Miller v. Perris Irr. Dist.

• Decision Date: 15 January 1900
• Docket Number: 752.
• Citation: 99 F. 143
• Court: U.S. District Court — Southern District of California
• Parties: MILLER v. PERRIS IRR. DIST. et al.

99 F. 143

MILLER v. PERRIS IRR. DIST. et al.

No. 752.

United States Circuit Court, S.D. California.

January 15, 1900

Works &amp Lee, for complainant.

C. C Wright, for defendants.

WELLBORN District Judge.

Complainant an owner of lands in the irrigation district mentioned, sues for the cancellation of bonds issued by said district, and to enjoin assessments against his lands for the payment of said bonds. The case has already been before me twice,-- the first time on demurrer and plea to the original bill (Miller v. Irrigation Dist. (C.C.) 85 F. 693), and the second time on demurrer and exceptions to the amended bill (Id., 92 F. 263). At the latter hearing a formal ruling on the exceptions was inadvertently omitted, and an order allowing them will now be entered. The facts and statutory provisions pertinent to the present submission, except so far as they are herein stated, will be found in the two cases above cited.

After the demurrer to the amended bill was overruled, defendants pleaded thereto:

First. That they are innocent purchasers of the bonds held by them, and that said bonds contain a recital in the words and figures following to wit:

'This bond is one of a series of bonds, amounting in the aggregate to $442,000, caused to be issued by the board of directors of said Perris irrigation district, and pursuant to a vote of the electors of said district at an election held for that purpose on the 1st day of November, 1890. The said series of which this bond is one is composed of 884 bonds, each of the denomination of $500; and said bonds are issued by authority of, and pursuant to, and after a full compliance with all of the requirements of, the act of the legislature of the state of California entitled 'An act to provide for the organization and government of irrigation districts, and to provide for the acquisition of water and other property, and for the distribution of water thereby for irrigation purposes,' approved March 7, 1887.'

Second. That appropriate proceedings were had, and final decree entered therein by the superior court of San Diego county, confirming the organization of said district and issuance of said bonds.

After defendants had interposed these pleas, complainant, by leave of the court, filed a supplemental bill alleging, in substance, that the people of the state of California had brought an action in the nature of quo warranto in the superior court of Riverside county, and that said court in said action rendered a judgment that said irrigation district was and is wholly void, and that said district was unlawfully usurping the rights and powers of, and claiming to be, a lawfully organized district under the laws of this state. To this supplemental bill defendants have demurred on the ground that the matters therein pleaded do not entitle the complainant to equitable relief, and have also excepted to said bill for impertinence, and have also interposed a plea that an appeal has been taken from the decree of the superior court of Riverside county, and that said appeal is pending and undetermined. Said pleas to the amended bill, and demurrer and exceptions and plea to the supplemental bill, having been argued at the same time, are included in the pending submission, and will be considered in the order in which I have stated them:

1. The supreme court of the United States has declared, through a long and unbroken line of decisions, that where a municipality has power, under certain circumstances, to issue, and does issue, bonds which recite that all requirements of the law have been complied with, and the officers issuing the bonds are charged with the duty of ascertaining and determining the facts authorizing their issuance, the municipality will not, as against bona fide holders, be heard to deny the facts so certified on the fact of the bonds. Mercer Co. v. Hackett, 1 Wall. 83, 17 L.Ed. 548; Town of Coloma v. Eaves, 92 U.S. 484, 23 L.Ed. 479; Commissioners v. Bolles, 94 U.S. 104, 24 L.Ed. 46; Commissioners v. January, 94 U.S. 202, 24 L.Ed. 110; San Antonio v. Mehaffy, 96 U.S. 312, 24 L.Ed. 816; Warren Co. v. Marcy, 97 U.S. 96, 24 L.Ed. 977; Sherman Co. v. Simons, 109 U.S. 735, 3 Sup.Ct. 502, 27 L.Ed. 1093; City of Evansville v. Dennett, 161 U.S. 434, 16 Sup.Ct. 613, 40 L.Ed. 760; Commissioners v. Rollins, 173 U.S. 255, 19 Sup.Ct. 390, 43 L.Ed. 689; Grattan Tp. v. Chilton (C.C.A.) 97 F. 145.

