Divide Creek Irr. Dist. v. Hollingsworth

• Decision Date: 28 July 1934
• Docket Number: No. 989.,989.
• Citation: 96 ALR 937,72 F.2d 859
• Parties: DIVIDE CREEK IRR. DIST. v. HOLLINGSWORTH.
• Court: U.S. Court of Appeals — Tenth Circuit

96 ALR 937, 72 F.2d 859 (1934)

DIVIDE CREEK IRR. DIST. v. HOLLINGSWORTH.

No. 989.

Circuit Court of Appeals, Tenth Circuit.

July 28, 1934.

Frank Delaney, of Glenwood Springs, Colo., for appellant.

S. E. Naugle, of Denver, Colo. (L. E. Kenworthy, of Denver, Colo., on the brief), for appellee.

Before PHILLIPS, McDERMOTT, and BRATTON, Circuit Judges.

McDERMOTT, Circuit Judge.

Action at law upon unpaid bonds and attached coupons issued by appellant and owned by appellee, a nonresident. After a motion to dismiss was denied, the district by its answer admitted that, pursuant to the statute creating the district, the bonds were authorized by a majority of the electors of the district; alleged that they were voted to pay for an irrigation system which was to be completely constructed before the bonds were issued; that in December, 1913, the district agreed to deliver to one Lockhard the entire $200,000 issue in payment for a completed irrigation system; but that, instead, the district "caused said bonds to be circulated and negotiated in payment for unperfected ditch and water rights," and stock in another ditch company said to have been later forfeited for nonpayment of assessments; that the proposed system was abandoned in 1928. It is further alleged that appellee was not a bona fide holder in good faith of the bonds and coupons sued upon. By way of cross-complaint, the district asked to have a prior judgment in favor of appellee on other bonds of the same issue set aside.

In reply, appellee denied all these charges, and attached a copy of the Notice for the Special Election at which the bonds were voted, which recites that the district proposes, with the bonds, to acquire other ditch and water rights, the particular reservoir and the stock of the particular ditch company complained of in appellant's answer. Appellee further denied that she had knowledge of any irregularities when she purchased the bonds. Appellee then alleged that such defenses were barred by final judgments rendered in two other cases between the same parties, involving other bonds of the same issue; and that appellant was estopped by the recitals in the bonds to raise such defenses. To appellant's cross-complaint, appellee interposed, in addition, a plea of laches.

Appellant demurred to this reply and also moved to strike therefrom many of the affirmative allegations. The demurrer and motion were overruled. The order indicates that the trial court examined the records in the two cases pleaded as res judicata, for the order finds that the defenses now sought to be interposed are identical with those interposed in the prior actions on other bonds of the same issue; that the parties were the same, and the proceedings were in the same court. Without regard to what the records in the earlier cases in fact disclose, the reply in this case alleged facts which, if true, constituted a good plea of estoppel by judgment and by recitals in the bonds. The order overruling the demurrer and the motion was therefore correct, irrespective of the reasons assigned therefor.

After a trial without a jury, judgment was rendered for the appellee for the amount sued for, the judgment order closing with the conventional words, "and that plaintiff have execution therefor." We group the errors relied upon for reversal.

1. Appellee introduced the bonds, proved ownership and the consideration paid therefor, and rested. Appellant offered testimony tending to support its answer and its opening statement, to the effect that the bonds were issued as consideration for water rights upon which no construction work was ever done, for a reservoir encumbered beyond its value, and for stock in the ditch company subject to forfeiture for unpaid assessments. There was no testimony offered, however, that the acquisition of water rights, the reservoir, and the stock of the ditch company was outside the purposes for which the bonds were voted as set out in the election notice. Counsel stated that the purpose of the questions was to show that the stock and rights acquired were worthless; that the reservoir was not completed to the capacity agreed by the former owner to whom the bonds were issued; that other properties acquired for the bonds were encumbered and later foreclosed. Objections to all this testimony were sustained.

The proffered testimony strongly indicates that appellant's business affairs were badly handled; bonds were apparently issued piecemeal to acquire fragments of a complete system, and the system never completed but eventually abandoned. As it has turned out, the district is saddled with a heavy bonded indebtedness and, if the proffered testimony is true, has nothing now to show for it — a situation that has recurred all too frequently since the days when railroad-aid bonds were issued, and no railroad ever built. The rulings of the trial court were right, nevertheless, if the same issues of fact had been theretofore finally adjudicated between the parties, for no one is entitled to renew a controversy once finally determined; or, the rulings were right if these negotiable bonds found their way into the hands of one who purchased them for value, before maturity, without knowledge that they had been improvidently issued, for negotiable municipal bonds are "couriers without luggage."

