Cleveland State Bank v. Cotton Exchange Bank

Sykes, J., delivered the opinion of the court. The appellee, Cotton Exchange JBank, filed a petition in the circuit court of the Second district of Bolivar county, for a writ of mandamus to compel the appellant, Cleveland State Bank, to pay a number of school warrants owned by the appellee. A list of these warrants is made Exhibit A. to the petition, and the amount in all aggregates the sum of four thousand two hundred and sixty-seven dollars. These warrants were drawn by the clerk of the hoard of supervisors, and issued by bim, because of pay certificates issued by the superintendent of education of this county to parties named therein. The petition alleges that it was the duty of the appellant bank, which is the custodian of all of the county funds and especially of this fund, to have paid these warrants: that there was sufficient money on deposit with this bank to pay them. The petition further alleges that the warrants were duly presented for payment, and payment was refused. It is also alleged that, appellee is the owner for valuable consideration in due course of these warrants. There were some special pleas filed to this petition to which demurrers were sustained. Leave of court was then granted the appeTant bank to file additional pleas. Appellant then filed a plea of the general issue, and under it gave the following notice: “Plaintiff will take notice that under the foregoing' plea of general issue, defendant, if it should decide so to do, will show: “First. That there was no contract made, as provided by law, between the county superintendent of education of Bolivar county, Miss., and any one of the persons named in Exhibit A to plaintiff’s petition to teach school in Bolivar county, Miss., during the scholastic year 1915-16. “Second. That none of the persons named in Exhibit A taught school in Bolivar county, Miss., for the — 888 — month and in the school for which warrants listed in Plaintiff’s Exhibit A were issued as payment. ‘ ‘ Third. That no list of teachers, including* the names of any of the persons listed in Exhibit A to plantiff’s petition was ever filed by the county superintendent of education in the office of the clerk of the chancery court of Bolivar county as a list of teachers of public schools in Bolivar county for the scholastic year 1915-16. “Fourth. That the alleged pay certificates mentioned in plaintiff’s petition were issued without any authority of law, in that the persons listed in said Exhibit A did not teach school during the months for which such pay certificates purported to be payment, and no contracts were ever made by any one of said teachers to teach-such school, and the name of such person never appeared on any list of teachers filed by the county superintendent in the office of the chancery clerk. “Fifth. The said warrants listed in Exhibit A were issued by the chancery clerk of Bolivar county, Miss., without authority in law, in that they were issued on pay certificates payable to persons whose names did not appear on the list of teachers of Bolivar county in his office for the scholastic year 1915-16. “Sixth. That said persons named in said Exhibit A did not present any pay certificate to the chancery clerk and the warrants listed herein were never delivered by the chancery clerk to the persons named therein. “Seventh. Defendant has therefore at the suit of Stones v. Robertson, state revenue agent, been by decree of the chancery court of the second district of Bolivar county, Miss., perpetually enjoined from paying said warrants, said suit being number-in said court, said decree being issued at the July, 1916, term of said court to which decree reference is hereby made as fully as if copied herein. “Eighth. None of the warrants listed in Exhibit A to plaintiff’s declaration were issued to persons holding — 889 — license to teách school in Bolivar county, Miss., for the scholastic year 1915-16.” A motion hy appellee was made and sustained, striking this plea and the notice thereunder from the files. It is unnecessary to set out the grounds of this motion. It is the contention of the appellee in this court that the notice under the general issue did not present a legal defense, to the petition, and that the' action of the court below was proper in sustaining the motion to strike the notice. Appellee does not seriously contend that the court was correct in striking the plea of the general issue from the files. Appellant declining to plead further, judgment final was entered in favor of appellee, and the peremptory writ of mandamus ordered to he issued. From which judgment this appeal is prosecuted. Learned counsel for the appellee, in speaking of the action of the lower court in striking the plea of the general issue with the notice thereunder from the files, says that the pleadings are to be considered in their entirety, and the question argued in the trial court on all the pleadings was as to the soundness of the defenses attempted to be made by this notice; that the court held that the pleadings of defendant did not constitute any defense, and therefore struck the plea as well as the notice from the files. The plea, of the general issue put in issue every material allegation in the petition, and it was error under any view of the case to strike this plea from the files. The contention of the appellee in this case is stated .in its brief as follows: “The real question involved in this case is as to whether or not when the law has given authority to certain officers to issue warrants against the county, requiring them, before issuing the warrants, to determine certain facts which are not and cannot be. known to the purchasers of the warrants, and the officers appointed by law are designated by the county and re — 890 — quired to give bond for the faithful performance of their duty, and those officers pass upon the facts and direct that pay certificates and warrants be issued, and the warrants are issued, and' contain on their face all that the law requires, and subsequently reach the hands of a bona-fide purchaser without notice, can the county, under these circumstances, refuse payment of the warrants ? This is the . question which the court is asked to determine in this case. Our contention is that the county is estopped, under the above circumstances, from repudiating payment of the warrants.” Again counsel for appellee say: “This