Town of Brewton v. Spira

COLEMAN, J. — The action was to recover the amount of two interest coupons, upon the municipal bonds of the appellant. The defense was ultra vires. The town of -Brewton was authorized to issue bonds by legislative enactment. The first four sections of the act, which we deem material, .read as follows : “An Act “To authorize the mayor and councilmen of Brewton to issue bonds of said city for an amount not exceeding twenty-five thousand dollars for the purpose of putting in — 233 — a system, of water works and making other permanent improvements in said city. “Section 1. Be it enacted by the General Assembly of Alabama, that the Board of Mayor and Councilmen of Brewton be and they are hereby authorized to issue bond? of said city of Brewton to an amount not exceeding twenty-five thousand dollars, or so much thereof as said Board may deem necessary for the purpose hereinafter named, in denominations of not less than one hundred dollars each, and payable thirty years from the date of their issuance, with coupons attached, bearing interest at a rate of not exceeding six per cent per annum, and payable semi-annually to bearer, said bonds and coupons being payable in gold of the present standard weight and fineness, in the city of Montgomery at some bank to be designated by the Board. “Section 2. Be it further enacted,'that the bonds authorized to be issued under the provisions of this act shall be signed by the mayor and countersigned by the treasurer of said city, and the city treasurer must keep a correct record and account of all the bonds issued and disposed of under this act. “Section 3. Be it further enacted, that said mayor and councilmen of Brewton are hereby authorized to do any and all things that may be necessary to carry out the powers hereby granted, and no technical informality, irregularity, neglect or omission in the proceedings or records of said board shall in any way vitiate or annul said bonds or coupons, which shall have all the properties and protection of commercial paper, and shall be receivable for all dues to the city in the way of taxes or otherwise. “Section 4. Be it further enacted, that said mayor and councilmen of said city are hereby authorized to negotiate and sell such bonds as are issued by them by virtue of this act, but said bonds shall not be sold for less than ninety cents on the dollar, and the proceeds of said bonds shall be paid over to and kept by the treasurer of said city to be used and applied in constructing and operating a system of waterworks in said city and in purchasing, building and improving school houses in said city, and in opening and improving the streets of said city, and in building and constructing sewers in said city : Provided that not more than five thousand — 234 — dollars of said money may be devoted to purchasing, improving and building school houses, and not more than three thousand dollars to opening and improving streets, and not more than two thousand dollars to building and constructing sewers.” The bonds read as follows : “ City of Brewton, State of Alabama. “Six per cent Public Improvement Bonds, redeemable June 1st, 1922. “Thirty years after date the city of Brewton, in the county of Escambia, State of Alabama, promises to pay to the bearer at the First National Bank in the city of Montgomery, State of Alabama, in gold of the present standard weight and fineness, one thousand dollars, with interest thereon at the rate of six per cent per annum, payable semi-annually at said bank, upon presentation of proper coupons hereto attached, “This bond is issued by virtue of an ordinance adopted by the Board of Mayor and Councilmen of the City of Brewton .on the 14th day of April, 1892, under authority of and in accordance with the provisions of an act of the Legislature of Alabama, approved February 14th, 1891, authorizing the said city of Brewton to issue bonds. “City of Brewton, State of Alabama. (Seal) In virtue whereof the Board of Mayor and Councilmen of the said city of Brewton have caused this bond and the coupons thereof to be signed by the Mayor and countersigned by the Treasurer of said city of Brewton, and the seal of said city to be. affixed thereto at said city, this 1st day of June, 1892. C. F. Rankin, Mayor. T. S. Sowell, Treasurer.” The defendants contend that the ordinances of the town of Brewton show that the bonds were in fact issued to provide water works and electric lights, and that there was no authority to issue bonds for electric lights, and the recital in the bond “that it'was issued by virtue of an ordinance adopted by the board of mayor and councilmen of the city of Brewton on the léthof April, 1892,” gave notice to all persons that the bond was issued to construct water works and supply electric lights, and was, therefore, unauthorized and ultra -vires. The question presented is, whether a purchaser of the bonds, was required to examine further than the act of — 235 — the legislature authorizing the issue and the recitals of the bond, when no such duty was imposed by the statute. We think not. When the legislature authorizes a municipal corporation to issue bonds ‘ ‘having the properties •and