Geneva Nat. Bank v. Independent School Dist.

• Decision Date: 01 January 1885
• Parties: GENEVA NAT. BANK OF GENEVA, N.Y., v. INDEPENDENT SCHOOL-DIST. OF RIVERSIDE.
• Court: U.S. District Court — Northern District of Iowa

25 F. 629

GENEVA NAT. BANK OF GENEVA, N.Y., v. INDEPENDENT SCHOOL-DIST. OF RIVERSIDE.

United States Circuit Court, N.D. Iowa, Western Division.

October Term, 1885

Berryhill & Henry, for plaintiff.

S. M Marsh, O. J. Taylor, and J. H. Swan, for defendant.

SHIRAS J.

In this action plaintiff seeks to recover judgment for the amount of certain interest coupons, taken from bonds purporting to have been issued by the defendant corporation in the years 1877 and 1878. On behalf of the defendant it is averred that the bonds from which the coupons were detached are void, because the issuance thereof was not authorized by the electors of the district as required by law; that when issued the district was indebted to an amount exceeding 5 per cent. of the taxable property in the district, and that therefore the bonds were illegal and void under the provisions of section 3 of article 11 of the constitution of the state of Iowa, and also according to the provisions of the statutes of Iowa, under which the bonds were issued which limits the amount of indebtedness to 5 per cent. of the taxable property of the district. In reply plaintiff avers that the recitals in the bonds estop the defendant from setting up these defenses; and, further, that all defenses to the validity of these coupons have been adjudged against the defendant in a prior action, brought by plaintiff against defendant in the United States circuit court for the district of Iowa, upon certain earlier maturing coupons attached to the same bonds, and in which suit the defendant contested the validity of the bonds, and denied liability thereon.

The evidence shows that plaintiff is the owner of the coupons sued on, and of the bonds from which they were detached, and became the owner thereof before maturity, for value, and having only such knowledge of the facts touching said bonds as is to be derived from the bonds themselves, and from the constitution and laws of the state of Iowa. The evidence also shows that, at the several times when the bonds in suit were issued, the Independent District of Riverside was then indebted in amounts exceeding the limit fixed by the constitution, to-wit, 5 per cent. upon the taxable property of the district. The evidence also discloses the fact that at the October term, 1881, of the United States circuit court for the district of Iowa, the present plaintiff brought an action against the defendant upon the interest coupons maturing in 1879, 1880, and 1881, belonging to the identical bands from which the coupons included in the present suit were detached. In that action the Independent School-district of Riverside, as defendant, pleaded that the bonds in question were illegal for the reason that at the date thereof the school-district was already indebted to the full limit of 5 per cent. upon the taxable property of the district, and hence the bonds were issued in violation of the provisions of the constitution of the state of Iowa. The record shows that the cause was tried before a jury, and that there was a verdict and judgment for the plaintiff. On behalf of plaintiff it is claimed that, under the doctrine announced in Beloit v. Morgan, 7 Wall. 619, this judgment estops the defendant from contesting the validity of the bonds in the present action.

In the case of Beloit v. Morgan, this question came before the supreme court in the following form: The town of Beloit, Wisconsin, issued certain bonds in aid of the construction of a railroad. Morgan brought suit to recover the unpaid interest on part of these bonds, and, in January, 1861, obtained judgment therefor. He then brought a second action upon other of the bonds belonging to the same issue, and thereupon the town of Beloit filed a bill in equity to enjoin the proceedings at law, and to compel the cancellation of the bonds, on the ground that the issuance thereof was illegal and the bonds void. Morgan set up, as an answer to the bill, the judgment obtained in January, 1861, as an estoppel upon the right of the town to question the validity of the bonds involved in the second action. Mr. Justice SWAYNE, delivering the opinion of the court, ruled as follows:

'On the ninth of January, 1861, the appellee recovered a judgment at law against the appellant upon another portion of these securities, though not the same with those in question in this case. The parties were identical, and the title involved was the same. All the objections taken in this case might have been taken in that. The judgment of the court could have been invoked upon each of them; and, if it were adverse to the appellant, he might have brought the decision here by a writ of error for review. The court had full jurisdiction over the parties and the subject. Under such circumstances, a judgment is conclusive, not only as to the res of that case, but as to all further litigation between the same parties touching the same subject-matter, though the res itself may be different. * * * But the principle reaches further. It extends, not only to the questions of fact and of law which were decided in the former suit, but also to the grounds of recovery or defense which might have been, but were not, presented.'

In Cromwell v. Sac Co., 94 U.S. 351, the same question arose upon the following facts: Sac county, Iowa, issued negotiable bonds to the amount of $10,000, ostensibly for the erection of a court-house. In fact, the issuance of the bonds was fraudulent. Cromwell became the owner of a part of the bonds, paying value therefor before maturity. The interest coupons not being paid, an action thereon was brought against the county in the name of one Samuel C. Smith, though really for the benefit of Cromwell. In this action it was shown that the bonds were, as against the county, fraudulent and without consideration, and it not being shown that Smith was an innocent holder for value, judgment was rendered for defendant. Subsequently, Cromwell brought an action on four of the bonds against the county, and in defense to this action the county pleaded, in estoppel, the judgment in the former action upon the coupons. Mr. Justice FIELD, speaking for the court, held that--

'In considering the operation of this judgment, it should be borne in mind, as stated by counsel, that there is a difference between the effect of a judgment as a bar or estoppel against the prosecution of a second action upon the same claim or demand, and its effect as an estoppel in another action between the same parties upon a different claim or cause of action. In the former case, the judgment if rendered upon the merits, constitutes an absolute bar to a subsequent action. It is a finality as to the claim or demand in controversy, concluding parties, and those in priority with them, not only as to every matter which was offered and received to maintain or defeat the claim or demand, but as to any admissible matter which might have been offered for that...