Commercial Trust Co. of Hagerstown v. Laurens County

• Decision Date: 23 July 1920
• Docket Number: 171.
• Citation: 267 F. 901
• Parties: COMMERCIAL TRUST CO. OF HAGERSTOWN v. LAURENS COUNTY.
• Court: U.S. District Court — Southern District of Georgia

267 F. 901

COMMERCIAL TRUST CO. OF HAGERSTOWN v. LAURENS COUNTY.

No. 171.

United States District Court, S.D. Georgia, Western Division.

July 23, 1920

Jones Park & Johnston, of Macon, Ga., for plaintiff.

Hall Grice & Bloch, of Macon, Ga., and M. H. Blackshear and Burch & Daley, all of Dublin, Ga., for defendants.

SIBLEY District Judge.

Commercial Trust Company of Hagerstown, as a corporation of Maryland sues at law Laurens county, Ga., upon three promissory notes each for $10,000, dated January 10, 1918, due December 31, 1918, and payable to Frank Scarboro Company, or order, signed in the name of Laurens county, by its treasurer and county commissioners, and indorsed, 'For value received without recourse,' by Frank Scarboro Company. Each note, besides matters quoted hereafter, recites, 'This note is issued in pursuance of a resolution duly adopted by the commissioners of the county of Laurens on January 10, 1918, and duly signed by the clerk of commissioners of said county, as required by law,' and is accompanied by a copy of the resolution as follows:

'Whereas, there is a casual and temporary deficiency in the public funds in the treasury of the county of Laurens; and whereas, there is a casual and temporary need of money to meet the current expenses of the county government: Therefore be it resolved that to cover said casual and temporary deficiency, in order to meet the current expenses of the county government, we hereby authorize and empower the treasurer and county commissioners of the county of Laurens to negotiate a temporary loan for the sum of seventy-five thousand dollars for the county of Laurens upon the best rate of interest possible. * * * Said notes to be payable thirty-first day of December, 1918.'

There is exhibited, as accompanying the notes, a statement, signed by Laurens county, by its clerk, addressed to Frank Scarboro Company, purporting to be information given for the purpose of obtaining a loan of $75,000, and showing, among other things, 'Assessed valuation of property for 1917, $9,360,654,' and that the notes for the loan are issued under authority of article 7, Sec. 7, of the Constitution of Georgia.

1. Jurisdiction rests on diverse citizenship, and is questioned by demurrer, because the citizenship of Frank Scarboro Company is not alleged, and Judicial Code, Sec. 24, subd. 1 (Comp. St. Sec. 991(1)), prevents suits in a federal court by an assignee of a note unless the assignor could have sued. The presumption is against jurisdiction, and the facts giving it must be clearly and positively averred. It must therefore be assumed that Frank Scarboro Company is a citizen of Georgia for purposes of jurisdiction. But the petition, as amplified by amendment, alleges that Scarboro Company was the mere broker and agent of Laurens county, employed to sell the notes, and never advanced any money or credit for the notes, or became at any time a creditor of the county, which owed no one anything until plaintiff paid its money for the notes to Scarboro Company as the county's agent. Such facts would constitute the plaintiff, though in form an assignee, in substance an original creditor, and as such it could maintain the suit. Holmes v. Goldsmith, 147 U.S. 150, 13 Sup.Ct. 288, 37 L.Ed. 118; Baltimore Trust Co. v. Screven County (D.C.) 238 F. 834.

2. A plea to the jurisdiction alleges the Scarboro Company to be a corporation of Georgia, and denies that it was the agent of Laurens county in this transaction. The plea, if true, is good, and a motion to strike it will be overruled.

3. The general demurrers aver that no cause of action is set forth, because of a provision of article 7, Sec. 7, of the Constitution of Georgia, as follows:

'And no such county, municipality, or division shall incur any new debt, except for a temporary loan or loans to supply casual deficiencies of revenue, not to exceed one-fifth of one per centum of the assessed value of taxable property therein, without the assent of two-thirds of the qualified voters thereof, at an election for that purpose, to be held as may be prescribed by law.'

The petition alleges no election, but does allege 'a casual deficiency in revenue,' and the notes, besides the reference to the resolution of the commissioners, contain recitals as follows:

'It is hereby certified and recited that each and every act, condition, and thing required to be done, to have happened, and to be performed precedent to and in the issuance of this note, has been done, has happened, and has been performed in full and strict compliance with the Constitution and laws of the state of Georgia, and that this note is within every debt and other limit prescribed by law, and the faith and credit of the county of Laurens are hereby irrevocably pledged to the punctual payment of the principal and interest of this note, according to its terms.' Where authority to make a loan exists or may arise upon certain conditions, that such recitals may be estoppels, conclusively establishing the validity of such obligations, notwithstanding constitutional provisions like that quoted, has been repeatedly adjudicated. The cases are reviewed in Gunnison County v. E. H. Rollins & Sons, 173 U.S. 255, 19 Sup.Ct. 390, 43 L.Ed. 689; Waite v. Santa Cruz, 184 U.S. 302, 22 Sup.Ct. 327, 46 L.Ed. 552; Stanly County v. Coler, 190 U.S. 437, 23 Sup.Ct. 811, 47 L.Ed. 1126. The Constitution may thus be annulled by a lie. But there must be such explicit statements of fact as may easily deceive, they must be made by officers who have authority under the law to ascertain and state the facts, and the person claiming the estoppel must actually have been deceived to his hurt, or, as it is generally stated, must be 'a bona fide holder for value. ' In Georgia, while counties are corporations, none of their officers have any general authority to borrow money. They have only such powers as are expressly given them by law. Dent v. Cook, Ordinary, 45 Ga. 323. In this they resemble officers of the federal government. Floyd Acceptances, 7 Wall. 667(5), 676, 19 L.Ed. 169. The authority to borrow money is given county officers only in the two situations stated in the quoted provision of the Constitution: First, to supply a casual deficiency in revenue; and, second, on the assent of two-thirds of the qualified voters.

Under the law of Georgia an election to ascertain such assent is called, conducted, and the result declared by the county commissioners. Code, Sec. 440 et seq. So that a recital by them that the authority of an election existed, though false, would no doubt estop the county. The recital of these notes that every condition precedent to their issuance had happened, if it stood alone, would probably have this result; but this recital is preceded by the reference to the resolution of January 10, 1918, as the authority for making these notes and that resolution contains no allusion to an election. It must therefore be concluded that this special reference overrides the more general recital, and confines the authority intended to be asserted by the notes to this resolution, and excludes any reliance by the lender upon an election.

Confining the inquiry, therefore, to the existence of an authority because of a casual deficiency in revenue, we find the estoppel unsustainable. These words have a definite and well-established significance in the law of Georgia. The constitutional scheme of county finance worked out in the statutes is that liabilities for lawful things and services may be incurred all through the fiscal, which is also the calendar, year, if there be no money on hand to pay for them but that in the summer taxes shall be laid, to be collected in the fall, sufficient to cover all such liabilities. No debt, within the meaning of the Constitution, is thereby created. Dawson v. Dawson Waterworks Co., 106 Ga. 696, 32 S.E. 907; Butts County v. Jackson Banking Co., 129 Ga. 801, 60 S.E. 149, 15 L.R.A. (N.S.) 567, 121 Am.St.Rep. 244. If, after the levy of the taxes, it appears that they will, from a casual and unanticipated cause, not cover the liabilities for that year, then a casual deficiency in revenue arises, and a limited loan may be resorted to to...