Case ID: ohio-st_78/html/0287-01.html
Source: Caselaw Access Project
Author: {"author": "Summers, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Commissioners of Muskingum County v. The State of Ohio.
    
      Power of county commissioners to issue bonds — Section 2834a, Revised Statutes — Action to enjoin delivery of bonds — Money judgment against recipient of bonds — May be rendered, when.
    
    1. County commissioners are authorized by Section 28340, Revised Statutes, to issue new bonds and to exchange them for outstanding bonds, 'but they are not authorized to exchange them for the promissory notes or other evidences of the debt of the county.
    2. In a suit by a taxpayer, against the board of county commissioners and the party to whom the bonds of the county have been delivered without authority of law, to enjoin the delivery of the bonds, the court may render a money judgment against such party for money had and received or for a conversion of the bonds, when it appears from the facts disclosed on the hearing, but not known to the plaintiff when he brought his suit, that the bonds had already been issued and delivered and had been transferred to a bona tide holder.
    (No. 10865
    Decided June 9, 1908.)
    Error to the Circuit Court of Muskingum County.
    In November, 1904, a taxpayer of Muskingum county brought suit to enjoin the board of county commissioners from issuing $55,500 of county bonds to P. S. Briggs & Company, of Cincinnati, Ohio. He averred that Briggs & Company contracted with the commissioners to print and purchase bonds to that amount for the purpose of refunding the floating indebtedness of said county and prayed that the commissioners be enjoined from issuing and delivering the bonds, on the ground that they had not been advertised as required by law. He also averred that the prosecuting attorney had refused to bring the suit.
    January 13, 1905, the taxpayer moved the court to dismiss the action and on the same day C. U. Shryock, another taxpayer, asked leave to become a party defendant in the action to prosecute the same and for leave to file an answer and cross-petition as such taxpayer. The court overruled the motion to dismiss and granted leave to Shryock to file an answer and cross-petition.
    January 17, 1905, Shryock filed his answer and cross-petition and obtained leave to make the Cincinnati Trust Company, a corporation, a party defendant, and on the same day the court granted an order restraining the trust company and Briggs & Company from selling -and disposing of the bonds until further order of the court.
    Summons on the cross-petition and the restraining order were served upon Briggs & Company and the trust company on January 18.
    In his answer and cross-petition Shryock averred that since the commencement of the action, to-wit, on or about the first day of December, 1904, the commissioners had attempted to carry out the contract, and had executed and delivered to Briggs & Company the bonds of the county in the sum of $55,5°° for the par value thereof when said board and company well knew that the market value of the bonds was $61,000. He averred that the board of county commissioners never had determined that it was necessary or to the interests of the taxpayers of the county, or to the interests of the county, to issue any of said bonds, and that no advertisement of the sale and issue of said bonds had been made. He prayed that Briggs & Company and the trust company be enjoined from disposing of the bonds and that upon a final hearing they be ordered to return and restore and cancel the bonds, and that upon their failure to so do, that the court enter a judgment against them in favor of the county for $61,000, the value of the bonds.
    Briggs & Company filed an answer admitting that they had entered into the contract, but averring that the contract never had been carried out, and averring that it did not own or have possession or control of the bonds, or any interest in them, or any of them, at the time of the service of the restraining order, or at any time thereafter.
    The trust company answered denying that any contract ever had been entered into by the county commissioners and Briggs & Company for or on its behalf, and admitting that on or about the first day of December, 1904, the trust company was the owner of certain evidences of indebtedness of Muskingum county, which were drawing interest at the rate of six per cent, per annum, and that it agreed with the board of county commissioners to exchange, and that it did exchange said evidences of indebtedness, dollar for dollar, for other evidences of indebtedness, to-wit, bonds of the county, drawing interest at the rate of 4^ per cent, per annum, and it denied that at the time of the service of the restraining order, or at any time since such service, it either owned, controlled or had possession of the bonds referred to, or any interest in them or any of them.
    The court of common pleas found for the defendants and dismissed the petition. Shryock appealed the case to the circuit court. The circuit court at its April term, 1907, found for the plaintiff and ordered the defendants, Briggs & Company and the trust company, to return the bonds to the county auditor within ten days and that upon such return the auditor should return to the defendants the notes that 'had been given in exchange for the bonds, and “that upon failure of said defendants to deliver up said bonds as herein decreed, it is ordered, adjudged and decreed that the plaintiff recover from the said- defendants the sum of $4,400 with interest from December 9, 1904, at six per cent.”
    It appears from the bill of exceptions that on June 24, 1904, the board of county commissioners at its meeting adopted the following resolutions:
    “Whereas, The county bridge fund has been overdrawn by reason of extraordinary expenditures caused by unusual storms destroying bridges and roads; and
    “Whereas, It will be necessary to further draw on the bridge funds to replace bridges destroyed and make repairs.
    “Therefore, be it resolved, That the tax levy made by this board at its June session, 1904, for the restoration of bridges be anticipated, and $25,-500 be borrowed from the Old Citizens National Bank of Zanesville, Ohio, in anticipation of the collection of said tax, and the two notes each in the amount of $12,750, bearing date of June 24, 1904, with interest at six per cent, and payable on demand, be executed by this board in favor of said the Old Citizens National Bank.
    
