88 Iowa 579 | Iowa | 1893
The plaintiffs, five in number, being citizens and taxpayers of Lyon county, Iowa, “each for himself and for the benefit and use of all the taxpayers” of said county, brought suit in May, 1887, against George W. Bowers, as treasurer, T. C. Thompson, as auditor, and others, as members of the board of supervisors, of said county, representing that: “All
Upon notice to the county auditor and the members of the board of supervisors, and upon their failure to appear, a temporary writ was ordered on the eighth ■of September, 1887. No-service of the original notice was made,, except upon George W. Bowers, as treas
The service of the notice under the petition, as amended, was, as to most of the parties, they being nonresidents, by publication. George B. Provost is a resident of this state, at Dubuque, and was served personally. The Orient Fire Insurance Company and George B. Provost appeared, joined in the issues after-wards tried, and are appellants in this court. The county auditor and members of the board of supervisors, after the amendment to the petition was filed, were brought in as parties, and joined in the issues. On the fifth day of March, 1890, a decree was entered against all parties then served, except the Dubuque National Bank, the Orient Fire Insurance Company, and George B. Provost. In October, 1890, the cause came on for trial upon the issues joined between the plaintiffs and appellants. In March, 1891, the district court entered its decree, granting to plaintiffs relief as prayed. Other important facts can be better stated in connection with the different propositions to be considered.
We think, to a proper determination of this question, we should look to the purposes of the suit at its commencement, and the course of procedure to the time of filing the amendment to the petition. That the purpose of the suit, originally, was to free the taxpayers from a liability to pay the bonds, is not to be doubted;
It is said that the amendment is distinct from the
To the amendment therg is a prayer that the bonds be declared void and canceled, and it is urged that it •constitutes a separate action from the original to which the county should be a party. The same facts must be established to secure the judgment sought under the original petition, namely, a restraint of collection, as to justify a cancellation; that is, that the bonds were invalid. The prayer for cancellation is induced by the presence of the parties in interest, and is for the same purpose that the restraint of payment was sought. It follows that if citizens, as taxpayers, can conclude the parties in interest by perpetually enjoining the collecr tion of the bonds because not valid, they might have a judgment'for cancellation, which is, in effect, the same.
It is said that in the original. notice served on Provost there is “no intimation of any action such as that of the original petition. No more does it refer to the amendment. The original petition was there, as amended, and the original, with the amendment, constituted the petition, and the notice is that “there is now a petition filed by said plaintiff,” etc. It may further be said that at the same term with Provost, the •auditor and members of the board of supervisors were made parties, and a decree entered against them. It is true that service may have been made upon them after service on Provost, but the order of service could make no difference.
“The town of Grand Chute, in Wisconsin, filed its bill on the equity side of the court below against one Winegar; three.other persons, Goodwin, Hewett, and Conkey, being also made defendants. It set forth that Winegar had brought suit on the law side of the same court against the town to recover from it the amount of certain bonds, nine in number and for the sum of eight thousand, five hundred dollars in all, purporting to have been issued by the said town; that the*587 bonds were issued without authority, in violation of law, and in fraud of the town, by the other defendants, Goodwin, Hewett, and Conkey; that for reasons set forth in the bill the bonds had no legal force or validity, that the transfer of them to "Winegar was colorable merely; that he paid no valuable consideration on the pretended purchase; that he had given his note for them, he was a bankrupt, and altogether ‘irresponsible in a financial point of view; ’ that he knew all the facts in relation to the issue; and that he never had any right or title to the said pretended bonds, or to any of them. It was further alleged that Winegar was a citizen of the state of New York, and that the other defendants were citizens of Wisconsin. The bill prayed that an injunction might be issued, restraining Winegar and his confederates from the further prosecution of the suit on the bonds, and that the bonds themselves might be adjudged to be fraudulent and void, and be decreed to be canceled. To this bill the defendant demurred. The demurrer was sustained in the court below, and the complainant now appeals to this court.”
