Shaffer v. WOLFE COUNTY, KY.
Decision Date | 12 December 1946 |
Docket Number | No. 72.,72. |
Citation | 69 F. Supp. 149 |
Parties | SHAFFER v. WOLFE COUNTY, KY. |
Court | U.S. District Court — Eastern District of Kentucky |
Ernest Woodward and Woodward, Dawson, Hobson & Fulton, all of Louisville, Ky., and Alfred Holman, of Cincinnati, Ohio, for complainant.
J. Douglas Graham, County Atty. Wolfe County, of Campton, Ky., for defendant.
In 1928 Wolfe County, Kentucky, issued and sold 29 negotiable funding bonds of $1,000 each bearing interest payable semi-annually at the rate of 5¼% per annum, maturing 20 years after date, for the purpose of funding a floating indebtedness previously incurred by the county. Nineteen of the bonds remain outstanding. The county has renounced the obligation to pay any part of the principal or interest of these bonds on the ground that the debt which they purported to fund was in excess of constitutional limitations.
Alleging that he is the holder and owner of these remaining 19 bonds, that he acquired them in good faith, for a valuable consideration, before maturity and without knowledge of any infirmity in them, the complainant, Earl Shaffer, filed this action under 28 U.S.C.A. § 400 for a judgment declaring the bonds and attached interest coupons valid and enforceable. The county filed answer asserting the invalidity of the bonds for the reasons above stated. The complainant then filed an amended complaint pleading that the county is estopped to assert the defense set up in its answer by reason of the following recital upon the face of each of the bonds:
The defendant has moved to strike the amended complaint on the ground that under the law of Kentucky the recitals set out in the bonds do not constitute or raise the estoppel asserted.
In support of the motion to strike, the defendant relies upon Pulaski County v. Ben Hur Life Association, 1941, 286 Ky. 119, 149 S.W.2d 738, and Kentucky Utilities Co. v. City of Paris, 1933, 248 Ky. 252, 58 S.W.2d 361, contending that, properly interpreted, these cases disclose that the Kentucky Court of Appeals has established the rule that recitals in bonds such as those incorporated in the bonds here involved do not constitute an estoppel against the county to show that the bonds were in excess of constitutional authority, and that since, under Erie R. Co. v. Tompkins, 1938, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487, it is the duty of this Court to apply the law as announced by the highest Court of the State, previous adjudications to the contrary should not be followed.
Without considering whether the defendant's interpretation of the above-mentioned Kentucky cases is correct, it is sufficient to point out that they were decided many years after the bonds here in question were issued and sold.
At the time of the issuance of the bonds, the law established by numerous decisions of Federal Courts, in the lawful exercise of diversity of citizenship jurisdiction, was that a bona fide purchaser of such bonds was entitled to accept recitals such as those above set out as stating the truth and as against such purchaser the county was estopped to allege the contrary and would not be heard to say that the bonds were in excess of constitutional authority. Gunnison County Commissioners v. Rollins, 1899, 173 U.S. 255, 19 S.Ct. 390, 43 L.Ed. 489; Presidio County v. Noel-Young Bond Co., 1909, 212 U.S. 58, 29 S.Ct. 237, 53 L.Ed. 402; Henderson County v. Sovereign Camp, 6 Cir.,...
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