158 P. 207 | Cal. | 1916
Appellant, an irrigation district, issued certain bonds, to recover judgment upon part of which issue this action was brought.
In its answer defendant admitted the issuance of the bonds, but averred that they were unlawfully issued in that they were erroneously dated; that there was no value or lawful consideration paid therefor; that recovery thereon was barred by the statute of limitations; and that instead of being sold for cash they were, contrary to the provisions of the act authorizing their issue, exchanged for labor, commodities, and supplies.
The bonds and coupons described in the complaint, the due execution of which by the officers of the district in the form required by the act and their authority so to do is not questioned, together with accrued interest thereon, amounted to the sum of $15,098.30. The court found that plaintiff was the legal holder of all the bonds; that a portion thereof, evidenced by coupons which had matured more than four years prior to the filing of the complaint, was barred by subdivision 1 of section
At all the times in question defendant was an irrigation district organized and existing under an act of the legislature of the state of California, entitled "An act to provide for the organization and government of irrigation districts, and to provide for the acquisition of water and other property, and for the distribution of water thereby for irrigation purposes," approved March 7, 1887 (Stats. 1887, p. 29). In the exercise of power conferred by said act, defendant authorized its officers to issue bonds in the sum of two hundred thousand dollars, of which the bonds in question are part thereof. The bonds upon which the judgment is based are all negotiable in form, dated January 1, 1891, and on their face recite that they were "issued by authority of, pursuant to, and after a full compliance with all the requirements of the act of the legislature of the State of California, entitled 'An act to provide for the organization and government of irrigation districts, and to provide for the acquisition of water and other property, and for the distribution of water thereby for irrigation purposes,' approved March 7, 1887, and the acts amendatory and supplementary thereto," all as provided in section 15 of the act. They may be divided into three classes, designated as follows: 1. The Bradshaw bond, numbered 1, for five hundred dollars, sold and delivered on March 1, 1892, claimed to have been acquired thereafter by plaintiff in the ordinary course of business for a valuable consideration and without notice of any want of consideration paid therefor. 2. The Curtis bonds, being ten in number, each for the sum of one hundred dollars, which bonds were transferred to plaintiff for collection and which, it is claimed, were for a valuable consideration, acquired by Curtis, before maturity and without notice of alleged defects or want of consideration and from holders thereof other than defendant. 3. The remainder of the bonds included in the judgment may be designated as the Ham bonds, being those found by the court to have been acquired from parties other than defendant by plaintiff in the ordinary course of business, for a valuable *614 consideration and without any notice of the facts upon which appellant insists they are void.
Appellant's first contention is that, since the bonds provided that the installments of principal were payable only upon the surrender of coupons evidencing such principal, and the interest coupons provided for their payment at the office of the treasurer upon surrender thereof, the facts of presentation, offer to surrender, and demand should have been alleged and proved in order to entitle plaintiff to judgment. Section
Appellant's chief contention is that the bonds, contrary to the provisions of the act, were originally sold and delivered to purchasers thereof from whom plaintiff, with notice that they were disposed of in violation of law, acquired them, and even though acquired without notice prior to maturity and for value in the ordinary course of business, the bonds were nevertheless, by reason of the violation of the provisions of *615 the act by the officers of the district in the sale and issue thereof, void in his hands.
All of the bonds involved in the suit, other than the Bradshaw bond No. 1, were part of a purported issue and sale of one hundred and fifty thousand dollars in bonds, made by the officers of the district to one J.W. Mattern in the manner following: The bonds were duly advertised for sale, and it appearing there would be no bids for them, an understanding was had with Mattern whereby it was agreed that he should make a bid therefor of ninety cents on the dollar, which the board should and did accept; it being understood and agreed that Mattern, however, should assume no obligation to take or pay for the bonds so pretended to be purchased by him and the officers of the district were to retain possession thereof, and as they were, if at all, in fact sold and disposed of, deliver them to the real purchaser in the name of and under the pretense that they belonged to Mattern. Under the provisions of the act the bonds, other than in exchange for property at par, could not be disposed of, except by sale for cash at ninety cents on the dollar. Unable to secure purchasers of the bonds, and the board of directors being desirous of constructing its irrigating system and developing water therefor, and having no money on hand wherewith to do the work, they, as a part of the scheme, adopted the further plan of purchasing material, goods, and supplies and procuring labor to be performed, ostensibly for cash, but in fact for bonds, by agreeing with plaintiff and his firm that they would buy groceries and supplies from him and at the end of the month, upon rendering his statement therefor, he should give his check for bonds at ninety cents on the dollar, and upon presenting the same, together with his monthly bill, they would deliver to him bonds in the amount of his check so received and return the check to him, it being understood that the check should not be cashed. One J.L. Adams, who at the time the arrangement was made was a director of the district and thereafter superintendent of construction, acted as the agent of plaintiff in the transaction had with the district, wherein and through such agency plaintiff acquired a part of the bonds. As to the bonds so purchased by plaintiff with groceries through Adams, the court rendered judgment for defendant. A like arrangement was made with various parties who furnished labor *616