      “Ayes: J. B. Tanner, J. H. Crooks, A. S. Leland”
    It further appears that this money was obtained from the bank and the following notes, or evidences of indebtedness delivered to the bank:
    “County of Muskingum, State of Ohio.
    “Zanesville, Ohio, June 24, 1904.
    “On or before the first day of March, 1905, the county of Muskingum will pay to The Old Citizens National Bank, or order, twelve thousand seven hundred and fifty dollars, and interest, six per cent, thereon from date, the interest to be paid semi-annually on the twenty-third day of December and the twenty-third day of June in each year. Value received; payable at the county treasury, Muskingum county, Ohio.
    “This note given for money borrowed in anticipation of the collection of tax levied by the County Commissioners of said county, at their- June session in 1904, for repairing and rebuilding bridges under authority granted by Section 871, Revised Statutes of Ohio.
    “Board of Commissioners of the County of Muskingum, State of Ohio.
    “[Seal.] “J. B. Tanner,
    “J. H. Crooks,
    “A. S. Leland,
    “Countersigned by Auditor: L. E. Brelsfobd.'”
    “Zanesville, Ohio, June 24, 1904.
    “County of Muskingum, State of Ohio.
    “On or before the first day of September, 1905, the county of Muskingum will pay to The Old Citizens National Bank, or order, twelve thousand seven hundred and fifty_ dollars, and interest, six per cent, thereon from date, the interest to be paid semi-annually on the twenty-third day of December and the twenty-third day of June in each year. Value received; payable at the county treasury, Muskingum county, Ohio.
    “This note given for money borrowed in anticipation of the collection of tax levied by the County Commissioners of said county, at their June session in 1904, for repairing and rebuilding bridges under authority granted by Section 871, Revised Statutes of Ohio.
    “Board of Commissioners of the County of Muskingum, State of Ohio.
    “[Seal.] . “J. B. Tanner,
    “J. H. Crooks,
    “A. S. Leland. “Countersigned by Auditor: L. E. Brelsford.”
    September 1, 1904, at a meeting, the board of commissioners adopted the following resolution:
    “Whereas, overdrafts exist in the funds of the county treasury from lawful payments made therefrom, as follows:
    “In general county fund the sum of $18,166.70 and in the court fund the sum of $12,184.97, in all $30,351.67, which indebtedness is an existing, valid and binding obligation of the county of Muskingum, State of Ohio, and said amounts are due . and required to be paid at once, and from limits of taxation the said county is unable to pay the same at maturity and it is necessary to borrow money for the payment of said indebtedness; therefore, for the purpose of funding the said indebtedness and extending the time for payment of the same, it is ordered that the notes or obligations of the county be made and issued according to law, to be signed by the commissioners and auditor according to law, for a sum not exceeding the amount of said indebtedness, to-wit, $30,351.67, such notes to be to such persons or parties and in such sums as is deemed best by the commissioners, and bear interest from their date at the rate of six per cent, per annum, and to run for a period not exceeding four months from date, and said notes shall be made payable at Zanesville, Ohio, and be issued and delivered to the payees named thereon for a sum not less than the face value thereof; and it is further ordered that the sum so realized from the said notes so to be issued be applied to the payment of said existing indebtedness and for no other purposes.
    “Ayes: Tames B. Tanner, Tohn H. Crooks, A. S. Leland
    With respect to this loan the following appears from the journal of the commissioners:
    “Temporary loan of $30,351.67 secured from The Union National Bank and First National Bank. In compliance with the foregoing order, the sum of $20,000 was borrowed from The First National Bank of Zanesville, Ohio, and $10,351.67 from The Union National Bank of Zanesville, Ohio, making in all the sum of $30,351.67, of which sum $18,166.70 is for payment of overdrafts in the general county fund and $12,184.97 is f°r payments of overdrafts in the court fund. In consideration of said loan, the Board of County Commissioners have executed two several notes of the county, in favor of said parties, of which the following are true copies:
    “Zanesville, Ohio, September i, 1904.
    “For value received, the county of Muskingum, State of Ohio, promise to pay to the order of The Union National Bank of Zanesville, Ohio, the sum of ten thousand three hundred and fifty-one dollars and sixty-seven cents four months after date, with interest from date at six per cent, per annum, payable at said bank. This note is made pursuant to the order of the board of county commissioners of said county made this date, for the purpose of funding a valid, existing and binding indebtedness of said county, under Section 2834a, Revised Statutes of Ohio.
