TOWN OF COVINGTON.
"But it does not appear on the face of the bill when W. Radcliff discovered the alleged fraud, or that he ever did discover the fact, now stated by his heirs, that the judgment had been paid by Rowley, as the agent of the judgment debtor, with funds in his hands belonging to the latter, before the sheriff's sale. * * * And I think, upon a proper construction of the statute, it is not necessary that the complainant should allege in his bill that'be has discovered the fraud complained of within six years. A demurrer, therefore, will not liei to a bill for relief on the grQund of fraUd, although it appears that the fraud occurred more than six years, before the commencement of tJte suit, unless it also appears positively, or by necessary intendment, that the fraud was discovered by the party aggrieved more than six years before he tiled his bill for relIef: Where that does not appear. the defendant must be left to affirmative issde upon make his defence by plea or answer, so as to prevent the question of the discovery of the fraud." . ,
The position thus taken by the York court I regard as sound. What has been saId necessarily leads to the conclusion that, the court will not, in support of a demurrer, setting up the statute ,of limitations, infer from the fact that the alleged fraud occurred more than six years prior to the commencement of the suit, that the complainants .discovered the facts constituting the frauds before that period of six years. For the reasons given, an order will be entered overruling the demurrer, and giving the defendants 30 days within which to pleati or answer.
THE TOWN OF COVINGTON.-
(Ol'rcuit Oourt, D. Indiana.
MUNIOIPAL BONDS-POWER TO ISSUE.
Municipal corporations are created for governmental and administrative purposes, and not for business purposes. Their power to issue bonds or other commercial paper must be derived from legislative authority, either express or clearly implied.
2. HOLDERS OF-MUST
TAKE NOTICE AND INQUIRE,
The holder of municipal bonds, in which there are no recitals to estop the municipality, is bound to know that they were issued under express legislative authority, and to inquire whether they were issued in the mode and for the purposes provided by the law authorizing their issue.
WHEN NOT COMMERCIAL PAPER.
Bonds not issued in pursuance of express legislative authority, and in the mode and for the purposes provided by law, possess none of the qualities of commercial paper, but when the municipality is authorized to issue bonds under certain conditions, and the bonds contain recitals of the existence of the necessary conditions, such recitals are in favor of a bona;fide purchaser.
·Reported h;y Cha·. L. Hollteln, United states Attorner.
4. PLEADING-BuRDEN OF PROOF.
The plaintiff, iIi a suit upon niunicipal bonds, which contain no recitals as to the law, etc., under which they were issued, must aver and prove that they were issued under legislative authority, and in the mode and for the purposes provided by law. I
McDonald forplaiutiff. Tkos. F.Davidson, for defendant. GRESHAM, D. J. This is an action on interest coupons, alike except in number, one of which reads as follows: "$8. COVINGTON, IND., October 1, 1876.
" One year after date tlle town of Covington will pay to the bearer, in the city of New dollars, being one year's interest 0)1 bond No. 14. "A. GEST, President. "Attest: FRANK M. HICKS, Clerk."
It is in the complaint that the town ,of Covington executed certain bonds to which the coupons, in suit had been attached. Copies of the bonds are not filed with the complaint; there is no allegation as to their tenor and effect, the purpose of their issue, orthe authority for it. To this compialnt a demurrer is interposed, whiph presents the question under consideration. ," ':: Poweris given by a statute of Indiana, (1 Davis, 34:3,)tirtde'r specifiedconditions, to cities and towns, tq issue bonds not $50,000, payable' in not less than one nor mote than twenty years, to provide means for school purposes. And in section 27 of ailOther statnte (1 Davis, 881) it is declared that towns shall not have power to borrow money, or incur any debt or liability, except upon the petition of the citizen owners of of 'the taxable property. It is insisted, in support of the demurrer, that the power to issue negotiable bonds is not inherent in a municipal corporation; that if it exists in a given case it pmst be exercised in the mode and for the purpose prescribed in the act conferting the authority; and that in an action upon the bonds ofa municIpal corporation, containing no recitals, the declaration must show authority to issue the bonds sued on, and its exercise in the mode and upon the conditions prescribed by law. ' In support of the complaint it is contended that municipaJ corporations in Indiana have power to issue commercial paper for some purposes; that public officers are presumed to act in accordance with and pot contrary to law; and that the plaintiff.had aright to buy the coupons as commercial'paper, without inquiry, presuming they were issued for il,'properpurpose, and under authority of the statutes just mentioned. . ,
HOPPER V. TOWN OF COVINGTON.
