аfter stating the case as above,, delivered the opinion of the court.
The constit tion of Iowa, art. 11, sec. 3, ordains as follows: “No county, or other political or municipal corporation, shall be allowed to become indebted in any manner, or for any purpose, to an amount in the aggregate exceeding five per centum on the value of the taxable property within such county or corpоration — to be ascertained by the last state and county tax lists, previous to the incurring of such indebtedness.”
*371 The scope and meaning of this provision of the fundamental and paramount law of the State are clear and unmistakable. No municipal corporation “shall be allowed” to contract debts beyond the constitutional limit. When that limit has been reached, no debt can be contracted “ in any manner, or Nr any purpose.” The limit of the aggregate debt of the i ,u licipality is fixed at five per cent of the value of the taxable property within it; and that value is to be ascertained “by the last state and county tax lists,” wrhich are public records, open to all, and of the contents of which all are bound to take notice. The prohibition is addressed to the legislature, as well as to all municipal boards and officers, and to the people, and forbids any and all of them to create, or to give binding force to, any debts of the corporation in excess of the limit prescribed. The prohibition extending to .debts contracted “ in- any manner, or for any purpose,” it matters not whether they are in every sense new debts, or are debts contracted for the purpose of paying old ones, so long as the aggregate of all debts, old and new, outstanding at оne time, and on which the corporation is liable to be sued, exceeds the constitutional limit. The power of the legislature in this respect .being restricted and controlled by the constitution, any statute which purports to authorize a municipal corporation to contract debts in any manner or for any purpose whatever in excess of that limit is to that extent unconstitutional and void.
By the terms of the statute of Iowa of 1880, c. 132, under which the bonds in question were issued, any independent school district or district township, having a bonded indebtedness outstanding, is authorized to issue negotiable bonds for the purpose of funding that indebtedness; and “ the treasurer of such district is hereby authorized to sell the bonds provided for in this act at not less than their par value, and apply the proceeds thereof to the payment of the outstanding bonded indebtedness of the district, or he may exchange such bonds for outstanding bonds, par for par.”
There is a wide difference in the two alternatives which this statute undertakes to authorize. The second alternative, of *372 exchanging bonds issued under the statute for outstanding bonds, by which the new bonds, as soon as issued to the holders of the old- ones, would be a substitute for and an extinguishment of them, so that the aggregate outstanding indebtedness of the corporation would not be increаsed, might be consistent with the constitution. But under the first alternative, by which the treasurer is authorized to sell the new bonds and to apply the proceeds of the sale to the payment of the outstanding ones, it is evident that if (as in the case at bar) new bonds are issued without a cancellation or surrender of the old ones, the aggregate debt outstanding, and on which the corporation is liable to be sued, is at once and necessarily increased, and, if new bonds equal in amount to the old ones are so issued at one time, is doubled; and that it will remain at the increased amount until the proceeds of .the' new bonds are applied to the payment of theiold ones, or until some of the obligations are otherwise discharged.
It is true that if the proceeds of the sale are used by the municipal officers, as directed by the statute, in paying off the old debt, the aggregate indebtedness will ultimately be reduced to the former limit. But it is none the less true, that it has been increased in the interval; and that unless those officers do their duty, the increase will be permanent. It would be inconsistent alike with the words, and with the object, of the constitutional provision, framed to protect municipal corporations from being loaded with debt hey.ond a certain limit, to make their liability to be charged with debts contracted beyond that limit' depend solely upon the discretion or the honesty of their officers.
There could be no better’ illustration of the reasonableness, if not the necessity, of this construction, in order to secure to municipal corporations the protection intended and declared by the "constitution of the State, than is afforded by the facts of the present case. The total valuation of the propеrty of the district, 'as shown by the last state and county tax list before it issued the bonds in question, was $131,038, five per cent of which, or $6551.90, was the limit beyond which it was prohibited by the constitution to contract debts. ■ Its outstand *373 ing bonded debt was already not less than $20,000, which upon the facts found must be assumed to be valid. For the purpose of funding that debt-it executed and sold bonds to the amount of $25,000, and it actually applied less than $6000 of the proceeds of the sale to the payment of outstanding bonds. The result of holding the new bonds good would be to double the whole bonded debt of the district, and to bring it up to about thirty per cent of the valuation.
.This construction of the constitution of Iowa appears to us to be warranted, and indeed required, by previous decisions of this court.
In construing a prohibition of the constitution of Illinois of Í870, art. 9, sec. 12, expressed in substantially the same words, this court, speaking by Mr. Justicе Harlan, said: “The words employed are too explicit to leave any doubt as to the object of the constitutional restriction upon municipal indebtedness. The purpose of its framers, beyond all question, was to withhold from the legislative department the power to confer upon municipal corporations authority to incur indebtedness in excess of a prescribed amount.” “ No legislation could confer upon a municipal corporation authority to contract indebtédness which the constitution expressly declared it should not. be allowed to incur.”
Buchanan
v. Litchfield,
In
Dixon County
v. Field,
The constitution of Colorado of 1876, aft. 11, sec. 6, provides that the indebtedness contracted in any one year, by any county having a valuation of not less than one million of dollars, shall not exceed a certain per cent on its assessed valuation, and that “the aggregate amount of indebtedness of any county, for all purposes, exclusive of debts contracted before the adoption of this constitution, shall not at any time exceed twice the amount above herein limited.” This court held, in
Lake County
v.
