District Township of Doon Lyon County Iowa v. Cummins/Dissent Brown

by Henry Billings Brown

United States Supreme Court

142 U.S. 366

District Township of Doon Lyon County Iowa  v.  Cummins

Mr. Justice BROWN, (with whom were Mr. Justice HARLAN and Mr. Justice BREWER,) dissenting.

These bonds were issued under an act of the legislature authorizing district townships having a bonded indebtedness outstanding to issues negotiable bonds for the purpose of funding such indebtedness, and subject to a constitutional provision that no municipal corporation shall become indebted in any manner or for any purpose to an amount in the aggregate exceeding 5 per cent. on the value of the taxable property within such corporation. The bonds were certified by the proper officers of the district to have been executed and issued in pursuance of and in accordance with the statute anthorizing such bonds, (a copy of which was printed upon the bonds,) and in accordance with the laws and constitution of the state of Iowa, and in conformity with the resolution of the board of directors, etc. Plaintiff purchased these bonds for their par value, in cash, of one Richards, who had been appointed 'refunding agent to negotiate the bonds,' Under the provision of the constitution, the township had no power to create an indebtedness in excess of $6,551.90, that being 5 per cent. of the taxable property of the township, as shown by the last tax-list previous to the issuance of said bonds.

But, granting that the indebtedness already existing exceeded the constitutional limit, these bonds were issued, not for the purpose of increasing this indebtedness, but merely to change its form and reduce its rate of interest. The object of the constitutional provision was to prevent the incurrence of a new debt or the increase of an existing debt beyond a limited amount. The object of the statute was to enable district townships to fund their indebtedness by issuing and selling bonds at not less than their par value, and applying the proceeds to the payment of such outstanding indebtedness, or by exchanging such bonds for outstanding bonds. If the construction placed upon this statute by the court be correct, it is difficult to see how any township can avail itself of it, if such township has an existing indebtedness up to the amount of the constitutional limitation, since the new bonds, whether issued to be sold for cash or to be exchanged for other bonds, must, while the process of sale or exchange is going on, nominally increase the indebtedness of the corporation. I regard this as too technical an interpretation of the constitutional provision.

In giving a construction to this clause, the supreme court of Iowa held in Railway Co. v. Osceola Co., 45 Iowa, 168, that the validity of negotiable bonds of a county, issued in satisfaction of a judgment, in the hands of innocent holders for value, without notice of any claim that they are illegal for any cause, could not be questioned, by showing that the judgments were rendered upon warrants issued in excess of the constitutional limitation of 5 per cent., and that the board of supervisors fraudulently omitted to interpose the defense when the warrants were sued upon. 'When a bond,' says the court, 'issued in discharge of a judgment, is placed upon the market, a purchaser, who has no intimation of anything affecting its validity, has a right to presume that the board of supervisors have been mindful of their interest and their duty, and that all available defenses have been presented and passed upon.' This case was recognized and cited with approval in Miller v. Nelson, 64 Iowa, 458, 20 N. W. Rep. 759, and Railway Co. v. Osceola Co., 52 Iowa, 26, 2 N. W. Rep. 593. See, also, Commissioners v. Potter, 12 Sup. Ct. Rep. 216, and cases there cited; Powell v. City of Madison, 107 Ind. 106, 8 N. E. Rep. 31.

Had the proceeds of these bonds been properly applied, no question could have arisen as to the indebtedness of the township having been increased by their issue. If the district township had the right to issue the bonds, which it certainly had, if the statute under which they were issued be constitutional, the purchaser of such bonds was under no obligation to see that the money he paid for them was applied to extinguishing the existing indebtedness. He was entitled to act upon the presumption that the officers charged with the execution of the law would not betray their trust, and would deal fairly with the people who had put them forward to represent them. In my view, this is simply an attempt to saddle the holders of these bonds with the derelictions of the officials chosen by the electors of this township to act for them in this transaction, and who were alone entitled to receive the money.