    “Witness the hands of the County Commissioners of said county, attested by the Auditor of said county, on the day aforesaid.
    “James B, Tanner,
    “John H. Crooks,
    “Almon S. Leland,
    “County Commissioners of Muskingum County, O.
    “Zanesville, Ohio, September 1, 1904.
    “For value received, the county of Muskingum, in the state of Ohio, promises to pay to the order of The First National Bank of Zanesville, Ohio, the sum of twenty thousand dollars, four months after date, with interest from date at the rate of six per cent, per annum, payable at said bank. This note is made pursuant to the order of the Board of County Commissioners of said county made this date, for the purpose of funding a valid, existing and binding indebtedness of said county, under Section 2834a, Revised Statutes of Ohio.
    “Witness the hands of the County Commissioners of said county, attested by the order of said county, on the day aforesaid.
    “James B. Tanner,
    “John H. Crooks,
    “Almon S. Leland,
    “County Commissioners of Muskingum County, Ohio.”
    November 15, 1904, the following resolution appears upon the minutes of the board of county commissioners:
    “Whereas, The county of Muskingum, Ohio, is indebted to various persons in the aggregate sum of $55,500, all of which indebtedness is now due, and which indebtedness this county, from its limits of taxation is unable to pay; and
    “Whereas, Said indebtedness and each and every item thereof is now determined and declared by this board to be an existing, valid and binding obligation of this county; and
    “Whereas, Said indebtedness bears interest at the rate of six per cent, per annum and can be funded at the- rate of four and one-half per cent, per annum; and
    “Therefore, This board deems it to be for the best interests of the county that said debts should be funded at such lower rate of interest;
    “Therefore, be it resolved by the Board of County Commissioners of Muskingum county, Ohio, that for the purpose of extending the time of payment of said indebtedness and to reduce the rate of interest thereon, and to change but not increase the same, bonds of said county be issued in the sum of $55,500. Said bonds shall be of denomination of $500 each, numbered from 1 to 111 each, inclusive, shall be dated December 1, 1904, shall bear interest at the rate of four and one-half per cent, per annum, payable semi-annually, and shall mature as follows:
    “$15,500 December 1, 1921.
    “$20,000 December 1, 1922.
    “$20,000 December 1, 1923.
    “Said bonds shall be substantially in the following form, to-wit:
    “No.- $500.00
    “United States of America,
    “State of Ohio,'
    “County of Muskingum,
    “4 J2 % Refunding Bonds.
    “Know all men by ti-iese presents, That the county of Muskingum, in the state of Ohio, acknowledges itself to owe, and for value received hereby promises to pay to bearer the sum of five hundred dollars in lawful money of the United States of America, upon the first of December, 19 — , with interest thereon at the rate of four and one-half per cent, per annum, payable semi-annually, on the first days of June and December of each year, until the payment of the principal sum hereof, upon presentation and surrender of the proper coupon therefor hereto attached. Both principal and interest hereof are payable at the county treasurer’s office, in Zanesville, Ohio.
    “This bond is one of a series of 111 bonds of like date, denomination and tenor, except as to maturity, numbered from I to hi each, inclusive, and-is issued under authority of the general statutes of the state of Ohio and by virtue of a resolution duly passed by the Board of County Commissioners of said Muskingum county on the fifteenth day of November, 1904.
    “It is hereby certified and recited that all acts, conditions and things required by law precedent to and in the issuance of this bond, in order to make the same, a legal, valid and binding obligation, have been done, have happened, and been performed in regular and due form; that the indebtedness to fund which this series of bonds was issued was a legal, valid, and binding obligation of said county of Muskingum; that this issue of bonds, together with all other indebtedness of said county of, and with the full faith, credit and revenues and all the real and personal property of said county of Muskingum are hereby irrevocably pledged for the prompt payment of this bond and interest, as the same mature.
    “in witness whereof, the county of Muskingum, Ohio, has caused this bond to be signed by its Board of County Commissioners, duly authorized hereunto, countersigned by the county auditor, and the county seal to be affixed, and the coupons to bear the facsimile signature of its county auditor, at Zanesville, Ohio, this first day of December, 1904.
    “John H. Crooi-cs, “James B. Tanner, “A. S. Leland, “County Commissioners.
    “Countersigned: L. E. Brelsford, County Auditor.
    
