GERMAN INS. CO. V. CITY OF MANNING.
597
That the sureties on a bond executed under the foregoing provision might be liable to the plaintiff, if such a bond had been made, does not determine the question as to whether the sureties of a bond under section 4133 would not be also liable. There may be no such necessary conflict between the two acts as to work a repeal of the act of April, 1892. Indeed, the provisions of section 4134 authorize the county court to require an "additional bond" to that required by section 4133, in its discretion, and provide that "the sureties on all the bonds executed by the sheriff shall be jointly and severally liable for any default of the sheriff during the term in which the said bond may be executed, whether the liability accrued before or after the execution of such bonds." Under this provision, section 1884 may be well regarded as a provision covering the terms and prescribing the obligations of any "additional bond," within the meaning of section 4134. Since this writ of error has been pending the question thus presented has been decided by the supreme court of Kentucky, in the case of Howard v. Com., 49 S. W. 466, where the suit was upon a bond executed by a sheriff under section 4134, and where the defense made by the sureties was that they were liable under the bond only for the default of the sheriff in respect to state taxes. It was held that the sureties upon the bond were liable for state and county revenue alike. Section 1884 was construed as a provision under which an "additional bond" for the double protection of the county might be required. Aside from any question of the duty of this court to follow the construction of this statute by the highest state court, we are entirely content to agree with the Kentucky court in holding that the purpose and intent of the act of November 11, 1892, was by a general law "to protect the revenues of the state, and the various counties as well, by requiring a state and county revenue bond of such comprehensiveness as that those executing it would be liable for state and county revenues, of whatever kind or description." The construction of the statute under which the bond in suit was executed is the only question argued or submitted. Judgment reversed, with direction to overrule the demurrer. GERMAN INS. CO. OF FREEPORT, ILL., v. CITY OF IOWA.
(Circuit Court, S. D. Iowa, C. D. No. 3.588.
July 25, 1899.)
1.
MUNICIPAL BONDS-INDEBTEDNESS OF CORPORATION AT TIME OF ISSUANCEV AI,IDITY OF PRIOR ISSUE.
The test of the validity of municipal bonds, for the purpose of determining whether they are to be included as a part of the outstanlling indebtedness of the municipality at the time a subsequent issue was made. is not whether they were recognized as valid by the officers of the corporation, but whether they were legally enforceable; and where the indebtedness of the corporation exceeded the constitutional limit when they were issued, they at no time constituted a legal indebtedness, though they may have been afterwards paid, and while their validity had not been questioned·.
95
FED:e:RAL REPORTER.
2.: F1EDEnAT,COtJRTS-FoLLOWINO ST'A'1'EDECIIlIONS·
.'fe' ,:i ""single decision of the supIjelIll;! cOllX;t of ,a s1:ate, co¥struing a statute, becomes. the settled law of the ,state, to be by courts, where it has been acqUiesced itJ:·for Years by the courts,of the state . ;', and 'its legislative department. S. MUNICIPAL BONDS-POWER OF CORPORATION TO ISSUE-IoWA STATUTE. Code Iowa 1873, § 500, providing.that "lOans may be negotiated by any , , municipal corporation in anticlwtl?n of, the revenue thereof," does not COnfer authorlt, on such corporations to issue negotiable bonds in payment , of such loans. Heins v. Lincoln, ,71N. W. 189, 102 Iowa, 69, followed, OF PURCHASER OF VOID BONDS. · ' While. a municipal corporation may in some cases be liable for the consideration received for its negotiable bonds, which are void :1'01' want of legal authority to issue them, such liability in no case arises on the instruments themselves, which are void for, all purposes; and a transferee of such bOnds, issued by a town in payment tor property, who has no relation to ,the consideration which passed betWe'en the original parties, is not subrogated, by his purchase, to any right of action a.gainst the town for its recovery, and cannot, by treating ;the bonds as merely nonnegotiable evi· of indebtedness incurred by: the ,town for the purchased, n1:11a.llltaln an actioll thereon. OF RESOLUTION-RECORD OF YEAIl ANI>
5.
,NAYs...
The requirement of Code Iowa 1873, § 493 (as amended by Laws 18th Gen. Assem. c. 146), that "on the passage or adoption of * * * every resolution or order to enter Jnto a, by any coullcil of any municipal corporation the yeas and nays shaIlbe . called and recorded," is fully met where the record states that such ar,esoilltion was "carried by the followIng vote,'" followed by the names of every member of the council.
. "":
'
. '
6.
MmhClPAL
Under the provision of Const; ·Iowa, art. 11, § 3, that no municipal corporation shall be alloW:ffi Indebted in any manner, to an amount in tQ.e aggregate exceeding 5 per centum on the value of the property within such corporation, warrants outstanding at the time bonds are Issued do'uot constitute an indebtedness when there Is money in the treasury to meet them; and the burden ,rests- upon the corporation, which asserts, the Invalidity of the bonds on the ground that the indebtedness thereby created, together with the outstanding warrants, exceeded the constitutionallimit, to prove that such warrants exceeded the cash in the treasury available for their payment, and by what amount,-the presumption being In favor of the validity .of the bonds.
BONDS-ExCEEDING LIMIT TION OF INDEBTEDNESII.
