Hopper v. Covington/Opinion of the Court

The town of Covington had no general power to issue negotiable bonds. If the general statute of Indiana of June 11, 1852, under which it was incorporated, conferred any power upon towns to issue bonds, it was only for certain municipal purposes therein specified; and the general statute of May 15, 1869, authorized towns to issue bonds for the purchase and erection of lands and buildings for school purposes only. 1 Gavin & H. St. 623-626; Davis, Supp. 116. The bonds in suit containing no statement of the purpose for which they were issued, and no recital which can bind the town by way of estoppel, any one suing upon the bonds is bound to allege and prove the authority of the town to issue them. The plaintiff relies upon the statement of Mr. Justice SWAYNE in Gelpcke v. Dubuque, 1 Wall. 175, 203, repeated by him and by Mr. Justice CLIFFORD in later cases, that 'when a corporation has power, under any circumstances, to issue negotiable securities, the bona fide holder has a right to presume they were issued under the circumstances which give the requisite authority, and they are no more liable to be impeached for any infirmity in the hands of such a holder than any other commercial paper.' Supervisors v. Schenck, 5 Wall. 772, 784; Lexington v. Butler, 14 Wall. 282, 296; San Antonio v. Mehaffy, 96 U.S. 312, 314; Macon Co. v. Shores, 97 U.S. 272, 279.

But the circumstances thus spoken of were the preliminary facts requisite to the exercise of the power, not the limits, fixed by law, of the objects and purposes for which the power could be exercised at all. In each of the cases cited the defects suggested were in the requisite preliminary proceedings, and the bonds sued on appeared, by recitals on their face, to have been issued according to law. When the law confers no authority to issue the bonds in question, the mere fact of their issue cannot bind the town to pay them, even to a purchaser before maturity and for value. Marsh v. Fulton Co., 10 Wall. 676; East Oakland v. Skinner, 94 U.S. 255; Buchanan v. Litchfield, 102 U.S. 278; Dixon Co. v. Field, 111 U.S. 83; S.C.. 4 Sup. Ct. Rep. 315; Hayes v. Holly Springs, 114 U.S. 120; S.C.. 5 Sup. Ct. Rep. 785; Daviess Co. v. Dickinson, 117 U.S. --; S.C.. ante, 897.

A demurrer admits only facts, and facts well pleaded. The town having but a limited authority to issue bonds for certain purposes, it is not enough for the plaintiff to aver in general terms that the town was authorized to issue the bonds in suit, but he must state the facts which bring the case within the special authority. There is nothing in this declaration, or in the copies of instruments annexed to and made part of it, which shows, or has any tendency to show, for what purpose the bonds were made. The averment that the defendant is a municipal corporation under the laws of Indiana, 'with full power and authority, pursuant to the laws of said state, to execute negotiable commercial paper,' if understood as alleging a general power to execute negotiable commercial paper, is inconsistent with the public laws of the state, of which the courts of the United States take judicial notice. The averment that the bonds held by the plaintiff were executed pursuant to the laws of the state is but a statement of a conclusion of law, which is not admitted by demurrer. The declaration is fatally defective for not stating the facts necessary to enable the court to judge for itself whether that conclusion of law has any foundation in fact. Pumpelly v. Green Bay Co., 13 Wall. 166, 175; Cragin v. Lovell, 109 U.S. 194; S.C.. 3 Sup. Ct. Rep. 132; Kennard v. Cass Co., 3 Dill. 147; Broome v. Taylor, 76 N. Y. 564; Cotton v. New Providence, 47 N. J. Law, 401.

Judgment affirmed.