Northwestern Savings Bank v. Town of Centreville Station, Ill.

SEAMAN, Circuit Judge (after stating the facts). The bonds in suit are executed on behalf of the town of Centreville Station, by the supervisor and town clerk, to borrow money for improvements, under the purported authority of an act of the Illinois Legislature, approved June 23, 1883, which appears as section 20, in 3 Starr & C. Anri. St. 1896, c. 121, p. 3559, pai. 20. This act is entitled as one “in regard to roads and bridges in counties under township organization,” and authorizes the issue of bonds “by the supervisor and town clerk, acting under the direction of the commissioners, when the commissioners desire to expend on any bridge or other distinct or expensive work on the road, a greater sum of money than is available to them by other means,” upon petition, vote, and proceedings specified. Issuance under this act is expressly stated on the face of. the bonds, together with recitals that the supervisor and town clerk were acting therein, “under the direction of the commissioners of highways of said town, to borrow money to build distinct and expensive improvements on the highways of said town, pursuant to a vote by ballot at a special town meeting” (mentioned in detail), and other proceedings are recited in conformity with all requirements of the act referred to and certain constitutional provisions. Authority for issuing the bonds thus appeared from the recitals, so the rule upheld in Lincoln v. Iron Co., 103 U. S. 412, 416, 26 L. Ed. 518, and County of Clay v. Society for Savings, 104 U. S. 579, 586, 26 L. Ed. 856, is plainly applicable., namely, that the holder in such case can rest, primarily at least, -upon the presumptions arising from the recitals, and the burden of showing want of authority is cast upon the defendant, if provable in any view. The particular improvements intended or made out of the fund thus raised are not specified in the recitals, and surely no presumption arises that they were beyond the statutory authorization. The first count, therefore, stated prima facie liability, and was not demurrable, even on the assumption that such liability to this holder was open to contest for invalidity in fact. The plaintiff in error, however, is a bona fide holder of the bonds for value, under the averments, and, unless its standing is impeached [85] as such holder, the rule is settled beyond controversy in the federal jurisdiction that the municipality is bound by the recitals in the bond when vested with legislative authority to issue-bonds for the purpose recited. In the leading case of Commissioners of Knox Co. v. Aspinwall, 21 How. 539, 545, 16 L. Ed. 208, the doctrine was thus pronounced, and it is reaffirmed in a uniform line of decisions (collated in 3 Notes U. S. Rep. 897), including the recent case of Stanly Co. v. Coler, 190 U. S. 437, 450, 23 Sup. Ct. 811, 47 L. Ed. 1126. Consequently, inquiry is not open, by way of defense, whether the improvements for which the money was borrowed and expended were strictly within the meaning of the act referred to, as the nature of the improvements does not appear from the recitals. Although the purchaser of the bonds is chargeable with notice of the terms of the legislative authority, he is not bound to ascertain the regularity of the municipal action thereunder, in the face of these recitals and their conclusive import, under the doctrine stated. The contentions on which the rulings and judgment against the plaintiff in error rest are substantially these: (1) That the improvements intended and effected out of the bond fund were beyond the objects authorized by the act; and (2) that decisions of the state Supreme Court and Appellate Court to that effect, which are cited, establish 'the want of authority for the issue of bonds. The decisions referred to are St. L., A. & T. H. R. R. Co. v. People ex rel., 200 Ill. 365, 367, 65 N. E. 715, and Town of Stites v. Wiggins Ferry Co., 97 Ill. App. 157, 159. While the first-mentioned case relates to this issue of bonds, and both cases involve interpretation of the statutory authority, both are subsequent to the issue and sale of the bonds in controversy, and are thus inoperative to govern the rights of the plaintiff in error, in any view under the authorities. Burgess v. Seligman, 107 U. S. 20, 33, 2 Sup. Ct. 10, 27 L. Ed. 359, and 10 Notes U. S. Rep. 446; Folsom v. Ninety-Six, 159 U. S. 611, 624, 16 Sup. Ct. 174, 40 L. Ed. 278; Stanly Co. v. Coler, 190 U. S. 437, 444, 23 Sup. Ct. 811, 47 L. Ed. 1126. This rule appears to be recognized, to a limited extent, in the brief, for defendant in error, but it is contended that the decisions referred to are entitled to great wéight, at least, as expressions of the state law. In so far as statutory construction and policy are determinative of the issue, it is of the utmost importance and well settled that state decisions, which are generally controlling, are in any aspect strongly persuasive when like questions are involved in the-federal courts of co-ordinate jurisdiction. But in any view of the decisions cited, they are plainly inapplicable here, under the aforementioned doctrine, which protects the bona fide holder from a. defense, opposed to the recitals in the bonds, that the legislative authority was not exercised in conformity with the statutory terms as interpreted by the courts. The main reliance in support of the judgment is the case of St. L., A. & T. H. R. R. Co. v. People, supra, relating to the bonded indebtedness in controversy, and we are of opinion that the conclusions in that case are inapplicable for another reason. It arose upon the appeal of a taxpayer from a judgment of the county court for a de [86] linquent “road and bond tax,” levied on account of the same bonded indebtedness involved, in the present suit, and the validity of the indebtedness was challenged, without the presence of bondholders. It was submitted upon stipulated facts that the bonds were voted and issued “to construct of rock and macadam four different public roads in said town under section 20 of the act,” referred to, and plainly failed to show that several “distinct and expensive improvements on the highways” were contemplated and made, as stated, not only in these bonds, but in the proceedings offered in evidence. The conclusion there reached, therefore, that bonds so issued and the tax levy to pay interest thereon were without authority of law, may well stand as unquestionable under the facts so submitted, but is in no sense binding against the bondholders, or upon the state of facts appearing in the present record. Indeed, the opinion in that case implies, at least (page 367 of 200 Ill., and page 716 of 65 N. E.), that such distinct and expensive improvements as are indicated in these recitals are within • the meaning of the statute; and they certainly cannot. be treated as excluded under that ruling, if otherwise applicable. Discussion of the appellate court decision in Town of Stites v. Wiggins Ferry Co., supra, is unnecessary, as the narrow construction of the statutory authority there adopted, if not inconsistent with the first-mentioned opinion, can, in no view, disturb the rights of the plaintiff in error previously acquired. We are satisfied that the first count sufficiently states the cause of action, and that error is well assigned for the ruling which sustains demurrer to such count. So the second count was not demurrable, though facts are averred which do not enter into the prima facie case. The plaintiff in error was éntitled to recover upon the evidence received, and the finding and judgment contra were erroneous. The judgment is reversed, and the case remanded, accordingly, for further proceedings not inconsistent with this opinion.