Case Name: Verbeck, Appellant, vs. Scott, imp., Respondent
Court: Wisconsin Supreme Court
Jurisdiction: Wisconsin
Decision Date: 1888-02-28
Citations: 71 Wis. 59
Docket Number: 
Parties: Verbeck, Appellant, vs. Scott, imp., Respondent.
Judges: 
Reporter: Wisconsin Reports
Volume: 71
Pages: 59–64

Head Matter:
Verbeck, Appellant, vs. Scott, imp., Respondent.
February 2
February 28, 1888.
(1) Municipal bonds: Preliminary injunction to restrain disposal by-holder: Discretion. (%) Who is bona fide purchaser. (8) Flec-tions: Failure of electors to vote.
1. In this case the refusal of the circuit court to grant a preliminary-injunction restraining the holder of municipal bonds from disposing of them pending the action to have them declared void, is held not to have been an abuse of discretion, the facts entitling the plaintiff to such relief not being clearly shown.
3. One who buys municipal bonds from a bona fide purchaser, is himself a bona fide purchaser, notwithstanding any prior knowledge on his part.
3. An election is not vitiated by the mere fact that a considerable number of the electors failed to vote.
APPEAL from the Circuit Court for Winnebago County.
The following statement of the case was prepared by Mr. Justice Cassoday:
This action was commenced July 14, 1887, to restrain the town officers of Menasha from collecting a tax to pay certain bonds issued by such officers in 1871 to the Wisconsin Central Railroad Company, and to have said bonds declared void in the hands of the defendant Scott, and to restrain him from disposing of the same during the litigation. None of the defendants resisted the application for a temporary injunction except Scott, and upon the hearing the court made an order restraining such officers from collecting the tax, but refusing to restrain Scott from disposing of the bonds during the litigation. Erom so much of said order as refused to so restrain Scott, the plaintiff appeals.
It appears, from the plaintiff’s shoAving, in effect, that May 10, 1870, the railroad company, pursuant to ch. 120, Laws of 1869, submitted to the voters of the towns of Menasha and Neenah, respectively, the proposition men tioned in Menasha v. Wis. Gent. R. Go. 65 Wis. 502, for their aid by each voting to such company $50,000 of its bonds in consideration of that amount of the capital stock of such company, and the building of its depot on block 3 on Doty’s island, and its road from thence to the Wolf river, as therein provided; but in the event that Neenak failed to accept, and the required additional sum of $50,000 should be furnished to the company by individual subscription to stock in like amount and satisfactorily secured to be paid, the depot should be located, and the road constructed therefrom, in such place in said town of Menasha, and on such route as might be agreed upon between the company and the town, under the proposition as thereby qualified; that Neenah refused to accept the proposition; that Menasha accepted of it June 4, 1870; that July 15, 1871, Menasha town bonds to the amount of $50,000 were issued to the company, bearing date June 1,1871, each payable to the company, or bearer, in New York, twenty years from date, with coupons attached for semi-annual interest at the rate of seven per cent.; that October 12, 1871, such town officers burned and destroyed all of said bonds, and October 26, 1871, issued similar bonds to the same amount; that the tax in the tax roll for paying the interest thereon in 1872 was restrained by order of the court February 18, 1873; that upon the organization of the city of Menasha in 1874, one fourth of said bonds remained outstanding against the town; that the company never constructed any railroad from said block 3 to the Wolf river, or to any other point; that the town officers knew, -when they issued the bonds, that the company had not complied with their proposition; that during the time Scott was a resident of Menasha, and knew ail the facts stated, and actively participated in procuring the vote; that May 20, 1887, the officers of the town agreed upon a compromise and settlement with Scott, whereby the town was to pay him $5,750 in full discharge and satisfaction of said bonds so beld by him; and the same was submitted to the qualified electors of the town at a special town meeting therefor June 6,1887,'and ratified and agreed to by 47 of the 83 votes cast thereat; and it is alleged that there were over 150 qualified electors in the town. Bad faith and collusion between Soott and such officers in making said settlement is charged, and denied on the part of the defense.
