Independent School Dist. of Sioux City v. Rew

• Decision Date: 23 September 1901
• Docket Number: 1,525.
• Parties: INDEPENDENT SCHOOL DIST. OF SIOUX CITY, IOWA, v. REW.
• Court: U.S. Court of Appeals — Eighth Circuit

111 F. 1

INDEPENDENT SCHOOL DIST. OF SIOUX CITY, IOWA, v. REW.

No. 1,525.

United States Court of Appeals, Eighth Circuit.

September 23, 1901

[Copyrighted Material Omitted]

David Mould (C. R. Marks, on the brief), for plaintiff in error.

H. J Taylor (E. A. Burgess, on the brief), for defendant in error.

The defendant in error, Robert Rew, brought an action against the independent school district of Sioux City, Iowa, the plaintiff in error, upon 10 school district bonds, of $1,000 each, and the coupons thereto attached. The bonds were payable to Ogilvie C. Tredway or order, but the coupons were payable to bearer. The court below held that it had no jurisdiction of the causes of action upon the bonds under the act of congress of August 13, 1888 (25 Stat. 434), because the court would not have had jurisdiction of those causes of action if no assignment or transfer of the bonds had been made, for the reason that both the parties to the action would have been citizens of the same state. But it sustained its jurisdiction of the causes of action based upon the coupons because they were issued by a corporation and payable to bearer, and thus were excepted from the prohibition of jurisdiction contained in the statute. The result was a judgment on the coupons for $2,600.28, interest thereon, and costs. The court tried the case without a jury, and made a special finding of facts. It found that the bonds and coupons were issued by the district township of Sioux City, Iowa, a municipal corporation created under the laws of the state of Iowa; that the plaintiff in error succeeded in the year 1890 to the territorial jurisdiction, the assets, and the liabilities of that township; that the bonds and coupons were issued on November 1, 1880, under chapter 51 of the Laws of Iowa of 1880, which provided that any district township against which unsatisfied judgments had been rendered prior to the passage of that act might issue negotiable bonds for the purpose of paying off such judgment indebtedness, upon a resolution of the board of directors of the district township; that these bonds should be in the name of the district township, should be signed by the president of the township, and countersigned by the secretary; that they should be in substantially the same form as was by law prescribed for county bonds, and the form prescribed for county bonds contained a certificate that they were issued by the board of supervisors of the county pursuant to the provisions of the law authorizing their issue, and in conformity to a resolution of the board; that these bonds and coupons were issued pursuant to a resolution of the board of directors of the district township of Sioux City passed on October 27, 1880, which recited that judgments had been rendered against the township prior to March 16, 1880, which were embraced within the provisions of chapter 51 of the Laws of the 18th General Assembly of the State of Iowa, and which resolved 'that all judgments rendered against the district of Sioux City prior to March 16, 1880, be bonded or paid off by the issue of negotiable bonds of the district township of Sioux City as provided in said chapter fifty-one aforesaid,' that each bond contained this recital 'This bond is issued by the board of directors of said district township under the provisions of chapter fifty-one of the Acts of the Eighteenth General Assembly of the State of Iowa, and in conformity with a resolution of said board dated the thirtieth day of October, 1880;' that after the issue of the bonds and coupons, and before their maturity they were brought by bona fide purchasers, without notice of any defect or invalidity therein, and the defendant in error subsequently took the title and rights of these purchasers, but that at the time they were issued the indebtedness of the township exceeded its constitutional limitation, and the unsatisfied judgments against the township amounted to only $983.65, while bonds to the amount of $10,000 were issued. The plaintiff in error attacks the judgment against it on the grounds that the court below had no jurisdiction of the causes of action upon the coupons, and that they were void because the constitutional limitation of the indebtedness of the township had been exceeded before they were issued.

Before SANBORN and THAYER, Circuit Judges, and ADAMS, District Judge.

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

The act of congress of August 13, 1888 (25 Stat. 434), contains this provision:

'Nor shall any circuit or district court have cognizance of any suit, except upon foreign bills of exchange, to recover the contents of any promissory note or other chose in action in favor of any assignee, or of any subsequent holder if such instrument be payable to bearer and be not made by any corporation, unless such suit might have been prosecuted in such the said contents if no assignment or transfer had been made.'