If this suit, like that, was to enjoin a suit at law for judgment on the bonds, the authority would apply with force, for then we would have a case in which the authorities of the county would, presumably, at least, be resisting payment in the interest of the taxpayers, and their rights would be protected in a defense to the suit sought to be enjoined. But how different in this case! Hei’e there is no suit pending on the bonds, and the proper officers of the county are about to levy taxes for the payment of the bonds, or the interest,, and apply the money thereto, and the taxpayer has'no remedy at law. Without this suit the bond owners have but to present their bonds when mature, and they will be paid, and there is no action on the instruments in which defense can be made, either present or prospective. And, further, in the opinion, in that case, refer
On the first day of May, 1885, the county issued a series of one hundred and twenty bonds, of one thousand dollars each, and they were placed in the hands of one Richards, as refunding agent for the county, who negotiated the same, and applied the proceeds to the payment of other outstanding bonds, except a small amount used for commissions and expenses. It is this series of one hundred and twenty bonds that is the subject of this suit. Just the amount of the indebtedness of the county on the first day of May, 1885, when the one hundred and twenty thousand dollars of bonds were issued, does not definitely appear, nor is it material as to the precise amount. It is a fact that it was quite largely in excess of the one hundred and twenty thousand dollars of bonds that were issued, and it is also a fact that the constitutional limitation at that time was seventy-one thousand} eight hundred and seventy-six dollars and thirty-five cents.
Another important fact to be stated, in view of the argument, is this: That of the previous issue of bonds, paid off with the proceeds of the one hundred and twenty thousand dollars of bonds in question, were some issued in discharge of judgments existing against the county, and probably bonds issued upon warrants* or other evidences of debt within the constitutional limitation ; so that it may be said, for the purposes of our present consideration, that the bonds in question represent indebtedness both within and without the constitutional limit. A ground of earnest contention by appellants against the judgment of the district court is that, notwithstanding the validity of a part of the indebtedness for which the bonds issued, yet the decree embraces, and declares void, the entire series.
Counsel do not seem to differ as to the correctness of the rule stated, as applicable to that kind of a proceeding, but their difference is as to the applicability of the same rule to this proceeding, being in equity. Accepting the correctness of the rule as applied, some additional authorities may aid in its application to this case. However, to a full understanding of the opinion in that case, it may be well, in addition to the above quotation, which is that of appellants, to add the following, as a part of the same paragraph: “It seems to me that the only means of solving the difficulties of the situation is for the plaintiff and the other nonresident bondholders to unite in a proper proceeding against the county and such other bondholders as may refuse to act as complainants; and in such a suit it can
Since that case was determined, the case of Doon Township v. Cummins, 12 Sup. Ct. Rep. 220, has been decided in the supreme court of the United States, and it will be hereafter referred to. The relationship of that case to this, as to the subject-matter, is such that, if the two courts are in harmony as to the legal rules for application, the final solution of a problem of great importance to parties in interest will be materially aided.
