Richardson v. Marshall County

• Decision Date: 19 March 1898
• Parties: RICHARDSON v. MARSHALL COUNTY et al.
• Court: Tennessee Supreme Court

45 S.W. 440

100 Tenn. 346

RICHARDSON v. MARSHALL COUNTY et al.

Supreme Court of Tennessee.

March 19, 1898

Appeal from chancery court, Marshall county; W. S. Bearden Chancellor.

Bill in equity by James D. Richardson, executor, etc., against Marshall county and the Bank of Lewisburg, to recover on certain bonds and coupons. Judgment for defendants. Plaintiff appeals. Affirmed as to the county, and reversed as to the bank.

McLemore Richardson & Davis, for appellant.

J. L Marshall, for appellee Marshall county. Armstrong, Smithson & Armstrong, for appellee Bank of Lewisburg.

CALDWELL J.

On July 1, 1873, Marshall county issued a series of $115,000 of 20 years', negotiable, interest bearing coupon bonds to the Duck River Valley Railroad Company, in payment of the county's subscription to the capital stock of the company. Three of these bonds, two for $500 each, and one for $1,000, with the twentieth annual coupon attached to each of them, went into the hands of James D. Richardson, executor as parts of the assets of the estate of Mrs. N. P. McCord, deceased. In April, 1895, almost two years after maturity, this bill was filed by the executor to collect these bonds and coupons. The county defended upon two grounds: First, that the whole series of bonds was issued without legislative authority, and was therefore void; secondly, that the particular bonds sued on had been paid and canceled by the county, and that thereafter some unknown person had fraudulently taken them from its files, and, after removing the indorsed cancellation by means of some chemical, had fraudulently put them in circulation again, without the knowledge or consent of the county. The chancellor, without passing on the first of these defenses, was of the opinion that the second one was true in fact and sound in law, and so adjudged, dismissing the bill. The court of chancery appeals held that the first defense was well made in fact and in law, and that the second one was sustained by the proof, but that it must be unavailing because presented in the form stated by an answer, and not by a formal plea of non est factum. The result was an affirmance of the decree of the chancellor, but upon a different ground.

It is well settled that negotiable bonds issued by counties cities, or towns without legislative authority are void ab initio, and nonenforceable in whosesoever hands. Claiborne Co. v. Brooks, 111 U.S. 400, 4 S.Ct. 489; Kelley v. Milan, 127 U.S. 139, 8 S.Ct. 1101; Norton v. Dyersburg, 127 U.S. 160, 8 S.Ct. 1111; Mayor, etc., of Pulaski v. Gilmore, 21 F. 870; Town of Milan v. Tennessee Cent. R. Co., 11 Lea, 329; Colburn v. Railroad Co., 94 Tenn. 43, 28 S.W. 298; Johnson City v. Charleston, C. & C. R. Co., 99 Tenn. --, 44 S.W. 670. But the original validity of all this series of bonds must be held to have been conclusively and finally adjudged long before the present litigation arose. In December, 1875, E. T. Williams, and more than 100 other citizens and taxpayers of Marshall county, filed their bill against the railroad company and the county's tax collector, to restrain and perpetually enjoin the collection of the taxes laid by the county to pay the interest on these bonds for that year. This relief was sought upon the allegations that the railroad company was not chartered according to law, that the subscription of the county was not lawfully made, and that there was no "legal warrant or authority for the issuance of said bonds." On final hearing, the chancellor dismissed the bill, and, on appeal, this court, in March, 1878, affirmed his action, and by its decree specifically adjudged, among other things, that the $115,000 of bonds were "legal and valid." Although it was not distinctly alleged in the bill that the absence of "legal warrant or authority" to issue the bonds was due to a lack of legislative authorization, and although it was not distinctly recited in the decree that this court found sufficient authorization in existing statutes, it can but be entirely manifest that the allegation was broad enough to raise, and the decree specific enough to adjudge, that exact question. Indeed, when the court adjudged that the bonds were "legal and valid," it necessarily, ex vi termini, held that there was ample legislative authority for their issuance, since without such authority they must, unavoidably, have been illegal and invalid. The county was not a formal party to that litigation, nor before the court otherwise than through its tax collector; yet it was cognizant of the decree, and acquiesced in it without complaint, paid the interest year after year, and parts of the principal from time to time, until about half the bonds were satisfied in full, and then refunded practically all of the other. In the face of such a decree in such a litigation, and of such a recognition, and the consequent encouragement to free circulation in the markets of the country, the county will not at this late day be heard to question the original validity of the bonds upon any ground whatsoever, and especially as against the complainant, whose testatrix made her purchase in good faith and for value, long after that adjudication, and when nearly all of the interest had been paid on each of the bonds she bought. It may be conceded, as was decided by the court of chancery appeals, that the statutes existing in 1873, when this bond issue was made, did not authorize it, and yet, because the court of last resort adjudged otherwise, the result would be the same. Under the maxim that every man is presumed to know the law, all intending purchasers were bound, of course, at their peril, to see that the bonds were issued under competent legal authority. In this, however, they were not required to make an infallible construction of the statutes for themselves, but were allowed to rely upon the adjudication of this court. In other words, they were not required to know the law otherwise than as declared, if declared, by the highest tribunal erected for its interpretation. Moreover, should this court now interpret those statutes differently, and hold that the bonds were issued without proper legislative authorization, the rights of present bona fide holders could not be disturbed thereby; for the validity of the bonds, in the hands of such persons, must be determined by the law as it was judicially construed to be when the lands were put upon the market. Douglass v. Pike Co., 101 U.S. 677; Taylor v. Ypsilanti, 105 U.S. 60; New Buffalo v. Iron Co., Id. 73. It should be noted that the opinion filed by this court (Williams v. Railroad Co., 9 Baxt. 488), in advance of its decree, mentioned and considered only the impeachment of the railroad's charter and of the county's subscription, and did not refer to the alleged absence of "legal warrant or authority" for the issuance of the bonds. That omission in the opinion, however, could not operate now as a limitation upon the scope of the decree, which was subsequent in point of time, and might well have embraced matters not discussed in the opinion. The decree in such a case must be regarded as controlling. The opinion only, and not the decree, was brought to the attention of the court of chancery appeals; hence that court naturally concluded that the question of legislative authority was not involved in that case, and, in view of that fact, made an original investigation and determination, in the light of...