The complaint alleges that Soott “ is not a tona fide holder of said bonds; and that he received the same well knowing all the facts and circumstances aforesaid in- relation to the execution and issuing of said bonds; and that the same do not constitute a valid and Iona fide indebtedness of said town of Menasha to Mm” This is denied in the same language, except the omission of the words “ to Mm” The complaint alleges, upon information and belief, that if the $5,750 is not paid, Scott threatens and intends to remove the bonds from the state and dispose of the same to nonresidents who can enforce payment in the United States courts. This, however, is denied on the part of the defense. The defense denied that the company had not complied with the terms and conditions of its proposition submitted to the town; and, in effect, alleged that all the terms and conditions of said proposition had been complied with; that Neenah never subscribed to such railroad stock or any part thereof, and never issued its bonds to said company, and said company never had any Neenah bonds, whereupon the company made its starting point in Menasha and constructed its road to the Wolf river, as it had a lawful right to do; that the railroad runs nearer said block 3, and has a depot in Menasha and also in Neenah, giving both of said cities and the present town of Menasha better and nearer facilities for railroad purposes than if the station or starting point had been upon said block 3; that the city and town of Menasha several years ago settled and took up all said bonds except the sixteen owned by Scott, and in such settlement used and enjoyed $50,000 of stock issued and given by the railroad -company; that Scott had always been advised that the bonds were issued by authority of law; that he received them in good faith, and knew the owner thereof paid a full and valuable consideration therefor, having no knowledge whatever of any injunction or restraining order or any o'ther fact or circumstance tending to invalidate the same; that Scott’s entire connection with said bonds was bona fide, without any knowledge or information of any unlawfulness or irregularity in the issue or delivery thereof or since, and he denies that he had owned and held the bonds since about the time they were issued; that the railroad was constructed from a point in Menasha to the Wolf river; that the injunction mentioned in the complaint, and which was issued July 31,1871, was answered and never prosecuted to final judgment; that the plaintiff therein had died, and the suit never revived; that the tax-warrant to collect such taxes was issued under ch. 216, LavTs of 1887, returnable in forty days; that all the bonds had been paid, except the sixteen owned by Scott, and for one fourth of which the town was liable. There were other affidavits in support of the allegations on the part of the defense, and asserting the good faith of the settlement between the town officers and Scott and the vote thereon by the qualified electors of the town.
For the appellant there was a brief by Gary c& Forward, attorneys, and Moses Hooper, of counsel, and oral argument by Mr. Gary.
For the respondent there was a brief by Gabe Bouck, Henry Fitzgibbon, and Smith <& Schoetz, and the cause was argued orally by Mr. Bouch.
They argued, inter alia, that when the material facts are denied an injunction should not issue. Menasha v. M. cfi ,W. JR. Go. 52 Wis. 414. It should issue only when the right of the plaintiff is evident, prima facie, free from doubt. Extreme caution should be exercised. Willard’s Eq. Jur. 343; Muir v. Howell, 37 N. J. Eq. 39. If the respondent bought the bonds from a bona fide holder, he has a good title, and can transmit it to a person having full knowledge of the illegality, if any, in their inception. 1 Daniel on Neg. Inst. sec. 803; Burroughs on Pub. Sec. 361; Gomm’rs v. Ciarle, 94 II. S. 286; Cromwell v. Sac, 96 id. 59; Bailey v. Bidwell, 13 Mees. & W. 73; Mitchell v. Catching s, 23 Eecl. Rep. 710; Batter son v. Wright, 64 Wis. 289; Pringle v. Dunn, 37 id. 449; Kinney v. Kruse, ■28 id. 184.

Opinion:
Cassoday, J.
The application for this preliminary injunction was undoubtedly addressed to the sound discretion of the trial court under the facts and circumstances alleged in the complaint and supported by affidavits. Upon such hearing the defendant Scott controverted, and in fact disproved, many of such allegations; and alleged others as stated. The court, in the exercise of such discretion, refused to restrain Scott from disposing of his bonds; and we are now asked upon the whole record, a brief summary of which is given above, to reverse that part of the order. After a careful examination of the record we are unable to say that such discretion has been abused. The plaintiff brings this suit as a resident freeholder and tax-payer of the town issuing the bonds. The burden was upon him to allege facts calling for equitable interference to prevent irreparable injury. It seems to us that the complaint, with the allegations therein disproved, as stated, does not come up to this requirement. It does not clearly appear that the railroad company did not comply with the proposition submitted in 1870, so far as Menasha was concerned. It does not clearly appear that the particular bonds in question were issued in violation of any injunction. It does pretty clearly appear that the railroad stock received in consider ation for such bonds was used by the town and city of Me-nasha, or one of them with the consent of the other, many years ago, in taking up and settling all of the bonds so issued, except those owned by Scott. It does not clearly appear that the sixteen bonds in question were never owned' by a bona fide purchaser for a full and valuable consideration paid therefor. If they were ever owned by such purchaser, and subsequently were transferred to Scott, then he would be such bona fide purchaser, notwithstanding any prior knowledge on his part. It does not clearly appear that the compromise and settlement agreed upon by Scott and the officers of the town in May, 1881, was not honestly made and in good faith submitted to the qualified electors of the town at a special town meeting therefor, June 6, 1887, and in good faith ratified and agreed to by a majority of the votes cast at that election. The mere fact that a considerable number of such qualified electors failed to vote thereon did not vitiate the election. Under the circumstances stated we are unwilling to disturb the action of the trial court.
By the Oourt.— That part of the order of the circuit court appealed from is affirmed.