Clapp v. Village of Marice City

SEVERENS, Circuit Judge, having stated the case as above, delivered the opinion of the court. Apparently there was an inadvertence in that part of the order which purports to sustain a demurrer of the defendant to the petition, and thereupon dismissing the suit. There was no such demurrer.. The case was before the court only upon the demurrer to the first and second special grounds of defense. Another general averment of the answer was that the plaintiff had never purchased, and was not the owner or holder of, the bonds. The demurrer did not reach that part of the answer, and the question whether the plaintiff had purchased and then owned the bonds, as alleged in the petition and denied by the answer, was a question of fact which stood at issue. Whether this fact was as alleged in the petition was a vital one, and it was erroneous to dismiss the case without a solution of that question. If that were found for the plaintiff, he would be entitled, under the repeated decisions of this court in similar cases, to recover; the defendant having admitted the actual, though not the lawful, issue of the bonds by the proper officers. The statute (section 2701) in unmistakable terms authorized the council to issue bonds for the purpose specified. The statement in the bonds is that they were issued pursuant to the provisions of the statute. This is -equivalent to a representation that they were issued for the purpose stated in the statute giving the authority, namely, for the purpose of extending the time for the payment of an indebtedness which, from its limits of taxation, such corporation is unable to pay at ■.maturity;' for they would not be issued pursuant to the provisions [107] of the statute if they were issued for a purpose not authorized 'by it. The representation would be false. Risley v. Village of Howell, 12: C. C. A. 218, 64 Fed. 453, 455. As was said in School Dist. v. Stone, 106 U. S. 183, 1 Sup. Ct. 84, 27 L. Ed. 90: “Where a statute confers power upon a municipal corporation, upon the performance of certain precedent conditions, to execute bonds in aid of the construction of a railroad, or for other like purposes, and imposes upon certain officers, invested with authority to determine whether such conditions have been performed, the responsibility of issuing them when such conditions liave been complied with, recitals by such officers that the bonds have been issued ‘in pursuance of’ or ‘in conformity with’ or ‘by virtue of’ or ‘by authority of’ the statute have been held, in favor of bona fide purchasers for value, to import full compliance with the statute, and to preclude inquiry as to whether the precedent conditions had been performed before the bonds were issued.” This statement of the law was repeated in City of Evansville v. Dennett, 161 U. S. 434, 443, 16 Sup. Ct. 613, 40 L. Ed. 760. By section 2703 of the Revised Statutes of Ohio it is provided that the bonds shall express upon their face the purpose for which they are issued, and under what ordinance. • These are the only statutory ■requirements as to what the bonds must show. These bonds state that they were issued “to pay certain indebtedness of the village of Marice City, Ohio, incurred in the improvement of said village.’7 This means an indebtedness already incurred, and not one then about to be incurred. This language is plainly referable to the purpose specified in section 2701. The bonds were payable at dates running; from three to ten years after their execution, thus providing for a very considerable extension of the payment of the indebtedness. The bonds refer to the ordinance, and tbé ordinance states that the bonds are issued under the authority of section 2701, and only-one purpose is authorized by that section. The case differs from that in Barnett v. City of Denison, 145 U. S. 135, 12 Sup. Ct. 819, 36 L. Ed. 652. There no purpose whatever was stated on the face of the’ bond. We think the purpose for which the bonds here in suit were’ issued was sufficiently expressed upon the face of the bonds. The-ordinance under which they were issued is referred to in the bond’ by its date and general purport, and this is all that is required. Village of Kent v. Dana, 100 Fed. 56, 63, 40 C. C. A. 281. And the ordinance, when seen, recites a lawful purpose. The power of the. council to issue such bonds is denied by the defendant in error for the reason that no certificate of the auditor or clerk was made and’ filed, stating that the money required for the payment of those obligations was in the treasury, as provided by section 2702, which is. as follows: “No contract, agreement or other obligation involving the expenditure of money shall be entered into, nor shall any ordinance, resolution or order for the appropriation or expenditure of money be passed by the council or by any board or officer of a municipal corporation, unless the auditor of the corporation, and if there is no auditor, the clerk thereof, shall first certify that the money required for the contract, agreement or other obligation, or to pay the appropriation or expenditure, is in the treasury to the credit of the fund from which it is drawn, and not appropriated for any other purpose, which certificate shall be filed and immediately recorded; the sum s® certified shall not thereafter be considered unappropriated until the corpora [108] tion is discharged from the contract, agreement or obligation, or so long as the ordinance, resolution or order is in force, and all contracts, agreements or other obligations, and all ordinances, resolutions and orders entered into or passed contrary to the provisions of this section shall be void.” Obviously, this section has no relation to the issue of bonds under section 2701. If the money were already in the treasury, there would be no occasion for the bonds, or for the extension of the time of payment of the indebtedness. The provisions of the section quoted relate to certain methods—not all—by which original indebtedness is to be incurred. Whether the indebtedness for the extension of which the bonds are issued was a valid obligation of the village was one to be settled by the council when they issued the bonds. No other board or officer for this purpose is provided, and that question is necessarily referred to the council, which represents the village in the transaction. City of Cadillac v. Woonsocket Inst. for Savings, 58 Fed. 938, 7 C. C. A. 574. Moreover, the certificate referred to in section 2702 becomes a part of their own records, and is not a record of another office; and when it is recited, as it is in these bonds, that all the preliminary steps required by law had been taken by the village, its officers and agents, the village is estopped from objecting that the certificate of some of its officers, which was by law required to be filed as a preliminary step, was not in fact filed. These considerations dispose of the case for the present. We think the court erred in overruling the demurrer of the plaintiff to the first and second defenses made by the answer, as well as in dismissing the plaintiff’s petition. Neither of them could be sustained if the plaintiff is a bona fide holder of the bonds for value, and this is not negatived by these grounds of defense. ■ The judgment must be reversed, and the cause remanded, with directions to sustain the demurrer, to grant leave to the defendant to replead if it shall elect to do so, and to proceed with the cause in conformity with law.