Coffin v. Board of Com'rs

THAYER, District Judge, after stating the case as above, delivered the opinion of the court. The first question presented for our consideration is whether the — 140 — proviso contained in the act relative to the organization of new counties (1 Gen. St. Kan. 1889, p. 586, § 120) was intended by the legislature to prohibit newly-organized counties from issuing funding bonds, as authorized by the act of March 10, 1879, or was merely 'intended as a prohibition against the issuance of those bonds which could only be issued when authorized by a popular vote? Much stress is laid on the fact that the proviso as first adopted on March 15, 1876, declared that “no bonds of any kind shall be issued,” etc., whereas the proviso, as amended on March •11, 1887, provides “that no bonds except for the erection and furinishing of schoolhouses shall be voted for and issued.” It is sa'id ¡that, as funding bonds, under the general laws of the state of Kan- * sas, may be issued without a popular vote, the addition to the proviso, of the words “voted for,” by the act of March 11, 1887, is ■significant, and indicates an intention to except funding bonds from, the operation of the proviso. This, we think, is a very partial view of the question, and one .that overlooks some important considerations. It must be borne •in mind that the legislature was dealing with newly-organized counties, that would rarely, if ever, have occasion during the first year of their existence to issue bonds for the purpose of funding ■their outstanding indebtedness, if their affairs were honestly administered. Again, it is hardly probable that the legislature intended to confer on the commissioners of a partially organized county the power to issue any class of bonds at will, during a period when they were deprived of the power to issue every other ■species of bonds which required the sanction of a popular vote. But a more important consideration is this: It is manifest to us that :the restriction upon the power to issue negotiable securities was im- «. posed upon newly-organized counties because the legislature deemed 'it unwise to confer that power until their affairs had become in a measure settled, and until the machinery for county government had been fully adjusted. We do not have to look far among the records of judicial proceedings in that state to discover the circumstances which probably gave rise to that opinion in the mind of- the lawmaker. State v. Stevens, 21 Kan. 210; Lewis v. Comanche Co., 35 Fed. Rep. 343; Id., 133 U. S. 198, 10 Sup. Ct. Rep. 286. In view of the purpose which evidently inspired the proviso '■in question, it would be strange if the legislature intended to leave .the newly-organized political subdivisions of the state at full liberty to issue funding bonds, and no such purpose should be presumed without the clearest evidence that such was the legislative intent; for, if that view should prevail, it might lead to the very train of evils which the lawmaker intended to prevent. The power contended for could be so wielded as to enable a few irresponsible persons, without any practical restraint, to saddle a new and sparsely settled county with a large indebtedness, that would prove a serious impediment to its future growth and prosperity. Finally, it is proper to call attention to the rule of law which requires the authority of a municipal corporation to issue negotiable — 141 — paper to be clearly made out and established whenever the existence of such a power is called in question. A power of that nature will not be deduced from uncertain inferences, and can only be conferred by language which, leaves no reasonable doubt of an intention. to confer it. Brenham v. Bank, 144 U. S. 173, 182, 12 Sup. Ct. Rep. 559; Askuelot Nat. Bank v. School Dist. No. 7, (8th Circuit,) ---U. S. App.---,---C. C. A.---, 56 Fed. Rep. 197. In view of these considerations we have concluded that the proviso to which the discussion relates was intended to prohibit newlv-organized counties from issuing bonds of any description until one year after they were duly organized. In our judgment, the words “voted for,” which were added to the proviso by the amendment of March 11, 1887, instead of enlarging the power of newly-organized counties to 'issue bonds, were in fact intended as a further restriction, and were inserted in the proviso for the purpose of preventing such counties, during the first year of their existence, not only from issuing bonds, but from taking any of the preliminary steps requisite to an issue of negotiable securities. We think that this is a more reasonable view of the purpose of the amendment than that which regards it as authorizing newly-organized counties to issue funding bonds. The next question to be considered arises out of the contention of counsel that the county of Kearney is estopped by the recitals contained in the bonds from asserting as against a bona fide holder thereof that the bonds are invalid. The argument in this behalf may be fairly summarized as follows: It is said that Kearney county, under the terms of the act relating to the organization of new counties, became a “duly-organized” county of the state of Kansas on April 3, 3888, by the appointment by the governor of three persons to act as commissioners, and by their qualification; tliat the phrase, “shall be deemed to be duly organized,” as used in the act, implies that the county is admitted to the family of counties, and becomes vested with whatever powers are possessed by the older counties of the staie, under the general laws of the state, including the power to issue funding bonds; and that the proviso heretofore quoted is merely a limitation of the right to exercise that power for a given period, to wit, for one year. From these premises it is argued that, in view of the recitals contained in the bonds herein sued upon, a purchaser thereof in the open market was not required to ascertain if the county had been organized for one year before the bonds were issued; in other words, it is contended, in effect, that the county officials who caused the bonds to be issued, had power to make a representation as to whether rim time limited had expired, and that they did make such a representation, which is binding upon the county, whether true or false, in a suit on said bonds by a person who bought them on the faith of their recitals. With reference to this contention we remark, in the first place, that we cannot assent to the proposition that the phrase “duly organized” must be held to mean that upon the appointment of com — 142 — missioners for a new county, and upon their qualification, such county thereupon becomes vested with whatever powers are possesed at the time by other counties under the