THAYER, Circuit Judge,
after stating tbe case as above, delivered the opinion of the court.
The special iinding which was made by the trial court shows that when the bonds of Lawrence county were issued from which the coupons iu suit were detached the indebtedness of the county then exceeded 4 per centum of the value of alL the taxable property within the county as ascertained by the last assessment, so that the decision in the case at bar hinges upon the construction which should be given to the act of congress of July 30, 1886 (24 Stat. 170, c. 818), whereby lhe above-described limitation upon corporate and municipal indebtedness was imposed. Counsel for the county contend that, when congress declared, in the concluding clause of section 3 of the act of July 80, 1886, that-“nothing in this act shall be cons trued'to prohibit the refunding of any existing indebtedness of such territory or of any political or municipal corporation, county, or other subdivision 1 herein,” nothing more was intended by the lawmaker than that new bonds might be exchanged, dollar for dollar', for old bonds without reference to the rate of interest reserved on either class of bonds; and that, even if this, view of the meaning of the word “refund” is too limited, congress at least did not intend that refunding bonds should be sold below par, — as, for example, at 90 cents on the dollar, — and (he proceeds used to take up outstanding bonds at par. On the other hand, counsel for the bondholders contend broadly that congress intended by the language above quoted to leave the territories and each of the political subdivisions thereof at full liberty to refund any of their indebtedness which existed ou July 30, 1886, as they thought best; and to leave the territorial legislatures at liberty to legislate as they deemed proper relative to the refunding of any existing debts, provided the power to refund; was exercised iu good faith. We are of opinion that the latter view of the act is supported by the better reasons, and that it should prevail. It is noticeable that the power to refund existing debts was conferred upon the various political subdivisions of the territories in the most general terms, and that the clause conferring that power serves to qualify every other provision contained in the act. .Besides, the provisions found"in section 4 of the act — particularly the clause which authorizes the respective territorial legislatures to legalize previous acts under and by virtue of which bonds had been issued or contracted to be issued— indicate very clearly that congress not only intended to protect all existing obligations, but to confer on the various territorial legislatures plenary power to legislate as they deemed expedient with reference to the settlement of such obligations. As the learned judge of the trial court well remarked, a careful study of the act' in all of iis provisions leads one to conclude “that it was the intent of congress to leave the past fiscal acts of municipal corporations in the territories. and the power of the territorial legislature to deal with ilie same, wholly unaffected by the act. The limitation upon the indebtedness of such corporations fixed by the act is directed wholly to their new business affairs transacted after its passage. Past [908]*908follies could not be cured. The purpose of congress was to prevent their repetition. What had been done was not to be invalidated, nor was the power of municipal corporations or of the legislature to deal with and meet the emergencies arising out of past transactions to be in any way impaired.” We have not been able to discover any provision in the act of July 30, 1886, which would warrant the inference that the right to refund existing debts which is therein recognized was intended to be confined to an actual exchange of new for old securities. It was, doubtless, well known to congress that it often happens that an old indebtedness on the part of a municipality can only be retired by the sale of new securities, and that this is one of the most common methods by which an old indebtedness is refunded when the new securities are designed to bear a lower rate of interest. It must be presumed, therefore, that when congress declared, as in the act of July 30, 1886, that it should not be construed “to prohibit the refunding of any existing indebtedness” that had been contracted by the various political subdivisions of the territories, it intended to leave them at- full liberty to refund their debts in any of the customary ways in which such an operation might be accomplished, and to place no restrictions upon acts done in that behalf, save the restriction that the operation should be undertaken and pursued in good faith, for the sole purpose of retiring an existing debt. Any other view of the act under consideration would render the power to refund, which congress clearly intended to confer, of little practical value, since it is no doubt true that when the act was passed many municipal corporations within the territories were indebted for large sums of money that had been borrowed at high rates of interest which could only be discharged by the sale of new securities bearing a less rate of interest than the old indebtedness. Such was the situation in Lawrence county which led to the issuance and sale of the bonds in controversy, and it is not unreasonable to suppose that many other municipalities within the territories found themselves in a similar condition.
