| U.S. Circuit Court for the District of Northern Iowa | Jul 10, 1899
The general rules which should be applied in the determination of the questions presented by the record in this suit are fairly stated in the opinion of the court upon the heaiing of the demurrer to the bill, and which is reported in 82 F. 929" court="None" date_filed="1897-11-01" href="https://app.midpage.ai/document/ætna-life-ins-v-lyon-county-9307773?utm_source=webapp" opinion_id="9307773">82 Fed. 929. The record shows that all the owners of the series of bonds issued by the defendant county under date of May 1, 1885, and amounting to the sum of §120,000, arc parties to this suit, and therefore the final decree herein will fully settle the liability of the county, if any, upon this entire issue of bonds. The evidence proves that, aside from the defense based upon the limitation contained in the constitution of the state of Iowa, forbidding the creation of indebtedness by municipalities of the state to an amount in excess of 5 per cent, upon the value of the taxable property of the municipality, the bonds in question were issued under due and proper authority of law, and the county received full value therefor, and thus the question is narrowed down to the proposition whether the constitutional limitation prevents the granting of any relief to the complainants, under the facts established by the evidence in this case. The stipulation herein filed shows that the total taxable value of the property in the county, at the date of the issuance of the bonds now held by complainants, was the sum of §1,580,735, including therein the sum of §143,208, entered upon the tax hooks of the county as exemptions allowed under the timber-culture acts of the state of Iowa, but which sum, for tin; reasons stated in Keene Five-Cent Sav. Bank v. Lyon Co., 90 F. 523" court="None" date_filed="1898-11-26" href="https://app.midpage.ai/document/keene-five-cent-sav-bank-v-lyon-county-of-state-of-iowa-9336500?utm_source=webapp" opinion_id="9336500">90 Fed. 523, I hold is not to he deducted from the valuation of the property as shown upon the county tax lists; and thus it appears that in 1885 the limitation fixed by the constitution of the state upon the extent of the indebtedness lawfully eatable by the county was the sum of §79,036.75. On May 1, 1885, the indebtedness of the county consisted of the so-called “Shade Bonds,” amounting to §100,000; §8,0-00 of the bonds issued between June 3, 1878, and June 5, 1879; the funding bonds of §40,600; and warrants to the amount of §17,700. The Shade bonds, being issued in excess of the constitutional limitation, were not enforceable, a nd, under the ruling of the court of appeals in Lyon Co. v. Ashuelot Nat. Bank, 30 C.C.A. 582" court="8th Cir." date_filed="1898-05-09" href="https://app.midpage.ai/document/lyon-county-v-ashuelot-nat-bank-of-keene-8861997?utm_source=webapp" opinion_id="8861997">30 C. C. A. 582, 87 Fed. 137, they cannot be included in the computation of the existing indebtedness of the county, and, omitting these bonds, there remains a total liability then outstanding of §66,300; thus showing that the county indebtedness had not reached the constitutional limit by the sum of, §12,736.75. Furthermore, the evidence shows that with the money procured from the complainants there were paid off §16,900 of the outstanding valid refunding bonds previously issued by the county, and it thus ap pears that the aggregate of these two amounts, to wit, §29,636.75, can be charged against the county without causing the indebtedness to exceed the sum of §79,036.75, the amount of the constitu
On behalf of the defendant, it is urged that the statute of limitations bars any recovery in this case, even admitting that a liability existed against the county at the date of the furnishing the money by the complainants. If this was an action for money had .and received, or for damages or the like, the cause of action would be held to have accrued in 1885, when the money of complainants was paid to the county, and the plea of the statute might well be availed of to defeat a recovery. The present proceedings are not to recover for money had and received, nor for damages for fraud or deceit, but the bill is filed for the purpose of having it decided what part or portion of the contracts entered into by the county with complainants can be enforced, in view of the constitutional limita,tion. The purpose of the bill is not to obtain a decree canceling or rescinding the contracts in fact entered into, whereby the complainants'paid to the county certain sums of money, in consideration of its promise to repay the same in 20 years, with interest payable at stated intérvals, but to ascertain, by judicial determination, what portion, if any, of the contract can be enforced.. If it be held that a given amount is valid and enforceable, that part must be enforced, in accordance with the terms of the contract between the parties, which fixed the time of payment of the principal sum due at 20 years from May 1, 1885.
If the suit is maintainable for this purpose, then the statute of limitations is 'only available against such portions of the interest as may have come due more than 10 years preceding the filing the bill herein, but is not available to defeat the proceeding as a whole. Thus, the pivotal question is whether the complainants can enforce their claims against the county for an amount which, if allowed, will not increase the'liability of the county beyond the constitutional limit. This is not a case wherein the rights and equities of complainants are based solely upon a purchase by them, in open market, of the negotiable securities of the county; but the evidence shows that B. L. Richards, the refunding agent of the county, directly negotiated with complainants, and submitted to them the resolution of the board of supervisors, indicating the purpose of the county to refund the outstanding indebtedness in order to reduce the interest, and submitted evidence showing that it was the purpose of the county to use the money it desired to obtain from complainants in refunding the
As evidence of the obligation which the county had assumed to repay the sums received by it from complainants, the written promise, in the form of negotiable bonds and interest coupons, was executed and delivered to complainants; but, when performance of the promise was demanded of the county, it replied that, owing to the restrictive limit upon municipal indebtedness contained in the constitution of the state of Iowa, it could not lawfully incur the whole amount of the indebtedness represented by the bonds held by the complainants, and thereupon this suit was brought to ascertain what part or proportion of the indebtedness actually incurred can be enforced without violating the constitutional restriction, and, it having been ascertained that at the time of the negotiations had with complainants the county could lawfully borrow from complainants a .given amount, no reason exists why the promise of the county should not be enforced against it up to this amount.
