# Merrill v. Monticello

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United States Supreme Court
138 U.S. 673
Merrill v. Monticello
This was an action at law by Abner L. Merrill, a citizen of Massachusetts, against the town of Monticello, in the state of Indiana, upon certain bonds and coupons issued by the town, and purchased by the plaintiff in open market. The bonds and coupons were in form like the following:
'United States of America.
'No. 1. State of Indiana. $100.
'Funding Bond of the Town of Monticello.
'Ten years after date, the town of Monticello, in the county of White, state of Indiana, promises to pay to the bearer, at the Importers' and Traders' National Bank, New York, one hundred dollars in gold, with interest thereon at the rate of seven per cent. per annum, payable annually, in gold, at the same place, upon presentation of the proper coupon hereto attached, without any relief whatever from the valuation or appraisement laws of the state of Indiana. The principl o f this bond shall be due and payable, at the option of the holder, on the non-payment, after due presentation, of any of said coupons, for ninety days after the maturity thereof. This bond is one of a series of $21,000, authorized by the said town by an ordinance passed by the board of trustees thereof on the thirteenth day of May, 1878, for the purpose of funding the indebtedness of the said town. In witness whereof the board of trustees of the town of Monticello have caused this bond and the coupons thereof to be signed by their president and clerk, and the seal of the town to be affixed hereto, at the said town of Monticello, this twentieth day of May, 1878. R. W. CHRISTY, President. Attest: F. BOSINGER, Clerk.'
[Copy of coupon:] 'The town of Monticello, Indiana, will pay the bearer, in gold coin, seven dollars, without relief from valuation or appraisement laws of the state of Indiana, at the Importers' and Traders' National Bank, New York, on the twentieth day of May, 1880, being one year's interest on bond No. 1. R. W. CHRISTY, President. Attest: F. BOSINGER, Clerk.'
The coupons numbered 2, attached to each bond, having been presented for payment, when due, at the place specified therein, and payment having been refused, the plaintiff, as the holder of 143 of the bonds with coupons attached, elected to declare the principal sum due, in accordance with the terms of the bonds, and accordingly, on the 1st of July, 1881, brought this action to recover that amount. A demurrer to the defendant's answer having been sustained, it filed an amended answer, in substance as follows: At the time the bonds in suit were issued, the defendant was, and still is, a municipal corporation or town, duly organized under the laws of Indiana, in pursuance of a statute of that state passed June 11, 1852. On the 24th of June, 1869, a petition was presented to the board of trustees of the town by the school trustees praying for the issue of the bonds of the town to aid in building a school-house; and on the same day the trustees of the town passed an ordinance directing that there be issued to the school trustees $20,000 worth of coupon bonds, of the denomination of $100 each, bearing 10 per cent. interest, payable annually, which bonds, running 10 years, were issued by the town May 1, 1869, and were afterwards sold in open market. The principal of them had not been paid, and they constituted the only indebtedness of the town, when, on the 11th of May, 1878, the following petition, signed by the owners of taxable property in the town, was presented to the town trustees: 'We, the undersigned, citizens of the town of Monticello, Indiana, and owners of the taxable property therein, respectfully petition that you, as trustees of said town, contract a loan for said town, for the purpose of paying the indebtedness thereof, in the sum of twenty-one thousand dollars.' On the same day the board of town trustees passed and entered of record the following ordinance: 'Be it ordained by the board of trustees of the town of Monticello, Indiana, that said town issue bonds in the sum of twenty-one thousand dollars, in denominations of one hundred dollars, bearing interest at the rate of seven per centum per annum, payable in gold, to provide the means with which to pay the indebtedness of said town. And be it further ordained, that when said bonds are issued they be placed in the hands of J. C. Wilson, a member of the board of trustees, for negotiation and sale. And be it further ordained, that said bonds shall not be sold at a price less than ninety-four cents on the dollar.' In pursuance of this ordinance, on the 20th of May, 1878, there were issued coupon bonds of the town to the amount of $21,000, bearing 7 per cent. interest, payable annually, and due in 10 years, being the same bonds, a large amount of which are involved in this action. After the bonds were issued, they were delivered to said J. C. Wilson, who sold them, and converted the proceeds thereof to his own use, the town not receiving any benefit therefrom. The answer further allege that on the 20th of May, 1878, when these bonds were issued, there was no law of the state of Indiana which authorized the trustees of an incorporated town in that state to issue its bonds for the