It is manifest, we think, from the findings which were made by the trial court that in issuing and selling the bonds from which the coupons in suit were clipped the county commissioners of Lawrence county acted in the utmost good faith. The bonds were issued and sold for the sole purpose of retiring the outstanding 10 per cent, bonds, and with no intent, so far as we can discover, to use the proceeds of the sale for an ulterior purpose. It is also manifest that, if the expectations of the county officials had been fully realized, and if the entire proceeds of the funding bonds could have been invested in the purchase of the old bonds, the transaction would have resulted in'a large reduction of the obligations of the county. It so happened, however, that the entire issue of 10 per cent, bonds could not be obtained, whereupon so much of -the sum realized from the sale of the funding bonds as had not been so expended after the lapse of about one year was used in repurchasing a portion of the funding bonds. In taking this latter step the county commissioners evidently acted in a manner which they deemed most ad[909]*909vantageous to the county. We conclude, therefore, in the light of what has already been said concerning the proper interpretation of the act of July 80, 1886, that the county commissioners had the power to sell the funding bonds in controversy to the Municipal Investment Company, and that the bonds were valid obligations in the hands of the latter company and in the hands of its assignees, notwithstanding the temporary increase in the amount of the county debt while the funding operation was in progress, and notwithstanding the fact that the funding bonds were sold at a discount of 10 per cent., pursuant to legislative authority. The act of congress not only did not interdict such a transaction, it having been undertaken in good faith to refund an existing indebtedness, but in express terms left the county at liberty to refund the old debt in any way that that end could be accomplished with the sanction and approval of the territorial legislature.
It is further contended by the defendant county that the act of the territorial legislature of 1889 (Sess. Laws 1889, Dak. T. c.
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THAYER, Circuit Judge,
after stating tbe case as above, delivered the opinion of the court.
The special iinding which was made by the trial court shows that when the bonds of Lawrence county were issued from which the coupons iu suit were detached the indebtedness of the county then exceeded 4 per centum of the value of alL the taxable property within the county as ascertained by the last assessment, so that the decision in the case at bar hinges upon the construction which should be given to the act of congress of July 30, 1886 (24 Stat. 170, c. 818), whereby lhe above-described limitation upon corporate and municipal indebtedness was imposed. Counsel for the county contend that, when congress declared, in the concluding clause of section 3 of the act of July 80, 1886, that-“nothing in this act shall be cons trued'to prohibit the refunding of any existing indebtedness of such territory or of any political or municipal corporation, county, or other subdivision 1 herein,” nothing more was intended by the lawmaker than that new bonds might be exchanged, dollar for dollar', for old bonds without reference to the rate of interest reserved on either class of bonds; and that, even if this, view of the meaning of the word “refund” is too limited, congress at least did not intend that refunding bonds should be sold below par, — as, for example, at 90 cents on the dollar, — and (he proceeds used to take up outstanding bonds at par. On the other hand, counsel for the bondholders contend broadly that congress intended by the language above quoted to leave the territories and each of the political subdivisions thereof at full liberty to refund any of their indebtedness which existed ou July 30, 1886, as they thought best; and to leave the territorial legislatures at liberty to legislate as they deemed proper relative to the refunding of any existing debts, provided the power to refund; was exercised iu good faith. We are of opinion that the latter view of the act is supported by the better reasons, and that it should prevail. It is noticeable that the power to refund existing debts was conferred upon the various political subdivisions of the territories in the most general terms, and that the clause conferring that power serves to qualify every other provision contained in the act. .Besides, the provisions found"in section 4 of the act — particularly the clause which authorizes the respective territorial legislatures to legalize previous acts under and by virtue of which bonds had been issued or contracted to be issued— indicate very clearly that congress not only intended to protect all existing obligations, but to confer on the various territorial legislatures plenary power to legislate as they deemed expedient with reference to the settlement of such obligations. As the learned judge of the trial court well remarked, a careful study of the act' in all of iis provisions leads one to conclude “that it was the intent of congress to leave the past fiscal acts of municipal corporations in the territories. and the power of the territorial legislature to deal with ilie same, wholly unaffected by the act. The limitation upon the indebtedness of such corporations fixed by the act is directed wholly to their new business affairs transacted after its passage. Past [908]*908follies could not be cured. The purpose of congress was to prevent their repetition. What had been done was not to be invalidated, nor was the power of municipal corporations or of the legislature to deal with and meet the emergencies arising out of