National Life Ins. Co. of Montpelier v. Board of Education of City of Huron
Decision Date | 16 July 1894 |
Docket Number | 402. |
Citation | 62 F. 778 |
Parties | NATIONAL LIFE INS. CO. OF MONTPELIER v. BOARD OF EDUCATION OF CITY OF HURON. |
Court | U.S. Court of Appeals — Eighth Circuit |
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.
The following is a copy of one of the bonds from which these coupons were cut:
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:
'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.'
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