The expression 'want of power' has been usefully paraphrased as follows:

'Want of power arises from the following causes: (1) Because the bonds are issued without authority of any statute. (2) Because the statute under which the bonds are issued contravenes some provision of the state constitution. (3) Because the bonds are issued for some private, and not a public, purpose. (4) Because the power exercised is different from that delegated. (5) Because some of the conditions precedent to the issue of the paper (as, for instance, the signatures of a certain number of taxpayers, the presentation of a petition, or the consent of the electors) have not been obtained or performed, or no election has been held, although required, and only upon such compliance are the bonds to issue. (6) Because the total amount of paper issued exceeds the statutory or constitutional limit. In the first two cases the paper is void for want of power, and cannot be cured by any act of the municipal corporation. In the last four cases the paper, although issued without authority, may yet be held good in the hands of a bona fide holder, because of recitals contained in the paper, made by the officers of the corporation issuing it, which assure the purchaser that the paper is lawfully issued, provided there existed statutory authority for the issue of paper such as the paper in the hands of the bona fide holder purports to be; and, although the paper shows no recitals, the municipality may be estopped by its acts from repudiating it. The true meaning of the term 'want of power' is the total lack of authority in the corporation to act; and every act done by the municipal corporation without power is void, and cannot be made valid by any act of the corporation or its officers. Therefore the last four cases cannot logically be construed to arise from want of power, where the term is used in its true sense. They arise from irregularity or illegal use of the power, and for that reason are illegal. ' Simonton, Mun. Bonds, Sec. 192.

In Mercer Co. v. Hackett, supra, the court says:

'Where county bonds on their fact import a compliance with the law under which they were issued, the purchaser is not bound to look further. That evidence of fraud practiced by the railroad company to whom these bonds were delivered, and by whom they were paid to bona fide holders for value, or the fact that they were negotiated at less than their par value, cannot defeat a recovery on them by such holders. That on questions of mercantile or commercial law the federal courts do not feel bound to yield their judgment to state decisions.'

In San Antonio v. Mehaffy, supra, the court says:

'The holder of commercial paper, in the absence of proof to the contrary, is presumed to have taken it underdue, for a valuable consideration, and without notice of any objection to which it was liable. If a municipality could under any circumstances issue negotiable securities, the bona fide holder of them has a right to presume that they were issued under the circumstances which give the authority. The municipality is estopped by the recital on the face of the securities to deny their verity as against a bona fide purchaser.' In the case last quoted from the bonds had the following recital:

'This debt is authorized by a vote of the electors of the city of San Antonio, taken in accordance with the provisions of an act to incorporate the San Antonio and Mexican Gulf Railroad Company, approved September 5, 1850. Entered and recorded in the office of the city treasurer, and is transferable on delivery.

'City Hall, City of San Antonio, March 1, 1852.'

And the court declared the effect of the recital thus:

'This shuts the door, as a matter of law, to all inquiry touching the regularity of the proceedings of the officers charged with the duty of subscribing and making payment in the way specified. The rule in such cases is that, if the municipality could have had power under any circumstances to issue the securities, the bona fide holder has a right to presume that they were issued under the circumstances which gave the authority, and they are no more liable to be impeached in his hands for any infirmity than any other commercial paper. Supervisors v. Schenck, 5 Wall. 772, 18 L.Ed. 556; City of San Antonia v. Lane, 32 Tex. 405.'

In Warren Co. v. Marcy, supra, the court says:

'If a municipal body has lawful power to issue bonds, dependent only upon the adoption of certain preliminary proceedings, the holder in good faith has a right to assume that such preliminary proceedings have taken place, if the fact be certified on the face of the bonds themselves by the authority whose primary duty it is to ascertain it. Such bonds may be valid in the hands of a bona fide holder, nothwithstanding the fact that the preliminary proceedings requisite to their issue may have been so defective as to sustain a direct proceeding against the officer to annul them or prevent their issue.'

In Grattan Tp. v. Chilton, supra, the court says:

'If under any circumstances, the board would have had authority to issue them, and the bonds would have been valid, innocent purchasers had the right to presume that those circumstances existed when they were issued, and the township was estopped to deny their existence after such purchasers had bought them in reliance upon the...