Olr
LA.WFUL INDEBTEDNESIl-COMPUTA',
This was an action on negotiable bonds issued by the defendant, the city of Manning, Iowa. Berryhill & Henry, for plaintiff. B. I. Salinger and A. B. Cummins, for defendant. WOOLSON, District Judge. This case is now presented on the medts. Upon the legal question tendered in petition, a decision was handed down in 1897, and is found in 78 Fed. 900. ,That decision overruled. the .demurrer interposed by defendant to the' original petition. The plaintiff is a citizen of the state of illinois, and defendant isa citizen. of the state of Iowa. The action is based upon :five negotiable bonds, dated October 23, 1884,. for $1,000 each, with interest from date at 8 per cent. per annum, payable semiannually; the bonds maturing October 14, 1894. Interest ,on these bondtil Wils 'regularly'paid to the date of maturity thereof; so that,
599
if the bonds are valid, there is due thereon to plaintiff the principal, with interest from October 14, 1894, at the rate of 8 per cent. per annum, payable semiannually. The defendant is a municipal corporation, being an incorporated town, according to the classification of municipal corporations in force in the state of Iowa at the date of said bonds and yet in force. The defendant, for its defense herein, while admitting that the papers in suit were signed by its officers, as exhibited, and that plaintiff, before the maturity thereof and for value, became, and is now, the holder and owner thereof, and that nothing has been paid thereon, except interest up to date, including the installment covering October 14, 1894, nevertheless, for the reasons below stated, denies its liability thereunder: (1) Said bonds are void, because defendant had not legal authority to execute same under the Code of Iowa then in force. (2) Denies defendant ever issued or authorized the issue of said bonds. (3) That at the date said bonds are claimed to have been issued, defendant was indebted in a sum largely exceeding the limitation contained in the constitution of the state of Iowa, to wit, in excess of 5 per cent. on the value of the taxable property within such defendant corporation, as ascertained by the last state and county tax lists preceding the issue of said bonds. It is proper here to state that in the agreed statement of facts filed herein the second ground of defense above stated is waived, by the agreed fact that defendant did issue said bonds. In its reply, plaintiff avers that what is set out in answer of defendant under its third above-stated defense, as an indebtedness of defendant outstanding at the time the bonds in suit were issued (and which, if valid, would invalidate the bonds in suit), was not a valid indebtedness; but that the bonds which evidenced or constituted such alleged outstanding indebtedness were not valid, in that, at the date of their issue, the aggregate indebtedness then outstanding of the defendant exceeded 5 per centum of the value of the taxable property within the limits of defendant corporation, as ascertained by the last state and county; tax lists previous to the issuance of said bonds. It is due to counsel herein that the findings of the court shall be sufficiently comprehensive to permit· a thorough review in the appellate court. This court has been favored by counsel on either side with exhaustive briefs, supplementing the oral argument. While perhaps not actually required, in view of the present decision herein reached, yet counsel may properly expect that the findings of the court will cover substantially all the material issues raised by the pleadings. 1. As to the contention of defendant that the bonds in suit are invalid, because, at date of their issue, the aggregate indebtedness of defendant, in violation of the constitutional exceeded 5 per centum of the taxable property within the defendant corporation, as ascertained by the last preceding state and county tax list: If the fact claimed is sustained by the evidence, the conclusion claimed IDust follow. The limitation prescribed in the constitution of the state of Iowa is correctly given in this contention, and the evidence is undisputed that at the date of issuance of bonds in suit there were outstanding bonds, issued in 1882 by defendant, which, if included in
600
·"05 FEDERAL 'REPORTER.
th<l.then existing aggregate indebtedness of defendant, make such aggregatein excess of the constitutional limitation. It is practically conceded that. such 1882 bonds (the bonds in suit were issued in 1884) were themselves, at date of their issue, obnoxious to the abovequoted constitutional limitation. They were, however, treated by defendant as a valid indebtedness, and previous to the institution of the present action had been paid in full. They were thus treated by defendant when the bonds in suit-issue of 1884-were issued. Defendant contends that, since defendant treated them as valid, and has paid them out of the ordinary revenues of the defendant, the spirit of the constitutional limitation does not apply, and especially so as they were so treated by defendant, and were being so paid, when the bonds in suit were issued. But to my mind the fact that the defendant elected to pay, while the law did not require it to pay, does not convert into an indebtedness that which the law does not recognize as an obligation to pay. There may exist, from the standpoint of mere morals, an obligation which the law does not regard as an obligation enforceable in the courts. The constitutional limitation uses the term "indebted" as meaning an indebtedness which the law will recognize, and by its process enforce. Such a test may readily be applied. The process, is simple and uniform. Given the facts, will the law, applied thereto, compel payment? If so, there is an indebtedness. But if the will of the corporation, the mood of its governing officials, is to be the test, there can be no certain or reliable and permanent knowledge as to whether an enforceable indebtedness exists. To-day the officials recognize, and are discharging by payment, a "debt" which the courts would not enforce. Additional bonds, now issued, are obnoxious to the constitutional limitations, because of the former "debt." A month later new officials are installed. They do not recognize the "debt" which their predeces" sors were paying off, and refuse payment of saine. Will the additional bonds, issued as above suggested, no longer be obnoxious to the constitutional limitation, but thus become valid? Or, take the converse: A series of bonds, issued yesterday, are beyond the constitutional limitation and invalid. Hence a' series of bonds issued to-day are valid, because the former issue is not, in law, an outstanding indebtedness. .Next month a new set of city officials recognize as valid, by paying off, the first set of bonds just above suggested. Does their payment of these bonds, thus rendering them valid, now make this former issue an outstanding indebtedness, and therefore the latter issue thereby become invalid? And what shall be said when the same officials change the course of the corporation during their own administration? These difficulties increase if we accept as the test the will of the corporation in place of the force of the law. If it be claimed that, because the corporation ha;s paid off such bonds,therefore what the law would not have compelled the corporation to pay has become, because Of voluntary payment, an indebtedness, we are yet further than before from an acceptable test; for such "debt," though not recognized as such by the law, is capable at any time of being paid off, and thus a new bond issue cannot
601
be safely made while the old issue is outstanding. If the fact of payment is to be substituted as a test, in place of the obligation which the law recognizes and enforces, then the validity of a new bond issue would depend, not on the facts existing at the time of the issue, and thus capable of being then ascertained, but on the whim or conclusion of the corporation officials, which may come into existence long after such new bond issue, and which could only be ascertained at time of such issue by one having the gift of prophecy. The result here reached is, therefore, that if the bond issue of 1882 was invalid, because obnoxious at time of issue to the constitutionallimitation, it will not be included when determining the aggregate indebtedness of defendant at time of the issue (1884) ()f the bonds in suit; and, thus examining, the bonds in suit, so far as this gl'Olllld of defense is concerned, are valid. 2. Had defendant, at the time these bonds in suit were issued, authority, and was that authority duly exercised, to issue the bonds sued on herein? Plaintiff, as a part of its case, brings into court the bonds, which on their face assert they were issued under section 500 of the Iowa Code of 1873. Said section 500, so far as material herein, is as follows: "Loans may be negotiated by any municipal corporation in anticipation of the revenues thereof. * * *" The question now under consideration was before this court on demurrer to the petition, and was decided adversely to defendant. 78 Fed. 900. Counsel on both sides have reargued the question on the present hearing. I have given it extended consideration and reexamination, in the light of the present argument and the additional cases cited by counsel. In the former decision herein, reached on demurrer, the judgment of the court on the main question involved was with the defendant, and to the effect that, as a principle of general municipal law, (1) a municipal corporation is not authorized to issue negotiable bonds for loans relating to current expenses, unless the power to issue such bonds was expressly conferred on such corporation; (2) that a loan negotiated in anticipation of revenues, a "borrowing" of money where no delegation of power was by the statute conferred, except the power "to borrow," would not authorize the issuing of negotiable honds, such as those in suit herein. But the court held the bonds in suit were validly issued, under said section 500, in accordance with the construction of such section theretofore announced by the supreme court of Iowa, and that this court was bound by that construction of the section which the highest ('ourt of the state had adopted. This conclusion was reached largely because the only construction of this section by such court was that which I have indicated, and because, in the many years which had passed since such decision was reached, the lawmaking department of the state had made no .change therein, but by silence had acquiesced in the force of the statute as thus construed by the supreme court, and such construction had remained unchallenged in such supreme court since the time (1882) of the deliverance of the decision (City of Sioux City v. 'Weare, 59 Iowa, 95, 12 N. W. 786) on which the former decision on demurrer herein was based.
