Ninth Nat. Bank v. Knox County

37 F. 75, 1888 U.S. App. LEXIS 2719

• Court: U.S. Circuit Court for the District of Eastern Missouri
• Decided: September 11, 1888
• Status: Published

Opinion

Thayer, J.

The motion for a new trial is based on three grounds: (1) That the jury was misdirected; (2) that illegal testimony was admitted ; (3) that the verdict was against the weight of testimony. The last proposition requires no extended notice. If the testimony on which the verdict rests was admissible, the court is satisfied with the findings of the jury. Whether illegal testimony was admitted depends, in my .judgment, upon the effect that ought to be given to the recital contained in the bonds on which the suit is founded. If the recital is in effect a declaration that the bonds were issued under power derived solely from the thirteenth section of the charter of the Missouri & Mississippi Railroad 'Company, and the recital is conclusive against the plaintiff, then unquestionably very much of the testimony, both for the plaintiff and defendant, was incompetent; but if the recital does not amount to an estoppel against the plaintiff, then all of the evidence to which an exception was taken, in my opinion, "was competent. The inquiry under the pleadings being as to which of two laws the county court had acted under in issuing bonds, if the recital is not conclusive on that issue, it was, in my opinion, proper to admit in evidence the entry appearing on the bond register of the county, and also the official statements of the county debt published by authority of law. Vide section 80, art. 4, Wag. St. 1872, pp. 414, 415. It was also proper to permit the plaintiff to show under which of the two laws authorizing an issue of bonds the county court had proceeded in the matter of levying taxes to meet the interest on the bonded debt in question from the year 1868 to 1875. All of this testimony had a direct bearing on the issue, and, moreover, it was evidence against the county, made by its own officers in the discharge of duties imposed on them by law.

Recurring, then, to the question above stated, as to the effect of the recital in the bonds, it will suffice to say that, after an attentive consideration of the subject, I adhere to the opinion expressed at the trial, that the recital is not conclusive, and does not create an estoppel, at least against the plaintiff. M3r conclusion is based mainly on the following grounds:

First. The case may be distinguished from that class of cases in which it has been held that recitals in municipal bonds are conclusive against the municipality, in suits by innocent purchasers, if they recite the existence.of facts on which the power to issue bonds depends, and the recitals are made by officers of the municipality who are authorized to detérmine and certify as to the existence of such facts. Town of Coloma v. Eaves, 92 U. S. 484; Dixon Co. v. Field, 111 U. S. 83, 4 Sup. Ct. Rep. 315; Marcy v. Oswego, 92 U. S. 638; St. Joseph Tp. v. Rogers, 16 Wall. 644; Commissioners v. Bolles, 94 U. S. 104; Commissioners v. Clark, Id. 287; County of Warren v. Marcy, 97 U. S. 104; Pana v. Bowler, 107 U. S. 539; 2 Sup. Ct. Rep. 704. The rule announced in these cases has for its object the protection of innocent purchasers of municipal bonds, who have bought on the faith of representations contained therein that certain antecedent steps, necessary to render the securities valid, have been taken. These cases enforce the doctrine that a person who has made representations as to material facts will not he allowed to dispute the facts represented, in a suit by a party who has acted on the representation. But in the case under consideration the recital related nierely to the law under which the bonds sued upon had been issued; there being two laws, (one special and one general,) from either of which the requisite power might be derived. While, the recital fairly implied that the county court had acted under the special law, yet there was no specific statement to that effect, and the recital was' not necessarily inconsistent with the view that it had acted under the general law. Furthermore, the records of the county court showed that before the bonds were issued a popular vote had been taken, as the general law required; the bond register and published statements of the county debt declared that the bonds had been issued under the general law; and taxes to pay interest on the same, for a period of years, had been levied in violation of the provisions of the special law, and in accordance with the general law. These were facts shown by the county records, to which purchasers of the bonds had access, and, moreover, they contradicted whatever inference arose from the recital contained in the bonds. In the respects thus noted, the case differs from those above cited, and, in my judgment, is not controlled by the principle that underlies those decisions.

Second. The recital in question was not made as an introduction to, ox as the basis of, a contract about to be 'entered into. It was a general recital in the body of the bond, and was not intended as a definite statement of matters of fact, with reference to and on the faith of which the parties had contracted. The recital, therefore, cannot be looked upon as in effect an agreement between the county and 'the bondholder to admit the facts recited, and as being for that reason conclusive. This, I think, is apparent from the form of the recital, and the relation it bears to the bond. Bigelow, Estop. (4th Ed.) pp. 858, 365-369, and cases cited; Bowman v. Taylor, 2 Adol. & E. 278.

