Hughes County, S.D., v. Livingston

• Decision Date: 09 October 1900
• Docket Number: 1,337.
• Citation: 104 F. 306
• Parties: HUGHES COUNTY, S.D., v. LIVINGSTON.
• Court: U.S. Court of Appeals — Eighth Circuit

104 F. 306

HUGHES COUNTY, S.D., v. LIVINGSTON.

No. 1,337.

United States Court of Appeals, Eighth Circuit.

October 9, 1900

T. P Estes (J. K. Lambert and C. E. De Land, on the brief), for plaintiff in error.

McNeil v. Seymour (H. R. Horner, R. W. Stewart, Edward C. Stringer and W. P. Warner, on the brief), for defendant in error.

In Error to the Circuit Court of the United States for the District of South Dakota.

On January 19, 1899, Crawford Livingston, the defendant in error, brought an action in the court below against the county of Hughes, in the state of South Dakota, the plaintiff in error, to recover the amount due upon coupons cut from 56 bonds issued by that county, and dated July 6, 1891. In his complaint the defendant in error alleged: That on July 6, 1891, the county of Hughes, in compliance with laws of the state of South Dakota, and in conformity with the enactments recited in the bonds, issued 224 municipal bonds. That each of these bonds was in the following words and figures:

'Number-- . United States of America. $500.00.

'State of South Dakota. Hughes County Funding Bond.

'Know all men by these presents, that the county of Hughes, in the state of South Dakota, acknowledges itself to owe, and for value received hereby promises to pay, to T. W. Pratt or bearer the sum of five hundred dollars ($500.00), in lawful money of the United States of America, on the sixth day of July, A.D. 1911, or at any time after the sixth day of July, A.D. 1901, at the option of said county, with interest thereon at the rate of six per centum per annum, payable annually on the sixth day of July in each year, on presentation and surrender of the annexed interest coupons as they severally become due. Both principal and interest of this bond are payable at the Chemical National Bank, in the city of New York, and state of New York. This bond is one of a series of like tenor and date, numbered from 1 to 224, both inclusive, aggregating the sum of $112,000.00, and is issued by said county of Hughes for the sole purpose of funding the outstanding indebtedness of said county incurred for constructing a court house and jail, and is issued in pursuance of an act of the Eighteenth legislative assembly of the territory of Dakota, entitled 'An act authorizing and empowering organized counties of Dakota to erect county buildings for court house and jail purposes, and to issue and dispose of bonds to provide funds to pay therefor, and to provide for the payment of principal and interest of such bonds' (Laws Dak. T. 1889, c. 42), and in accordance with an election duly called and held on the second day of June, 1891, and it is hereby certified and recited that all acts, conditions, and things required to be done precedent to and in the issuing of this series of bonds have been properly done, happened, and been performed in regular and due form, as required by law, and that the total indebtedness of said county, including this issue of bonds, does not exceed the constitutional and statutory limitations. In witness whereof (that) said county of Hughes, by its board of county commissioners, has caused this bond to be signed by the chairman of said board, attested by the county auditor of said county, and caused the seal of said county to be affixed hereto the sixth day of July, A.D. 1891.

'(Signed)

John F. Hughes,

'Chairman of the Board of County Commissioners.

'Attest: Harry Ernest, County Auditor.

'Registered in my office according to law.

'Thomas H. Green, County Treasurer.'