95 FEDERAL REPORTER.
The present contention of defendant recognizes the force of the quotations in the former opinion herein from Douglass v. Pike Co., 101 U. S. 677: "A's a rule, we treat tbe construction whicb tbe bigbest court of a state bas given the statute of that state as part of tbe statute, and govern ourselves accordingly."
Azld' '1 "
"Tb,ii;lcourt must, recognize this decision of the supreme court of the state as an authoritative construction of the statute, made before tbe bonds were issued, and to be followed by tbis court." ,
It is unnecessary to attempt citations of the many cases wherein the supreme court of the United States have reaffirmed the principle embodied in these quotations. Defendant, however, insists that the decision ,given in City of Sioux City v. Weare, supra, is not applicable here, because it is "mere di,ctum." . This> court cannot so declare. Apparently there lay di,the path necessarily to be traveled, by the court the very rectly questi()l now under consideration, viz. whether loans negotiated by a city "in anticipation of revenues" could be validly evidenced by negotiable bonds. This point was presented in the pleadings, and tbe daimthereon made that the'bonds were invalid, because of want of P9Wer in the city to validly iS$ue same. There was no dispute that Jh#;, bonds in contro.versy had been issued under said section 500 .ofthe1owa Code, in the progress of and as evidencing "loans negotiated'? .by the munici,pal corporation "in anticipation ,of its revenues." If the supreme court had sustained the contention of the deviz, that said section 500 did not confer the power negotiable bonds, then it would seem that the defendant to thereiA was entitled to. judgment; ,for said defendant; apparently, co:uld nQtbe held, under 'the petition in that suit, unless the delivery of these bonds was a payment of the claim againSt, the city. Whetheljthel'lupremecourt of the state might have reached the same conclusion, viz. right· of action by the city, by some 'other process of reasojlling,: is wholly immateriat here. It had the right to select thegrou.nds on which it would reach and base its conclusions. That which the court had declared material, by making the same the material basis of its decision;tbis oourt cannot regard or accept as not m,aterial, but must take the decisi,on as it finds it, Again, the court cite, as sustaining theconcIusion reached in that opinion. Rogersv. Burlington, 3 Wall. 654.' Now the only point in ,apparent agreement between the case then in progress of decision and the Rogers-Burlington Case is that which is above stated as the basis of thedecisioli. in City of Sioux City v. Weare, supra.; Defendant further contends that the principle thus decided in Cit;v of Sioux. CitY v. Weare, supra, is not "the settled law of the state." Counsel sa.y: "In order to warrant tbe circuit court Of the United States in SUbordinating tbe decision9f the supreme conrt of the United States to that of a state tribunal, it mPlilt, be found that the construction bas developed into a settled rule; tbat is to say, it must have been accepted and received as the true meaning of tbe statute."
603
Tills extract from defendant's brief maybe as stating the rule, How is it to be here applied? Before the decision of City of Sioux City v. Weare, supra, said section 5<10 had not been construed by the supreme comt of the state. After the decision of that case, and until the former decision filed herein, that court had not again had under consideration the said section in the point thus involved in City of Sioux City v. Weare. Certainly, then, that en1inent tribunal had given no conflicting decisions on that point. It will scarcely be claimed that a single decision, squarely presented, may not become settled law by acquiescence of years. Surely. it is not necessary, in law, any more than in liquids, that a repeated agitation or stirring up is essential to an abiding settlement. Once settled, it so remains until in some manner it is disturbed; and here we had silent acquiescence during 15 years, by supreme and nisi prius ('ourts of the state, as well as of the lawmaking department of the state. Since the handing down of the former opinion herein, the supreme court of Iowa have had under constI'uction substantially the point heretofore under consideration from said section 500. Heins v. Lincoln, 71 N. W.189, 102 Iowa, 69, was an action in equity to restrain the issuance of bonds by the city of Cedar Rapids. One point involved is expressly stated (71 N. W. 189, Ht2 Iowa, 71) to be that "the issue of the bonds is also claimed to be void because not authorized by the city charter." Cedar Rapids was acting under a special charter. That charter (section 54) provides: "The city council is hereby authorized to borrow money for any object or purpose In their discretion. and to pledge the faith .of the city for the payment thereof. provided [here follow provisions for submitting question of borrowing to vote of electors of the city]; and if·u majority decided in favor of said loan. then the city eouncil shall by ordinance establish a sinking fund to provide the means to payoff any indebtedness created by virtue of the authority granted in this section."
In that case the bonds were to be issued "to payor redeem its outstanding general warrants." The supreme court (page 191, 71 X W., and page 76, 102 Iowa) say: "The real question is, does this section confer on the city the right to pay its current debts. which are evidenced by city warrants, by issuing long-time, interest-bearing bonds therefor?"
After considering with a good deal of fullness, the general principles govermng or prescribing the powers of municipal corporations, that eminent tribunal considers, with much of detail, the authority of the city to issue bonds, in the absence of express statutory authority therefor. Its conclusion is thus stated (page 191, 71 N. W., and page 78, 102 Iowa): "'Ve do not understand that the power to borrow vested in a municipal corporation authorizes such corporation to issue bonds in payment therefor, in the ausence of express authority to that effect."
The opinion continues: "We know that some courts have so held, but we are not prepared to assent to the correctness of such holdings."
604
A.fterquoting from Merrill "t. :Monticello, 138 U. S. 673, 11 'Sup. Ct. 441, that part of the opinion which sustains the above-quoted proposition, the opinion proceeds: "So, in the case at bar, no express power'is given to issue bonds, and none can 'be implied, because it is not necessary to carry out theobjectd and purposes of the municipality. * * * It is a familiar rule that all dochts as to the existence of authority of a municipal corporation to ,do an act be resolved against it."
After citing various cases, it proceeds (page 192, 71 N. W., and page 79, 102 Iowa): "Some language used in the case, of City of Sioux City v. Weare, 59 Iowa, 98, 12 N. W. 786, may seem to conflict with the views herein expressed, but the facts in that case are different; nor do we think the court intended to adopt the broad rule that, if a municipal corporation had the power to, borrow moneyj it would necessarily follow tha't it had the power to issue its negotiable bonds therefor, in the absence of express authority so to do."