2. A final judgment in a prior action on the same cause of action is conclusive upon the parties, and those in privity with them, not only as to all matters in fact litigated in the prior action, but as to all matters which might have been therein litigated. But where the prior action was between the same parties, but the cause of action different, the judgment operates as an estoppel only as to those matters which were litigated and determined in the former action. Larsen v. Northland Transportation Co., 54 S. Ct. 584, 78 L. Ed. 1096; Tait v. Western Md. Ry. Co., 289 U. S. 620, 53 S. Ct. 706, 77 L. Ed. 1405; Cromwell v. County of Sac, 94 U. S. 351, 24 L. Ed. 195. A matter is litigated and determined, within the scope of the rule, if it is decided as a matter of law upon demurrer. "It is well established that a judgment on demurrer is as conclusive as one rendered upon proof." Northern Pacific Railway Co. v. Slaght, 205 U. S. 122, 130, 27 S. Ct. 442, 445, 51 L. Ed. 738; Sacks v. Stecker (C. C. A. 2) 62 F.(2d) 65; Passailaigue v. Herron (C. C. A. 5) 38 F. (2d) 775; Ledbetter v. Wesley (C. C. A. 8) 23 F.(2d) 81; Old Dominion Copper Mining & Smelting Co. v. Lewisohn (C. C. A. 2) 202 F. 178.

The reply in this case set up two judgments as prior adjudications. The parties in each were the same, but different bonds were involved. In one of them, No. 7826, it appears that judgment was rendered by default. No issue being tendered in that cause, none was determined, and that judgment does not operate as an estoppel in this action. In case No. 8695, it appears from the findings of the court on the demurrer to the reply, certain defenses interposed in that action and found to be insufficient on demurrer, are renewed here. If that be true, the plea of estoppel as to such defenses is well taken.

Appellant contends, however, that this record does not disclose the facts in that respect. That is true. Neither party offered in evidence the pleadings or the judgment roll in case No. 8695. Appellee contends that the trial court should and did take judicial notice of prior proceedings between the same parties in the same court, and that on appeal, the record here being silent, it must be presumed that the trial court correctly ruled that the defenses interposed in the two cases were the same. Appellant contends the law is to the contrary.

On first impression, and perhaps on final analysis, the authorities on the point appear to be in conflict. The Seventh Circuit reversed a decree dismissing a bill because the trial court found, upon motion, that plaintiff was barred by a judgment in a former action in the same court. The Circuit Court of Appeals held that decisions must depend upon evidence introduced, so that the adversary may have the opportunity to meet and overcome it. Paridy v. Caterpillar Tractor Co. (C. C. A. 7) 48 F.(2d) 166, certiorari denied 278 U. S. 617, 49 S. Ct. 21, 73 L. Ed. 540. Cases from many state courts are cited in that opinion in support of that ruling. The Ninth Circuit is in accord. National Surety Co. v. United States (C. C. A. 9) 29 F.(2d) 92.

On the other hand, the Fourth Circuit, in Morse v. Lewis, 54 F.(2d) 1027, certiorari denied 286 U. S. 557, 52 S. Ct. 640, 76 L. Ed. 1291, affirmed a decree of the trial court which dismissed a bill on motion because of a final decree in the same court on the same cause of action. It will be observed, however, that in this case the Court of Appeals by looking at its own records on the appeal of the prior action, was able to determine that the causes were identical, while in the case from the Seventh Circuit, there was no appeal from the prior decree, and that court was unable to determine the identity of the causes from its own records. The Eighth Circuit Court of Appeals has likewise held that "the District Court could take judicial notice of its own records, and in so doing would have full knowledge of the original suit." St. LouisSan Francisco R. Co. v. Byrnes (C. C. A. 8) 24 F.(2d) 66, 69. To the same effect, is Bowe-Burke Mining Co. v. Willcuts (D. C. Minn.) 45 F.(2d) 394.

The Supreme Court of the United States, in a number of cases, has taken notice of its own records in other cases in order that the controversy might not be prolonged. For example, in National Fire Ins. Co. v. Thompson, 281 U. S. 331, 50 S. Ct. 288, 74 L. Ed. 881, it examined the record on an appeal in another case between the same parties to find the content of an order made by the Superintendent of Insurance. In De Bearn v. Safe Deposit & Trust Co., 233 U. S. 24, 34 S. Ct. 584, 58 L. Ed. 833, the court, taking judicial notice of the record on a prior...