State Bank of Cornell v. Town of Wash.

• Decision Date: 11 March 1924
• Citation: 184 Wis. 124,197 N.W. 933
• Parties: STATE BANK OF CORNELL v. TOWN OF WASHINGTON.
• Court: Wisconsin Supreme Court

184 Wis. 124

197 N.W. 933

STATE BANK OF CORNELL

v.TOWN OF WASHINGTON.

Supreme Court of Wisconsin.

March 11, 1924.

Appeal from Circuit Court, Rusk County; James Wickham, Judge.

Action by the State Bank of Cornell against the Town of Washington. Judgment for plaintiff, and defendant appeals. Reversed and remanded, with instructions.

This action was brought to recover on two promissory notes executed by the town of Washington to the State Bank of Holcombe, one dated May 17, 1920, the other June 3, 1920, each for $1,500, each due March 15, 1921, and each bearing interest at the rate of 7 per cent. per annum. Each note was signed, “Town of Washington by R. B. Hopkins, Chairman, Louis Cholvin, Clerk.” The proceeds of these and other notes so executed by the town of Washington, amounting in the aggregate to $8,000, were deposited in said State Bank of Holcombe to the credit of the town treasurer and were paid out by the bank upon town orders signed by the chairman and clerk. The town treasurer never drew checks against this fund, except one check to close the account. It seems to have been the practice for the holders of town orders to present them to the bank, where they would be cashed by the bank and the amount charged against the deposit to the credit of the town treasurer. The town treasurer testified that he never knew anything about these transactions or this fund, but it plainly appears that the bank from time to time returned the canceled town orders to the town treasurer with a statement of the status of the account. The proceeds of the notes, however, never came into the hands of the town treasurer except in the manner indicated.

On the 2d day of September, 1920, the State Bank of Holcombe sold and transferred said notes to the plaintiff, which brings this action to recover thereon. Judgment was entered in favor of the plaintiff for the sum of $3,000 and interest, less $1,267.25 paid on said notes on June 20, 1921. From that judgment the defendant appealed.D. W. Maloney and T. M. Thomas, both of Ladysmith, for appellant.

Farr & MacLeod, of Eau Claire, for respondent.

OWEN, J. (after stating the facts as above).

Appellant claims that the notes were void for the reason that their execution was never authorized either by the town or by the town board. Section 60.29 (17), Stats. 1921, empowered the town board of supervisors “to borrow money, when authorized at the last preceding town meeting, not exceeding the amount appropriated at such meeting, at a rate of interest not to exceed eight per centum per annum, to pay town orders which may be drawn upon the town treasurer and to direct the town chairman and clerk to issue negotiable promissory notes of the town therefor, payable not later than the first day of March following the date of their issue.” The trial court found that at the annual meeting of the town of Washington on April 6, 1920, a resolution was adopted which was entered on the minutes of the town clerk, as follows: “Resolution passed to borrow money from the State Bank of Holcombe.” The evidence disclosed no other or more definite resolution upon the subject.

[1][2] The town board had no power to borrow money except as authorized at the last preceding town meeting. The resolution adopted did not prescribe the amount of money that might be borrowed, neither did it prescribe the rate of interest which should be paid. It merely designated the place where money should be borrowed. To say that such a resolution authorized the borrowing of money ad libitum would be to sanction practice which the legislation no doubt intended to restrain.

In this case the town borrowed $8,000, which was nearly $3,000 in excess of the amount appropriated at the town meeting, as will be observed by a reference to Stamper v. Hopkins (Wis.) 197 N. W. 929, decided herewith, and which is really a companion case to this. The resolution adopted cannot be held to constitute authority for the borrowing of any particular amount of money.

[3] While the trial court found that the town board of said town borrowed money from the State Bank of Holcombe and issued the promissory notes involved in this action, it also held:

“That said arrangement for borrowing and disbursing said money was made and...