It would ha"te proven instructive had the learned court stated wherein they regarded the facts in City of Sioux City v. Weare as materially different-that is, a difference so controlling as to lead to a ,different decision upon this point-from those ipvolved in the C darRapids Case. True, in the latter there was express statutory 'authority and direction to the city to "establish a sinking fund to provide means to pay" the indebtedness. 'Such express authority or direction was wholly wanting in the Sioux City Gase. It would seem that, if the facts in the Sioux City Case could have sustained therein the decision as we have construed it, there would appear to be no escape from a fortiori conclusion, in the Cedar Rapids Case, that the bonds must be declared va,lid on the strength of the Sioux City decision, since in the Cedar Rapids Case the statute provided for and compelled the establishment of a sinking fund. It cannot be denied, as confessed by the court, that "some language used" in the Sioux City Case "may seem to conflict with the views" expressed in the Cedar Rapids Case. Except for the above-quoted statement from the opinion delivered in the Cedar Rapids Case, the latter deeision would naturally be accepted as an overruling of the former on the point under consideration. Regarding the Cedar Rapids Case as stating the law of this state, and as modifying the opinion given in the Sioux City Case, the question is presented as to the effect such later (Cedar Rapids) decision must have in the case at bar.. Had the latter expressly overruled the former decision, this court would have maintained its ruling heretofore reached on demurrer herein. The legal status of the bonds in suit herein, such bonds having been issued before such overruling, would have been determined with reference to the decision in force at the time of such issuance. With much hesitation, I have concluded that I must accept the Cedar Rapids decision, as construing the force to which the Sioux City decision is entitled. While unable satisfactorily to harmonize the announcement of the supreme court of the state as given in these two decisions, I am impressed with the fact that, except for the Sioux City decision, these bonds can have no valid standing herein. The utterances of the supreme court of the
GERMAN INS.
eo.
V. CITY OF MANNING.
605
United States as to such bonds, issued under the circumstances herein shown, are positive, and admit of no doubt. Tested by such utterances, as applicable to municipal bonds generally, the bonds in suit are invalid, because they were issued by a municipality as negotiable bonds, under the power to negotiate loans, i. e. to "borrow money," and without express delegation of power to issue negotiable bonds. Unless there is found in the legislation of this state statutory authority for the issuance by said city of these municipal bonds in their present negotiable form, plaintiff is not entitled to judgment against the defendant; and it is conceded that the only statute, existing at time of their issuance, under which claim can be made for their valid issuance, is section 500 of the Code of Iowa of 1873, above quoted. It is also conceded that that section does not expressly authorize the issuance of negotiable bonds, and that such authority to issue is found, if at all, in the construction given by the supreme court of the state to said section 500. Before this court is justified in deciding that the bonds in suit are not within the general rules announced by the supreme court of the United States, but are exceptions thereto, I must find that the settled law of this state places them without such announced rules. The acceptance of the later utterance of the supreme court of the state as to the force, effect, and intent of its earlier decision compels me to hold, contrary to the holding upon demurrer herein, which was made before such later utterance had been given, that section 500 of the Code of Iowa of 1873 did not authorize a municipality, when borrowing money in anticipation of its revenues, to issue negotiable bonds. This decision necessitates a finding herein for defendant. I confess that I am not satisfied with this conclusion. The defendant corporation contracted for a system of waterworks for its use and operation. In payment for such system it issued these bonds. It issued them in payment for such waterwol'ks, and as a valid issue, and those entitled to receive payment for the waterworks furnished by them to the city took these bonds, believing them to be valid. During the 10 years between issuance of the bonds and their maturity, the defendant corporation annually paid the interest thereon, without in any manner objecting to their validity. To me it is a matter of great regret that the judgment of this court apparently results in permitting the repudiation by the corporation of what manifestly was by it intended to be, and what was certainly accepted by those furnishing the waterworks as being, the valid obligation of the corporation to pay for its system of waterworks. I shall be heartily pleased if, in appellate proceedings, the judgment herein entered shall be reversed, and good morals and good law go hand in hand in this case, and what was at the time intended to be, and accepted as, the valid obligation of the defendant, as evidenced in the bonds in suit, declared capable of enforcement. On Rehearing. ReI, with a draft of finding of facts, additional argument ,vas permitted by the court as upon a rehearing, and also upon an applica1. After the fOr going opinion was prepared and submitted to coun-
,606
91>
FEDERAL ljtEPORTER.
,ion JOfplaintiff forleaye to file Jln amendment tq i original, petit;iOiQ., for purpose, as in the amendment, qt<;o,J,liorming the to the eyidence. ,',rhe substance of such amendment, which is ,offered as an additional is as follows: That,#l:the year 1$84 the defendaI1t, the town of.Manning, contracted Freeport Machine Company (which is the payee in the bonds in, suit) ,for the, of a system of for its use and that sUl'hsystem was duly constructed, bY said company, and 'by ,town; that said town, having authority pnderthe laws. of the stat.e of Iowa to llegotiate loans in anticipation of its revenues, of negotiating a loan to raise the which to discharge its indebtednel!\s to said company, executed and delivered to said company, as evidence of its indebtedness, I,l,nd of the terms upon which the same was to be paid, the five in writjng (being the: 'bonds) set out .in the original petitionherein; that the plaintiff insurance company thereafter, for value and before maturity thereof, became the o,,:,n,er, of such evidences of ,illdeqtedness ()n the part of the town to said, ;Freeport Machine CQtpPfi.ny" the latter company "thus raising the: .lll;oney for the dis,of said indebtedness on the part of the defendant to it"; that the defap.dant thereafter paid to plaintiff the inte,rest ,called for by said bonds until the maturity thereof, to wit, October 14, 1894; that pll,lintiff is still the ho'der and owner thereof, and tbe same, with are wholly unpaid, and judgment is, demanded.. The substallceof tbe facts alleged in the proposed, aJP,endment is clearly trial. proveu ill the evidence which w\ls, introduced, ,on, It will readilYl.:>enoted t11;at thisprqposed additio;n.al count changes entirely tl;J,e line upon w;hicbplaintiff claims judgment. It is, therefore,prpperly named ,as The original petii{ion declared on "theinstrnments of writing" as, upon valid while this coullt declares on them as merely "evidences ,o,f indebtedness." If the pending action was a snit in equity, thiscollnt would be regarded as claiming the, ,right to recover on the theory that plaintiff had,become subrogated to the rights of the payee in the bonds or evidences of indebte.llness. are payable to the Freeport Machine Company, or order, ,and are inq.or"ed by that company in blank as to indorsee, but "without recourse.", As to thl;l right of action under said count 2, defendant is pertinent: Whether witho,ut nlOj'.'e than said indorsement, can recoyer on said count 2, or claim to be subrogated to the ,payee's of right of action, even if.. said count 2 is not barred by the limitatiop.s. So far as relates to. any right in equity, the plaintiff company has to claim to1;>e subrogated to the machine company's rights of action against the defendant, the words, of Justice :Miller, in, JEtna Life Ins. Co. v. Town of Middleport, 124 U.. S. 534, 548, 8 Sup. Ct. 625, are pertinent (the names being changed): "The payment in this case was a voluntary interference of the [German Insurance] Company in the transaction. It had no claim against the city of [Manning]. It had no interest which required it to pay this debt. If it had stood off, and let the [machin'e] company and the city work out their own relations to each other, it ,could have suffered no harm. and no loss, There was no obligation on account of which, or reason why, the complainant should
607
have connected itself in any way with this transaction, or have paid this money, except the ordinary desire to make a profit in the purchase of bonds. The fact that the bonds were void, whatever right it may have given against the [machine] company, gave it no right to proceed upon another contract and another obligation of the city to the [machine] company."
