have just decided contrary to the contention of the city in the case of City of Georgetown v. Elliott et al., 4 Cir., 95 F. 2d 774; and in accordance with our decision there we hold that the notes, which are in form negotiable municipal obligations, were authorized as such by section 4554 of the Civil Code of 1922, and that there is nothing in article 8, § 7, of the Constitution of the state, which prevents a municipal corporation issuing tax anticipation notes of this character. Our reasons for so holding are fully set forth in the opinion in that case, and need not be repeated here.

And we think it clear that the rights of plaintiffs with respect to the notes are those of a holder in due course. The city points to the fact, in this connection, that the notes were acquired by plaintiffs after maturity; but, while the fact is true, it is immaterial, since plaintiffs acquired them through the state treasurer, who was a holder in due course, and there is no contention that plaintiffs were parties to any fraud or illegality. They have all the rights, therefore, of the state treasurer with whom the notes were pledged before maturity. Code S.C.1932, § 6809; Farr-Barnes Lumber Co. v. Town of St. George, 128 S.C. 67, 122 S.E. 24; Montclair Township v. Ramsdell, 107 U.S. 147, 2 S.Ct. 391, 27 L.Ed. 431.

We have, then, tax anticipation notes issued by a municipality which is authorized by law to issue notes of that character, and we have them in the hands of holders in due course clothed with all the rights of bona fide purchasers for value without notice and before maturity. We have, moreover, recitals in the notes themselves that all conditions precedent to their issuance have been complied with in accordance with the Constitution and laws of the state of South Carolina, and that they are within every debt and other limit prescribed by law. These recitals were made by the officials of the city upon whom rested the legal duty of determining whether the issuance of obligations of that character was necessary for the corporate purposes of the city and whether they were...

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4 cases
  • City of Georgetown v. Elliott
    • United States
    • U.S. Court of Appeals — Fourth Circuit
    • April 5, 1938
    ... ... As was well said by the late Judge Ernest F. Cochran in Citizens & Southern National Bank of Savannah v. The City of Florence (an unreported decision of the District Court for the Eastern District of South Carolina): "It is argued, however, that tax anticipation notes must ... ...
  • U.S. Fidelity & Guaranty Co. v. Wells
    • United States
    • Arkansas Supreme Court
    • March 3, 1969
    ...& Mortgage Co., 137 Cal.App. 180, 30 P.2d 446 (1934); In re Canal Bank & Trust Co., 186 La. 366, 172 So. 421 (1937); City of Florence v. Anderson, 95 F.2d 777 (4th Cir.1938); Wheeler v. Wallace, 167 S.W.2d 1043 (Tex.1943)); or without payment of value (Ferber v. Third Street Realty Co., 166......
  • Knott County v. Aid Ass'n for Lutherans
    • United States
    • U.S. Court of Appeals — Sixth Circuit
    • January 24, 1944
    ...as a defense against innocent holders, that the obligations were issued for some other purpose not within its power. City of Florence v. Anderson, 4 Cir., 95 F.2d 777. Appellant relies upon Sutliff v. Lake County Commissioners, 147 U.S. 230, 13 S.Ct. 318, 37 L.Ed. 145, where it was held, un......
  • St. Paul Fire & Marine Ins. Co. v. TOWN OF MONONGAH, W. VA.
    • United States
    • U.S. District Court — Northern District of West Virginia
    • June 1, 1962
    ...449, 158 A.L.R. 924 (1944), and the cases cited in an exhaustive note on the subject in 158 A.L.R. 938. See also City of Florence v. Anderson (Cir. 4, 1938), 95 F.2d 777. The order of the Public Service Commission is a nullity, and the plaintiff is entitled to the declaratory judgment as pr......

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