School City of Rushville v. Hayes
| Decision Date | 18 February 1904 |
| Docket Number | 20,211 |
| Parties | School City of Rushville et al. v. Hayes et al |
| Court | Indiana Supreme Court |
From Rush Circuit Court; Douglass Morris, Judge.
Action by William J. Hayes and others against the School City of Rushville and others. From a judgment for plaintiffs defendants appeal.
Affirmed.
B. L Smith, Claude Cambern, D. L. Smith and Gates Sexton, for appellants.
W. H H. Miller, J. B. Elam, J. W. Fesler and S.D. Miller, for appellees.
For the purpose of supporting its common schools by the purchase of grounds and the erection of buildings thereon, the school city of Rushville, with the approval of the common council of the civil city, determined to issue its bonds to the amount of $ 35,000, and to sell them to the highest bidder. Due notice of the intended sale was given by publication. The advertisement required that all bids should be accompanied by a certified check for five per cent. of their amount. The appellees sent in a sealed proposal for the whole of the bonds, together with their certified check for $ 1,750, being the amount required as a deposit. Their bid was the highest, and the board of school trustees awarded the bonds to them at the price offered. Afterward the appellees were advised that the act of the legislature, under which the bonds were issued, was void, that it had been repealed before the commencement of the proceedings for the issue of the bonds, and that the bonds were invalid. They refused to complete the purchase, and demanded the return of the $ 1,750 deposited by them with their bid. The school city declined to surrender the $ 1,750, and insisted that the sale was valid, and the bonds legal. It offered to credit the amount of the deposit on the bid, and to deliver the bonds on payment of the balance of the bid, but, in the event of the failure of the appellees to complete the purchase of the bonds, it declared its intention to retain the $ 1,750 as a forfeiture, and to sell the bonds to other persons. Thereupon, this suit was brought by the appellees to recover the amount of their deposit, or, in case the bonds should be held valid, to restrain the appellants from disposing of them to any other bidder, and to compel their delivery to the appellees. The complaint stated the foregoing facts, among others, and a demurrer to it having been overruled, the school city and its board of trustees refused to plead further, and judgment was rendered in favor of the appellees.
The decision on the demurrer is the error assigned.
Section one of the act of March 9, 1903 (Acts 1903, p. 347), under which the school city proceeded in issuing its bonds, is as follows: Section two requires the school trustees to file with the county auditor a bond payable to the State of Indiana in a sum not less than the face value of the bonds, with security to be approved by the auditor, conditioned for the faithful and honest application of the proceeds of the sale of the bonds. Section three authorizes the levy of a special tax additional to that now provided, for the payment of the interest and principal of such bonds. Section four directs the application of any surplus special school revenue to the payment of the interest and principal of any debt incurred under the act. Section five repeals all laws in conflict with the act. Section six declares an emergency requiring the immediate taking effect of the law.
The main objection taken to this statute by the appellees is that it is local and special, and therefore void under the provisions of article 4, § 22, of the state Constitution. The appellants answer that the act is general, and that the classification of cities named in it is a proper one. They also deny that the appellees have such an interest in the subject of the statute as authorizes them to contest its validity.
The latter position is clearly untenable. The appellees are directly interested in the question of the constitutionality of the act. The appellants assert a right under the statute to compel the appellees to pay to them the amount of their bid for the bonds, or, upon failure of the appellees to do so, to retain as a forfeiture the deposit of $ 1,750 which accompanied appellees' bid. If the statute is valid, these claims may be well founded and enforceable. If it is void, because in conflict with the Constitution, the appellees can not be required to take and pay for the bonds, nor can the appellants lawfully retain the sum deposited by the appellees. The agreement between the parties contemplated the delivery to the appellees of valid obligations of the appellant school city to the amount of $ 35,000. Unless such obligations can be delivered, the appellees, as such purchasers, can not be required to accept and pay for them.
It is not true, as asserted by appellants, that the school city and all its property owners and taxpayers are estopped to deny the validity of the bonds, and therefore that the rights of the appellees could not be prejudiced by the fact that the statute under which they were issued was void. The contrary has often been decided in this State and in other jurisdictions. Town of Winamac v. Huddleston, 132 Ind. 217, 31 N.E. 561; Alexander v. Johnson, 144 Ind. 82, 41 N.E. 811; Louisiana v. Wood, 102 U.S. 294, 26 L.Ed. 153; High, Injunctions, §§ 783, 784; Read v. Plattsmouth, 107 U.S. 568, 2 S.Ct. 208, 27 L.Ed. 414. If appellants' view of the law were correct, the restrictions of the Constitution in many cases would be vain and ineffectual. Any city or town could incur debts and issue notes or bonds in violation of the express prohibitions of that instrument, all of which would be enforceable, and against whose validity and payment neither the corporation itself nor its property owners and taxpayers could be heard to object.
The payment of the bonds, if issued without authority, could be enjoined at the suit of any taxpayer, or, if sued upon, the corporation could resist their collection on the ground that they were illegally issued. This being the case, the bonds would have no legal value in the hands of a purchaser, and an agreement to buy and to pay for them would be without consideration. Unless the appellees are permitted to reject the bonds if they were issued without authority of law, they will be compelled to pay more than $ 35,000 for securties for which the school city is not liable, and the collection of which can not be enforced by legal process. It is very evident that the appellees have an interest in the question of the validity of the bonds which entitles them to challenge the constitutionality of the statute under which they were issued.
The deposit of the check for $ 1,750 by the appellees at the time they made their bid did not constitute such a voluntary payment as deprived them of the right to demand its return, and to recover it upon discovery of the fact that the proposed issue of the bonds would be void. Gist v. Smith, 78 Ky. 367; Gwin v. Smurr, 101 Mo. 550, 14 S.W. 731; Louisiana v. Wood, supra; Read v. Plattsmouth, supra.
As the offer to purchase the bonds made by the appellees was conditional, they had the right to refuse to take the bonds on that ground also.
The act of March 9, 1903, supra, purports to be a general law. It attempts to make a classification of cities and towns, and its operation is confined to the class so created. That class embraces cities and towns having a population of not more than 4,545 nor less than 4,540 according to the last preceding census. At the time of the enactment of the statute only one city in the State came within the prescribed description. The point to be determined on this appeal is whether this act is, in fact, general, or whether it is local and special, within the meaning of the Constitution.
The views of counsel for appellants are thus stated in their brief: ...
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