But this action is at law, and no assignment is claimed, in favor of plaintiff, from the machine company, of whatever cause of action such company held, as for money, etc., of such company expended under ecntract for waterworks for the city, for which the city had agreed to pay, and had not paid, since the bonds were void. Counsel for plaintiff has cited some cases holding that.the bonds themselves may be treated as mere evidences of indebtedness given by the city, although they are in form negotiable, and so intended and treated by the parties to them at the time"of their execution and delivery; that is, that they may be treated as though not negotiable, and recovery had thereon, as either merely evidencing indebtedness, or as notes without elements of negotiability.. Without pausing to,review these cases, which I have examined, I am content to base my decision on this point upon the case of Dodge v. City of Memphis, 51 Fed. 165, decided in 1892, by Judge Thayer, then district judge of the Eastern district of Missouri, but now one of the circuit judges of this circuit.. That case was at. law on. municipal bonds issued by the city of 1Iemphis in payment of subscriptions of stock to a railroad. These bonds had been declared void' by decision of the supreme court of the United States. Said Judge Thayer: "The theory of plaintiff's counsel seems to be that the first count of the petition is' a Suit on the bonds,treating them as nonnegotiable instruments; that the bonds evidence the contract of SUbscription; and that the plaintiff is entitled to sue on the same, ignoring their negotiable quality, precisely as if they were an ordinary nonnegOTiable contract, which the town was authOrized to malte and had made."
This was the count attacked. After referring to the cases cited as supporting the right to recover on such a theory, the learned judge states: ' . "The authorities show that, if negotiable paper is uttered by a municipa\ corporation without authority of law, it is void, and a suit cannot be maintained thereon for any purpose."
Numerous cases, decided by the supreme court of the United States, cited as sustaining this proposition. Referring to the cases dted by plaintiff, Judge Thayer says: "They show, no doubt, that when a municipal corporation sells bonds which are void, and receives the money, it may be compelled to restore it, in an action for money had and received. So, when a municipal corporation is authorized to purchase property for any purpose, or to contract for the erection of public buildings or for any other public work, and it enters into such authorized contract, but pays for the property acquired or worlt dorle in negotiable secUrities which it has no express or implied power to issue, it may be compelled to pay for that which it has received, in a suit brought for that purpose, In no case, however, does it appear that a suit has been sustained on a void bond, tre'ating it as nonnegotiable, and as something entirely different from what the parties intended it should be. As the court understands the cases, suit must be brought on the implied promise which the law raises to pay the value of that which the municipality has received, but has in fact not paid for, because the securities Issued in pretended payment were void."
608,
REPORTER.
Further, the amendment cannot be now presented, because it contradicts the'statements of the bonds in an important matter, viz.: The bonda,in e:xpress terms,recite that they are issued "under the provisions of section 500, Code .of Iowa," which has hereinbefore .been quoted, and which only deals with the negotiation, by a municipal corporation, of loans in anticipation of its revenue. As given in the bond, the recital is the equivalent of a recital that: "This bond is issued as part of a loan negotiated in anticipation of the revenues of sald town of Mann\ng," etc.
But the amendment offered expressly states that: "Instead of negotiating a loan to raise the money with which to discharge the indebtedness, the defendant executed and delivered to said company, as evidence of such indebtedness, and of the terms upon which the same was to be paid, the five instruments in writing [meaning the bonds]."
Leave to file the proposed amendment must, therefore, be denied, to which plaintiff excepts. 2. Counsel for defendant attack the action of the council of defendant in issuing bonds under the contract for erecting defendant's waterwork1'! system as invalid because the yeas and nays were not "called and recorded" on the vote taken to so issue, and ask the court to find such omission as a finding of fact herein. Section, 493, Code Iowa 1873 (as amended by Laws 18th Gen. A.ssem. c. 146), requires that: "On the passage or adoption of · · · every resolution or order to enter into a contract by any council of any municipal corporation, the yeas and nays shall be called and recorded."
There were introduced in evidence the minutes of proceedings had at two meetings of the counsel of defendant with reference to issuing bonds under this contract. They are, in full, as follows: "Oct. 14, 1884. Special meeting caUed by the mayor for the purpose of obtaining the views of the council in regard to letting Freeport Machine Co. have town bonds. Members present: Martin, Roush, Sharp, and Funk. The follOWing resolution was read: 'ResolVed, by the town council of the town of Manning, Iowa, that the council hereby empower the mayor to issue bonds to the amount of $5,000, and that $3,000 of said amount be paid over to Freeport Machine Co., and balance be heldin hands of treasurer until settlement is made and work accepted, at which time balance due on contract to be paid to the Freeport Machine Co.' Carried by follgwing vote: Morrow, Sharp, ROUSh, Patton, Funk, Schoop. On motion adjourned. W. K. Lindsay, Rec." "Called meetjng, Dec. 25th, 1884. Council met in calle(i session, at call of the mayor, for the purpose of taking action in regard to approval of waterworks. In abseuce of mayor, Councilman apptd. mayor pro tem. Members present: Funk, Patton, Sharp, Morrow, Roush. Verbal report of waterworks committee heard, reporting fa:vorabl"y on acceptance of same. On motiou of Morrow, contract of Freeport Machine Co. for building and construction of waterworks as per contract was accepted, and bill presented for above works allowed (.Amt., $4,539.43), on the vote: Yeas-Sharp, Morrow, Funk, Roush, Patton. The following resolutiou presented an(i read, and passed on favorably by unanimous vote of the council: 'Whereas, the :B'rei:lport Ma<;hine Co. of Freeport, Ills., has successfully completed the waterworks, wl:\ich they agreed to build for the town of Manning, aud in accordance with a contract made by said Freeport MacllineCo. and the town of Manning, and dated .Aug. 14, 1884: 'l'berefore, be it resolved, the town couucil of the town of
609
tbat tbe said waterworks be, and tbe same are hereby, accepted by the town of :\fanning as acceptable in every way; and, furtber, resolved, that the thanks of the town .of Manning are due, and are hereby tendered, to the Jlreeport Machine Co. for the very prompt and efficient work it has done in constructing and completing the said waterworks, thus insuring to the town and its citizens at all times a good supply of water for fire protection and domestic use, placing the water facilities of this town far ahead of most towns of the size in the state.' On motion adjourned. 'V. K. LindsllY, Rec."
