The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1886-04-30
THE BONDSMEN NOT LIABLE.
A Ruling by Judge Woods in the Fraud
ulent Township Warrant Cases.
The Demurrer to the Complaint Fully Sus-
tanned, and the Bondsmen of the Dis
honest Trustees Released from Liability.

| the bondsmen of Jacob A. Shipley, the trustee
| of Gregg township. Morgan county, who issued
| fraudulent warrants to r. B. Pollard, was ruled
upon in the federal court yesterday by Judge
| Woods. The ruling is OF much Importance, as
| it involves the liability of the suretes on
| the bonds of the trustees who were implicated
in the Pollard conspiracy, for the value of the
| fraudulent warrants which were issued, amount
ing, in the aggregate, to sum variously esti-
| mated at from 5000, 900 to 100000. The
| ruling applies directly to FIVE of the cases now
pending in court, in which demurrers had been
filed by the defendants and indirectly affects
the others, as they all of the same character.
Stanton was one Of the principal victims of the
swinde, as at the time the fraudulent operations
| of the dishonest trustees were disclosed he held
between $50. 900 and $50 600 worth Of the spuri
Gus warrants. In last November he instituted
suits in the federal court against the bondsmen
of each of the trustees, asking Judgment against
them for the value of the warrants, because they
had been issued by the trustees in violation
of the second section of IAN act touching
the duties of township trustees in certain par
ticulars,' approved on March 3, 1883 Shipley,
the trustee who is defendant In the case ruled
upon. was the only one of the number implicated
under Indictment in Morgan county. awaiting
trial on criminal charge. The others succeeded
in reaching Canada before their fraudulant trans
actions were discovered. and are now at large.
The suits by Stanton are based upon Section
6006 of the Revised Statutes, which is TO the
effect that whenever it becomes necessary for
the trustee of any township to contract any debt
or debts aggregating more than the fund
on hand to which the debts are chargeabie,
and the fund to be derived from the tax as
sessed for the year, the trustee shall procure
from the Board of County Commissioners an or
der authorizing him to contract such indebted
ness In Section 6007 it is provided that "such
order shall be granted only upon petition of
the trustee, showing the object and proximate
amount of the debt or debts to be incurred, and
upon proof that notice has been given in pre-
scribed manner, of the pending petition" Eight
notes. aggregating So, 536 IS, issued by Shipley,
are covered by the case, and. excepting the
amounts for which they purport to be given, are
all of the same tenor. They are made payable
to r. B. Pollard, or order, for school supplies
bought for and received by this township and
payable out of the special school fund for which
taxes are now levied" To each of these notes
was appended certifcase stating
that ahey. were given for school sup,
accepted and that said warrant was issued ac-
cording to law and will be paid when due. The
entire indebtedness is less than per cent of its
assessed valuation" Each certificate bears
date subsequent to the date of the note to which
it is attached In commenting upon these facts
the court remarks that 1.-The complaint shows
that each of these obligations was issued in vio-
lation OF the statutory provisions referred to-,
but contains no ayerrment in respect to the real
consideration Indebtedness for which they
were made"
The first question con idered and discussed in
the decision is the one of jurisdiction. THE
plaintiff" the court says, lis shown to be citi-
zen of New York. and the defendants all to be
citizens of Indiana, but the citizenship of
Pollard, the forger of the paper. is not
averred, and counsel for the defendants. assert
ing that the notes are not negotiable by the law
merchant, insist that the plaintiffs can come
into this court only by showing that Pollard
might also have been here By the act of Con-
gress circuit or district court can 'have cog.
nizance of any suis founded on contract in
favor OF an assignee, unless suit might have
been prosecuted in such court to recover thereon
if no assignment had been made except in cases
of promissory notes negotiable by the law mer-
chant and bills of exchange" If the plaintiffs
suit be regarded as founded upon the notes set
out in the complaint, and his counsel have in
sisted that the action is. in sense. upon the
notes, think there Is want of jurisdiction"
That the notes are not negotiable by the law
merchant the court thinks clear, for two rea-
sons. The first of these is that each purports
to be payable out Of q particular fund. The
second reason is that they purport to be notes of
a school township-a municipal corporation, ex-
listing under public laws, and endowed only with
restricted powers, granted for special and pure
iy local purposes OF q non commercial enar-
acter. Such bodies. as every one must take
notice. have no power, without express clearly
implied grant, to make negotiable paper; and If
their officers or agents attempt to put out cor
porate paper in commercial form it will be
deemed void; OF. at most, a sim
Pile obligation Of which the actual
consideration may he shown against any holder or
purchaser There can be no doubt that town
ship trustee in Indiana, within the scope of his
powers with respect to township affairs, may OK
crta unfa vUhi hall ho md hic
township. It was explicitly SO held in johnson
School Township vs. Citizens Bank, 81 Indiana
Report, page Sig, and in Sheffield School Town
ship VS.. Address, Sc Indiana Report, page 157,
and is distinctly applied III earlier and later
cases; but that he cannot make obligations
which, in the hands Of innocent purchasers will
not be subject to just defenses. seems to have
been put beyond dispute, some of the latter cases
even containing dcta to the effect that trustee
cannot execute a writing which will be. in itself,
prima facie evidence of township liability
The counsel in the case however, argued that
this rule had been modified by the act of 1883.
which, they insist. was designed, upon consdera-
tions of public policy, to give greater CONNER
obligations like those in the suit. which made
absolutely payable to their full amount by the
trustees who issue them, in disregard of the law,
and by their bondsmen, as If they had been put
forth by them as their individual obligations.
The court thinks that if this view should be
adopted, then the liability of the defendants
must be strictly according to the
terms of the notes sued on, disregard
ing only the clause in respect to
payment out of public funds or taxes While
this might make the pape- commercially nego-
table and eliminate the question of jurisdiction
it would be fatal to the action on the merits be-
cause by shsir terms the notes in suit are not
yet due. This construction of the statute, how
ever, does not meet the courts approval. 1t
means that the original holder of such paper,
though made without consideration, and for
fraudulent purposes, to which he was a party.
may recover the amount thereof, not only from
the trustee who may or may not have intended
wrong, but from his bondsmen, inno
So interpreted the statute would be highly penal,
and, by the rule of strict construction. the
court would be inclined to hold that liability
doas not attach IN suretioa IN euch honda at all