That to each bond there were attached 20 interest coupons, for $30 each, payable at intervals of six months from the date of the bond, that these bonds and coupons were sold as commercial obligations of the county, and passed from purchaser to purchaser, until they were bought by the defendant in error. That, 'at the time the said bonds of the defendant were issued and sold, the said defendant, through its officers, in order to facilitate the sale thereof to all persons who might then or thereafter purchase in open market the said obligations, prepared certificates and certified copies of the records of the defendant, duly made by its proper officers, showing the proceedings had and taken by the defendant with reference to the issue of said bonds, the purpose for which it was proposed to use the money, the amount of the indebtedness, the equalized assessed valuation, and generally all matters pertaining to the issuance of said bonds affecting their validity, showing by said certified copies and records the full right of the defendant to issue the same. Said bonds were all thereupon sold in open market to various persons, who were induced to purchase the same by reason of the recitals therein contained, and said certificates and certified copies, and the same were purchased in the ordinary course of business, before maturity, in good faith and for value, and by such purchasers in the same manner resold; and some time thereafter all of the bonds and coupons referred to in the several subdivisions of this complaint were duly sold to this plaintiff in the ordinary course of business, and in good faith and for value, who likewise was induced to purchase the same relying upon the recitals therein contained and upon said certificates and certified copies'; and that the defendant in error, prior to the 1st day of July, 1895, in good faith and for value, in open market, before the maturity thereof, purchased the 56 bonds from which the coupons in suit were cut and the coupons themselves, and is the owner and holder thereof. That these coupons have never been paid, though payment thereof has been demanded of the plaintiff in error.

The county interposed a demurrer to this complaint, which was overruled, and then it answered. Its answer was an admission that the bonds had been issued by the county; a denial that the county ever had the power to issue them; and averments that it never had any outstanding indebtedness which was fundable under the act referred to in the bonds; that it never received any consideration for them; that they were issued to take up fictitious warrants, which were issued by its board of county commissioners without consideration, without authority, and without a compliance with the statutes; that none of the proceedings required to be taken to authorize the creation of a fundable debt or the issue of these funding bonds had ever been taken by the officers of the county; and that the records of the board of county commissioners, of the county treasurer, and of the county auditor of the county disclosed these facts. The case was tried without a jury, and the court made a general finding for the defendant in error, and entered judgment against the county.

At the trial the defendant in error proved the execution of the bonds by the proper officers of the county; his purchase of them for value in good faith, in the ordinary course of business, in reliance upon the recitals therein, and upon the opinion of an attorney at law. At the close of his evidence, a motion was made for judgment in favor of the county, and that motion was denied. The plaintiff in error offered the records of the county and the testimony of witnesses to show that the county never owed a debt fundable under the act recited in the bonds; that it never received any consideration therefor; that the bonds were issued to take up warrants which were issued by its board of county commissioners without any consideration, and were never delivered to any creditor; that the proposition submitted to the electors relative to the issuance of the bonds was not in accordance with the recitals therein contained or with the terms of the statute; that the county commissioners did not advertise the bonds for sale before they issued them, and that they did not register them, although the statutes of South Dakota required them to make such an advertisement and to register the bonds before they were issued. The court below rejected all this evidence, on the ground that the defendant in error was a bona fide purchaser of the bonds, and that the recitals estopped the county from showing their falsity to defeat his action against it. Every ruling, act, and omission of the court in the conduct of this case from the order overruling the demurrer to the order for judgment is challenged upon this writ of error. The main issues of law are presented by this statement. The grounds of the more minute specifications of error have not been set forth here, to avoid repetition, because they must be stated in the opinion where they are considered.

Before CALDWELL, SANBORN, and THAYER, Circuit Judges.

SANBORN Circuit Judge, after stating the case as above, .

Many questions have been presented and argued by counsel in this case, but the main issue concerns the scope and effect of the estoppel in favor of an innocent purchaser raised by the recitals in the bonds from which the coupons in suit were cut. These bonds were issued under an act of the 18th legislative assembly of the territory of Dakota entitled 'An act authorizing and empowering organized counties of Dakota to erect county buildings for court houses and jail purposes, and to issue and dispose of bonds to provide funds to pay therefor, and to provide for the payment of principal and interest of such bonds. ' Laws Dak. T. 1889, c. 42. That act empowered each board of county commissioners of certain counties of Dakota territory, one of which was the county of Hughes, to issue and sell the bonds of its county, upon a favorable vote of the electors thereof, for the purpose of purchasing the site for, and the erection of, a court house or jail, or both, whenever in the opinion of a majority of the board the county had insufficient or inadequate...