purpose of funding its indebtedness, or to issue its bonds for negotiation and sale for the purpose of paying its indebtedness, or of raising money to pay its indebtedness; and that at the date last above mentioned the defendant was an incorporated town, organized under the general law of the state for the incorporation of towns having a population of 1,200 inhabitants. A general demurrer to the amended answer, as not stating facts sufficient to constitute a good defense to the complaint, was overruled by Judge GRESHAM in December, 1882, (14 Fed. Rep. 628;) and the plaintiff then filed a reply, that part of it material to this consideration being, in substance, as follows: After admitting the main facts stated in the answer respecting the issue and sale of the bonds of 1869, and also as to the issue of the bonds of 1878, here in suit, it was alleged that the bonds in suit were legal, having been authorized by an act of the state legislature passed March 3, 1873; that the town was without means to pay its indebtedness except by the issue of its bonds, the tax levies permitted by law being insufficient for that purpose; that J. C. Wilson, as the agent of the town, under and by virtue of the authority conferred upon him by the aforesaid ordinance, negotiated the bonds in open market, and received from their sale the sum of $19,680.17, a part of which sum, to-wit, $6,618.10, he deposited in a bank in that town, and absconded with the remainder; that the town, by suit instituted for that purpose, recovered the aforesaid amount which had been deposited in the bank, and appropriated it to its own use; and that the plaintiff, in July, 1878, purchased 143 of the bonds (those in suit) in open market in Boston, at par, for cash, without any notice or knowledge on his part that Wilson had not accounted to the town for the money received by him from the sale of the bonds. A demurrer to the reply was overruled by Judge WOODS, holding the circuit court. 22 Fed. Rep. 589. The case was then tried before Judges GRESHAM and Woods upon the merits, under a written stipulation waiving a jury; judgment being given in favor of the defendant.
Plaintiff afterwards made a motion for a new trial, which was overruled by Judge WOODS at the November term of the court, 1886. At the same time plaintiff again made a motion for a new trial, setting up, in substance, the following: That he had prepared a bill of exceptions setting forth all the evidence in the case, all of which, it was alleged, tended to support the declaration and the reply; that he was desirous of bringing the case to this court by writ of error, but, under the rules and practice here and the statutes of the United States, he would not be able to present the questions involved to this court without a special finding of facts upon the evidence adduced at the trial; that a manifest hardship and injustice had been done him in the case, which occurred in the manner following: The judge who heard the case on demurrer to the answer held the answer sufficient, while another judge of the court, who heard the case on demurrer to the reply, pronounced the reply sufficient, and at the final hearing plaintiff, relying upon the evidence which supported and proved his reply, did not require or ask a special finding of facts, supposing, of course, that, his reply having been proved, there would be a certificate of division in opinion between the judges who tried the cause, or that, if not so, he would have saved to him by the record the questions of law in some other proper manner; that the entry of the judgment took him wholly by surprise, and he had not saved the legal questions as he should have done by requesting beforehand a special finding of facts, because, having had his replication sustained, he had no doubt of the final judgment of the court being favorable to him; and hat he was fearful he would be remediless to present to this court the questions involved in the case, unless the judgment should be set aside and a special finding of facts made by the court. This motion was sustained by Judge WOODS, over the objection of the defendant, and a new trial was granted. The case was again tried by Judge WOODS without a jury, who, at plaintiff's request, made and filed the following finding of facts, and entered judgment thereon in favor of the defendant. '(1) At the time hereinafter mentioned the defendant was a municipal corporation organized and existing under and by virtue of the laws of the state of Indiana, and situate in the county of White, in the said state. (2) That upon the 24th day of January, 1869, a petition was presented to the board of trustees of said town by the school trustees thereof praying for the issue of the bonds of said town to aid in the building of a school-house in said town, which said petition was granted, and in pursuance thereof the trustees of said town did pass and adopt an ordinance directing that there should be made and issued to the said school trustees of said town twenty thousand dollars of coupon bonds of said town, of the denomination of one hundred dollars each, with interest at the rate of ten per cent. per annum, payable annually; and afterwards, to-wit, on the 1st day of May, 1869, the said town executed the said bonds under