Shaw v. Independent School Dist. of Riverside

SET IRAS, District Judge (after stating the facts). On behalf of the defendant, it is pleaded that the bonds upon which this suit is based are void, in that the constitution of the state of Iowa (section 3, art. 11) provides that: “no county, or other political or municipal <•<'» poratiou shall be allowed to become indebted in any manner, or for any purpose to an amount in the aggregate exceeding live per centum on the value of the taxable property within such county or corporation, — to be ascertained by the last state and county tax. lists, previous to the incurring of such indebtedness,” and that the constitutional limit had been exceeded when the bonds in suit were issued, and therefore the defendant district had no power to issue the bonds in question. On behalf of the plaintiff, it is claimed that chapter 182 of the Acts of the 18th General Assembly of the State of Iowa clothed school districts with full power to issue refunding bonds; that the bonds contain recitals showing that they were issued in pursuance of and in accordance with the provisions of that act, and that the plaintiff, having paid value for the bonds, relying upon the recitals therein contained, is entitled to estop the defendant from showing that the constitutional limitation had been exceeded. The material questions arising in this case were before me in Cummins v. District of Doon, 42 Fed. 644, and I therein held that bonds issued for refunding purposes under the provisions of chapter [914] 132, Acts 18th Gen. Assem. Iowa, differed from bonds issued for purposes other than to refund outstanding obligations; that the burden of showing that the refunding bonds were invalid was on the defendant, and that this required the defendant to show that the pre-existing indebtedness which it was proposed to refund was itself invalid, and not enforceable; and that, in the case of refunding bonds sold for cash, the purchaser, having paid his money to the proper officers of the district, was not bound to see to the proper application of the money after it had passed from his control, as he had a right to assume that the officers of the district would properly perform their officiál duties. This case was' carried to the supreme court by writ of error, and the judgment was reversed. See Doon Tp. v. Cummins, 142 U. S. 366, 12 Sup. Ct. 220. The ruling of the supreme court in that case is decisive of the one now before the court. In this cáse, as in that, the amount of bonds purchased by the plaintiff, to wit, $7,500, was in excess of the constitutional limitation, and of this fact the plaintiff was bound to take notice, because, as is held by the supreme court in Doon Tp. v. Cummins, he was bound to take notice of the constitutional provision, and also of the amount of the taxable property of the district, as shown by the public tax lists. Under these circumstances, if I correctly interpret the. ruling of the .supreme court in the Doon Township Case, the plaintiff cannot rely on the recitals in the bonds as an estoppel on the defendant. If it appeared that the bonds bought by the plaintiff were in fact nsed to retire or refund a pre-existing, enforceable indebtedness of the district, then it might be true that they would be valid, even though they exceeded the limitation. From the evidence it appears that they were issued to O; W. Rollins in exchange for other bonds held by him, but it does not appear that the latter bonds were valid in his hands, but, on the contrary, it appears that they were part of a fraudulent series known as the “Martin Bonds,” the nature of which may be readily seen from the fact that Rollins held $72,000 of them, — an amount in excess of the entire taxable property of the district. Under these circumstances, judgment must be in favor of the defendant, and it is so ordered.