Thornburgh v. School Dist. No. 3

• Citation: 75 S.W. 81,175 Mo. 12
• Court: United States State Supreme Court of Missouri
• Decision Date: 27 May 1903
• Parties: THORNBURGH v. SCHOOL DIST. No. 3.

75 S.W. 81

175 Mo. 12

THORNBURGH v. SCHOOL DIST. No. 3.

Supreme Court of Missouri, Division No. 1.

May 27, 1903.

SCHOOL DISTRICTS — BONDS — VALIDITY — RECITALS — ESTOPPEL — BONA FIDE PURCHASER.

1. Recitals in school district bonds issued in violation of statutory provisions cannot give rise to an estoppel in favor of bona fide purchasers before maturity.

2. Under Const. art. 10, § 12, providing that no school district shall be allowed to become indebted to an amount exceeding the revenue for the year, without the assent of two-thirds of the voters voting at an election held for the purpose, and limiting the indebtedness which may be incurred to a sum not exceeding 5 per cent. of the value of the taxable property therein, one suing the school district on bonds issued by it has the burden of proving that the bond issue was authorized by two-thirds of the voters, and that it did not exceed the debt limit.

3. Rev. St. 1879, § 7032, as amended by the act of 1881, directs that a school district election for the purpose of authorizing the school board to borrow money shall be held at an annual or special meeting for the purpose after 15 days' notice, and provides that the voting shall be by ballot, and that the authority to make the loan shall be conferred by two-thirds of the votes cast. The records of a school board showed that at a board meeting a special meeting of the voters was called; that 21 days later a voters' meeting was held, at which propositions to sell the old schoolhouse and site and erect a new building were submitted and carried; that subsequently the school board met, and "ordered that notices be posted, calling meeting of the voters for the purpose of changing site, selling old house, making appropriation of $3,789, or one per cent. on assessed valuation, leaving proceeds arising from sale of present house for seating new house," and that afterwards the voters "assembled, pursuant to call, after due notice of 20 days, * * * and considered propriety of the loan as per notice"; and that the loan was carried by a vote of 17 to 2. Held not to show authority in the board to issue bonds.

4. Const. art. 10, § 12, prohibiting any county, city, town, school district, or other political corporation from incurring any indebtedness exceeding 5 per cent. of the "value of the taxable property" therein, as ascertained by the assessment for state and county purposes, forbids a school district from incurring an indebtedness exceeding 5 per cent. of the value of the taxable property therein subject to taxation for school purposes.

5. Where a school district issues bonds in excess of the debt limit, the court cannot reduce them to an amount within the debt limit, and give judgment thereon for the reduced amount, the bonds being wholly invalid.

6. The fact that a school district used the money obtained from the sale of invalid bonds issued by it in the construction of a school building did not render the bonds enforceable at law.

Brace, P. J., and Marshall, J., dissenting in part.

Appeal from Circuit Court, Chariton County; John P. Butler, Judge.

Action by William H. Thornburgh against School District No. 3. From a judgment for defendant, plaintiff appeals. Affirmed.

T. K. Skinker, for appellant. A. W. Mullins, for respondent.

VALLIANT, J.

This is a suit upon nine bonds and coupons issued by the defendant, a school district in Chariton county. The bonds bear date December 1, 1883, and are a part of an issue of 14 bonds, aggregating $3,500, which was made to raise money to build a schoolhouse in the district. The answer admits that the bonds were issued by the persons at the time holding the position of directors for the school district, but avers that they acted without authority and in violation of law, for the reasons that no election was held as required by law, no notice of such election was given, no order was made by the board of directors, or entered on the record of the board, authorizing the issue of the bonds, or providing for the borrowing of money to build a school-house that the aggregate amount of the bonds issued exceeded 5 per centum of the value of taxable property in the district, as shown by the assessment next before the last assessment for state and county purposes — and for those reasons the bonds were invalid. The reply traversed the affirmative statements in the answer, and averred that the bonds were sold by the district for $3,500; that the district received the money, and with it built a schoolhouse, which has been used as such since 1883, and is still so used by the district.