said ordinance to the amount of $20,000, maturing in ten years after the date thereof, which bonds were sold and delivered to certain persons, who then and there became the purchasers thereof, and which bonds at the times hereinafter mentioned were outstanding, unpaid, and valid obligations of the said town. (3) On the 11th day of May, 1878, a petition was presented to the board of trustees of the defendant, signed by citizens, owners of taxable property in said town, praying for the issue of bonds of said town to the amount of $21,000; which petition (omitting the names of the signers thereto) is in the words following, to-wit. [Then follows the petition as set out in the answer, and heretofore quoted.] (4) That upon the 20th day of May, 1878, in pursuance of the said petition and ordinance, the said defendant town made and executed its 210 coupon bonds payable to bearer, of the denomination of $100 each, bearing interest at the rate of seven per centum per annum; which bonds and coupons are in the words and figures following, to-wit. [Then follows a copy of a bond and a coupon heretofore set out in full.] (5) That the said bonds were put in the hands of the said J. C. Wilson, in pursuance of said ordinance, for sale, and that $14,300 of the said bonds, being the same as those now in suit, were sold to Claypool and Stoddard, of Indianapolis, Indiana, for which the said firm of Claypool and Stoddard paid to the said Wilson the sum of $12,918.40, which said last-named sum was paid to said Wilson in the following manner: On or about April 14, 1879, said Claypool and Stoddard, by the direction of said Wilson, paid a draft drawn by G. A. Ivers, of Chicago, for $6,000; on the same day said Claypool and Stoddard paid said Wilson, by their check on the First National Bank of Indianapolis, the further sum of $5,000; that on the 13th day of May, 1879, the said Claypool and Stoddard paid to said Wilson, by their check on the First National Bank of Indianapolis, the further sum of $1,840.30; and within a few days after the last-named date said Claypool and Stoddard, for the balance of the said sum of $12,918.40, paid to him the sum of $78.17. (6) That the board of trustees of said town required and exacted from their said agent, J. C. Wilson, a bond, with sureties, to secure the money which he might realize from the sale of said bonds. (7) That the said Wilson, after the sale of said bonds, failed to turn over the proceeds thereof to the treasurer of the said town, and fled the country. (8) That at the time the said Wilson fled the country he had a large sum of money on deposit in the First National Bank of Montcel lo, Indiana, to his credit as 'trustee;' that suit was instituted by the defendant town against said bank to recover the same, upon the ground that such money was the proceeds of the sale of said bonds so made by the said Wilson; that judgment was rendered in favor of said town, and against said bank, for the sum of $6,988.43; that thereupon the receiver of the said bank appealed to the supreme court of Indiana, and thereupon said judgment was affirmed by said supreme court, (Bundy v. Town of Monticello, 84 Ind. 119,) and said town recovered the sum of $6,988.43. (9) That the said town instituted a proceeding upon the bond so given by the said Wilson to the said town to secure the money which he might realize from the sale of said bonds, and in a court of competent jurisdiction recovered judgment against the sureties and the said Wilson on the said bond for the full amount of the proceeds arising from the sale of said bonds, and from which judgment an appeal was taken to the supreme court of Indiana, and reported in 85 Ind. at page 10, and which said judgment was reversed and remanded by said supreme court for another trial, and afterwards the said suit was dismissed by the said town, and that the said town has received nothing on account of said bond. (10) That at the time of the issuing of the bonds in suit there was in the town treasury $3,047.85, and no more, received under the taxing act of the legislature of Indiana, under which the bonds were issued, as a special fund for the payment of the $20,000 ten per cent. bonds then outstanding, and that under the laws of the state of Indiana a sum sufficient to pay said bonds could not have been raised before maturity of the same on the amount of taxable property in said town. (11) That the plaintiff is a resident of Newton, in the state of Massachusetts, and that he bought the bonds in suit in open market, in the city of Boston, as an investment, and paid therefor a valuable consideration, without any notice of any irregularity as to their issue, or any claim to that effect. And the court further finds that the principal of the bonds sued on is wholly unpaid, and that the interest upon the same accrued is wholly unpaid from the 20th day of May, 1880. And the court further finds, as a conclusion of law upon the foregoing facts, for the defendant.
A. C. Harris, for plaintiff in error.
David Turpie and Wm. E. Uhl, for defendant in error.
Mr. Justice LAMAR, after stating the facts as above, delivered the opinion of the court.

## Notes

This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).
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