National Life Ins. Co. of Montpelier v. Board of Education of City of Huron

CourtUnited States Courts of Appeals. United States Court of Appeals (8th Circuit)
Citation62 F. 778
Docket Number402.
Decision Date16 July 1894

62 F. 778


No. 402.

United States Court of Appeals, Eighth Circuit.

July 16, 1894

Syllabus by the Court.

Where a municipal body has lawful authority to issue bonds or negotiable securities, dependent only upon the adoption of certain preliminary proceedings, and the adoption of those preliminary proceedings is certified on the face of the bonds by the body to which the law intrusts the power, and upon which it imposes the duty, to ascertain, determine, and certify this fact before or at the time of the issuing of the bonds, such a certificate will estop the municipality, as against a bona fide purchaser of the bonds, from proving its falsity in order to defeat them.

Such an estoppel may arise, in a proper case, upon a recital that an act required by a constitution has been performed, as well as upon a recital of the performance of an act required by statute.

Recitals in municipal bonds may constitute an estoppel in favor of a bona fide purchaser, even where the body that issued the bonds had no power to issue them, and could not, by any act of its own or of its constituent body, make a lawful issue of the bonds, if the fact of this want of power does not appear from the bonds the purchaser buys, the constitution and statutes under which they are issued, nor the public records referred to therein.

But recitals in municipal bonds, by the representative body that issues them, to the effect that all the requirements of the laws with reference to their issue have been complied with, will not estop the municipality from proving, as against a bona fide purchaser, that the representative body had no power to issue them where no act of the representative or constituent body could make the issue lawful at the time it was made, and this fact appears from the constitution and statute under which the bonds are issued, the public records referred to therein, and the bonds the purchaser buys.

A board of education, authorized to issue bonds, issued them without complying with a constitutional requirement (Const. S.D. art. 13, Sec. 5) that, at or before the time of incurring such indebtedness, provision should be made for the collection of an annual tax to pay interest and principal. although the board had full power to make such provision, but the bonds recited 'that all conditions and things required to be done precedent to and in the issuing of said bonds have duly happened and been performed in regular and due form as required by law. ' Held, that the noncompliance with such requirement was not available to the board as a defense against bona fide purchasers of the bonds.

A city board of education, authorized to issue bonds for certain purposes, and to sell them for not less than 98 cents on the dollar, issued bonds purporting to be for such purposes, but in fact for an unauthorized purpose, accepted a bid from S. Therefor at par, delivered them to him, received part of the price, and transferred its right to the balance to the city, receiving a city warrant for the amount. S. sold the bonds for 97 1/2 cents on the dollar. Held, that this constituted an executed sale of the bonds to S. at par, and purchasers from him, who were strangers to his purchase from the board, were not chargeable with notice of the invalidity of the bonds, because they supposed they were buying from the board.

As against innocent purchasers for value, before maturity, of bonds issued by a city board of education, it is not defense that the board loaned nearly the entire proceeds of their sale to the city, for city warrants that were never paid, and that cannot be legally enforced.

Neither is it a defense to such bonds, as against bona fide purchasers thereof, that the citizens and officers of the municipal corporation, with intention to use the proceeds of the bonds for an unlawful purpose, certified on the face of them that they were issued for such lawful purpose, and then appropriated the proceeds to an unlawful purpose.

The adoption, by a vote of the electors of a city, at an election duly called in accordance with the provisions of the city charter, of an act relating to schools pursuant to the provisions of that act, is not void because a resolution of the city council calling the election which was not required by any provision of the statute or the charter, never took effect, because it was not legally published.

Under an act relating to schools, allowing adoption of its provisions at any time by organized cities, and also by towns or villages not organized, and making provision for an immediate election of school officers in such unorganized territory, but not in an organized city, such officers may be chosen, in an organized city adopting the act, at a special election called in compliance with the requirements of the city charter.

Where a de facto board of education, exercising all the powers and functions of such a corporation legally organized, is recognized, and its action acquiesced in, by the state and the citizens, bonds issued by it, within the powers granted to a broad legally organized, are binding in the hands of bona fide purchasers. [62 F. 779]

The following is a copy of one of the bonds from which these coupons were cut:

'Issued in accordance with the provisions of sections 1830, 1831 and 1832 of the Compiled Laws of 1887, of Dakota territory and in force in the state [62 F. 780] of South Dakota, authorizing boards of education to issue bonds to raise funds to purchase school sites, erect school buildings, or to fund bonded indebtedness. 'No. 1 United States of America $500.00.
'The State of South Dakota, Board of Education, City of Huron.
'The board of education o? the city of Huron, county of Beadle, state of South Dakota, fifteen years after the date hereof, for value received, promises to pay bearer five hundred dollars, lawful money of the United States, at the office of the Chase National Bank, New York City, with interest thereon at the rate of six per cent, per annum, payable semiannually according to the tenor and effect of the annexed coupons. This bond is one of series of bonds of like date, tenor, and effect, amounting in the aggregate to sixty thousand dollars, and numbered from one to one hundred and twenty, inclusive, issued to raise runs for the purchase of a school site, and for the erection of a school building thereon. And it is hereby certified and recited that all acts, conditions, and things required to be done, precedent to and in the issuing of said bonds, have duly happened and been performed in regular and due form as required by law, and that the total amount of this issue of bonds, together with all other outstanding indebtedness of said board of education, does not exceed the statutory or constitutional limitation, and that this bond has been duly registered by the clerk of the board of education in a book provided for that purpose, as required by law.
'In testimony whereof, the board of education of the city of Huron, in the

county of Beadle, state of South Dakota, has caused this bond to be

signed by its president, attested by its clerk, and countersigned by

(Seal) its treasurer, and the seal of said board of education to be hereunto

affixed, at the city of Huron, this 4th day of October, A.D. 1890. '(Signed) F. F. Smith, President. '(Countersigned) J. C. Klemme, Treasurer.

'Attest: John Westdahl, Clerk.'

In August, 1890, the city of Huron was a municipal corporation organized under a special act. Its board of education then consisted of two members from each of the four wards of the city, and, under its act of incorporation, one-half of these members would hold office until the first Tuesday of May, 1891, and one-half until the first Tuesday of May, 1892. Article 3 of chapter 17 of the Compiled Laws of Dakota Territory, which were then in force in South Dakota, relating to schools in cities, towns, and villages, provided as follows:

'Sec. 1808. All cities hereafter organized under the general act to provide for the incorporation of cities shall be governed by the provisions of this act; provided, that any city, town or village now organized under a general or special act, either for civil government or educational purposes, may at any time adopt the provisions of this act by a majority vote of the electors; provided further, that any town or village having a population of two hundred and fifty inhabitants or over within a radius of one mile from the center, and not organized for civil government nor under an independent school district act, may adopt the provisions of this act. In such case the county superintendent shall, upon petition of a majority of the legal voters within the proposed district, call the first election thereof by posting notices in not less than three of the most public places within it; which notice shall contain a full description of the boundaries of said proposed districts besides the time and place of holding the election, and the names and number of offices to be filled. ' Comp. Laws. Dak. 1887.

Section 1811 provided that the public schools of each organization effected in pursuance of this act shall be a body corporate and shall possess the usual powers of a corporation for public purposes by the name of 'The Board of Education of the City, Town or Village (as the case may be) of -- of the Territory of Dakota.'

'Sec. 1814. When any city or town is divided into wards, at each annual election there shall be a board of education consisting of as many members from each ward as there are members of the council, who shall be elected by the qualified voters thereof, one of whom shall be elected annually, and [62 F. 781] shall hold his office for the term of two years, and until his successor is elected and qualified. * * * '


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