Myers v. City of Jeffersonville

• Decision Date: 18 June 1896
• Docket Number: 17,989
• Citation: 44 N.E. 452,145 Ind. 431
• Parties: Myers v. The City of Jeffersonville et al
• Court: Indiana Supreme Court

44 N.E. 452

145 Ind. 431

Myers v. The City of Jeffersonville et al

No. 17,989

Supreme Court of Indiana

June 18, 1896

From the Clarke Circuit Court.

Reversed.

M. Z Stannard, for appellant.

L. A Douglass, for appellees.

OPINION

Hackney, J.

The appellant sought to enjoin the city of Jeffersonville and the officers thereof from executing certain bonds of said city. The questions presented by the record arise upon a special finding and conclusions of law rendered by the trial court.

By the facts specially found, it appears that the appellees were attempting to refund the indebtedness of the city at a lower rate of interest than that provided in the bonds of said city, already outstanding and representing said indebtedness. The facts found, further disclose that while said indebtedness exceeds the limit of "two per centum of the value of the taxable property within such corporation," as such limit is prescribed by the amendment to the State constitution, adopted March 14, 1881, R. S. 1894, section 220, all of said indebtedness was created prior to March 14 1881.

The refunding bonds were authorized by ordinances, and were divided into three distinct series, the last of which consisted of $ 87,000.00, and were to take the place of bonds found to have been issued as representing an indebtedness of said city, in a like sum, "the larger part of which * * was incurred in purchasing the necessary ground therefor and building a courthouse and jail for the county of Clarke, and in paying the cost and expense of conducting a county seat contest, brought to change the location of the county seat from the town of Charleston, in said county of Clarke, to the city of Jeffersonville, in said county."

The court found, as conclusions of law, that said several series of bonds were valid, and refused to enjoin the appellees from negotiating them.

It is here objected that none of the indebtedness proposed to be refunded was found to have been valid, and that it affirmatively appears, from the facts found, that said $ 87,000.00 indebtedness was not valid because of the absence of authority in the city to create the same for the purposes found.

As to the indebtedness, other than the $ 87,000.00, it appears to have been incurred for the erection of a schoolhouse, for defraying the running expenses of the city, and the cost of repairs of streets and alleys, and other public improvements of said city. We are not advised as to any valid objection to this class of indebtedness. All of it was refunded, as found by the court, after the act of March 3, 1877 (Acts 1877, p. 17), authorizing the funding of any indebtedness of such city, and providing that after the funding "bonds shall have been negotiated, no action or proceeding shall be instituted, nor any defense to any action interposed, by said city, or by any person or persons, the object of which shall be to impair the validity or security or depress the value of said bonds."

The bonds issued, therefore, in funding that part of the city's indebtedness, having passed into the hands of innocent and good-faith purchasers, as the court found, would not be subject to defense by the city and must stand, under the provisions of said act, as a bona fide indebtedness and subject to be refunded.

In 2 Beach. on Pub. Corp., section 929, it is said: "The municipality, by the issue of new bonds, waives any defenses it may have to the old bonds. By the new issue it obtains an advantage in postponing the time of payment, and generally in the rate of interest; and after the holders of the original issue have surrendered their evidence, the town will not be permitted to set up old irregularities as defenses which the creditor had the right to assume were waived when it made him the new offer. The municipality must do equity. So careful have the courts been to protect the interest of holders of renewal bonds, that where an old issue had been held invalid and the municipality could not ordinarily issue new bonds in renewal, yet where it was specially authorized to issue new bonds in payment of its indebtedness, the holders of the original bonds were deemed creditors and were entitled to new bonds." Town of Solon v. Williamsburgh, etc., Bank, 114 N.Y. 122, 21 N.E. 168; Hills v. Peekskill, etc., Bank, 101 N.Y. 490, 5 N.E. 327.

This doctrine is unnecessary to the authority to issue renewal bonds, but it supports the presumption we have indulged in favor of the validity of the indebtedness upon which the original bonds issued. Besides, the burden of the issue as to the validity of such indebtedness, rested upon the appellant, and, as well said by counsel for the appellants, "Where a special finding is silent upon the issue or any question of fact, such issue or fact is regarded as found against the party having the burden of the issue."

That the entire indebtedness, or any part thereof, was invalid for the one reason that it exceeded the two per cent. limit, as prescribed by the constitution after the indebtedness was incurred, cannot be maintained. Powell v. City of Madison, 107 Ind. 106, 8 N.E. 31; Scott v. City of Davenport, 34 Iowa 208.

The constitutional amendment was designed to operate prospectively, and would, therefore, not render invalid a prior indebtedness, nor deny the right of a city so indebted to refund such debt by the issue of new bonds after the adoption of such amendment.

As to the outstanding $ 87,000.00 of bonds, counsel for the appellees cite us to no express authority from the legislature, for the issue of bonds for the purpose of defraying the expense of litigation incident to the removal of a county seat, and the cost of a lot and a courthouse and jail for a county, made necessary by such removal. Nor have we been able to find any such express authority. Counsel for appellees suggest the well recognized rule that incidental or implied power exists for the purpose of carrying into operation such powers as are expressly given. It is not shown, or attempted to be shown, however, out of what express power the incidental power arises to authorize the incurrence of the debt, evidenced by the last mentioned bonds. We know of no express power given to cities, the execution of which would render necessary the borrowing of money for the purpose there found. There is a recital, in the ordinance looking to the refunding of said bonds, that "the proceeds thereof were used for the purpose of paying off notes and obligations of said city, which indebtedness was incurred by the expenditure for public improvements in said city." The ordinance containing this recital is found, at full length, in the special finding, and neither said ordinance nor said recital can be considered as a finding of fact with reference to the expenditure of said moneys, or the purpose for which they were borrowed. The ordinance is evidentiary, and it constitutes no finding of fact. The recital therein is neither the finding of a fact nor evidence of the facts. Furthermore, the express finding of facts by the court is contrary to the recital, unless it may be said that the "public improvements in said city," were in the erection of a courthouse and jail and the purchase of a lot therefor for Clarke county. Construing the finding, therefore, as establishing the fact that the $ 87,000.00, for which said bonds were issued, were borrowed and expended for and in the removal of said county seat, the purchase of a lot for and the erection thereon of a courthouse and jail for the county of Clarke, we conclude that such indebtedness was not valid.

It is argued, by the learned counsel for the appellee, that the bonds of a city, "regularly issued and delivered in the hands of a bona fide holder, for a valuable...