Court Opinion

ID: 9336470
Source: CourtListenerOpinion
Date Created: 2022-12-15 21:50:38.403131+00
Date Added: 2024-06-11T17:15:12.786171
License: Public Domain

SHIKAR, District Judge.
Under the facts of this case, there seems to be no escape from the conclusion that the bonds issued under the circumstances set forth in the ninth finding of facts were, when issued, null and void. The amount of this issue, being $8,000, exceeded ñ per cent, upon the total valuation of the taxable property in ilie district township of Rock, out of which the defendant district was carved, in the; fall of 1872, and therefore the amount of the bonds, when issued, clearly exceeded 5 per cent, upon the valuation of the taxable property in the defendant district. Furthermore, it appears that the bonds, when issued, were delivered to D. C. Whitehead, who was the ireasurer of the district, who disposed of the same, and appropriated the proceeds to his own use, and the district received hut little benefit or consideration therefrom. The evidence further shows that on the 14th day of June, 1881, the date of the bonds sued on, the defendant district was indebted in a sum in excess of the constitutional limit, and therefore could not lawfully create a further indebtedness. Consequently, the bonds in suit must be held to be invalid and void, unless it is shown that they represent a pre-existing enforceable indebtedness. So far as lire two bonds, called “judgment bonds,” are concerned, the evidence, though not entirely satisfactory, justifies tire conclusion that they were in fact issued io bond an outstanding judgment against the district; and, having been issued and used for that purpose, the bonds were valid and enforceable in the hands of the original holder, and are equally valid in the hands of the present plaintiff. With respect to the two bonds called “refunding bonds,” the evidence shows ihat they were issued to refund bond No. 5 of the issue of November, 1872, which bond was invalid under the constitutional restriction, and was without consideration and fraudulent in the hands of the original holder. The evidence shows that on June 14, 1881, this .$1,000 bond was owned by 1). 31. Hathaway, who exchanged the same for the two bonds in suit. The evidence fails to show that Hathaway paid value for the $1,000 bond, or that the plaintiff paid value for the refunding bonds issued in lieu thereof. It is not averred in the petition that the plaintiff paid value therefor, nor is there any evidence from which it can be found, as a matter of fact, that the plaintiff became the owner of the bonds before maturity or for value.
The case, so far as it rests upon these bonds, comes within the rule laid down hv the supreme court in Smith v. Sac Co., 11 Wall. 139, that, if there be fraud or illegality io the inception of negotiable paper, proof (hereof in a suit thereon casts upon the plaintiff the burden of showing that he is a holder for value; and, in the absence of such proof, the holder will be deemed to be merely a transferee, against whom the same defenses may be made that would be available against the original holder of the paper. I therefore hold that there can be no recovery on the so-called “funding bonds,” but'that the plainiiff is entitled to recover the sum due on the judgment bonds, *390and the coupons thereto belonging, being the sum of $1,902.30. In this computation, the coupons becoming due before April 7, 1888, are not included, as the same are barred by the statute of limitations. Judgment will therefore be entered in favor of plaintiff for the sum of $1,902.30, each party to pay their own costs.