Cook v. City of Socorro

OPINION OP THE COURT. ROBERTS, J. (after stating the facts as above). [1] The first proposition advanced by appellant upon which he relies for a reversal of the judgment of the court below is that the city of Socorro, on April 1, 1887, the date when the bonds in question were issued, acquired all of its power and authority to issue the municipal waterworks bonds under chapter 1 of the Laws of 1880, and that chapter 39 of the Laws of 1884 had no application to the city of Socorro, and that said city did not derive any authority from said act to issue the bonds in question. This argument is based upon the assumption that the city of Socorro did not reincorpórate under the provisions of chapter 39 of the Laws of 1884 and continued to exist as a corporation under the act of 1880. The appellant in the court .below offered no evidence showing that the city did not reincorporate under the act of 1884. Neither did he offer evidence to show that the precedent acts required under the act of 1880 for the issuance of bonds for the construction or purchase of waterworks had not been complied with. Therefore the court properly upheld the validity of the bonds. It is a well settled rule of law that where a municipal corporation has power to issue bonds upon a compliance with certain prerequisites, and the bonds are issued, they are prima facie valid obligations, and, as against a bona fide purchaser, the burden of proving want of performance of any of the prerequisites is upon the municipality. 21 Ency. of Law, p. 76. The evidence in this case shows that Mr. Fitch was a bona fide holder of the bonds which he owned, and there is no showing that the other defendants are not likewise .bona fide holders. The burden was upon the appellant to establish the fact that the city of Socorro did not reincorpórate under the act of 1884, because upon the face of the bond it appeared that the bond was issued under and by virtue of power conferred by said act, and it was shown in evidence that continuously from the time the bonds were issued in 1887 up to and including the time of the trial herein that the city of Socorro was pretending to be a city incorporated under said act, and, as such, exercising all powers and duties conferred upon it by this act. But it is not necessary for us to determine in this case under which of said acts the city of Socorro was incorporated and exercised the powers and functions of a municipal corporation at the time of the issuance of the bonds in question; for, if it be conceded that the necessary steps required on the part of the city to reincorpórate under the act of 1884 had not been taken, and that the city continued as a corporation under the earlier act, it will be presumed, in the absence of evidence to the contrary, that all the requirements of the act of 1880 had been complied with relative to the issuance of said bonds, nothing appearing on the face of the bonds to the contrary. It is well settled that the contracts of public corporations, formally executed, will, in the absence of proof to the contrary, be presumed to be valid and to have been made with due authority In Abbott on Public Securities, atl section 400, it is said: “Assuming the existence of authority to issue the securities in connection with the condition that they do not show upon their face facts sufficient to charge the holder with notice of their invalidity or of irregularities in their issue, the possession of negotiable securities then- in due form establishes in favor of the holder a prima facie case in an action upon them,, and throws the burden of proof upon the one attacking their validity in respect to ownership, bona fide holding, consideration, proper execution, notice, and existence of all conditions necessary to enable him to maintain the action. This rule does not dispense with all evidence but upon the production of the bonds or coupons and proof of authority to issue the plaintiff’s case is established. The rule has been well stated in a leading] text-book on Negotiable instruments, in the following language: ‘The mere, possession of a negotiable instrument, produced in evidence by the indorsee, or hy the! assignee where no indorsement is necessary, imports prima facie that he acquired it bona fide for full value in the usual course of business before maturity, and without notice of any circumstances impeaching its validity, and that he is the owner thereof, entitled to recover the full amount against all prior parties,’ in other words, the production of the instrument) and proof that it is genuine (where indeed such proof is necessary), prima facie establishes his case; and he may there rest it. Bills and notes payable to bearer do not, in this respect differ from other's, and the bearer is entitled to all the presumptions that apply to an indorsement in his favor. But the presumption of bona fide ownership does not apply where the instrument is not payable to bearer, unless it be indorsed specifically to holder, or in blank.” For cases discussing the question see Board of County Commissioners of Grear County v. Gregory, 15 Okl. 208, 81 Pac. 422; Flagg v. City of Palmyra, 33 Mo. 440; City of Quincy v. Warfield, 25 Ill. 317, 79 Am. Dec. 330; City of Gladstone v. Throop, 71 Fed. 341, 18 C. C. A. 61. What we have already said disposes of appellant’s second and third contentions, and in view of our conclusion here, it is not necessary to determine or pass upon the effect of the opinion by the territorial Supreme Court in the case of Territory ex rel. Parker v. Mayor, 12 N. M. 177, 76 Pac. 283, nor as to the effect of plea of res adjudicata interposed by the defendants. [2] Appellant’s sixth contention is that if the city of Socorro was reincorporated under the provisions of chapter 39, Laws of 1884, as maintained by appellees and as found by the court, the court erred in sustaining the demurrer to appellant’s answer to appellees’ counterclaim because the answer sets forth facts sufficient to constitute a proper defense to the water bonds. The record in this ease shows that appellees filed an answer to appellant’s complaint, and also a counterclaim in which they sought to enjoin and restrain the city from diverting or misappropriating funds in the city treasury, or which might thereafter be derived from the levy of the special tax, etc., for the purpose of paying the principal and interest on such bonds. In the counterclaim it was alleged that certain moneys had theretofore been raised by special tax, levied for the purpose of paying the principal and