case does not present the question of the public agent exceeding the powers clearly defined by law. It is not a case where a person is bound with the knowledge of the power of the public agent, because of some public statute which could be resorted to for the purpose of ascertaining those powers. This case presents a question where there was no way of finding out whether or not the public agent had fulfilled his duty to his principal, because the superintendent in this case had acted within the scope of the power given !him by law, and, if he had breached his duty, it was because he had perpetrated a fraud by adjudicating facts confided to him for determination, and of which we had no knowledge, and could have had no knowledge. ’ ’ The notice, given under the general issue, sets out facts which, if proven, show that the county superintendent of education fraudulently issued pay certificates to certain persons who were not entitled thereto. That no contracts for teaching school were entered into with these persons, and that no schools were in fact taught by them for the months specified on the pay certificates. Without specifically repeating the facts alleged in this notice, these facts, if proven, show that this action on the part of the county superintendent was fraudulent. The county superintendent of education, under section — 891 — 4560, Code of 1906, section 7376, Hemingway’s Code, can only make a contract with a licensed teacher, and under this same section of the Code it is made unlawful to issue a certificate for services to a teacher rendered before the contract is made and signed, except under certain conditions. The powers of the county superintendent of education with whom he may make contracts, and the manner in which these contracts are to be made, and the condition under which he is authorized to issue pay cer■tificates, are specifically and carefully enumerated in sections 4497, 4560, and 4561, of the Code of 1906 (sections 7574, 7576, and 7577, Hemingway’s Code). The pleadings in this case show a total failure on the part of the county superintendent to comply with these sections of the Code. They show an entire absence of either real or apparent authority on his part to issue pay certificates upon which the warrants were issued by the clerk of the hoard of supervisors. It is true that the statutes authorize the county superintendent to issue pay certificates to teachers with whom contracts have been made and who have taught school, but these statutes carefully limit the authority of the county superintendent of education to issue these certificates under the conditions named in the statute. This is not a case where there has been a substantial compliance with the statute, nor where there has been some mere irregularity in complying with the law; but the pleadings present a case where the county superintendent has fraudulently issued pay certificates to certain persons who have not taught school, with whom no contracts were made, and who are not entitled to them. The specific power vested in the county superintendent of education is to make contracts with only licensed teachers, and then to issue pay certificates to them only after the contract has been made and signed. Consequently in this case there is an entire absence of — 892 — specific statutory authority for the superintendent to have issued pay certificates. The county superintendent of education has no real nor apparent authority to fraudulently issue pay eertifieatest. It is not contended in this ease by the appellee that the persons to whom these warrants were issued could collect them, hut it is insisted that the appellee is a bona fide purchaser, and that the defenses relating to the invalidity of these warrants cannot be set up against it. In the case of Wayne County v. Hopper, 114 Miss. 755, 75 So. 766, in construing -section 4541 of the Code of. 1906 (section 7799, Hemingway’s Code), this court, through Etheidge, Justice, held that a contract with one who was not a licensed teacher was unlawful, and that, though the party had taught school, he could not recover under his contract. In the ease at bar, under the pleadings, no contract was made, no services rendered, and the names of the persons to whom the warrants were issued do not appear on the list furnished the clerk of the hoard of supervisors. While conceding that, the pleadings make out a ease of unlawful and fraudulent issuing of the pay certificates, counsel contend that appellee, being a purchaser for value of the warrants, is protected because there was specific statutory power given the superintendent to issue the pay certificates, and the clerk of the board of supervisors to issue the warrants. The authority of public agents to bind their principles is well stated in section 205, vol. 1, Clarke & Sykes on Agency. In that section it is stated that: • “The fact that the act done or contract made by a public agent related to a subject within the general scope of his powers does not make it obligatory upon the principal, if there was a want of specific power to do or make it.” — 893 — And in section 210 of the same authority the rule is laid down that it is the duty of one dealing with a public agent to ascertain from the laws and other public records the authority of the agent, and that he is acting within the authority expressly given him. It is stated: The fact that the contract made or act done related to a subject within the general scope of the agent’s powers does not make it obligatory on the principal, if there was a want of specific power to make it.” To the same effect are Mayor, etc., v. Reynolds, 20 Md. 1, 83 Am. Dec. 535; Story on Agency, section 307a; Johnson v. Frisbie, 29 Md. 76, 96 Am. Dec. 508. It is ■ earnestly insisted by counsel for appellee that under the law the county superintendent is given the exclusive authority of passing upon the validity of the claims for pay certificates, and that his action in issuing the pay certificates is in the nature of a judgment; that the claim is a valid one. This authority, however, only establishes the prima-facie right to the payment of the claim or warrant, and is not conclusive. Wall v. Monroe County, 13 Otto (103 U. S.) 74, 26 L. Ed. 430. In the case of Board of Supervisors v. Arrighi, 54 Miss. 668, the court said: “A county warrant is a valid judgment only in cases where the hoard of supervisors had legal authority to issue