Court Opinion

ID: 6684729
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:31:51.800355+00
Date Added: 2024-06-11T16:00:56.034814
License: Public Domain

Haney, J.'
Defendant appeals from an order overruling its demurrer to the complaint. In the view we shall adopt, but one of numerous objections to the complaint will need to be considered. The action is upon a bond issued by the defendant school district, pursuant to a special act of the territorial legislature, passed and approved February 21,1879. The complaint contains copies of the bond and special act. The bond bears date May 28, 1879. It is for $1,400, payable to Ledyard & Farwell, or order on May 28, 1889, with interest at 10 per centum, payable annually, and recites that it is issued under and in pursuance of the special act, and a vote of the district taken under its provisions. Said act contains the following: ‘ ‘Sec. 4. Such school .district shall not vote for or issue bonds exceeding the sum of $2,000.00, and such bonds shall be issued *347in denominations of not more than $500.00, nor less than $50.00” It is alleged that no other bond was issued by defendant under the special act. Is this one void for the reason that it is in a greater denomination than $500? That plaintiff is a bona fide holder does not affect the question. Every man is charged with notice of that which the law requires him to know, and that which, after being put upon inquiry, he might have ascertained by the exercise of reasonable diligence. Every dealer in municipal bonds which upon their face refer to the statute under which they were issued is bound to take notice of the statute and of all its requirements. Comp. Laws, § 4743; Brown v. Bon Homme Co., 1 S. D. 216, 46 N. W. 173; McClure v. Township of Oxford, 94 U. S. 429; People’s Bank of St. Paul v. School Dist. No. 52, (N. D.) 57 N. W. 787. The original payee and every subsequent purchaser of the bond was referred by its recitals to the provisions of the act, which alone authorized its existence. It is in a denomination not authorized by such act. If, for that reason, the bond is void, there can be no innocent holder, because tlie imperative command of the statute stamps its impress of invalidity upon the bond itself.
No question of fact is involved; nothing but a question of law: What construction shall be given the statute? The bond does not comply therewith. Is the provision in respect to denomination a limitation upon the power conferred, or merely a direction as to the manner of its exercise? Upon the answer to this question depends the validity of the security in the hands of even a bona fide holder. It was held in North Dakota that where a statute authorized the issue of municipal bonds, payable in not less than 10 years from date, bonds issued thereunder, payable in 11 days less than 10 years from date, are void, even in the hands of a bona fide purchaser. People’s Bank of St. Paul v. School Dist. No. 52, 57 N. W. 787. That decision rests upon sound reason and abundant authority. We can discover no difference in principle between it and the case at bar. “If,” in the language of Mr. Justice Cokliss, “the question is *348to depend upon the magnitude of the departure from the statutory requirement, it will be impossible to know where to draw the line.” Assuming $1,400 were required to pay for defendant’s school house, and, as alleged in the complaint, such house was furnished by the original payees, by whom the bond v/as taken without discount, it may be suggested that the district could not be affected by the fact that payment was made with a, single bond of $1,400, when there should have been two of $500 each, and one of $400; Doubtless, in this particular instance the materiality of the difference is not apparent, but the wisdom of the requirment does not concern this court. There are cases in which the denomination of municipal securities is a matter of vital importance, — a matter peculiarly within the legislative discretion. Should the court disregard the plain provisions of this special statute, and substitute its own notions of public policy for those adopted by the legislature, a way would be open for the annulment of all restrictions upon the exercise of municipal powers.
There is much practical wisdom in the observation of Chief Justice Tripp in the case of Dartmouth Sav. Bank v. School Dists. Nos. 6 and 31, 6 Dak. 332, 43 N. W. 826. He says: ‘ ‘While courts are disposed to protect the rights of innocent purchasers, and to uphold commercial paper, the rights of a people'will be much better protected, and the principles of commercial law sufficiently extended, by requiring all persons dealing with public officers and public corporations to inquire into their powers, and see that they are authorized to enter into the contract they assume to make.” Defendant’s officers and the original payees of the bond ¡sued upon, either wantonly or through inexcusable carelessness, disregarded an express provision of law. Plaintiff purchased the bond with notice of such conduct on their part, and cannot complain if compelled to suffer the consequences. The district was clothed with power to issue bonds of a certain and clearly defined description. It was not authorized to issue bonds of any other description. There *349was want of power to issue such a bond as the one sued upon. Therefore, the bond was void. This is not a case of irregular exercise of power, as in National Tube Works Co. v. City of Chamberlain, 5 Dak. 54, 37 N. W. 761. Whether plaintiff should be allowed to amend, and allege such facts, if he can, as will permit him to recover for the reasonable value of the building furnished to and retained by defendant, will not be decided at this time. We deem it unwise to anticipate the issues which might be raised by such an amendment. Considering that the allegations of the complaint are insufficient to warrant a recovery upon any theory, the order appealed from is reversed, and the cause is remanded for further proceedings according to law.