Upon the trial the plaintiff introduced in evidence the nine bonds and the coupons sued on. The following is a copy of one of the bonds. All the rest are like it: "Know all men by these presents, that in pursuance of section No. 2, of an act approved March 21, 1881, amendatory of section No. 7032 of article 1, chapter 150, of the Revised Statutes of Missouri, 1879, and by virtue of an election held at the schoolhouse on August 28th, 1883, in District No. 3, township 56, range 21, Chariton county, Missouri, whether a loan of $3,500 should be made for the erection of a schoolhouse in said district, which proposition was submitted to the legal voters thereof on said day, after twenty days' notice of said election had been given, as provided by law; and whereas, at said election, seventeen ballots were cast and canvassed in favor of the loan, and two ballots were cast and canvassed against the loan: Now, therefore, in compliance with an order made and entered on record by the board of school directors of said district on the 30th day of August, 1883, the said District No. 3, township 56, range 21, of Chariton county, Missouri, acknowledges itself indebted, and for value received, promises, fifteen years after date, to pay the bearer two hundred and fifty dollars, with interest thereon at eight per cent., payable annually at the Chariton County Exchange Bank in Brunswick, Missouri, upon the presentation of the proper coupons hereto attached, at said bank. This bond is payable at any time after the expiration of two years, at the option of said district, and after maturity bears ten per cent. interest. In testimony whereof, the said school district has executed this bond at a session of the board of directors thereof, by the said board signing their names hereto as directors of said district; and by the signing of the name of said district by said board and clerk. [Signed] District 3, Township 56, Range 21. By F. R. Stanley, S. P. Dillon, H. Suits, Directors. Attest: Hiram Suits, Clerk. December 10th, 1883." The plaintiff's evidence tended further to prove that he purchased the bonds and coupons before their maturity, paying for the same a premium over their face value; that in doing so he relied on the recitals on the face of the bonds, the certificate of registration by the State Auditor indorsed thereon, and the assurance by the person from whom he bought them that all the matured interest to date had been paid; that he made no examination of records to ascertain if the recitals contained in the bonds and in the certificate of registration were true. A witness for plaintiff testified: That he was one of the clerks of the election at which it is claimed the bonds were authorized by the vote of the people. That the election was held in the district on August 28, 1883. He saw several written notices posted in different places in the district, and the election was held pursuant to the notices. After that, at the request of the directors, witness procured the printing of the bonds, and witnessed their execution by the directors. Another witness for plaintiff testified: That his firm built the schoolhouse in 1883-84. They were employed by the directors to do so, and were paid out of money deposited in bank for that purpose. That there were about 150 voters in the school district.

Plaintiff's record evidence was as follows: Proceedings of the meeting of the school board August 2, 1883, showing that plans for a schoolhouse were submitted and adopted: "Ordered that notices be posted, calling meeting of voters for the purpose of changing site, selling old house, making appropriation of $3,789, or one per cent. on assessed valuation, leaving proceeds arising from sale of present house for seating new house." Proceedings of special meeting August 28, 1883: "The qualified voters of district No. 3, township 56, range 21, assembled pursuant to call, after due notice of twenty days. Organized by appointing W. A. Bennett and J. P. Moore as judges, and John Gould as clerk. Submitted and considered propriety of the loan, as per notice. Proceeded to ballot, with the following results: For the loan, 17; against, 2." Proceedings of meeting November 7, 1883, related to the purchase of a lot, "all to be paid for out of the proceeds arising from the appropriation for erecting house and purchasing site." Certain entries in the record book, showing the issuance February 5, 1885, of a warrant for $282.35 to pay interest on bonds; a payment of $98, as balance of bond No. 1; a payment of $526.96 January 23, 1887, on bond and interest; and a memorandum indicating a loan from the Exchange Bank at Brunswick on bonds amounting to $3,500.

Defendant introduced in evidence the proceedings of the meeting of the school board July 7, 1883, at which it was "ordered that special notice of meeting be posted according to law, calling the voters together for the purpose of erecting new schoolhouse, selling old site, purchasing new site." Then of the meeting of July 28th: "Voters of District No. 3, township 56, range 21, met pursuant to call; notice having been posted according to law. Submitted a proposition to sell old schoolhouse and site. Carried. Submitted proposition to erect new schoolhouse. Carried." A paper purporting to be a notice of an election to be held on August 29, 1883, on the proposition to negotiate a loan of $3,500 to...