it, or to contract the obligation in settlement of which it was issued; but it imposes no liability when issued in violation of law, or in fulfillment of a contract that the board was prohibited from entering into. The original contract being a nullity and imposing no liability upon the county, it is not possible for the board of supervisors, by the issuance of a warrant, to create one.” See, also, Beck v. Allen, 58 Miss. 143. The contention of the appellee that it is the duty of the appellant bank to pay this claim because it has — 894 — merely ministerial duties, namely, to pay warrants which appear valid on their face,- is not sound. The authority cited by counsel for this position is the case of Hendricks v. Johnson, 45 Miss. 649. In the Johnson Case, however, it will be noted that the court expressly said that the charges of fraud were not sustained. The facts did not show fraud. However, regardless of that question in the Johnson Case, the precise point under consideration was modified or overruled in the case of Files v. McWilliams, 49 Miss. 578. The opinion in the Files Case was written by the same judge who wrote the opinion in the Johnson Case, and also further modified by the decision of the court in the case of Beck v. Allen, 58 Miss. 143. The contention that the appellee is a bona-fide holder or purchaser for value without notice, and that these defenses cannot be interposed as to it, is unsound. A county warrant is not a negotiable instrument. 3 R. C. L. section 25; 15 C. J., p. 602; Section 310; Wall v. Monroe County, supra, Bank v. School Trustees, 1 N. D. 26, 44 N. W. 1002, 26 Am. St. Rep. 605. In the absence of statute, the' universal rule announced in all the text-books-and court decisions is to this effect. In the citation from volume 15, C. J. above made, speaking of assignment and negotiability of county warrants, it is stated: “While it is the rule, even as to those made payable to bearer, that county warrants, certificates, and orders are not negotiable in the sense of the law merchant so as to shut out in the hands of a bona fide purchaser inquiries as to their validity or to preclude defenses or set-offs which could be made to them in the hands of the original parties, they are subject to those equities only which exist between the county and the original payee, and, except in some jurisdictions, they are assignable so as to invest the assignee with the rights and remedies of the assignor as to collection and suit, provided such — 895 — assignment be made in the form prescribed by statute.” The case of Bank v. School Trustees, 1 N. D. 26, 44 N. W. 1002, 26 Am. St. Rep. 605, supra, is one very much in point. In that case a school warrant was issued to a teacher who held no lawful certificate to teach. The statute of North Dakota provided that any contract made in violation of its provisions was void. The statute of Mississippi provides such a contract to he unlawful. The North Dakota supreme court held that there was no consideration for the issuance of the warrant in that case; that the teacher had no claim, because she could not be employed to teach under the statute. In that case the. plaintiff claimed as an innocent purchaser for value. The court held that the warrant was not negotiable in the sense that negotiation would cut off defenses; that the purchaser bought at his peril. It was also claimed in that case, as it is claimed here, that the county is estopped by the act of the officers in issuing warrants. This opinion so well states the correct rule with reference to the- question of estoppel that we herewith quote it: “Nor is the doctrine of estoppel applicable. Could town officers in this manner estop a municipal corporation, void acts — acts void because expressly forbidden by the sovereign — would have validity, and the will of the legislature would be nullified by the conduct or statement of mere municipal agents.” In the case under consideration the acts of the superintendent were not performed in good faith under a mistaken idea as to his power or authority, but, according to the pleadings, were fraudulent, deliberately perpetrated to defraud the county. Under these conditions there can be no estoppel whatever on the part of the county. Since the attention of the custodian of these funds has been called to these facts, it was. its duty to defend his lawsuit. For the custodian of the — 896 — public funds of a county to be cognizant that county ■warrants were fraudulently issued, and, with these facts before it, to knowingly pay these warrants, would be a gross dereliction of duty on its part. A warrant is but a voucher for an indebtedness, and since the warrant is not a negotiable instrument, if the indebtedness is unlawful, this defense can be made in a suit upon the warrant, even in the hands of a bona-fide purchaser for value. This rule is correctly stated in the case of Mayor, etc., v. Bay, 19 Wall. 468, 22 L. Ed. 164, as follows: “But every holder of a city order or certificate knows that, to be valid and genuine at all, it must have been issued as a voucher for city indebtedness. It could not be lawfully issued for any other purpose. He must take it, therefore, subject to the risk that it has been lawfully and properly issued. His claim to be a bona fide holder will always be subject to this qualification. The face of the paper itself is notice to him that its validity depends upon the regularity of its issue. The officers of the city have no authority to issue it for any illegal or improper purpose, and their acts cannot create an estoppel against the city itself, its taxpayers, or people.” The pleadings of the appellant in this case state facts which, if proven, show that the conduct of the county superintendent was fraudulent, unlawful, and not within the specific powers intrusted to him under the statutes. It was the duty of the appellant bank to set up these defenses; and, if they can be proven, they are valid defenses to the suit of an innoceni bona-fide purchaser for value without notice. The lower court erred in striking the plea of the general issue and the notice thereunder from the files. There were other motions and pleas filed in .the ease, but they are not material to the questions presented on this appeal, and for that reason have not been dealt — 897 — with in this opinion. The judgment of the lower court is reversed. ?nd the canse remanded. Reversed and remanded.