and material for the district in the construction of its canals, conduits, and pipe-lines, pursuant to which they likewise gave their checks for the purchase of bonds to the extent of the work performed and materials furnished by them, for which bonds were issued and accepted at ninety cents on the dollar in payment of the bills rendered. The checks, pursuant to agreement, were not presented for payment nor paid, but merely used as the means of a purported compliance with the law, after which they were returned to the drawers thereof. The bonds and coupons upon which the judgment in favor of plaintiff was based were bonds so issued by defendant to other persons than plaintiff. That they were void in the hands of such purchasers and in the hands of subsequent owners thereof having notice of their infirmity is not questioned. (Hughson v. Crane,
The finding of the court "that subsequently to the issuance of said bonds, and each of them, the plaintiff did in good faith and in the ordinary course of business, and for value, without any knowledge either actual or constructive of what the said Grapeland Irrigation District had received for said bonds, and before the apparent maturity of either said bonds or coupons, and without any knowledge of their actual dishonor, purchase each of said bonds and coupons alleged in plaintiff's complaint to be owned and held by him, except such notice as said plaintiff may have received from said district through the sale of groceries through one J.L. Adams, and except as hereinbefore found with reference to the bonds purchased of J.W. Curtis," paying therefor a valuable consideration, is based almost entirely upon testimony given by Mr. Ham. As to the bonds received by him through Adams as his agent in exchange for groceries and supplies furnished the district, the court found that he was not without notice that they were issued to him contrary to law. Conceding that, in the absence of other evidence tending to charge him with notice of the illegal issue, the knowledge of Adams while acting as his agent should, as held by the court, be imputed to him as to the bonds so bought through Adams, nevertheless the latter had nothing to do with the purchase of the bonds involved in the judgment. "As against a principal, both principal and agent are deemed to have notice of whatever either has notice of, and ought, in good faith and the exercise of ordinary care and diligence, to communicate to the other." (Civ. Code, sec.
It appears that the Bradshaw bond was one of a block of twenty-eight thousand dollars in bonds issued at par in payment of the purchase price of property. The district cannot invoke as a defense to this bond the alleged fact that it made a bad bargain in purchasing the property. "The want of consideration for the undertaking of a maker, acceptor, or indorser of a negotiable instrument does not exonerate him from liability thereon to an indorsee in good faith for a consideration." (Civ. Code, sec. 3122) There was nothing illegal in the consideration originally paid for this bond.
It is next strenuously insisted that, regardless of how plaintiff acquired the bonds, and conceding his acquisition to have been without notice of their infirmity, they are nevertheless void and unenforceable in his hands. This contention is based upon section 42 of the act, which provides: "The board of directors, or other officers of the district, shall have no power to incur any debt or liability whatever, either by issuing bonds, or otherwise, in excess of the express provisions of this act, and any debt or liability incurred in excess of such express provisions, shall be and remain absolutely void." In discussing this question appellant directs our attention to the fact that the act provides only two ways in *619
which the district may issue bonds: One by sale thereof for cash at ninety cents on the dollar; the other, as in the case of the Bradshaw bond, in exchange for property at par. Our attention is also directed to the fact that the bonds were antedated, being dated January 1, 1891, and not actually sold and issued until some two or three years thereafter. As hereinbefore stated, all the bonds were in form negotiable, as required by section 15 of the act, and each bond recites, as required by said section, that it "is one of a series of bonds amounting in the aggregate to two hundred thousand dollars, caused to be issued by the board of directors of said Grapeland Irrigation District, and pursuant to a vote of the electors in said district at an election held for that purpose on the fifteenth day of November, 1890, . . . and issued by authority of, pursuant to, and after a full compliance with all the requirements of the act of the legislature of the state of California, entitled," etc. If appellant's position is correct, then no purpose is subserved by the express requirement that the bonds shall be negotiable in form; nor, if the district may, as against bona fide holders of bonds, be heard to deny the facts so certified, does the recital of compliance with the provisions of the act as required in issuing the bonds serve any purpose whatsoever. The authorities seem to be uniform in holding that where a municipality has the power, upon the performance of certain precedent conditions, to issue bonds, and its officers through whom it acts are charged with ascertaining and determining the facts which constitute such performance and certify on the face of the bonds to a compliance therewith, the municipality is estopped from pleading nonperformance as a defense to such bonds in the hands of a bona fide holder thereof. Thus, in San Antonio v. Mehaffy,
The judgment is affirmed.
Melvin, J., Shaw, J., Henshaw, J., Sloss, J., Lawlor, J., and Angellotti, C.J., concurred.