Court Opinion

ID: 6888818
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:36:10.184446+00
Date Added: 2024-06-11T16:05:47.335000
License: Public Domain

SIBLEY, Circuit Judge
(concurring).
I concur in the judgment but see the case as follows:
The electorate of the district, as provided by the Texas Constitution, authorized a bond issue. The statute then existing authorized the issuance of ten per cent thereof as ad interim bonds, on the security of the main bonds, not increasing at all the amount of indebtedness. After the election and before the issuance of any ad interim bonds the statute was amended so that twenty-five per cent of ad interim bonds might be issued. The officers of the district, thinking the amendment applied retroactively to their election and bonds, passed a resolution to issue twenty-five per cent. Only $650,000 were actually negotiated so as to become outstanding, being a little less than twelve per cent. About two percent thus were outstanding in excess of the ten per cent contemplated by the election.
The amending statute expressly repealed all conflicting laws, but this did not repeal the former ten per cent statutory authorization, but enlarged and carried it forward. There was no conflict. Either under the new, or under the former law, ten per cent of ad interim bonds could still have been issued. But since the election had authorized only ten per cent, no more could be issued for lack, as to the excess, of authority from the electorate. The result is that there was no lack of statutory authority, but as to two per cent there was excess of constitutioiuil authority from the electorate.
The consequence, as settled in Texas by Citizens’ Bank v. Terrell, 78 Tex. 450, 14 S.W. 1003, and cases following it, is that only the indebtedness in excess of the authority is void, and when all bonds are delivered at once as here, each must be scaled down pro tanto. That, I think, is clearly the case here. A Texas Court of Civil Appeals in Miller v. State, 155 S.W.2d 1012, expressed the opinion that these bonds are wholly void, but said also that they should not be scaled because the parties before the court were holders in bad faith, being persons who had participated in a fraudulent obtaining of the bonds from the district without payment of value for them. We should go no further in applying this case as authority against the previously settled law that bonds are to be scaled when authority is exceeded.
The appellant here, admitting his bonds must be scaled, seeks protection against the defense of want of consideration and fraudulent title in the first holder by asserting that he is a bona fide holder in due course before maturity. This involves no equitable principle, and no equitable doctrine of notice implied by being put on enquiry. The matter is regulated by the law merchant, embodied in the Negotiable Instruments Act. Vernon’s Ann.Civ.St. of Texas, Art. 5932 and following. Article 5935 defines a holder in due course, and in § 52, Paragraph 4 states as one necessary requirement: “That at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it.” The evidence here shows that appellant had no notice of the want of consideration or of the fraud in the title of the previous holder, but he did know of the facts which made the bonds subject to be scaled. That was an infirmity in the bonds, and notice of it prevented his being a holder in due course, and subjected him to all defenses that existed against the bonds. He loses for this reason only.