City of Pierre v. Dunscomb

• Decision Date: 27 February 1901
• Docket Number: 1,379.
• Citation: 106 F. 611
• Parties: CITY OF PIERRE v. DUNSCOMB et al.
• Court: U.S. Court of Appeals — Eighth Circuit

106 F. 611

CITY OF PIERRE v. DUNSCOMB et al.

No. 1,379.

United States Court of Appeals, Eighth Circuit.

February 27, 1901

Syllabus by the Court.

Where the constitution of the state prohibits the cities of the state from incurring an indebtedness beyond a given per cent upon the assessed value of the taxable property of the city bonds issued in excess of that limit will, upon proof of that fact, be declared void.

Where there is no recital in the bonds to the effect that they do not exceed the constitutional limit of indebtedness, and the assessment roll of the city issuing the bonds, when taken in connection with the official public record of the indebtedness of the city, kept in pursuance of law, discloses the fact that they are in excess of the constitutional limit of indebtedness, then the general recital in the bonds that they are 'issued for the purpose of funding the outstanding indebtedness of the city, in pursuance of the general incorporation laws of the state' and 'an ordinance of the said city,' will not estop the city from showing that the bonds exceed the amount of the constitutional limit of indebtedness; and when that fact is shown they are void in the hands of every one, including bona fide purchasers for value. Dixon Co. v. Field, 4 Sup.Ct. 315, 111 U.S. 83, 28 L.Ed. 360; Lake Co. v Graham, 9 Sup.Ct. 654, 130 U.S. 674, 32 L.Ed. 1065; Sutliff v. Commissioners, 13 Sup.Ct. 318, 147 U.S 230, 37 L.Ed. 145.

In Gunnison Co. Com'rs v. E. H. Rollins & Sons, 19 Sup.Ct. 390, 173 U.S. 255, 43 L.Ed. 689, the supreme court deduced these two rules from their previous decisions: (1) That where the recital in the bonds is to the effect that they are issued under and by virtue of, and in full compliance with, the statute or laws of the state, or other equivalent recitals, the county or city issuing the bonds is not estopped from showing that the constitutional limit of indebtedness had been reached before the bonds were issued, and when that fact is shown the bonds are void in the hands of every one; (2) but, where the bonds contain an express recital to the effect that the debt thereby created does not exceed the limit prescribed by the constitution, then the county or city is estopped from asserting, as against a bona fide holder for value, that the contrary was the fact.

Where the indebtedness of a city exceeds the constitutional limit of indebtedness, the issue and sale for cash of funding bonds increases the indebtedness of the city, and the bonds are void. Doon Tp. v. Cummins, 12 Sup.Ct. 220, 142 U.S. 366, 35 L.Ed. 1044; Shaw v. School Dist., 23 C.C.A. 169, 77 F. 277; Keene Five-Cent Sav. Bank v. Lyon Co. (C.C.) 97 F. 159.

Ivan W. Goodner, for plaintiff in error.

A. B. Kittredge, for defendants in error.

Before CALDWELL and SANBORN, Circuit Judges, and ADAMS, District judge.

SANBORN Circuit Judge.

This is an action brought by the defendants in error, who were bona fide purchasers of bonds of the city of Pierre, without any notice of any defenses thereto, to recover upon certain coupons cut therefrom. The city interposes two defenses in this court: (1) That it had no authority to issue the bonds; and (2) that at the time they were issued its indebtedness exceeded the constitutional and statutory limitation of 5 per cent. of its assessed valuation, and the issue of these bonds increased its debt.

The bonds were issued to fund the floating indebtedness of the city, and the first defense is that the legislature conferred no authority upon this city to issue bonds for this purpose, because the general power conferred upon it by the general law for the incorporation of cities, which took effect on March 6, 1890 (Laws S.D. 1890, c. 37, art. 5, Sec. 1), was limited by the constitution of the state, and by chapter 16, Gen. Laws Dak. 1887, to the purposes specified in the latter act. The act of 1887 took effect on March 8 of that year, and provided that any city organized, as was the city of Pierre, under a general law of the territory, might incur a bonded indebtedness for the purpose of erecting public school buildings and for certain other specified purposes, but it gave no power to such a city to issue its bonds for the purpose of funding its floating indebtedness. Section 1, c. 16, Gen.Laws 1887; section 1149, Pol. Code, Comp. Laws Dak. In the same year an act to provide for the general incorporation of cities, which took effect on March 11, 1887, and which gave authority to cities organized thereunder to borrow money on the credit of the corporation for corporate purposes, and to issue bonds therefor, was enacted by the legislature of Dakota territory, and is known as chapter 73, Gen. Laws Dak. 1887. The constitution of the state of South Dakota was adopted in the year 1889, and it provides:

'The legislature shall provide by general laws for the organization and classification of municipal corporations. * * * The legislature shall restrict the power of such corporations to levy taxes and assessments, borrow money and contract debts so as to prevent the abuse of such power. ' Article 10, Sec. 1. 'Except as otherwise provided in this constitution no tax or assessment shall be levied or collected or debts contracted by municipal corporations except in pursuance of law for public purposes specified by law, nor shall money raised by taxation, loan or assessment for one purpose be devoted to any other. ' Article 10, Sec. 2.