It will be noticed that these minutes, as to the passage of the resolution authorizing the issue of bonds in suit, do not expressly state that the yeas and nays were "called and recorded." But the minutes do state that such resolution was "carried by the following vote: Morrow, Sharp, Roush, Patton, Funk, Shoop." So that the minutes affirmatively show that the six councilmen, then composing the town council, voted in favor of passage of the resolution. The nays do not appear. It is not expressly stated whether or not they were called. But, since every councilman who was then a member of the town council voted in favor of passing the resolution, it would necessarily follow that no nay vote was cast. If the word "yeas" had been inserted before the names of those by whose vote the minutes declare the motion was carried, the objection raised by counsel for the town would be obviated. But to what degree would the proceedings, then, be more definite than now, on this point? To say that "the following councilmen voted in favor of the passage of the resolution," or that "the resolution was carried by the votes of the following named members of the counsel," or "the resolution was carried by the following vote," with the names afall the members of the council then stated, fulfills the spirit of the statutory requirement that the "yeas and nays be called and recorded" as fully as though it had been expressly stated that, "upon call of the yeas and nays, the result was: Yeas, [naming them]; nays, none." Assuming that the yeas and nays are to be "called and recorded," the purpose of the statutory requirement is as fully met, and by the record each councilman is given his full share of responsibility for voting in favor of the resolution. 3. Counsel for defendant urgently insist that the court failed to consider the item of $800 which the agreed statement of facts states was an outstanding indebtedness of defendant at time the bonds in suit were issued, and that, when said $800 outstanding indebtedness is added to the bonds in suit, the bonds at issue herein constitute an indebtedness in excess of that permissible under the constitntion of the state. The constitution provides (section 3, art. 11) that: "No · · · municipal corporation shall be allowed to become indebted in any manner, or for any purpose, to an amount in the aggregate exceeding five per centum on the value of the taxable property wIthiJi such * * · corporation, to be ascertained by the last state and county tax lists previous to the incurring of. such indebtedness."
The bonds in suit bear date October 23, 1884. The aggregatp. value of the taxable property within the municipal corporation of Manning, according to the state and county tax lists for 1884, was 95F.-39
610
Five per cent. of tbe last-named aggregate is $5,681.15. This,' then, is the limit, undel' the constitutional provision above t(j:Wliich the defendant could "become.indebted in any manner ,or anYPllrpose." Thel:/:greed statement of facts herein states (paragraph 10);that: ' ' ' "At the :time the bonds in suit 'were issued, the defendant town was already indebted', Without reference to the bond issue of September 9, 1882, in the sum of $800." \ i,
bond issue of September 9, 1882," is the bond issue hereinbefore considered and found invalid. Paragraph 2 of the additional statement of facts states: that: "!tis agre'ed that thefioating Indebtedness of the'defendant, in the sum of $800, referred to in former stipulation, was in existence at all the times at which it is claimed that defendant' entered into any contract or contracts."
contention of defendant is that'this $800, added to the $5,000 suit, exceed the. 5, centum above shown, and thereof bonds issue, which: t,o ,', th.e $8,00 tWs eXCeSEl,lS v\:>ld, III VIOlatIOn. of th,e. By,computlltion. it is ascertaiJ:1.ed, tJw.t such aggre($5,800) .exceeds onsaidvillue of taxable p,r,' .8 P .!t,nd, alt,.,ho,' .; '"th,l,'!> excess. is a small sum, y,et, .it, it s,ctllil:lly.existed, it invaHdated :the ' A inquiry arises as to the ,meaning of, the word "inused, in,theconstitutio:Q.., Defendant iJ;l!;\ists that, whatever itlilmeaning, the, excessiv,r .is proven, bej:ause the phraseology-"ill,debted"-of ,llgr\*.d statement of .facts (paragrap4 lO,sllPra)Js the tllat. co,Atained jn suc4. constitutional provi!3ion. It mtl-y be ,noted, that the. ··wragraph above quoteQ,from the statement of facts denomin!ltes , We therefore th,iswdebt,edness as, a "floating conclude ,that such at the highest, evidenced by The agreed of facts and the evidence introduced are equally silent as to the condition' of defendall,t's ,treasury at the date of the, iElsuance .of the bOJl.ds in suit.. If were no money in its, treasilr,y, ,the $800. of o,utstanding warra:lts ,llndoubtedlYl1n indebtedIless. But, if there were $800 treasury, would this "floating indebtedness" constitute an iullebtEldness within the meaning of .the constitution as above quoted? i Whenever the warrants ,were presented, they could, be pJ.'omptly paid. As rapidly ,as they were thus paid, this "floating indebtedness" would be thereby reduced. If all were presented, no indebtedness would remain, But, if they remained outstanding bethey werEt l:\ot presente(l for payment, can cause, and only, this constitutional prohibition apply? .In justice to the town, ought it, thenJ'to apply? We turn to the decisions of the supreme court of this state, to ascertain whMher that court has construed this portion of the constitutiQn, and find the matter considered and decided in Dively v. City of, Oed!lr ;Falls, 27 Iowa, 227, 232. This was an action at law, balled on "scrip," or warrants, wherein the city pleaded that the
GERMAN INS. CO,' V. CITY OF MAl'INING.
