Barnett v. Denison/Opinion of the Court

This case involves the single question whether a requirement of a charter that the bonds issued by a municipal corporation shall specify for what purpose they are issued is so far satisfied by a bond which purports on its face to be issued by virtue of an ordinance, the date of which is given, but not its title or its contents, as to cut off defenses which might otherwise be made.

We are of the opinion that it is not. It is the settled doctrine of this court that municipal corporations are merely agents of the state government for local purposes, and possess only such powers as are expressly given or implied, because essential to carry into effect such as are expressly granted, (1 Dill. Mun. Corp. § 89; Ottawa v. Carey, 108 U.S. 110, 2 Sup. Ct. Rep. 361;) that the bonds of such corporations are void unless there be express or implied authority to issue them, (Wells v. Supervisors, 102 U.S. 625; Claiborne Co. v. Brooks, 111 U.S. 400, 4 Sup. Ct. Rep. 489; Concord v. Robinson, 121 U.S. 165, 7 Sup. Ct. Rep. 937; Kelley v. Milan, 127 U.S. 139, 8 Sup. Ct. Rep. 1101;) that the provisions of the statute authorizing them must be strictly pursued, and that the purchaser or holder of such bonds is chargealbe with notice of the requirements of the law under which they are issued, (Ogden v. County of Daviess, 102 U.S. 634; Marsh v. Fulton Co., 10 Wall. 676; Town of South Ottawa v. Perkins, 94 U.S. 260; Northern Bank v. Porter Tp. Trustees, 110 U.S. 608, 4 Sup. Ct. Rep. 254; Hayes v. Holly Springs, 114 U.S. 120, 5 Sup. Ct. Rep. 785; Merchants' Bank v. Bergen Co., 115 U.S. 384, 6 Sup. Ct. Rep. 88; Harshman v. Knox Co., 122 U.S. 306, 7 Sup. Ct. Rep. 1171; Coler v. Cleburne, 131 U.S. 162, 9 Sup. Ct. Rep. 720; Lake Co. v. Graham, 130 U.S. 674, 9 Sup. Ct. Rep. 654.)

It is certainly a reasonable requirement that the bonds issued shall express upon their face the purpose for which they were issued. In any event, it was a requirement of which the purchaser was bound to take notice, and, if it appeared upon their face that they were issued for an illegal purpose, they would be void. If they were issued without any purpose appearing at all upon their face, the purchaser took the risk of their being issued for an illegal purpose, and, if that proved to be the case, they are as void in his hands as if he had received them with express notice of their illegality. Ordinarily the recital of the fact that the bonds were issued in pursuance of a certain ordinance would be notice that they were issued for a purpose specified in such ordinance, (Hacket v. Ottawa, 99 U.S. 86,) and the city would be estopped to show the fact to be otherwise, (Ottawa v. Bank, 105 U.S. 342.) But, where the statute requires such purpose to be stated upon the face of the bonds, it is no answer to say that the ordinance authorized them for a legal purpose, if, in fact, they were issued without consideration, and for a different purpose.

In this case the bonds were not only issued for a purpose not named in the ordinance, viz., in aid of the Texas & Atlantic Refrigerator Car Company, which had agreed to erect at Denison slaughter houses, tanks, machinery, and other material of the value of $15,000, but upon a consideration which had wholly failed, the company having failed to comply with the terms of the contract; and the bonds, so far as they were known to exist, were canceled.

In State v. School Dist., 34 Kan. 237, 8 Pac. Rep. 208, relied upon by the plaintiff, the state sued a school district upon certain school-district bonds and their coupons. Upon the trial, the defendant objected to the introduction of any evidence upon the petition, upon the ground that the same did not state facts sufficient to constitute a cause of action, and the court sustained the objection and dismissed the action. One of the objections urged by the defendant against the petition was that the bonds did not state, as required by statute, the purpose for which they were issued. The court held that the bonds were not void for that reason, because, under the allegations of the petition, they must be considered as issued in good faith; 'that the school district received ample consideration for them; and that the state of Kansas is an innocent and bona fide purchaser of them; for nothing appears to the contrary in the petition, and all the allegations of the petition would tend to indicate this.' This ruling, however, is not inconsistent with the idea that, if they had been issued for an illegal purpose, the purchaser would have been chargeable with notice of such illegality, by reason of the omission to state on the face of the bonds the purpose for which they were issued.

In Young v. Camden Co., 19 Mo. 309, the act required that county warrants should be written or printed in Roman letters, without ornament, in order to prevent the issuing of paper by county courts which could be used as a circulating medium. This was held to be merely directory; but the case, though cited by the plaintiff here, is not in point. The court held expressly that all the words prescribed by the statute were in the warrants, and that the introduction of other words did not vitiate them.

In view of the circumstances under which these bonds were issued, the instruction to return a verdict for the defendant was proper, and the judgment of the court below is therefore affirmed.

Mr. Justice BREWER dissented.