On part of complainants, it is contended that as the proceeds of the Shade bonds were partly used to pay judgments and other enforceable indebtedness existing against the county, and as these bonds were wholly paid off by the proceeds of the issue of May 1, 1885, complainants are entitled to have this amount ascertained as part of the sum for which the county is liable, even though the aggregate would exceed the 5 per cent, limit; hut in view of the ruling of the supreme court in Insurance Co. v. Middleport, 124 U.S. 534" court="SCOTUS" date_filed="1888-02-06" href="https://app.midpage.ai/document/aetna-life-ins-co-v-middleport-92152?utm_source=webapp" opinion_id="92152">124 U. S. 534, 8 Sup. Ct. 625, it cannot he held that complainants are entitled to be subrogated to the rights of the owners of the judgments or other debts paid off from the proceeds of the Shade bonds, and the relief decreeahle must be confined to the sum already named, to wit, $29,636.75.
Much reliance is placed by the defendant upon a decree rendered in a case entitled Anderson v. Insurance Co. (Iowa) 55 N.W. 348" court="Iowa" date_filed="1893-05-26" href="https://app.midpage.ai/document/anderson-v-orient-fire-insurance-7105846?utm_source=webapp" opinion_id="7105846">55 N. W. 348, by the district court of O’Brien county, Iowa, and affirmed on appeal by the state supreme court, which was a proceeding in equity brought by certain residents and taxpayers of O’Brien county to restrain the county treasurer from making any payments on the bonds negotiated by B. L. Richards, and to have the bonds adjudged to be illegal and nonenforceable, and in which case a decree to that effect was entered. It is shown upon the record that in that case service of the original notice therein was not had upon .any one of the complainants within the state of Iowa, they being all residents of other states, fmd no appearance therein was entered for any of the complainants except the Orient Fire Insurance Company, and therefore the decree therein is of no force against any of the complainants, except the Orient Company; it being well settled that, in personal actions, the service of notice by publication, or by reading tbe process to the party, at a place outside of the territorial jurisdiction of the court, confers no jurisdiction over the party thus served. Pennoyer v. Neff, 95 U. S.
“Tlie opinion in that case contains some reasoning as to the application of the proceeds of the sale of the bonds, and the consequences 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.”
There is therefore nothing in the adjudication entered in that case, or in the opinion of the supreme court, which prevents this court, upon the facts now presented before it, from ascertaining what portion of the indebtedness created by the county in borrowing the money of complainants, for the purpose of paying off the outstanding obligations of the county, can be declared valid and enforceable, without violating the constitutional limitation. On the contrary, the decision and opinion in that case sustain, in principle, the right of this court to hear and determine the issues presented by this record. If a court of equity has the right, at the suit of residents of the county, to entertain a bill brought to ascertain whether certain bonds issued by the county are valid or invalid, and, if the latter, to restrain the collection thereof, then it must possess the right to investigate all the facts inhering in the situation, and to determine what part are valid and what part are invalid. Thus if, in the case of Anderson v. Insurance Co., the complainants herein had appeared, and, by proper pleadings and evidence in support thereof, had proven just the state of facts that .are now made to appear, would it not have been the duty of that court to have heard and decided the question thus presented to it, and if, as a result, that court had found that a certain part of the indebtedness actually incurred by the county to the complainants for money borrowed could be enforced without overstepping the constitutional limitation, would it not have been the duty of the court to so adjudge? As the complainants, save the Orient Company, did not appear in that case, and were not brought within the jurisdiction of the state court, the adjudication therein •does not affect them, and they are at liberty in this proceeding to obtain the relief which would have been open to them had they become parties in fact to the suit in the state court.
Leaving out of consideration the parties who are bound by the adjudication in the state court, the question is, what sum can the county be held liable for to the complainants and other holders of its ¡bonds, without overstepping the constitutional limit? As already stated, the conclusion reached is that, under the facts proven in this
The conclusion reached is that the county, through the refunding operations carried on by its agent, B. L. Richards, incurred an enforceable indebledness to (he amount of $29,636.75, which it bound itself to repay in 20 years from May 1, 1885, with interest thereon at 6 per cent, per annum, payable semiannually, and, as evidence thereof, it executed the bonds and coupons issued under date of May 1, 1885; that the complainants are entided to a decree adjudging the liability of the county as above stated; that, for the protection of the defendant county, the bondholders will he required to deposit with the clerk of this court, within 60 days from the entry of the decree, the bonds held by them, and the clerk will then enter upon the faae of the bond and coupons not yet due a recital ‘showing the amount for which the same are adjudged to be valid; that the county be adjudged to pay the semiannual interest that has matured, and remains unpaid, for the period of 10 years next preceding the bringing of this suit, upon the amount of $29,636.75, for which the county is held liable; and that complainants have judgment for costs.