Some facts and well-settled rules of law lie at the threshold'of this inquiry. It is to be remembered that it is the taxpayer, and not the county, that brings the suit, and also that defendants to the suit are the officers of the county, who are its legal representatives and business agents, and upon whose care and conduct the taxpayer has a right to rely for protection against illegal taxation. These bonds were wrongfully placed upon the market by these officers against whom they now .seek relief. It is a rule of law that purchasers of such bonds are bound to take notice of the constitutional limitation of municipal indebtedness, and of such facts as constitute a basis for their issuance, with certain defined exceptions, as to the facts recited in the bonds. In Buchanan v. Litchfield, 102 U. S. 278, it is said: “The purchaser of the bonds was certainly bound to take notice, not only of the constitutional limitation upon municipal indebtedness, but of such facts as the authorized official assessments disclosed concerning the valuation of taxable property within the city.” The rule is quoted and approved in Dixon County v. Field, 111 U. S. 83, 4 Sup. Ct. Rep. 315. In Lake County v. Graham, 130 U. S. 674, 9 Sup. Ct. Rep. 654, the rule is stated as follow’s: ‘ ‘Nothing is better settled •than th’j rule, that the' purchaser of bonds, such as
Litchfield v. Ballou, 114 U. S. 190, 5 Sup. Ct. Rep. 820, was a suit in equity to establish a lien for the purchase price of such bonds, because of the adjudged illegality of 'the bonds, on certain waterworks of the city, to the construction of which the money had been applied. Mr. Justice Milleb, in the opinion, used these words: “The holders of the bonds, and agents of the city, are participes criminis in the act of violating that pi’ohibition, and equity will no more raise a resulting trust in favor of the bondholders than the law will raise an implied assumpsit against a public policy so strongly declared.” The “declared” public policy refers to the constitutional provision limiting the indebtedness of the city, and while that is a case from Illinois, the constitutional language is the same as ours^ — that a county “shall notibe allowed to become indebted, in any manner or for any purpose, to an amount, including existing indebtedness, in the aggregate exceeding five per centum on the value of its taxable property.” The following, from the opinion, indicates the scope of this prohibitive language:
“It shall not become indebted. Shall not incur any pecuniary liabilty. It shall not do this in any manner; neither by bonds nor notes, nor by expressed or implied promises. Nor shall it be done for any purpose. There stands the existing indebtedness to a given amount, in relation to the sources of payment, as an impassable*593 obstacle to the creation of any further debt, in any manner or for any purpose whatever. If this-prohibition is worth anything, it is as effectual against the implied as the express promise, and is as binding in a court of chancery as a court of law.”
The italicised language is the same in the opinion. The case being in equity, and dealing with the equitable rights of such holders of bonds, because of the advantages of the corporation from the use of the money paid for the bonds, we may profitably give the case further notice. It denied to the plaintiff a recovery in any form, and directed the lower court to dismiss the bill. In the most unmistakable terms, it holds that no debt was created because of'the purchase of the bonds, either expressed or implied; that if the plaintiff had a right against the city it-was for some specific property, as the particular money expended, or the property representing it, “as property which they have purchased.” The court below granted the lien on the waterworks, and the opinion speaks of it as “having decreed an indebtedness where none can exist.” It is further said: “The money received on the bonds having been expended, with other funds raised by taxation, in erecting the waterworks of the city, to impose the amount thereof as a lien upon these- public works would be equally a violation of the constitutional prohibition, as to raise against the city an implied assumpsit for money had and received.” That case is a very significant and conclusive one upon the equitable claim that the county should be held to respond to the extent of its having received, appropriated, and profited by the money paid for the bonds, and we doubt if such a holding would have obtained except for the controlling principle that the bond purchasers, in parting with their money, were parties to a legal fraud upon the taxpayers. Doon Township v. Cummins, 142 U. S. 366; 12 Sup. Ct. Rep. 220, is a law action to recover upon interest coupons,
The opinion in that case contains some reasoning as to the application of the proceeds of the sale of the bonds, and the consequence to result from a failure of the officers to do their duty in that respect, which we do not find it necessary to approve or disapprove, because in this case the situation is such that there is no pretense of knowing, or being able from the record to know, that any part of the proceeds of the bonds in question, that is, those affected by the judgment in this case, were applied, or intended to be applied, to any legal indebtedness of the county, and the burden of such a showing, even if available, which we do not decide, would be with the holder of such bonds. Under the facts as they appear in this case the bonds are to be treated as void. We are not to be understood as in any manner changing the rule as to the right of a municipal corporation, where its indebtedness is up to, or
The appellants cite many authorities upon familiar rules as to “laches” and “clean hands” for those asking equity, but they are entirely inapplicable, and have never, to our knowledge, been applied to a similar state of facts.
Our conclusion, is that the decree of the district court is fully warranted under the law, and it is AFFIRMED.