Municipal corporations are created to secure to the peop1eresiding within their jurisdiction the benefits oHocal government, and not for business purposes. Unlike trading or business corporations, their powers are governmental and administrative. In addition to the power to raise revenue by taxation, aud other express powers conferred upon them by their charters, they may exercise such incidental powers as are ne.cessary to enable them to accomplish the object of their being. The power to make contracts and expenditures carries with it the implied power to incur indebtedness, and to issue proper obligations therefor. But it does not follow that because municipal corporations, in the exercise of their legitimate and ordinary jurisdiction, may incur indebtedness and issue vouehers, orders, or other instruments for the same, they may issue commercial securities, payment of which will be enforced against the tax-payers, in favor of bona fide holders, however irregular or fraudulent the issue may be. The court, in Mayor v. Ray, 19 Wall. 477, say:
"If, in the execution of their important trusts, the power to borrow money and issue bonds or other commercial securities is needed, the legislature can easily confer it, under proper limitations and restraints, and with proper provisions for future repayment. Without such authority it cannot be legally exercised. * * * No such power ought to exist, and in our opinion no such power does exist, unless conferred by legislative enactment, either express or clearly implied."
While concurring in the judgment of the court, but dissenting from Bome of the grounds upon which it was based, Justice Hunt said that in his opinion a municipal corporation might borrow money for legitimate uses and issue its commercial paper for the same, unless expressly prohibited by its coarter, or by some statute, from so doing. Police Jury v. Britton, 15 Wall. 566; Hitchcock v. Galveston, 2 Woods, 272; Chisholm v. City of Montgomery, ld. 584. But, while municipal corporations cannot borrow money or issue commercial securities without legislative authority, express or clearly implied, it is, nevertheless, the law in the federal courts that when a municipality, or its officers, are invested with authority to issue bonds and to decide whether the conditions exist under which a special enactment authorizes the issue of such securities, and such officers issue bonds, reciting the· existence of tlie necessary conditions, the recital is itself a decision by the appointed tribunal, which is conclusive in favor of a bonafide purchaser. Coloma v. Eares, 92 U. S. 484. In Buchanan v. City of Litchfield, 102 U. S. 278, the city issued its water bonds, amounting to $50,000, to ail in construetingand main-
tail?-ing a system of water-works. The bonds recited that they were issued under and in pursuance of a particular act of the legislature a.nd a city ordinance, which authorized the issue, and the plaintiff was a bona fide holder. The court held that the bonds were void, because they created an indebtedness in excess of the amount to which the municipality was restricted by the state constitution. "As, therefore," says'Justice Harlan, in delivering the opinion of the court, "neither the constitution nor the statute prescribed any rule or test by which persons contracting with municipal corporations should ascertain the extent of their indebtedness, it would seem that, if the bonds in question had contained recitals which, upon any fair construction, amounted to a representation upon the part of the constituted authorities of" the city that the requirements of the constitution were met-that is, that the city indebtedness, increasedpy the amount of the bonds in quebtion, was within the constitutional limit -thEm the city, under the decisions of this court, might have been estopped from disputing the truth of such representations as against that bona fide holder of its bonds. ,. · · The present action cannot be maintained unless we should hold that the mere fact that the bonds were issued, without any recital of the circumstances bringing them within the limit fixed by the constitution, was in itself con· clusive proof in favor of a bona fide holder that the circumstances existed which authorized them to be issued. We cannot so hold." This case clearly supports the doctrine that municipal bonds which contain no recitals are not unimpeachable in the hands of bona fide holders for value; that is to say, they are not commercial paper. It is not claimed that the town of Covington had any general or incidental power to issue bonds or other commercial paper, but it is asserted for the pIu.intiff that when a municipality has express authority, as in this case, to issue bonds for one purpose, it may issue its securities with or without recitals, and it will be conclusively presumed, in favor of purchasers for value without notice, that the issue was authorized. It would follow, if this be true, that when express authority exists for the issue of municipal bonds for one purpose, bonds which are issued without recitals, for an unauthorized and fraudulent purpose, will be enforced against the tax-payers, in favor of purchasers for value without notice; and that an act conferring authority upon municipalities to issue bonds, under clearly-defined conditions and restraints, for a particular purpose, confers anthority, as between the municipality and bonafide third parties, to issue commercial securities for all purposes.
HOPPEn '11. TOWN OF COVlNGTON.