Under this statute an action cannot be maintained in the circuit court upon an assigned instrument made by a corporation, which is not payable to bearer, unless such an action could have been maintained by the assignor. If, however, the assigned instrument is payable to the bearer, the assignee may recover in the federal court, whether his assignor could have done so or not. Lyon Co. v. Keene Five Cent Sav. Bank, 100 F. 337, 338, 40 C.C.A. 391, 392; Newgass v. City of New Orleans (C.C.) 33 F. 196; Rollins v. Chaffee Co. (C.C.) 34 F. 91; Wilson v. Knox Co. (C.C.) 43 F. 481; Cloud v. City of Sumas (C.C.) 52 F. 177; Benjamin v. City of New Orleans (C.C.) 71 F. 758. In the case now in hand the bonds were payable to the order of a citizen of the state of the defendant, and, because he could not have maintained an action in the federal court, no subsequent holder could do so. But the coupons, on the other hand, were payable to bearer, and were made by a municipal corporation, so that they fell within the express terms of the exception to the prohibition of the statute; and any holder of them who was a citizen of a different state from that of the plaintiff in error could lawfully maintain his action upon them in the national courts.

In this state of the case, counsel for the plaintiff in error contend that the defendant in error deprived the court below of its jurisdiction because he pleaded the cause of action on the coupons in the same counts with those upon the bonds. His petition consisted of 10 counts. In each of these counts he pleaded a bond, the recitals therein, and all the unpaid coupons originally attached to it, and alleged that the bond and the coupons had been sold and transferred together to the same parties at the same times and under the same circumstances. It is difficult to conceive his this pleading could have deprived the circuit court of jurisdiction over the causes of action upon the coupons. Each coupon was a separable promise, distinct from the promises to pay the bonds and the promises to pay the other coupons, and it gave rise to a separate cause of action. Nor was this cause of action accessory to the demand on the bond to which the coupon was attached. It was not only a separate cause of action, but a principal and primary one. City of Aurora v. West, 7 Wall., 82, 19 L.Ed. 42; Amy v. City of Dubuque, 98 U.S. 470, 473, 25 L.Ed. 228; Nesbit v. Independent Dist., 144 U.S. 610, 12 Sup.Ct. 746, 36 L.Ed. 562; Edwards v. Bates Co., 163 U.S. 269, 273, 16 Sup.Ct. 967, 41 L.Ed. 155. The amount claimed upon the causes of action upon the coupons was sufficient to give the court jurisdiction, regardless of the claims upon the bonds. The defendant in error therefore presented to the court below, by his causes of action upon his coupons alone, controversies between citizens of different states which involved more than the jurisdictional amount. The circuit court could not lawfully disregard these causes of action of which it had plenary jurisdiction because the defendant in error pleaded other causes of which it could not lawfully take cognizance. A federal court is not deprived of jurisdiction of causes of action of which it is authorized and required to take cognizance by the fact that the plaintiff has joined with them in the same action and petition other causes of which it has no jurisdiction. The objection to the jurisdiction of the court was properly overruled.

The chief complaint concerning the action of the court below however, is that it held that the independent school district was estopped by the recitals in the bonds and in the resolution of the board of directors of the district township from defeating the coupons in the hands of an innocent purchaser either on the ground that neither the bonds nor their proceeds were used to pay judgments, or on the ground that the debt of the township exceeded the constitutional limitation when the bonds were issued. Many objections to this ruling have been presented. One of them is that the recitals in the bonds are not available to the plaintiff in an action on the coupons, and that the municipality can be estopped by them only in an action on the instruments which contain the recitals; that is to say, on the bonds themselves. But it is not indispensable to the effectiveness of an estoppel that the acts, words, or deeds which work it shall be contained in a negotiable instrument or in any written contract which is the basis of the action. They are as fatal when found in instruments not negotiable, in writings which are not the basis of the action, when they are mere spoken words, and when they are silent and deceitful acts, as they are when they are contained in a bond or note which is the subject of the action. In Southern Minnesota Ry. Extension Co. v. St. Paul & S.C.R. Co., 55 F. 690, 696, 5 C.C.A. 249, 255, 12...