Third. Furthermore, several decisions of the supreme court of the United States warrant the conclusion that a recital in a municipal bond, merely as to the act under which it was issued, is not conclusive against the bondholder. In the cases of Commissioners v. January, 94. U. S. 202, and Anderson Co. v. Beal, 113 U. S. 239, 5 Sup. Ct. Rep. 433, the bonds in each case contained a recital that they were issued under laws which in point of fact had been repealed before the bonds were issued. Nevertheless the bonds were supported, and a recovery thereon was allowed, because it appeared that they had been issued in substantial conformity with other laws that were in force when the securities were put in circulation. In the cases of Crow v. Oxford, 119 U. S. 215, 7 Sup. Ct. Rep. 180, and Gilson v. Dayton, 123 U. S. 59, 8 Sup. Ct. Rep. 66, the bondsinvolved contained recitals to the effect that they were issued under laws which, as it transpired, were not in force when the bonds were executed. An attempt was made by the bondholders to sustain the issue under laws that were in force, but the attempt failed;—the court holding that, inasmuch as the plaintiffs relied on laws not referred to in the bonds themselves, they were not aided by the recitals, and that it was incumbent on them to show substantial compliance with the provisions of the laws so invoked, which they had failed to do. In none of these cases was it intimated that a recital contained in a bond as to the act under which it was issued operates as an estoppel against the bondholder, and precludes him from contradicting the fact recited. On the contrary, the decisions in each instance proceed on the assumption that recitals of that nature are open to explanation, and that the truth may he shown by any competent evidence, notwithstanding the recital. ■ I so ruled at the trial, and still adhere to that view.

The last and most important question for consideration is whether the jury was misdirected. The special issues framed and submitted required the jury to determine whether the county court, in subscribing for stqek in the Missouri & Mississippi Railroad Company, and in issuing bonds therefor, intended to exercise a power conferred on the court by the charter of the railroad company,- and that power only, or to exercise the power conferred by a popular vote at an election held under the general railroad law. The county court had an undoubted right to act either under the special law, without a popular vote, or to act under the general law, by the terms of which an 'election was necessaiy. In point of fact an election had been held, by order of the county court, prior to the subscription, and the requisite majority had voted in' favor of the subscription, as the records of the court showed. It will be seen, therefore, that' the jury had to determine which of the two powers the county court intended to exercise at the time the subscription was made. The question at issue was one of intention. Now, it is undeniable that there was some oral testimony in the case tending to show that after the special election was held, and prior to the subscription, a discussion took place in the presence of the county judges as to the legality of the special election, and that doubts were excited, in the minds of some persons at least, as to the validity of a subscription made in obedience to the vote cast at such election. In view of this testimony and other facts in the case, it was possible, if not probable; that the jury might conclude that the county court was influenced in its action by both the general and the special law; that in point of fact it eventually acted on the theory that it would obey the public will expressed at the election; and that if for any reason the election should.be held to be invalid, the subscription could at least be supported under the special law. It seemed to be necessary, therefore, in view of this phase of the testimony, to give the jury some directions applicable thereto to enable them to answer the special issues. The court accordingly directed the jury to find that the bonds were issued under the general law if it appeared that the county court relied on both the general and special law to support the subscription, and had been influenced in its action by the provisions of both laws. This direction was supplemented by the general statement that “it was competent for the county court to rely and act upon both laws,” and that “it might well invoke the aid of any law that -was supposed to confer power on the court to make the subscription.” Under the circumstances, however, the-latter statements could only have been understood as meaning that it' was possible that the county court had been influenced in its action by both laws, and that the county judges might rightfully have been influenced by the consideration that power to make the subscription without a popular vote was conferred by the special law, and would support the subscription, even if the election held under the general law proved to be invalid. So far as I can see; there was nothing in the charge calculated to produce the impression on the mind of the jury that it was immaterial whether the bonds had been issued under the general or special law. No such view was advanced by the court. On the contrary, the charge was carefully framed so as to require the jury to determine ■whether the subscription had been made solely in dependence upon the special law, or in obedience to a popular vote; and that part of the charge which is objected to was only intended to govern the action of the jurors in the event of their finding that the county judges had acted in reliance on both the general and special law, in the sense that the subscription would not have been made but for the existence of both laws. If the charge was erroneous, the error, in my opinion, consisted wholly in that part which authorized a finding that the bonds were issued in obedience to a popular vote, and under the general law, if the county court relied in part on the power so conferred, and intended to exercise it. That direction really implied that the county court after the election “might invoke the aid of both laws to support the subscription;” and that, if it did rely on both laws, that fact did not impair the right of the bondholder to insist that the subscription was made under the general law, inasmuch as the election held to authorize the subscription was a valid election. Such thought as I have been able to give to the subject since the trial does not satisfy me that the direction so given was erroneous. As the county court at the time the subscription was made in fact had power by virtue of an antecedent popular vote to make the subscription under the general railroad law, I think it is questionable whether any inquiry at this time as to intentions of the county court- is permissible, in view of the action of county authorities for a period of years in treating the bonds as issued under the general law, and in publishing that fact to the world in the manner before indicated. But be this as it may, it appears to me that if there was an actual intent to invoke as far as it would extend, or to any extent, the power conferred by a popular vote at an election lawfully held, the bonds may be rightfully said to have been issued under the general law, notwithstanding the fact that the existence of the special law may also have had some influence on the court’s action.

In conclusion I will add that the view which the court took, and expressed in its charge, of the validity of the order of the county court under which the election to authorize the subscription was held, is supported by the following decisions: Commissioners v. Thayer, 94 U. S. 631; Block v. Commissioners, 99 U. S. 698. In each case it was held, under a law very similar to the law which prevailed in this state when the election in question was called, that an order submitting to the voters of a county a proposition to subscribe stock in aid of a railroad, need not specify the name of the corporation if the proposition describes the proposed route of the road with the requisite certainty. As this case was submitted to the jury with directions as to the questions of law involved that in my judgment were substantially correct, I shall overrule the motion for a new trial. It is so ordered,