      “Coupon No. - $11-25.
    “On the first day of June, 1905, the county of Muskingum, state of Ohio, will pay to the bearer the sum of $11.25, tb-e county treasurer’s office, Zanesville, Ohio, being six months interest then due on its four and one-half per cent, refunding bond, No. -, dated December 1, 1904.
    “L. E. Brelsford, County Auditor.
    “Said bonds shall be signed by the Board of •County Commissioners, countersigned by the County Auditor, and the seal of the county affixed; provided that the coupons may bear the facsimile signature of the County Auditor.
    “When said bonds have been duly executed, they shall be delivered to the holder of the indebtedness to refund which they are issued, and exchanged for the same, dollar for dollar, and the evidence of the indebtedness shall be immediately cancelled, and to pay such bonded indebtedness, this board obligates itself to levy each year during the period these bonds have to run, a tax, in addition to the amount authorized, sufficient in amount to pay the accruing interest and the bonds as they mature.
    “Mr. Tanner moved the adoption of this resolution, and upon the call, of ayes and noes, the following members of the board voted: Ayes,- James B. Tanner, John H. Crooks, A. S. Leland; no, none. Resolution adopted.
    “Board adjourned sine die.
    
    “John H. Crooks,
    “Almon S. Leland,
    “James B. Tanner,
    “County Commissioners.”
    
      The defendants offered no evidence and the uncontradicted testimony is to the effect that the commissioners had acceptéd a proposal from Briggs & Company to exchange these notes for bonds, and that to prevent this the suit was commenced; that about the first of December, 1904, while the suit was pending, the trust company purchased the notes from the banks and exchanged them for the bonds, and that on December 9, 1904, it sold and delivered them to parties in Boston, and that they were at that time worth in the market a premium of eight per cent.
    
      Mr. Harry L. Gordon; Mr. Louis M. Ireton and Mr. Walter M. Schoenle, for plaintiffs in error.
    