protection of commercial paper, ” without conditions precedent, or qualification, but absolutely, although for a specified purpose, and the bonds are legally executed in form and issued by the city through its authorized board or officers, the recitals in the face of the bonds that they are issued by virtue of a city ordinance and in accordance and by virtue of the act of the legislature, operates as an estoppel against the city from setting up the defense against an innocent purchaser that they were in fact issued for an unauthorized purpose. When the act of the legislature requires that the bond shall state the purpose for which issued, and the bond fails to contain such notice, a purchaser is chargeable with notice of the defect in the bond. In the case of Hackett v. City of Ottawa, 99 U. S. 86, the court uses the following language : “For all corporate purposes, as we have seen, the council, if so instructed by a majority of voters attending at an election for that purpose, had undoubted authority, under the charter of the city, to borrow money upon its credit and to issue bonds therefor. The bonds in suit, by their recital of the titles of the ordinances under which they were issued, in effect, assured the purchaser that they were to be used for municipal purposes, with the previous sanction, duly given, of a majority of the legal voters of the city. If he would have been bound, under some circumstances, to take notice, at his peril, of the provisions of the ordinances, he was relieved from any responsibility or duty in that regard by reason of the representation, upon the face of the bonds, that the ordinances under which they were issued were ordinances providing for a loan for municipal purposes. Such a representation by the constituted authorities of the city, under its corporate seal, would naturally avert suspicion of bad faith upon their part, and induce the purchaser to omit an examination of the ordinances themselves. It was, substantially, a declaration by the city, with the consent of a majority of its legal voters, that purchasers need not examine the ordinances, since their title indicated a loan for municipal purposes. The city is therefore estopped, by — 236 — its own representations, to say, as against a bona fide holder of the bonds, that they were not issued or used for municipal or corporate purposes. It can not now be heard, as against him, to dispute their validity. Had the bonds, upon their face, made no reference whatever to the charter of the city, or recited only those provisions which empowered the council to borrow money upon the credit of the city and to issue bonds therefor, the liability of the city to him could not be questioned. Much less can it be questioned, in view of the additional recital in the bonds, that they were issued in pursuance of an ordinance providing for a loan for municipal purposes ; that is, for purposes authorized by its charter. — Supervisors v. Schenck, 5 Wall. 772. It would be the grossest injustice, and in conflict with all the past utterances of this court, to permit the city, having power under some circumstances to issue negotiable securities, to escape liability upon the ground of the falsity of its own representations, made through official agents and under its corporate seal, as to the purposes with which these bonds were issued. Whether such representations were made inadvertently, or with the intention by the use of inaccurate titles of ordinances, to avert inquiry as to the real object in issuing the bonds, and thereby facilitate their negotiation in the'money markets of the country, in either, case, the city, both upon principle and authority, is cut off from any such defense. What this court declared, through Mr. Justice Campbell, in Zabriskie v. Cleveland, Columbus & Cincinnati Railroad Co. et al. (23 How. 381), as to a private corporation, and repeated, through Mr. Justice Clieeokxi , in Bissell et al. v. City of Jeffersonville (24 Ib. 287), as to a municipal corporation, may be reiterated as peculiarly applicable to this case : ‘A corporation, quite as much as an individual, is held to a careful adherence to truth in their dealings with mankind ; and can not, by tlieir representations or silence, involve others in onerous engagements, and then defeat the calculations and claims their own conduct had superinduced.’ ” This rule was reaffirmed in the case of City of Ottawa v. National Bank, 105 U. S. 342, and the same principle fully recognized, in the case of County of Sherman v. Simons, 109 U. S. 735 ; 1 Dillon on Mun. Cor., § 549; Mayor of Wetumpka v. Wetumpka Wharf Co., 63 Ala. 611; Oilman, Sons & Co. v. N. O. & Selma R. R. Co., 72 Ala. 566. — 237 — The plea of the defendant setting up facts which presented a defense in the hands of one not an innocent purchaser, cast the onus on the plaintiff to satisfy the jury that he paid value received, in due course of trade. The record shows that plaintiff discharged this burden. There are several assignments of error which under our view of the law as declared above, require no consideration. The plaintiff was entitled to recover, and the court did not err in so instructing the jury.- Affirmed.