Rollins,
It is hardly necessary to add that the payment of some instalments of interest cannot have the effect of ratifying bonds issued beyond the constitutional limitfor a ratification can have.no greater .effect than a рrevious authority; and debts which neither the district' nor its officers had any power to authorize, or create cannot be ratified or validated by either of . them, by the payment of interest, or otherwise.
Marsh
v.
Fulton County,
In the Supreme Court of Iowa, it is settled law that the constitutional restriction includes not only municipal bonds, but all forms of indebtedness, except, warrants for money actually in the treasury, and perhaps contracts for ordinary exрenses within the limits of the current revenues.
Scott
v. Davenport,
In
Scott
v. Davenport, it was held that after the constitutional limit had been reached, by debts contracted either before or after the constitution took effect, no new debts could be contracted, even for the purpose of еrecting public works from which it was expected that the city would derive a revenue. In
McPherson
v.
Foster,
it was held that bonds issued in excess of the constitutional limit were void, even in the. hands
*377
of a
bona fide
purchaser for value, and could not be ratified by the municipality, by payment of interest or otherwise. In
Mosher
v.
Ackley
District, it was again held that such bonds were void against a
bona fide
holder, and that a statute giving a lien on a schoolhouse for, materials for which such bonds had been given was uncоnstitutional. In
Council Bluffs
v.
Stewart,
it was held that uncollected taxes and the levy for the current year could not be deducted from the outstanding debt for the purpose of ascertaining the real indebtedness, and that the contrary view “ confounds the distinction between an indebtedness and insolvency.”
The Iowa cases cited by the defendant in error fail to support his position. In
Austin
v.
Colony District,
The case of
Sioux City & St. Paul Railway
v.
Osceola County,
In the case at bar, the new debts did not arise on warrants for money actually in the treasury of the district, or on contracts for ordinary expenses payable out of its current revenues ; and none of the bends in question were given in payment and satisfaction of judgments. Nor did the plaintiff buy the bonds for value, in good faith, and without notice of any defect, from one to whom they had been issuеd bjr the district. He was himself the person to whom they were originally issued by the- district, and knew, when he took the first ten bonds, that the district, in issuing them, exceeded the constitutional limit, as appearing by public records of which he was bound to take notice, and that it intended still further to exceed that limit. Under such circumstances he had no right to rely on the recitals in the bonds, even if these could otherwise have any effect as against the plain provision of the constitution of the State. By the uniform course of the decisions of the Supreme Court of Iowa, therefore, as well as of this court, he cannot maintain this action.
Judgment reversed, and case remanded to the Circuit Court with directions to enter judgment for the defendant.
These bonds were issued under an act of the legislature authorizing district townships having a bonded indebtedness outstanding to issue negotiable bonds for the purpose of funding such indebtedness, and subject to a constitutional provision that no municipal corporation shall become indebted in any manner or for any purpose to an amount in the aggregate exceeding five per cent on the value of the taxable property within such corporation. The bonds were, certified by the proper officers of the district to have been executed and issued in pursuance of and in accordance with the statute authorizing such bonds, (a copy of which was printed upon the bonds,) and in accordance with the laws and constitution of the State of ' Iowa, and in conformity with the resolution of the board of directors, etc. Plaintiff purchased these bonds, for their par value in cash, of one Bichards, who had been appointed “ refunding agent to negotiate the bonds.” Under the provision of the constitution, the township had no power to create an indebtedness in excess of $6551.00, that being five per cent of the taxable property of the township, as shown by the last tax list previous to the issuance of said bonds.
But, granting that the indebtedness already existing exceeded the constitutional limit, these bonds were issued, not for the purpose of increasing this indebtedness, but merely to change its form and reduce its rate of interest. The object of the constitutional provision was to prevent the incurrence of a new debt or the increase Qf an existing debt beyond a limited amount. The object of, the statute was to enable district townships to fund their indebtedness by issuing and selling bonds at not less than their par value, and applying the proceeds to the payment of such outstanding indebtedness, or by exchanging such bonds for outstanding bonds. If the construction placed upon this statute by the court be correct, it is difficult to see how any township can avail itself of it, if such township has an existing indebtedness up to the amount of the constitutional limitation, since the new bonds, whether *380 issued to be sold for cash or to be exchanged for other bonds, must, while the process of sale or exchange is going on, nominally increase the indebtedness of the corporation. I regard this as too technical an interpretation of the constitutional provision.
In giving a construction to this clause, the Supreme Court of Iowa held in
S. C. & St. P. R. R. Co.
v.
The County of Osceola,
Had the proceeds of these bonds been properly applied, no question could have arisen as to the indebtedness of the township having been increased by their issue. If the district township had the right to issue the bonds, which it certainly had, if the statute under which they were issued be constitutional, the purchaser of such bonds was under no obligation to see that the money he paid for them was applied to extinguishing the existing indebtedness. . He was .entitled to act upon the presumption that the officers charged with the execution of the law would not betray their trust, and would deal fairly with thé people who had put them forward to represent them. In my view this is simply an attempt to saddle the holders of these bonds with the derelictions of the officials chosen by the electors of this township to act for them in this transaction, and who were alone entitled to receive the money.