      Mr. H. E. Buher, for defendant in error.
   Summers, J.

The case involves the construction of Sections 22b, 871 and 2834a, Revised Statutes. Section 2834a is as follows: “The trustees of any township, the board of education of any school district and the commissioners of any county for the purpose of extending the time of payment of any indebtedness, which from its limits of taxation such township, school district or county is unable to pay at maturity, shall have power to borrow money or to issue bonds of such township, school district or county, so as to change but not to increase the indebtedness in such amounts and for such length of time and at such rate of interest, as the trustees, board of education or commissioners may deem proper, not to exceed the rate of six per centum per annum, payable annually or semi-annually.

“Or when it shall appear to the trustees, board of education or commissioners of any township, school district or county to be for the best interests of such township, school district or county to renew, refund or extend the time of payment of any bonded indebtedness which shall not have matured and thereby reduce the rate of interest thereon, such trustees, board of education or commissioners shall have authority to issue for that purpose new bonds, and to exchange the same with the holder or holders of such outstanding bonds if such holder or holders shall consent to make such exchange and to such reduction of interest.

“Provided, however, that no indebtedness of any township, school district or county shall be funded, refunded or extended unless such indebtedness shall first be determined to be an existing, valid and binding obligation of any such township, school district or county by a formal resolution of the trustees, board of education or commissioners of any such township, school district or county, which resolution shall so state the amount of the existing indebtedness to be funded, refunded or extended, the aggregate amount of bonds to be issued therefor, their number and denomination, the date of their maturity, the rate of interest they shall bear and the place of payment of principal and interest.

“And for the payment of the bonds issued under this section the township trustees, board of education or county commissioners shall levy a tax, in addition to the amount otherwise authorized; every year during the period the bonds have to run sufficient in amount to pay the accruing interest and the bonds as they mature.”

The section was first enacted in 1896 (92 Ohio Laws, 6), and comprised only the first paragraph. It was amended the same year (92 Ohio Laws, 33), by the addition of the proviso, being the third paragraph; in 1898 (93 Ohio Laws, 233), by the addition of the fourth paragraph, providing for the levy of the tax, and in 1904 (97 Ohio Laws, 514) by the addition of the second paragraph providing for an exchange of bonds.

The wording of the statute is not accurate, but it clearly appears that authority is given, under the circumstances stated, to borrow money, or to issue bonds, and to issue new bonds and exchange them for outstanding bonds. It is contended that the negotiable promissory notes held by the banks were bonds, and that the commissioners were authorized to issue new bonds and to exchange them for the notes. In its broad sense a bond comprises a negotiable promissory note, under seal, but' a promissory note is not a municipal bond within the meaning of those words as understood in the commercial world. A negotiable promissory note generally is made payable to a person, or order, and is for a comparatively short period of time, while a bond generally is made payable to bearer, has a long time to run and has negotiable interest coupons attached. It is easier to distinguish them than to point- out the distinction.

“By the term ‘municipal bonds’ is meant evidences of indebtedness, issued by cities, incorporated towns, counties, townships, school districts, and other public corporate bodies, negotiable in form, payable at a designated future time, bearing interest payable annually or semi-annually, and usually having coupons attached evidencing the several installments of interest.

“Municipal bonds issued in the usual negotiable form, when authorized by law, have all the attributes of negotiable commercial paper of individuals or private corporations; they are usually made payable to bearer; they pass by delivery, and, like other negotiable instruments, are not subject to equities. between prior holders, in the hands of bona ñde purchaser for value, before due, without notice of such equities. Municipal bonds, when authorized by law, may be issued to raise money for the purpose of constructing or carrying on authorized public improvements or works. They represent a large portion of the wealth of the country, and their commercial value in the market depends very largely upon their negotiable character.” Harris on Municipal Bonds, 8.

