Henderson County, Tenn. v. Sovereign Camp, WOW

• Citation: 12 F.2d 883
• Decision Date: 09 June 1926
• Docket Number: No. 4562.,4562.
• Parties: HENDERSON COUNTY, TENN., v. SOVEREIGN CAMP, W. O. W.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

12 F.2d 883 (1926)

HENDERSON COUNTY, TENN., v. SOVEREIGN CAMP, W. O. W.

No. 4562.

Circuit Court of Appeals, Sixth Circuit.

May 7, 1926.

Rehearing Denied June 9, 1926.

W. G. Timberlake, of Jackson, Tenn. (Joe C. Davis, of Lexington, Tenn., on the brief), for plaintiff in error.

C. W. Hewgley, of Jackson, Tenn., and Chas. Claflin Allen, Jr., of St. Louis, Mo. (De E. Bradshaw, of Omaha, Neb., and Bond & Bond and Pearson & Hewgley, all of Jackson, Tenn., on the brief), for defendant in error.

Before DENISON, DONAHUE, and MOORMAN, Circuit Judges.

MOORMAN, Circuit Judge.

The defendant in error is the innocent holder for value of 114 road improvement bonds issued in the name of Henderson county, Tenn. This suit was brought by it on a like number of coupons, of $30 each, which had been detached from the bonds.

It is stated in the bonds that they were issued under and by virtue of designated legislative acts of the state. These acts authorize the county, through its county court, to issue bonds for highway purposes to bear interest at not exceeding 6 per cent. per annum, but provide that the indebtedness thus authorized, together with all other outstanding indebtedness of the county, shall not exceed 10 per cent. of the taxable property of the county as shown by the last preceding assessment for county taxation, or, in the alternative, 15 per cent., the first to be authorized by a majority vote, and the second by a two-thirds vote, of the qualified voters of the county. It is also provided that the bonds and coupons shall be signed by the "judge or chairman and countersigned by the clerk of the county court under the seal of his office."

Each of the bonds and coupons was signed by the judge and countersigned by the clerk. The seal of the county was attached to the bonds, but not to the coupons. Each bond recited that it was one of a series of 350, aggregating the principal sum of $350,000, issued for the purpose of road improvements pursuant to orders of the county court of Henderson county and in strict compliance with chapter 26 (the enabling acts) of the Acts of the General Assembly of the state of Tennessee for the 1913 first extra session and all acts amendatory thereto. They contained the further provision: "It is hereby certified and recited that all acts, conditions and things required to be done precedent to the issuance of this bond have been done and performed in due form of law, and for the prompt performance of the covenants, recitals and stipulations herein contained the full faith and resources of the said county of Henderson are irrevocably pledged."

The substantial question here is whether the bonds in the hands of an innocent holder for value are valid, or, stating it differently, whether the county is estopped by the recital in the bonds from asserting their invalidity against such holder. A preliminary question raised by the county is that under its plea of non est factum the bonds were not admissible in evidence for the purpose of proving their validity. This is partially based on the absence of the seal from the coupons. As to that it may be said that, even if the language quoted is to be construed as requiring the placing of the seal on the coupons, it is merely directory, and the validity of the coupons may in this respect rest on the bonds to which the seal was attached. In its other aspects the contention may be disposed of by saying that there was legislative authority for issuing the bonds in some circumstances, and inasmuch as they recited on their face that they were issued pursuant to the statute and were attested by the officers who were authorized thereunder to issue such bonds, a prima facie case of validity was made out. Montclair v. Ramsdell, 107 U. S. 147, 2 S. Ct. 391, 27 L. Ed. 431.

Admitting that the county court had the right in some circumstances to issue bonds of this kind — though claiming that its powers in that respect were ministerial — it is contended that these bonds are invalid, because the authority to issue them could be brought into existence only with and by the performance of certain statutory conditions that were never fulfilled. On the other hand, the holder of the bonds contends that the grant of power was in the present, with a deferred right to exercise it, depending upon the happening of certain precedent conditions, it being the province of the county court to determine whether those conditions had been fulfilled, and, that court having certified on the face of the bonds to their fulfillment, the county is estopped as against innocent holders to assert the contrary.

The act authorizes the county, through its county court, to issue bonds for highway purposes. If the state highway department agrees to supply funds for the improvement of roads or bridges, the county may appropriate double the amount contributed by the highway department, and, without submitting the question to a vote, issue interest-bearing...