The Wichita daily eagle. [volume] (Wichita, Kan.) 1890-1906, 1894-05-16
ARKANSAS CITY RELEASED FROM
PAYMENT OF SUSPICIOUS DEBT.
ALI Because the Mayor and Council
Did Not Transact Business Ac-
cording to Law = Anthony's
Mayor and Council Did and
Must Pay Their Debt.
Judge Williams Rem
derS Decision OF
Interest to Sec
ond Glass Cities.

by Judge Williams
They involve a trifie over $50, 600 each.
The first case was that OF Swan & Barrett
| against the city of Arkansas City, and
the other was the Noonsocket Institution
for Savings against the city of Anthony.
Both cases were similar except that in the
case of Arkansas City the bonds were not
issued under an ordinance or resolution
by the mayor or city council, while in the
Anthony case the bonds were issued under
an ordinance. In the Arkansas City case
a decision was rendered for the defendant,
while in the Anthony case the decision
was for the plaintiff.
The decision is quite an important one.
as many second-ciass cities in Kansas have
Issued bonds under similar circumstances.
OUTLINING THE ISSUES.
The following decision by Judge Will
Jams outlines the issues involved in the
cases:
In the United States circuit court for the
district of Kansas: Second division.
Swan & Barrett
VS..
The city of Arkansas City.
This Is an action against defendant,
which as city of the second class, on in
terest coupons of bonds issued under the
provisions of an act of the legislature ap-
proved March S, 1879, authorizing re-
funding OF Indebtedness. Uuder this act
bends issued by any city are to be signed
by the mayor and attes;ed by the city clerk
under the seal of the city. There were If
ty-four bonds issued, each of 81 900, bear
Ing 9 per cent interest per aunum, evil
denced by coupons, which not being paid
are the subject matter OF this action.
The bonds recite, THAT they were exc
a. nv ba /ff--
mise and refund its matured and matur-
ing Indebtedness heretofore legally created
by said city and in accordance with the
above named act of 1879" and there is this
further statement In tho bonds: 'EAnd it
is hereby certified that the total amount
of this issue of bonds does not exceed the
actual amount of the outstanding indebt-
edness of said city and that all the require
ments of the provisions OF the foregoing
act have been strictly complied with in
issuing this bond"
They were signed by the mayor and at
tested by the city clerk under the seal OF
the CITY,
The other provisions of law relating TO
cities OF the second class in force at that
time, IN so far as they are applicable to the
issues raised in this case are:
THE powers granted to and conferred
upon cities of the second class shall be ex-
ercised by the mayor and council of such
cities, as provided by law" Chapter 10,
Article l, Section ), Compiled Laws of
Kansas, 1885.
Before any bonds authorized by this
act shall be issued, an ordinance of the city
shall be duly passed, providing for the
ISSUANCE and exchange or sale OF said
bonds; and said bonds or coupons when
issued, shall be signed by the mayor and
city clerk aud shall have the seal of the
city attached thereto" Chapter 10, Arti-
Gle z, funding bonds, Section Ill
ISSUED WITHOUT AN ORDINANCE.
Sec. 10, OF Chap. 10, Art /, directs the
clerk TO keep an ordinance book. in which
all ordinances shall be recorded immedi-
ately after their passage.
The bonds sued on were issued by the
mayor, without any ordinance of the conn
Gil authorizing their issuance, nor is there
any record of a resolution Of the council
to that effect.
From the evidence it is clear that great
fraud was perpetrated on the city by the
issuance of these bonds. The. mayor WAS
the president of the r. r. Co. TO whom
the bonds were issued. The president of
The city council was the president of the
Construction Co, and nearly every mem
Der of the council was Euarantor of a
subscription to the r. L. Co.
AT first the city issued S24, 900 in bonds
and $50, 900 in warrants to the company,
but The brokers in New Y ork, Coler s, Co.,
being unwilling to purchase these, the
bonds now sued on, were issued at their
suggestion.
the object was TO stop the city from
ever Questioning the validity of these
bonds and warrants. The evidence of Mr..
Coler, the broker who purchased the bonds
leaves no doubt in my mind. that he was
fully cogniZant of the fraud practiced up
on the city. Whether Coler was the agent
fal inf - md rhn- liz LID,
affects plaintiff, it is unnecessary to de-
eide in this case, for the proof is conclu-
sive that plaintiff purchased these bonds
from Splitter u Co., who were innocent
holders and all their rights passed TO
plaintiffs.
Porter VS. Pittsburg Bessemer Steel Co.,
122 L. ). 261.
Scotland County VS.. Hill, 132 L. S. 1O7.
Plaintiffs are therefore entitled to all
the protection, which the law gives to
holders or this class of securities, who
them without hot &C and Tor
value.
Since the decision of the supreme court
in the Knox county case u, How 80, it is
the settled doctrine of the U. : courts,
that in an action on municipal bonds by
an innocent holder. the municipality viii
be estopped TO deny the truth of all recitals
III the bonds. which the
officers issuing them. were by law, to
before issuing the bonds |
But this does not affect the power of the
or its officers TO issue the
bouds. No recitals can estop the munich
pality from pleading want of power to
issue the bonds, for the reason that mu-
inequalities and the officers thereof are bus |
agents with limited powers, and their au-
thority TO act must be found in the Public |
Acts and will not be presumed TO exist II |
requires no citation OF authorities for this |
rule and the learned counsel for plaintiffs |
in their able brief concede this 10 be the |
law.
BOND RECITAL NOT SUFFICIENT.
The evidence clearly shows tnat these |
bonds were issued without any ordinance |
Or resolution OF the mayor and council Is 1
this fatal! On behalf of plaintiffs it is |
urged that the recitsls in the bonds, |
L nat all the requirements of the provis- |
ous OF the act have been strictly complied /
with in issuing them makes it unnecessary |
for purchaser to examine the public rec /
Drds Of the city for the purpose of ascer-
aiming whether the mayor had been duly
10 issue the bonds. That 1t is
within the power of the mayor to pass
upon that fact, and the issuance OF the
bonds by him. Is nonconclusive that the
power existed
Icannot give my assent to this PROPOSE
ION. nor do auy of the cases cited by the
,iligent counsel so TO that extent
TIE decision OF the United States circuit
court of appeals for the eighth circnit are
conclusive on this count and Natioua Bank
# Commerce vs. town of Grenada 10 L. 5
mn ea2 is decisive of this case.
In that case the court says: The plain
if was bound 10 know independently of
he recitals in the bond, that there WAS
uch an ordinance IN existence. IL the Off
,ers authorized 70 Issue the bonds upon a
condition are not the appointed tribunal