past transactions to be in any way impaired.” We have not been able to discover any provision in the act of July 30, 1886, which would warrant the inference that the right to refund existing debts which is therein recognized was intended to be confined to an actual exchange of new for old securities. It was, doubtless, well known to congress that it often happens that an old indebtedness on the part of a municipality can only be retired by the sale of new securities, and that this is one of the most common methods by which an old indebtedness is refunded when the new securities are designed to bear a lower rate of interest. It must be presumed, therefore, that when congress declared, as in the act of July 30, 1886, that it should not be construed “to prohibit the refunding of any existing indebtedness” that had been contracted by the various political subdivisions of the territories, it intended to leave them at- full liberty to refund their debts in any of the customary ways in which such an operation might be accomplished, and to place no restrictions upon acts done in that behalf, save the restriction that the operation should be undertaken and pursued in good faith, for the sole purpose of retiring an existing debt. Any other view of the act under consideration would render the power to refund, which congress clearly intended to confer, of little practical value, since it is no doubt true that when the act was passed many municipal corporations within the territories were indebted for large sums of money that had been borrowed at high rates of interest which could only be discharged by the sale of new securities bearing a less rate of interest than the old indebtedness. Such was the situation in Lawrence county which led to the issuance and sale of the bonds in controversy, and it is not unreasonable to suppose that many other municipalities within the territories found themselves in a similar condition.
It is manifest, we think, from the findings which were made by the trial court that in issuing and selling the bonds from which the coupons in suit were clipped the county commissioners of Lawrence county acted in the utmost good faith. The bonds were issued and sold for the sole purpose of retiring the outstanding 10 per cent, bonds, and with no intent, so far as we can discover, to use the proceeds of the sale for an ulterior purpose. It is also manifest that, if the expectations of the county officials had been fully realized, and if the entire proceeds of the funding bonds could have been invested in the purchase of the old bonds, the transaction would have resulted in'a large reduction of the obligations of the county. It so happened, however, that the entire issue of 10 per cent, bonds could not be obtained, whereupon so much of -the sum realized from the sale of the funding bonds as had not been so expended after the lapse of about one year was used in repurchasing a portion of the funding bonds. In taking this latter step the county commissioners evidently acted in a manner which they deemed most ad[909]*909vantageous to the county. We conclude, therefore, in the light of what has already been said concerning the proper interpretation of the act of July 80, 1886, that the county commissioners had the power to sell the funding bonds in controversy to the Municipal Investment Company, and that the bonds were valid obligations in the hands of the latter company and in the hands of its assignees, notwithstanding the temporary increase in the amount of the county debt while the funding operation was in progress, and notwithstanding the fact that the funding bonds were sold at a discount of 10 per cent., pursuant to legislative authority. The act of congress not only did not interdict such a transaction, it having been undertaken in good faith to refund an existing indebtedness, but in express terms left the county at liberty to refund the old debt in any way that that end could be accomplished with the sanction and approval of the territorial legislature.
It is further contended by the defendant county that the act of the territorial legislature of 1889 (Sess. Laws 1889, Dak. T. c. 56), v/hich authorized the county to sell its funding bonds at 90 cents on the dollar for the purpose of providing a fund wherewith to retire its outstanding 10 per cent, bonds, was a special law regulating county affairs, and that, being a lav/ of that nature, it was void, under section 1 of the act of July 30, 1886 (24 Stat. 170, c. 818), which prohibited such special legislation. This contention, however, overlooks the fact already mentioned that the concluding clause of section 3 of the act of July 30, 1886, qualifies every other provision of that act by declaring, in substance, that nothing in the act should be construed to prohibit the refunding of any indebtedness of any territory, or of any political or municipal corporation, county, or other subdivision therein. We think that this provision of the act in question left the territorial legislature at full liberty to pass such a special law as it deemed essential to enable any political subdivision of the territory to refund its indebtedness. The territorial legislature possessed that authority prior to the act of July 30, 1886, and it does not seem to have been the purpose of congress to withdraw the authority, or to place restrictions upon the exercise of any legislative power which it might be found expedient to exercise for the purpose of enabling any county or municipality of the territory to adjust, compound, and liquidate its antecedent, liabilities. The power to legislate to that end remained as it was before the act of July 30, 1886, was passed. Upon the findings made by the trial court our conclusion is that the judgment below was for the right party, and it is accordingly affirmed.