Practically the same definition is given by Judge Hainer in his work entitled “The Modern Law of Municipal Securities,” Section 4. Daniel on Negotiable Instruments, Section i486, says they are “A new species of security for money which has sprung at once to the front rank of negotiable instruments.. They constitute a vast portion of the wealth of this country.” In Mercer Co. v. Hacket, 1 Wallace, 83, Mr. Justice Grier says: “This species of bonds is a modern invention intended to pass by manual delivery and to have the qualitiés of negotiable paper; and their value depends mainly upon this character.” .

The power to issue bonds, or other negotiable securities, is not necessarily incident to a power expressly conferred upon a municipal corporation to borrow money, but generally the one power as well as the other must be expressly granted. In Merrill v. Town of Monticello, 138 U. S., 673, Mr, Justice Lamar says: “It is admitted that the power to borrow money, or to incur indebtedness, carries with it the power to issue the usual evidences of indebtedness by the corporation to the lender or other creditor. Such evidences may be in the form of promissory notes, warrants, and, perhaps, most generally, in that of a bond. But there is a marked legal difference between the power to give a note to a lender for the amount of money borrowed, or to a creditor for the amount due, and the power to issue, for sale in open market, a bond, as a commercial security, with immunity, in the hands of a bona ñde holder for value, from equitable defenses.” And again he says: “To borrow money, and to give a bond or obligation therefor, which may circulate in the market as a negotiable security, freed from any equities that may be set up by the'maker of it, are, in their language and legal effect essentially different transactions.” In Brenham v. German American Bank, 144 U. S., 173, where the charter authorized the city to borrow money for general purposes, on the credit of the city, it is held that the city in the exercise of this power, could give to the lender, as a voucher, for the payment of the money, evidence of indebtedness in the shape of non-negotiable paper, but that it did not authorize it to issue negotiable paper or .bonds, unimpeachable in the hands of a bona ñde holder.

Section 2834a does not confer power to borrow and to issue bonds as evidence of the debt, the power given is to borrow, or to issue bonds; and as originally enacted it read power to issue bonds or to borrow money, and this necessarily excludes the implication that the power to borrow includes the power to issue bonds.

Two of the notes recite that they are issued under authority of Section 871. That section authorizes the commissioners to borrow money and to issue the bonds of the county to secure the payment óf principal and interest thereof, but Section 872 provides that the bonds so issued shall be in sums not more than one thousand dollars each. These two notes are in the sum of $12,750.00 each. Moreover, each of the four instruments recites that it is a note. However, it is not necessary to determine whether the statute confers power to give negotiable promissory notes, for if the word “bonds” is used to designate a security different from a negotiable promissory note then the authority to issue new bonds and to exchange them for outstanding bonds does not include power to issue and exchange bonds for negotiable promissory notes or evidences of indebtedness other than bonds. There is a reason why such an exchange should be limited to bonds. Section 22&, Revised Statutes, enacted in 1883, provides that all bonds issued by boards of county commissioners shall be sold to the highest bidder after being advertised, and it may well be that in such case the legislature supposed it would be in the interest of the public to permit new bonds to be issued, bearing a less rate of interest, and to be exchanged for the outstanding bonds. Moreover, if the power to exchange is not limited to such an indebtedness, for which bonds had been advertised and sold, then the last amendment added nothing to the section, for it already conferred power to fund, refund or extend.

The bonds having been issued and delivered, without authority of law, to the trust company in exchange for the notes, and the bonds having passed from the trust company to a bona fide holder for value, the question remains whether the judgment against Briggs & Company and the trust company, as for a conversion of the bonds, is authorized.