The cases of Gelpcke v. City of Dubuque, 1 Wall. 175; Sup'rs v. ,Schenck, 5 Wall. 772; City of v. Britton, 14 Wall. 296; and Sun Antonio v. Mehaffy, 96 U. 8.314, are cited as showing that when a corporation has power, under any circumstances, to issue negotiable securities, the bonafide holder has a right to presume that they were issued under the circumstances that gave the requisite authority; that they are no more liable to be impeached in the hands of such a holder than any other commercial paper, ,and that recitals are not necessary olthese casestlie're was expres,s to estop the municipality. In authority to issue' the bonds sued. on, and they contained recitals that the proper officers had the precedent conditions existed upon which the power c1e}?enited; while In the other, v. Schenck,) although it does not expressly' appea;r that the bonds sued on contained recitals, that is the fair inference, for the it 16 settled law that a negotiable security of a cotporation, whleh face appelirs t'o have been dtiiy' issued,. is valid.' in the ofa; fide holder. " ,! : , : , : ,. ' : , " ' " "Jj:". , It is further urged for the even, if t\le 'bondl;4 and, CGUpons mentioned: in the complaint o.re; impeachfl,ble in the hands of the plaintiff, the question before the court'is one -of pleading,atid it devolves upon the'def(mdant to shcrW" that the bonds: were without authority·. 'The no recitals, andthete' i,s, 119allegation in the complaint that ,t1;\e"konds do. The counsel on both sides assumes thattheJ,'6 are no recitalsin theb@da. The plaintiff was bound to know that the bonds were issued linder express legislative'authority, for school purposes, and it was hikduty to inquire whether the conditions'exiElted that authQrized'th'em to be issl'led. Power :to issue commercial, paper was the and' the rule, and in the absence of suc4 ,recitals as would the municipality from impeaching the bonds in the hands ,of a bona fide holder, the plaintiff has no right of action, unless he shows ihhis complaint that the bonds were issued in substa,ntial compliance with the legislative enactments, and for a proper purpose. Bonds which are not issued in pursuance of express legislative authority, and in a mode prescribed by it, possess none of the qualities of commercial paper. The legislature was careful, in. conferring power oli municipalities to borrow money and issue bonds for school purposes, to prescribe the mode and manner of its execution, thereby making the mode of its execution the measure of the power granted. Anthony v. County oj.JaBper, 101 U. 8. 697. Demurrer sustEJ,ined. '
NEGLIGENCE-CONTRACT AS TO.
(Circuit (JI)urt, D. In4iana. 1881.)
A contract between employer and employe, whereby the employe, in consid, erationofthe employment,agrElell to, release and discharge his employer from all damages on l¥lcount of accident or death to the employe, caused by the negligence of his employer or co;employes, is void as against public policy.
This w,as f!.n action 'by Peter Roesrier, administrator of the ,estate of George Reed, against. Hermann, pu account of the death Reed while,'in the deferidant's employ; alleged to have resulted from the defendant's negligent use ofdefec£ive and unsafe maehinery.The defendant, in on,e of his answers, pleaded his 16:'lase and discharge from damages under and by of the fol.,. agreement, viz',: ' , . " In consideration of employment given me by Henry Hermann, and as an'inducement and 'as a' consideration to said Hermann to actuate, h'im to take and engage me into his employ, I herewith grant, bargain, and stipUlate, fdrmyllelf, my heirs, .exeeutorB, .au1ninistrators, asSigns, or personal representati:ves, whoever they maybe, to and with said Henry heirs, ,and assigns, that I, lJeillg such employe of said not hold whatever befalls during .sQch employment, or any sum, or for t;laqlages whatever; and! herebyrelease.and discharge, said Herulann from all liability herein, to roe orrHt' personlUrepresehtatives, for 16SS;: damage, sutl'ering,'sickness, ailment, dEiath; orbarm, of whatsoever Jiatureor kind I or they, my personal sentatives, may Butl'er by reason of. any accident. mishap, death, or damage to JPe while ,in the emploY, of saiq Hermann, whether it arise from said Hermann or by. or by reason of the negligence of the other of said Hermann's employes, or be the cause or mishap whatsoever it n'lay; thereby d(sl:harging him, lIermann, heretofore shown,from all kind'and natureandmamier of liabilitY Whatsoever, by reason of negligence on418.part, o'mission ofduty,'oraocident,:dliring Buch employment, from date hereQc forevE\r, .. . And additio111 also promise: to work not less than 10 hours per. dflY, :while in tlleell1pl9,y Hermann, under penalty of and damages. ' .
GEORGE X REED. [Signed) mark. . ;,Signeq. ofW,G;. BOEPPLE. rrhe plaintiff demurred, to this anSwer, and, after argument, the demurver was, sustained. No 'written, opinion was filed.' ' · Ohas. ,']j)enbyand J. S. for plaintiff, Chas. L. Wedding and Jas. L. fordefenclant,
*Reported by Cltas. L. Holstein, United States AttlJrney.