interest on the water bonds, and that such, city had been using this money for other purposes. The counterclaim set up facts showing that appellees were entitled to the relief sought. Appellant filed a reply to defendants’ answer, setting up certain new matter, and also an answer to the counterclaim. The record shows that appellees filed a demurrer to the reply, but does not show that any demurrer was! filed to the answer to the counterclaim. On the 11th day of November, 1915, there was filed in the office of the clerk of the said court, an order sustaining appellees’ demurrer. This order recites: “This case coming on for further' hearing upon demurrers of defendants to certain portions' of the plaintiff’s reply and of the plaintiff’s answer to the counterclaim, and the court having heard the arguments of counsel and being fully advised, it is ordered that the said demurrers of the defendants be and the same are hereby sustained.” Apparently, the court’s attention was never called to the error in this order, if it be true that no demurrer was ever filed to the answer to the counterclaim. Wihere a trial court inadvertently enters an order sustaining a demurrer to a pleading to which no demurrer has been filed, it is the duty of counsel to call the court’s attention to the error so made, so that the same may be corrected; and where the record on appeal shows that an order was made by the trial court sustaining a demurrer to an answer to a counterclaim, where a demurrer was filed only to the reply, the coiirt will not consider an assignment of error based upon such order insofar as the answer to the counterclaim is concerned, where such mistake was not called to the attention of the trial court. [3] The last point urged is that the court erred in denying plaintiff’s motion to adjudge in default for failure to answer the city of Socorro, George Parker, and other owners and unknown owners of any water bonds of the city of Socorro issued April 1, 1887. Parker and the city of Socorro were made parties defendants and other owners of bonds whose names were unknown to plaintiff were designated as defendants, as “all other owners and unknown owners of any municipal bonds of the city of Socorro, state of New Mexico, issued April 1, 1887, payable to bearer, and known as water bonds of the city of Socorro.” The city of Socorro was personally served, but failed to appear. Constructive service was had upon Parker and unknown owners. After the proofs were hoard in the case and on the same day that the court found the entire issue of bonds to be legal, valid, and subsisting obligations of the city appellant applied to the court for a default judgment against the city of Socorro, Parker,- and unknown owners. The application was denied. Appellant apparently does not contend that the court erred in overruling this motion, insofar as the city of Socorro is concerned, but contents himself by attempting to show that constructive service on the remaining bondholders was valid, and warranted a default judgment against them. No argument is required to demonstrate the unsoundness of this contention further than to call attention to two decisions of the Supreme Court of tlie United States. In the case of Town of Brooklyn v. Aetna Life Insurance Company, 99 U. S. 362, 57 L. Ed. 416, the plaintiff, the Life Insurance Company, instituted suit against the town of Brooklyn on certain interest coupons issued in the name of the town of Brooklyn, 111. The town answered, and in its fifth plea, averred that, by a decree of the circuit court of Lee county, 111., rendered November 14, 1873, in the action of the Town of Brooklyn and others against the Chicago & Rock River Railroad Company and others: “ ‘It was ordered, adjudged, and decreed that the said pretended bonds and coupons of the said, town of Brooklyn, so issued to the said Chicago & Rock River Railroad Company, and registered as aforesaid in the office of the auditor of public accounts of Illinois, are void and in no wise obligatory on the said town of Brooklyn,, and that the same he surrendered up by the parties holding the same to he canceled/ which decree it is averred is in full force and effect; that the said insurance company was made defendant in such suit with the other holders and owners' of the bonds and coupons; issued by the town, by the name and description of ‘The unknown owners of certain bonds and coupons issued by Washington J. Griffin, the supervisor of the town of Brooklyn, Lee county, Illinois, to the Chicago & Rock River Railroad Company, purporting to be the bonds and coupons of said town of Brooklyn.’'” And it was further alleged that the said circuit court of Lee county then and there had jurisdiction of the person or parties defendant therein, by the issuing and return of process, and by proof of publication made as required by the statute of the state of Illinois in the case of nonresident defendants. In considering this plea the Supreme Court of the United States said: “The suit commenced and determined in the circuit court of Lee county was a proceeding wholly in personam, against the holders and owners of bonds and coupons which had been issued in the name of the town, and delivered to the railroad company. Upon principle and authority, no decree therein, rendered could bind any one not personally served with process, or who did not appear. It could not affect the rights of non-resident holders of bonds and coupons,' proceeded against by constructive service. Such service,, as to them, was ineffective for any purpose whatever. Pennoyer v. Neff, 95 U. S. 714, 24 L. Ed. 565, and authorities there cited.” In the case of Township of Empire v. Darlington, 101 U. S. 87, 25 L. Ed. 878, the court held that a decree in an Illinois court, perpetually enjoining taxation to pay railroad aid bonds and declaring them void, did not conclude any bondholders proceeded against as “unknown owners and holders,” who' were not served with process and did not appear, nor bondholders residing in other states who were proceeded against only by constructive service, ITenee we conclude that where a suit' is commenced against the holders and owners of bonds and coupons which have been issued by a municipal corporation and delivered to the purchaser or purchasers a taxpayer cannot lawfully secure a default judgment against nonresident owners and holders of such bonds upon constructive service, adjudging said bonds to be invalid. For the reasons stated the judgment of the trial court will be affirmed; and it is so ordered. IIanna, C. J., and Parker, concur.