Harriman National Bank v. Pope County

Hart, C. J., (after stating the facts). The judgment of the circuit court was correct. Under article 16, § 1, of our Constitution, counties are expressly prohibited from issuing any interest-bearing evidence of indebtedness except in certain cases which are not necessary to a decision of the issues raised by the present appeal. County warrants are evidences of the indebtedness of a county. They are orders upon the treasurer of the county to pay out of its funds for county purposes, not otherwise appropriated, the amount specified. They are not negotiable instruments in the sense of the law merchant, and the transferee takes them subject to all legal and equitable defenses which exist to them in the hands of such payee. The cancellation of the warrants originally issued and the substitution of others in their place does not change their character. The face of the warrant is notice to the holder that its validity depends upon the legality of its issue. Vale v. Buchanan, 98 Ark. 299,135 S. W. 848; Wall v. Monroe County, 103 U. S. 74; and Bank of Commerce v. Huddleston, 172 Ark. 199, 291 S. W. 422. This court has also held that a county court, in the allowance of claims against the county, acts judicially, and its judgments are not open to collateral attack, except for fraud or lack of jurisdiction. Monroe County v. Brown, 118 Ark. 524, 177 S. W. 40. The circuit court was justified, under the evidence adduced, in finding that the warrants- involved in this appeal were issued in payment of interest on the $45,000 indebtedness of the county, evidenced by county warrants. The warrants in question were therefore issued in contravention of the section of the Constitution above referred to, and were illegal and void. Under the authorities cited there can be no innocent holder of paper issued by a county without power or in violation of law. The reason for the rule is that counties derive all their powers from public law, and persons taking their paper must, at their peril, ascertain the extent of their contracting powers and the limitations upon-them. The result of our views is that the warrants in question were illegal and void, and the circuit court properly sustained the judgment of the county court refusing to reissue them. The judgment will therefore be affirmed.