Stanton v. Shipley

• Decision Date: 29 April 1886
• Parties: STANTON v. SHIPLEY.
• Court: United States Circuit Court, District of Indiana

27 F. 498

STANTON v. SHIPLEY.

United States Circuit Court, D. Indiana.

April 29, 1886

Claypool & Ketcham, for plaintiff.

James H. Jordan, Adams & Newby, Duncan, Smith & Wilson, Grubbs &amp Parks, and McDonald, Butler & Mason, for defendants.

7 F 498>>WOODS, J.

Complaint upon the official bond of Jacob A. Shipley, as trustee of Gregg township, in Morgan county, Indiana; the defendants before the court being the sureties upon that bond. The plaintiff, who claims as assignee by delivery after indorsement in blank by the payee, seeks to charge the defendants with the amount of eight promissory notes alleged to have been made by said trustee in violation of the second section of 'An act touching the duties of township trustees in certain particulars,' approved March 5, 1883. Acts 1883, p. 114. That section provides 'that any township trustee in any county of the state of Indiana, who shall contract any debt in the name or in behalf of any civil or school township of which he may be the trustee, contrary to the provisions of sections one and two of an act approved March 11, 1875, (the same being sections numbered six thousand and six and six thousand and seven of the Revised Statutes of the State of Indiana,) shall be personally liable, and liable on his official bond, to the holder of any contract, or other evidence of such indebtedness, for the amount thereof.'

Section 6006, referred to, is to the effect that whenever it becomes necessary for the trustee of any township to incur any debt or debts aggregating more than the fund on hand to which the debts are chargeable, and the like fund to be derived from taxes assessed for the year, the trustee shall procure from the board of county commissioners an order authorizing him to contract such indebtedness; and in the other section (6007) it is provided that such order shall be granted only upon a petition of the trustee showing the object and proximate amount of the debt or debts to be incurred, and upon proof that notice has been given in a prescribed manner of the pendency of the petition.

The notes in question, except the amounts for which they purport to be given, are all of the same tenor. The one set out in the complaint as Exhibit B reads as follows:

'$763.50. STATE OF INDIANA, COUNTY OF MORGAN.

'TRUSTEE'S OFFICE, GREGG SCHOOL TOWNSHIP, April 11, 1885.

'This is to certify that there is now due from this township to R. B. Pollard, or order, seven hundred and sixty-three 50-100 dollars for school supplies bought for and received by this township, and payable out of the special school funds for which taxes are now levied, at the First National Bank of Martinsville, Indiana, on the twentieth day of December, 1886, with interest at 8 per cent. per annum, on the amount from date till paid, and attorney's fees. JACOB A. SHIPLEY, School Trustee of Gregg Township.

'P.O. Wilbur, Ind.'

To this (and likewise to each of the notes) is appended the following (or similar) certificate:

'This is to certify that Gregg township school warrant of Morgan county, Indiana, dated April 11, 1885, for seven hundred and sixty-three 50-100 dollars, payable to R. B. Pollard, or order, due on or before December 20, 1886, at 1st National Bank, Martinsville, Ind., was given by myself as trustee of said school township for school supplies, which have been received and accepted, and that said warrant was issued according to law, and will be promptly paid when due. The entire indebtedness of said township is less than two per cent. of its assessed valuation.

'JACOB A. SHIPLEY, Trustee of Gregg School Township.

'P.O. Address, Wilbur, Ind.

'Dated at Wilbur, Ind., April 17, 1885.'

It may be noted that each certificate bears a date subsequent to the date of the note to which it is attached.

The complaint shows that each of these obligations was issued in violation of the statutory provisions already referred to, but contains no averment in respect to the real consideration or indebtedness for which they were made.

The first question in order is one of jurisdiction. The plaintiff is shown to be a citizen of New York, and the defendants all to be citizens of Indiana; but the citizenship of Pollard, the payee of the paper, is not averred, and counsel for the defendants, asserting that the notes are not negotiable by the law-merchant, insist that the plaintiff can come into this court only by showing that Pollard might also sue them here. By the act of congress no circuit or district court can 'have cognizance of any suit founded on contract in favor of an assignee, unless a suit might have been prosecuted in such court to recover thereon if no assignment had been made, except in cases of promissory notes negotiable by the law-merchant, and bills of exchange.'

If the plaintiff's suit be regarded as founded upon the notes set out in the complaint, and his counsel have insisted that the action is, in a sense, upon the notes, I think there is a want of jurisdiction. That the notes are not negotiable by the law-merchant I think clear, for two reasons: First, each purports to be payable out of a particular fund; second, they purport to be the notes of a school township, a municipal corporation existing under public laws, and endowed only with restricted powers, granted for special and purely local purposes of a non-commercial character. Such bodies, as every one must take notice, have no power, without express or clearly-implied grant, to make negotiable paper; and, if their officers or agents attempt to put out corporate paper in commercial form, it will be deemed void, or at most a simple obligation of which the true consideration may be shown against any holder or purchaser. Police Jury v Britton, 15 Wall. 566; Mayor, etc., v. Ray, 19 Wall. 468; Reeve School...