In the year 1890, after the adoption of this constitution, the legislature of South Dakota passed the general law for the incorporation of cities under which the funding bonds in this case were issued. It provided by that law that the city council of any city organized under the prior general laws upon this subject should be subject to its provisions; that the city council of every such city should have the power 'to borrow money on the credit of the corporation for corporate purposes and issue bonds therefor in such amounts and forms and on such conditions as it shall prescribe,' upon a favorable vote of a majority of the legal voters of its city; and that chapter 73 of the General Laws of 1887, and all acts and parts of acts inconsistent with this general incorporation law of 1890, were thereby repealed. Laws S.D. 1890, c. 37, art. 5, Sec. 1, subd. 5; Id. art. 23, Sec. 7. The power to issue bonds granted to the city council of the city of Pierre by this act of 1890 was plenary. It was general, not special. It was not limited to any specific purpose, but was to borrow money and issue bonds for all corporate purposes. The whole is greater than any of its parts, and includes them all, and the power to borrow money and issue bonds for all corporate purposes necessarily includes the power to do so for the purpose of paying or funding the floating indebtedness of the corporation. City of Huron v. Second Ward Sav. Bank, 86 F. 272, 280, 30 C.C.A. 38, 46, 57 U.S.App. 593, 608, 49 L.R.A. 534; Insurance Co. v. Mead (S.D.) 82 N.W. 78, 79, 83 N.W. 335. The contention of counsel for the city is that this plenary power was restricted and limited to the special purposes specified in section 1, c. 16, of the General Laws of 1887. But that position is untenable, for various reasons. The argument that the act of 1887 was a restriction of the power of corporations to borrow money and contract debts pursuant to the mandate of section 1, art. 14, of the constitution is futile, because the act of 1887 was enacted before the constitution was adopted. If the provisions of the acts of 1887 and 1890 were repugnant, the former would not repeal or restrict the latter, but the later act of 1890 would repeal the former to the extent of the repugnancy. But there is no inconsistency or repugnancy in the provisions of the two acts. The act of 1887 gave to cities the power to issue bonds for certain specified purposes. The law of 1890 granted the power to issue them for all corporate purposes. The effect of the latter was to grant the power to issue bonds for all corporate purposes not specified in the act of 1887, in addition to those there specified. 'All statutes in pari materia are to be read and construed together as if they formed part of the same statute and were enacted at the same time. ' Potter's Dwar. St. 145. Reading these statutes together, the powers specified in the act of 1887 are enlarged by the additional grant of the general law of 1890, and the authority of the city of Pierre to issue bonds to fund its floating indebtedness under the act of 1890, is plain. Seward Co. Com'rs v. Aetna Life Ins. Co., 90 F. 222, 227, 32 C.C.A. 585, 590, 61 U.S. App. 41, 49; In re Henderson's Tobacco, 11 Wall. 652, 657, 20 L.Ed. 235; Gowen v. Harley, 56 F. 973, 979, 6 C.C.A. 190, 196, 12 U.S.App. 574, 584.

The second defense urged is that the bonds and coupons were void because they increased an indebtedness of the city which was in excess of the constitutional and statutory limitation at the time they were issued. This objection to the bonds arises upon this state of facts: At the time these bonds were issued the indebtedness of the city of Pierre was limited by the constitution and by the statutes of South Dakota to 5 per cent. of the assessed valuation of the property of the city. Section 4, art. 13, Const. S.D.; Gen. Laws S.D.

1890 c. 37, art. 5, Sec. 1, subd. 5. The limit of the indebtedness of this city under this constitutional and statutory restriction was $48,033.25, and its indebtedness was more than $100,000 on July 1, 1890, when these bonds were issued. The amount of bonds issued was $25,000, and this appeared upon the face of each bond. The bonds were issued and sold to the National Bank of Commerce of Pierre on July 1, 1890, for $25,950 in money, which was paid to the treasurer of the city, who expended at...