Knott County v. Aid Ass'n for Lutherans

• Decision Date: 24 January 1944
• Docket Number: No. 9571.,9571.
• Citation: 140 F.2d 630
• Parties: KNOTT COUNTY v. AID ASS'N FOR LUTHERANS.
• Court: U.S. Court of Appeals — Sixth Circuit

140 F.2d 630 (1944)

KNOTT COUNTY v. AID ASS'N FOR LUTHERANS.

No. 9571.

Circuit Court of Appeals, Sixth Circuit.

January 24, 1944.

D. Hollender Hall, of Hindman, Ky. (Carl D. Perkins and D. Hollender Hall, both of Hindman, Ky., on the brief), for appellant.

Alfred Holman, of Cincinnati, Ohio, for appellee.

Before ALLEN, HAMILTON, and McALLISTER, Circuit Judges.

McALLISTER, Circuit Judge.

This appeal is from a judgment of the district court, holding certain bonds issued by Knott County, Kentucky, to be valid, and sustaining claim to past-due interest thereon. It is contended by appellant county that the bonds were illegally issued and were, therefore, void. On this point, the district court held that appellant was estopped from asserting illegality, because of certain recitals set forth in the bonds.

In September, 1930, appellee bought in the open market, in good faith for value and without notice of any defect or infirmity therein, ten funding bonds, of the denomination of $1,000 each, aggregating the principal amount of $10,000, issued by the above-mentioned county. The bonds bore interest at the rate of 6% per annum, payable semi-annually, evidenced by interest coupons thereto attached. They were duly executed and delivered by the Fiscal Court of the county and bore the signature of the presiding judge of the Fiscal Court, countersigned by the county clerk. Each bond bore upon its face the following recital:

"This bond is one of a series of fifty (50) bonds of like tenor and effect except as to maturity, numbered from one (1) to fifty (50) both inclusive, all in the denomination of $1,000 each, aggregating $50,000 in amount, issued for the purpose of funding a like amount of outstanding indebtedness of Knott County, Ky., heretofore legally contracted by said County for the construction, repair and maintenance of the public roads and bridges and the public buildings in the County, under the authority of, pursuant to and in full compliance with the Constitution and Laws of the Commonwealth, particularly Sections 157, 158 and 159 of the Constitution, and Sections 1857, 1858 and 1859 of Carroll's Kentucky Statutes of 1922, and pursuant to the proceedings duly had by the Fiscal Court of Knott County in the premises.

"It is hereby certified and recited that all acts, conditions and things necessary to be done precedent to and in the issuance of this bond in order to make it a legal, valid and binding obligation of said County, have been done, have happened and been performed in regular and due form, time and manner as required by law; that the full faith, credit and revenues of said County are hereby irrevocably pledged for the prompt payment of principal and interest hereof at maturity; that no limitation of indebtedness or taxation, either constitutional or statutory, has been exceeded in issuing this bond and the series of which it is a part; and that due provision has been made for the levy, collections and appropriation, annually by taxation of an amount sufficient to pay the interest and to provide a sinking fund for the prompt payment of the principal as they respectively fall due."

It is contended by appellant county that the bonds in question were issued without authority and that appellee was not entitled to rely upon the recitals made therein. Issuance of renewal bonds, or bonds to fund the floating indebtedness of any county, is authorized by § 158 of the Kentucky constitution. However, it is claimed that, because the issue was not wholly for the purpose of funding indebtedness, it was void. It appears that the funds received by the county from the bonds were used partially to retire outstanding indebtedness, and partially for road machinery and construction work on the court house.

The case turns on the application of estoppel. Where bonds of municipal corporations contain recitals, showing that they were issued for a purpose within the municipality's powers, such recitals, when made by persons authorized to determine...