The petition does not state a cause of action at law, in which the defendants, Briggs & Company and the trust company, could be joined as defendants with the commissioners and be required to answer in the Muskingum court, but' it does state grounds for an injunction, that was the primary relief sought, and respecting that the defendants were properly joined and summoned and appeared without objection. While the suit was pending the commissioners issued and delivered the bonds to the defendant, the trust company, and it sold and delivered them to purchasers beyond the jurisdiction of the court, so that the primary relief sought could not be granted. It is well settled that, “If a court of equity obtains jurisdiction of a suit for the purpose of granting some distinctively equitable relief, such, for example, as the specific performance of a contract, or the rescission or cancellation of some instrument, and it appears from facts disclosed on the hearing, but not known to the plaintiff when he brought his suit, that the special relief prayed for has become impracticable, and the plaintiff is entitled to the only alternative relief possible of damages, the court then may, and generally will, instead of compelling the plaintiff to incur the double expense and trouble of an action at law, retain the cause, decide all the issues involved, and decree' the payment of mere compensatory damages.” i Pomeroy’s Equity Jurisprudence, Section 237. A case illustrative of this practice is referred to by Judge Burnet in the opinion in Rees v. Smith, 1 Ohio, 124. He says: “We consider it no objection to the decree in this case, that it is for the payment of money only. Such decrees are frequent. The case of Turner v. Dayton and others, decided at the last term, in Champaign, is in point. The bill was filed for a specific performance. The allegations of the bill were sustained, but Dayton having sold the land to his co-defendants, who had purchased for a valuable consideration without notice, a specific performance could not be decreed. The court, however, having become legally possessed of the case, refused to turn the plaintiff round, retained the cause and under the general prayer for relief decreed to the complainant the value of the land, which was admitted to be the sum for which it had been sold, and which was then in the hands of the defendant, Dayton.”

Piad these bonds remained in the hands of the trust company the court by its decree could have required that they be surrendered, but while the suit was pending they passed beyond the reach of the court, and we do not think there can be any doubt that a cause of action exists against the parties who obtained them and placed them beyond the the jurisdiction of the court as for a cpnversion of the bonds, or for money had and received, for the amount which the defendant .realized on their sale. In a somewhat similar case, the Town of Plainview v. Winona & St. Peter R. Co., 36 Minn., 505, it is said: “If it be conceded that these bonds, when once placed on the market, were liable to pass into the hands of purchasers who would be entitled to enforce the same as valid negotiable securities in the United States courts, as the result in this case has proved, it must necessarily follow, we think, that plaintiff has a cause of action for damages.” In Comstock v. Hier, 73 N. Y., 269-275, it is said: “It would be illogical, conceding the invalidity of the note in the hands of the defendants, and the non-liability of the plaintiff to them, to hold the defendants would acquire a title to the proceeds of the note by a transfer of 'the same to a third person. A party can not fortify his title to property by a sale, as the title to proceeds upon sale will be the same as to the property before sale. I am of the opinion that the plaintiff had an election of remedies — trover for the conversion of the note, or an action for money had and received, for the amount which the defendants realized upon the sale of the note. This follows from the conceded rule that the defendants were without title to the note, or authority to dispose' of the same.” In Chitty on Bills, *251, the author says: “Where a note or bill was void in its creation, the party entitled to the instrument may maintain an action of detinue or trover to .recover the same-or its value, or assumpsit for money had and received, if the proceeds of the bill have been received.” And in Lamb, Exr., v. Clark, 5 Pick., 193, 197, the court say: “There are cases where an injured party may have his election of remedies, as where there has been a tortious taking of his property, he may bring trespass or trover, or he may waive both, and bring assumpsit for the proceeds when it has been converted into money.” See also Farnham v. Benedict, 107 N. Y., 159; Webb v. City Council of Alexandria, 33 Gratt., 168.

The doctrine of lis pendens does not apply to negotiable securities .purchased before maturity, and there is no question as to the good faith of the trust company, the prosecuting attorney of the county advised that the statute authorized the commissioners to exchange the bonds for the notes, hut the trust company received the bonds in exchange for the notes and is charged with knowledge that the action of the commissioners was unauthorized. There is, however, no evidence that will support the judgment against Briggs & Company, and the judgment is reversed-as to it and as to the trust company it is affirmed.

Judgment reversed as to Briggs & Company.

Judgment affirmed as to trust company.

Price, C. J., Shaucic, Crew and Spear, JJ., concur.