611
indebtedness created by the issue of this scrip exceeded the constitutional limitation; The court, speaking by Wright, J.; say: "Telltimony was introduced ,to sho;y the aggregate of. the, tax 1I!>t8' within the corporation, * * * and that 5 per centum of either would fall below the whole amount of scrip issued. But, this' 'conceded, the' question actually arising is scarcely touched. There is no particle of testimony warranting the conclusion that, when the scrip in suit was issued, the town was 'indebted in any manner' in another cent. Indeed, .we do not know but there was money in the treasury to pay this [scrip], and more than this. If a municipal corporation bas the money in its treasury to meet its indebtedness, the issue of warrants to the amount of $20,000" or any other sum, however. ,great, over 5 per cent. of its taxable property,,:,,,ould not be a violation of the constitution..' In such a case, it would not 'become in(lebted,' within the meaning of the clause under consideration.'" ,
As before stated, the indebtedness, if the $800 is counted in with the $0,000 bonds, is but $118.85 in excess of the 5 per centum. If, then, there was that amount of cash ($118.85) in defendant's treasury when the bonds were issued, this aggregate indebtedness does not fall within the constitutional limitation. In the. absence of any evidence on such point, what is the presumption? The officers of the town were in duty bound, by the obligations imposed on them as such, to observe the constitutional limitation. The creation of a municipal indebtedness beyond that limitation would be in violation of the duty imposed upon them, and contrary to their oath to support the constitution of the state. The rule is well settled, and needs no citation of authorities in its support, that the presump, tion is in favor of the performance of offidal duty. Again, upon the defendant, which is seeking, to escape payment of what it issued ini the form of, and as, a valid obligation, rests the burden of proof, when it asserts such obligation is not valid and enforceable. It asserts an indebtedness on its part in excess of the constitutional limitation. If the proof fail to show such an excess, the burden is not sustained; and, when less than $120 cash in the municipal treasury at date of issue of these outstanding bonds would defeat; this defense of alleged excess, the court may well demand satisfactory proo(before such excess is declared, and especially when the record shows with what faithfulness and complete satisfaction to the town the payee of the bonds in suit complied with his contract, for whose payment said bonds were issued. When the town has 'received a system of waterworks which so fully satisfies the town that it tenders its thanks to the contractor for his "very prompt and efficient work in constructing and completing said works," and formally enters on its council records that thereby there is "insured to the town and its citizens at all times a good supply of water for fire protection and domestic use," and that thereby the contractor has "placed the water facilities of this town far ahead of most towns of its size in the state," the court may well decline to declare as invalid the bonds issued, and accepted as being valid, in payment for such waterworks, until the court shall find every essential requisite to this defense has been fulLy and satisfactorily met. "The laborer is worthy of his hire." The courts should favor his full payment. The labor having been satisfactorily performed,
612
th:e'court will not refuse its in compelUng payment, except where the law,applied to the facts, irresistibly and inevitably sta,ys the arm of the court. l1pon the whole case, and after reconsideration' of the original argument, as well as exaInination of the cases cited on rehearing, I,sincerely regret that I am notable to change the judgment hereinbefore directed. Judgment must be entered for defendant. Olnd the fOllowing facts proven herein: (1) At the date of the commencement of this action, plaintiff, the German Insurance Company of Freeport, TIl., was a corporation, organized under the laws of the state of TIlinois, and a citizen of that state; and defendant, the city of Manning, was a municipal corporation, within the meaning of section 3 of article 11 of the constitution, of the state of Iowa, to wit, an incorporated town, incorporated in,March, 1882, under thelaws of Iowa, .and a citizen of Iowa. (2) After proceedings duly had therefor under the laws of the state of Iowa, the defendant contracted with the Freeport Machine Company of Freeport, TIl., for the erection of a system of waterworks for defendant for fire protection; said works were erected, and, on ,settlement therefor,. the defendant, on October 23, 1884, issued the five bonds in suit; and plaintiff, for value and before maturitY,:'Purchased said bonds indue course of business, and is now the holder and owner, thereof. ,A copy of one of said bonds is as follows: "Number 1. . United States of America. "State of Iowa. (Jity of Manning, Ia. "The' city of Manning, In the county of Carroll and state of Iowa, for value receIved, promises to pay Freeport Machine Co. of Freeport, Ills., or order, at· the JJ'armers' and. Traders' Bank, Manning, Iowa, on the 14,th day of October, 1894, the sum of one thousand dollars, with interest at the rate of 8 per cent. per annUlI), payable at Manning, Iowa, semiannually, on the 14th day of April anq Oct. 14th in each year, on presentation and surrender of the interest coupons hereto'attached. "This bond is issued by the' city of Manning, Iowa,under the provisions of section 500,chllpter 10, of title 4, of the Code of 1873 of Iowa, and in conformity with a resolution of the council of said city of Manning, Iowa, adopted at a regular !lesslon of said council on the 14th day of Oct, 1884. "In testimony Whereof; the said city of Manning, Iowa, has caused this bond to be signed by the treasurer and countersigned by the mayor of said city of Manning, IOWa, this 23rd day of Oct., 1884. D. W. Sutherland, "Treasurer of the City of Manning, Iowa. "J. Martin, "Mayor of the City of Manning, Iowa." Indorsed on back: "Without recourse. Freeport Machine Co., W. S. Lamb, Treasr." , ,
W:
The other four bonds are identical' with that above copied, except as to number, said bonds being numbered, respectively, Nos. 1, 2, 3, 4, and 5. The interest on each of said bonds has been by said defendant paid up to and including the installment by terms of bond falling due on October 14, 1894, that date being the maturity of said bonds, and, such payments of interest were made by defendant without defendant making any question or objection with respect to the validity of said bonds.
GERMAN INS. CO. V. CITY OF' MANNING.
613
(3) On September 9, 1882, the defendant, city of Manning, issued a series of 10 bonds, each being for $500, a copy of one of said bonds being as follows: "No.1. $500. "Bond of the Incorporated Town of Manning, Carroll County, State of Iowa. "(One of a Series of Ten Bonds, Amounting to $5,000.) "Know all men by these presents, that the incorporated town of Manning, of the of Carroll and state of Iowa, for value received, is indebted to the bearer in the sum of five hundred dollars, which incorporated town of Manning hereby promises to pay on or before the ninth day of September, A. D. 1892, at Manning, with exchange on New York, at the rate of seven per cent. per annum, on the ninth day of September of each year, "upon presentation of the interest-bearing coupons hereto attached as they become due. 'l'he said incorporated town of Manning consists of the following described to wit: All of section seventeen, the east half of the east half of section eighteen; the northeast one·fourth of the northeast one-fourth of section nineteen, and the north of the north one·half (}f section twenty, township eighty-two north, of range thirty-six west of the Fifth principal meridian, Carroll county, Iowa. "This bond is issued under and by virtue of an act of the general assembly of the state of Iowa, entitled 'An act to authorize incorporated towns and cities to procure and donate to railway companies, sites of depots,' etc., additional to Code, title four, chapter ten (relating to cities and towns), of the Nineteenth general assembly. Allowed in accordance with a vote of the qmtlified electors of said incorporated town of Manning, held at Manning, Iowa, September fifth, 1882"Dated at Manning, Carroll county, Iowa, this ninth day of September, 1882. "M. Hoffmann, John L.McQuaid, 1 ":\1. F. Spear, R. F. Tidd, "P. A. Emery, J. M. Turner, J "J. B. Ingledue, Mayor. "[Seal.] Geo. C. Hunt, Recorder."
That attached to each of said bonds were 10 annual coupons, similar to the following: No. 10. "Manning, Iowa, September 9, 1882. "The incorporated town of Manning, Carroll county, Iowa, will pay the bearer September 9, 1892, thirty-five dollars, being one year's interest on incor· porated bonds. "M. F. Spear, R. F. Tidd, 1 ":\1. Hoffmann, P. A. Emery, "John L. McQuaid, J. M. Turner, J "J. B. Ingledue, Mayor. "G. C. Hunt, Recorder." Stamped on the face: "A. T. Bennett. Paid December 15, 1891." Stamped on the back: "Pay to O. E. Dutton. Platt Peck." "Pay to the order of Platt Peck. John Peck, per L. W. Peck, His Son." "$35.