general laws of the state. The statute declares that “from and after the qualification of the county officers appointed under this act the said county shall be deemed to be duly organized: provided, that no bonds except for the erection, and furnishing of schoolhouses shall be voted for and issued by any county or township within one year after the organization of such new county, under the provisions of this act.” It was clearly competent for the legislature to admit a new county into the family of counties, and yet to withhold from such new county, for the time being, some of the powers which the older counties possess. And in view of the fact that the phrase, “said county shall be deemed to be duly organized,” is immediately followed by the proviso, we think that the necessary effect of the proviso is to withhold from new counties for the period of one year the power to issue bonds which other counties possess. It declared, in effect, that the county should be deemed an organized county after the qualification of the commissioners, but that the general laws of . the state empowering counties to issue bonds should not become operative within such new county until a year after its due organization. The proviso does not, as counsel suppose, impose a limit ation upon the exercise of a power which becomes vested in a newly-organized county as soon as commissioners are appointed and qualified, but its effect is to prevent such power from becoming vested in a newly-organized county for a period of one year. The view that we have thus expressed touching the proper interpretation of the act relating to the organization of new counties appears to be entertained by the supreme court of Kansas. In the case of State v. Commissioners of Haskell Co., 40 Kan. 65,19 Pac. Rep. 362, the supreme court of that state had occasion to consider whether'the proviso prohibiting new counties from issuing bonds during the year succeeding their organization was a valid prohibition, or whether it violated that clause of the constitution of the state which declares that “no bill shall contain more than one subject, which shall be clearly expressed in its title.” In considering that question, the court said, in substance, that the organization effected by the appointment and qualification of commissioners for a new county is not “a completed or perfected organization sufficient for all purposes, * * * but at most is only temporary or provisional, * * and for special and limited purposes.” It was further remarked that when the legislature declared that, after “the temporary officers appointed by the governor *■ * * have qualified, the county shall be deemed duly organized,” it meant, and in effect said, that “it should be deemed duly organized, except for certain purposes, including the voting and issuing of bonds.” It is manifest from these exjjressions that the supreme court of Kansas construed the act relating to the organization of new counties as withholding from such communities some of the powers which fully organized and older counties possess, and that among the powers so — 143 — withheld was the power to issue negotiable bonds; and this view of the act — -that it withholds the power in question for the term of one year, instead of conferring it under certain limitations — overthrows the foundation on which counsel attempt to erect an estoppel, for no doctrine is better established than that a purchaser of municipal bonds is bound to ascertain if the municipality has authority to issue such securities, and that no recital contained in a municipal bond can cure such a delect as an utter want of power in the municipality to execute it. Dixon Co. v. Field, 111 U. S. 83, 4 Sup. Ct. Rep. 315; Town of Coloma v. Eaves, 92 U. S. 484, 490; Marsh v. Fulton Co., 10 Wall. 676; Northern Bank of Toledo v. Porter Tp. Trustees, 110 U. S. 608, 615. 4 Sup. Ct. Rep. 254; Anthony v. Jasper Co., 101 U. S. 693, 697; McClure v. Township of Oxford, 94 U. S. 429. But, even if we were able to concede,- according to the contention of counsel, that a newly-organized county in the state of Kansas is endowed with power during the first year of its existence, and by virtue of the appointment and qualification of commissioners, to issue funding bonds, and that the proviso is a mere limitation as to time, of the mode of exercising that power, still we would not be able to concede the further proposition of counsel that purchasers of bonds issued by such counties are not required to ascertain the age of the county, but may rely as to that upon recitals which such bonds happen to contain. It has frequently been held that municipalities will not be ('stopped by recitals contained in bonds unless the recitals relate to matters of fact which it may fairly he presumed that the officers of the municipality were left to determine. Town of Coloma v. Eaves, 92 U. S. 484, 490; Dixon Co. v. Field, 111 U. S. 83, 94, 4 Sup. Ct. Rep. 315; Lake Co. v. Graham, 330 U. S. 674, 9 Sup. Ct. Rep. 654; National Bank of Commerce v. Town of Granada, 54 Fed. Rep. 100. And the later decisions on this subject distinctly announce that recitals cannot be relied uj>on as an estoppel, where the facts recited are matters of public record, and are open to the inspection of every one who is disposed to make inquiries. Sutliff v. Commissioners, 147 U. S. 230, 235, 13 Sup. Ct. Rep. 318; Nesbit v. Independent Dist., 144 U. S. 610, 12 Sup. Ct. Rep. 746; Dixon Co. v. Field, and Northern Bank of Toledo v. Porter Tp. Trustees, supra. In the present case the fact which rendered the bonds invalid was a matter which could easily have been ascertained from the public records of the state. The act relating to the organization of new counties provides that the commissioners for such counties shall be appointed by the governor. It was at least incumbent on the purchaser of the bonds to ascertain that Kearney county had become a recognized political subdivision of the state. That; fact had to be ascertained to enable the bondholder to further ascertain if it had power under any circumstances to issue bonds. And even a casual examination of (lie record kept in the executive department wouldhavediselosed the fact that commissioners were not even appointed until April 3,1888, which was less than four months previous to the day on which the bonds bear date. It seems obvious, therefore, that within the — 144 — doctrine of the cases last cited, the purchasers of the bonds were bound to take notice of the fact that the bonds in suit had been issued within less than one year after the organization of the county, and were for that reason invalid. We are of the opinion, therefore, that the circuit court properly overruled the demurrer to the plea, and its judgment is hereby affirmed.