State Bank of Cornell v. Town of Washington

The following opinion was filed Maixh 11, 1924: Owen, J. Appellant claims that the notes were void for the reason that their execution was never authorized either by the town or by the town board. Sub. (17); sec. 60.29, [126] Stats. 1921, empowered the town board of supervisors “to borrow money, when authorized at the last preceding town meeting, not exceeding the amount appropriated at such meeting, at a rate of interest not to exceed eight per centum per annum, to pay town orders which may be drawn upon the town treasurer and to direct the town chairman and clerk to issue negotiable promissory notes of the town therefor, payable not later than the first day of March following the date of their issue.” The trial court found that at the annual meeting of the town of Washington on April 6, 1920, a resolution was adopted which was entered on the minutes of the town clerk, as follows: “Resolution passed to borrow money from the State Bank of Holcombe.” The evidence disclosed no other or more definite resolution upon the subject. The town board had no power to borrow money except as authorized at the last preceding town meeting. The resolution adopted did not prescribe the amount of money that might be borrowed, neither did it prescribe the rate of interest which should be paid. It merely designated the place where money should be borrowed. To say that such a resolution authorized the borrowing of money ad libitum would be to sanction practice which the legislation no doubt intended to restrain. In this case the town borrowed $8,000, which was nearly $3,000 in excess of the amount appropriated at the town meeting, as will be observed by a reference to Stamper v. Hopkins, decided herewith (post, p. 129, 197 N. W. 929), and which is really a companion case to this. The resolution adopted cannot be held to constitute authority for the borrowing of any particular amount of money. While the trial court found that the town board of said town borrowed money from the State Bank of Holcombe and issued the promissory notes involved in this action, it also held “that said arrangement for borrowing and disbursing said money was made and carried out without any [127] formal action of the town board entered upon the minutes of the town clerk, but was done with the knowledge and consent of all the members of the town board, the town clerk, and the town treasurer, and in pursuance of the resolution passed at the annual meeting of said town.” It is well settled that the official action of a town board, as well as that of any other deliberative body, must be taken at a meeting at which all members are present or of 'which all members had proper notice in order to make the action binding. Lawler v. Brennan, 150 Wis. 115 (134 N. W. 154, 136 N. W. 1058), and cases cited at p. 130; Walsh v. State, 180 Wis. 356, 192 N. W. 1004. The knowledge of and the acquiescence by the members of the town board in the transaction did not constitute the. official action of the town board and was not sufficient to authorize the town chairman and the town clerk to bind the town upon these promissory notes. These two very fatal defects in the authority of the chairman and clerk to bind the town in the premises render the notes absolutely void, and no action may be maintained upon them. The complaint contains appropriate allegations to the effect that the moneys which the bank loaned upon these notes were all disbursed for the legitimate purposes of the town, and that, even though the notes themselves should be void, recovery should be had for the amount of money which the town had and received from the bank and which was used for the legitimate purposes of the town. It will .be noted that this action is not brought by the Bank of Holcombe but by the State Bank of Cornell, to whom, it is alleged, the notes were transferred. There is no allegation in the complaint that the claim of the State Bank of Holcombe against the town for moneys so had and received by the town was assigned to the plaintiff, except as such result may incidentally and legally follow from the transfer of the notes. That the transfer of a negotiable note carries with it the original consideration for the note is an open and [128] doubtful question in this court. Farmers & M. State Bank v. Huss, 182 Wis. 658, 197 N. W. 177. That the transfer of the notes here in question carried with them the claim of the Bank of Holcombe for moneys disbursed by it for the benefit of the town is a still more doubtful question. However, it seems unnecessary for us to consider whether the plaintiff acquired title to any claim which the State Bank of Holcombe may have against the town in this respect by the purchase of the notes in question, for the reason that the town, on June 20, 1921, paid to the State Bank of Hol-combe all moneys disbursed by it for the legitimate purposes of the town. It appears that new officers were elected in the town of Washington at the annual town meeting in 1921. The newly elected town treasurer opened negotiations with the State Bank of Holcombe with reference to the claims against the town based upon the notes in question. He utterly refused to recognize the validity of the notes, but offered to pay the bank for every town order which it had cashed, except orders Nos. 38, 41, 126, 186, and 224. Orders Nos. 38 and 41 were orders issued by the town in payment for a tractor, which are declared void by our decision in Stamper v. Hopkins, decided herewith (post, p. 129, 197 N. W. 929). Orders Nos. 126, 186, and 224 appear to be orders issued by the town in payment of interest on other town orders. While the record is not clear as to this, and there is no finding of the court to this effect, such is our construction of the record before us. Sub. (3), sec. 60.35, Stats. 1921, provides that “If the electors at the last preceding town meeting shall have voted in favor of having town orders draw interest, the clerk of said town shall, in drawing said orders, plainly state upon the face of said orders the rate of interest fixed by vote of the electors as aforesaid and the said orders shall draw interest at the rate named until the first day of March following the date of issue,” etc. In the absence of such a resolution by the town meeting, [129] town orders do not and cannot draw interest (Mueller v. Cavour, 107 Wis. 599, 83 N. W. 944), and orders Nos. 126, 186, and 224, which the town treasurer refused to pay, do not constitute binding obligations against the town. It therefore appearing that the town has paid the Bank of Holcombe all moneys disbursed by it for the legitimate uses of "the town, or which constitute binding obligations against the town, neither the Bank of Holcombe nor the plaintiff has any further claim against the town in such behalf. It results that the complaint of the plaintiff should be dismissed. By the Court. — Judgment reversed, and cause remanded with instructions to enter judgment dismissing plaintiff’s complaint. A motion for a rehearing was denied, with $25 costs, on June 3, 1924.