That each of said 10 bonds was identical with that above copied, save as to serial number, such bonds bearing, respectively, serial numbers 1 to 10 inclusive; that when the 5 bonds described in the preceding paragraph (2) were issued, these 10 bonds (issue 1882) were outstanding, but before the institution of the present pending action said bonds in this paragraph described had been paid off and canceled out of the ordinary revenues of defendant. (4) At the time said (September, 1882) bonds, described in last preceding paragraph (3) of these findings of fact, were issued, the amount
tl;le.reof .was, in the .l,lggregat,(j ot5 tlUable ,of said,IQorp91'atipp; d,efendant. ils by the last state and county tax lists previous to tbe ip,curr,ing of After the incorporation of said defendant, and previous to the issue, said bonds, no. county and shl:te tax list!1Qf property situated,with,iIi the. corporate limits of said defelldant were made, on limited to within such is; but th.e' of the; sMd property, so situateduwithinsaidcm-porate limits, aCCQiIlding to the last st;lte and county.ta'x:.lists preceding isstianceofsaid bonds, Wlli!l $5·,252,-viz. real $4,940,and per,so'DJtl .· ·' .' the saill bolidsln sUiL(isstieof1884)were issued, town was indebted.,.-i.e.hada floati.ng indebtedness the sum of'<$SOO;without referenee to the said. issues does. not' show, and I of bonds hi 1882. am not ltlM:.to.tind" wb'at, otmoney iIlthe treasury of the·d.efendant town at the time when said $800 indebtedness was ,Incurred, or when any evidence thereof was issued, or when the said 1884 bonds were issrted: (6) The 'aggregate \Tallie ta,xabl¢property. !.within the defendant, ascertained by the state and c,ounty tax lists for· the yeal'!1883, was $:\.00,776. (7) The aggregate value of the taxable property within the de· fendant corpQ'ratio.n:; 'asceMain,edby tlfestateand; 'cou.nty tax lists for the year 1884,:was$liS,623. . .'. .' (8) The outstanding indebtedness of the defendant corporation at the date (October, 1884) when the bonds in suit herein were issued, and including said bonds, was not, in the aggregate, an amount ex: ceeding>r511er. centum.of the taxable property within said defendant corporation, as ascertained by the last state a;qd cQunty tax lists previous to said issue. (9) . Sa,idpopds in suit herein were by defendant corporation issued and a loan by said defendant in of the revenues thereof, in· attempted compliance with section 500 of the Code of 1873 of Iowa, which section, so as material to the issues . herein, readsas follows:
ot.
i
n
as
"Sec. 500. bE) negotiated bYUIlY municipal corporation in anticipation of the revenues thereof."
As conclusions of law, lfind: . .·. . .. oonds, 'issued in September, 1882, as above fOUlid in paragraph 3 of of faot, wel'e invalid,i1nd not constitute an outstanding indebtedness against said defendant corporation at the date :(Octobel',' 1884, of issuance of bonds herein. . 2. Thattll.e'defendalitdid notpossefils.legal authority to issue the negotiable; bonds in sUit,. under saids'ection500, Code Iowa 1873, that saidhondl!l ate:ilivalfd, and thatplaiiitiff cannot herein recover thereon."·, 3. Judgment must be 'rendered for defendant, with taxable costs herein. . 1.
CONWAY. V. UNITED STATES.
615
CONWAY v. UNITED STA'I'ES. (Circuit Court 'of Appeals. l!lighth Olrcuit. June 19, 1899.) No. 1,On
PUBr,lC LANDS-RIGHTS OF HOMESTEAD SETTLER-SALE OF TIMBER.
2.
In an action by the United States to recover the value of timber alleged to have been wrongfully cut from the pUblic lands, an answer alleging that defendant purchased the timber from one who had entered the land in good faith under the homestead law, and was proceeding in good faith to fit the same for pasturage and cultivation; that the character of the land was such as to render it eXpedient, proper, and necessary to remove the timber for that purpose; that the homesteader, by reason of his age and poverty, was unabie to do the clearing, and for that reason and in good faith made a contract with defendant by which the latter purchased the timber for $800, agreeing to remove the same and to expend the money in a house and buildings on the land, in breaking such land as could be cultivated, and in furnishing the settler with stock and provisions, which agreement had been carried out in good faith by defendant,-alleges 'sufficient facts to constitute a defense. PJ,EADING-SUFFICIENCY of<' DENIAL. In an action for unliquidated damages a general denial In the answer, together with a special denial that plaintiff has been damaged in the amount claimed, is sufficient to put the plaintiff upon his proof as to dam.ages.
In Error to the District Court of the enited States for the District of :Minnesota. This Is au action at law instituted by the United States of America, the defendant in error, against Hugh Conway, the plaintiff in errol', to recover the value. of certain' pine logs ·alIeged to have been by him Unlawfully. cut and from certain lands belonging to the United States. It is averred in the petition that said'!ogs' contained 336,230 feet, board rrteasute, and Were and are of the value of $1,681.15, all of Which said logs, it is alleged, the defendantdid then and there convert and dispose of to his own use, to the damage of the' plaintiff In the sum .of $1,(;81.15, together' 'with thereon. The answer filed by the defend::mt consists of a general dellial, with a special denial that the plaintiff has been injured or danlflged in the sUlll of $1,681.15, or in 'any sum whafsoe"er.By way of pleading IlU affirmative defense" the answer contains averments' in substance as follows: That on the 25th day of :May, 1895, one Currer Boyington, with a bona fide intention of acqulrlng title to lands described in the petition umler the homestead laws of the United States, duly filed his allP!ication to enter said lands as a homestead, and that the application s6 made by him was accepted by the local land officers in the state of Minnesota, where the lands were sitnated; that afterwards, in August, 1895, Boyington cOmmenced Ilis residence on the laiJds, and. has ever since resided and now resides thereon; that shortly before so commencing his residence he built a smail log house, and in the month of Xovember, ·1895, there was growing on the lands scattered timber, a large portion of which was and had been dnmaged by fire; that it was necessary to cut the same in order to realize therefrom, and.;;:we the timber from becoming a total loss by reason of decay; that a large portion of the land was fit principally for pasturage and meadow lands, and that it was expedient, proper, and necessary, in order to cultivate and improve said lands, to cut and remove the scattered and burned timber, so that the lands might be prepared for pasturage and cultIvation; that in the month of November, 1895, Boyington and the defendant, Conway, entered into a contract, by the terms of which Boyington, for the Inn'pOS(! of dearing and CUltivating said lands, covenanted and agreed to sell to Conway the sca1tered and burned timber thereon for. the sum of $800, to be paid for in the follOWing manner: Conway was to erect and construct a frame dwelling house on the lands for Boyington, and such other buildings as he should desire thereon, and also to break for Boyington such portions of the lands as could be cultivated, and also to furnish Bo.yington with sufficient