ASHLEY v. BOARD OF SUPERVISORS OF PRESQUE ISLE COUNTY, 60 F. 55

SE.VERENS, District Judge, (after stating the facts.) In regard to the question of the validity of the bonds of Presque Me county, issued in 1871, the court appears to have held that it was precluded by the. decision of the supreme court of Michigan in the case of Pack v.

Supervisors, 36 Mich. 377, which was supposed to have held that there was no organized county of Presque Isle at the time when those bonds were issued; and, inasmuch as the question of the proposed expenditure was in fact submitted to the electors before the bonds were issued, the ruling of the court below must be construed as recognizing the case referred to as a conclusive adjudication that the county of Presque Isle had no lawful existence in 1871, and therefore had no power to issue such bonds. We are unable, however, to find in that decision any warrant for giving it so wide a scope.

That case arose upon a petition for a mandamus against the supervisors to compel them to provide by taxation for the payment of certain county warrants issued in 1874 and January, 1875, nominally to one Boggs, who was the agent of the relator; the latter being the party in interest, and having knowledge of all the facts relating to their issue. The answer, which was taken as true, denied that there had been any legal organization of the county prior to the act of April, 1875, and assigned reasons for that conclusion.

It then proceeded to state the nature of the proceedings upon which the warrants were issued, namely: That the supervisors of the county held a meeting at Crawford’s Quarry,— not the county seat,- — where it was declared expedient to remove the county seat to the former place, and it was resolved to submit the question of the removal to the electors of the county. That meeting was averred to have been illegal, and without notice to the county clerk, who was not present. The warrants in question, amounting to $2,740, were issued, all within seven months, upon a contract for the erection of county buildings.

That the question of raising money was never submitted to a popular vote, as required by law where more than $1,000 was proppsed to be raised for building purposes. That no notice was given of the place to which it was proposed to remove the county seat, which is especially required by law when the vote of the electors is taken. And that there were no orders or resolutions authorizing the issue of the warrants.

The supreme court in its opinion, having recited these facts, said: “Under these circumstances, we are not disposed to discuss the question when the county of Presque Isle was organized, or to enter upon the other questions concerning the townships. A mandamus will not issue to enforce any doubtful right. The answer, for the purpose of the present controversy, is taken as true; and, if true, it shows that these warrants were issued without authority, to a party having notice of their invalidity, and for a purpose which was illegal.

It cannot be claimed, as this record stands, that the county buildings were lawfully contracted for, nor that the county seat had been removed, if the county itself was in existence. There has been no legislative recognition of removal, and, even if lawfully removed, the contract for buildings for more than one thousand dollars was unauthorized.

Acting upon this answer, as admitted, we must deny the mandamus.” It' is manifest that the court declined to go into the discussion of the lawful organization of the county, and rested its decision upon the character of the proceedings under review, without regard to the fundamental question whether the county had been duly organized or not.

It is equally manifest, we think, that, when the court say that those “warrants were issued without authority,” they refer, not to any want of authority deduced from the consideration of a matter they had expressly refused to consider, but to the defects, in the proceedings which they immediately point out. We have given a full analysis of this case, for the reason that it seems to have controlled the action of the circuit court.

We conclude that the effect of the decision was misapprehended, and that it does not conclude the question of the lawful authority of Presque Isle county to issue the bonds of November 1,1871. But we are required to consider whether the direction given by the court was right, notwithstanding our opinion that the reason given for it was wrong.

Thé proposition insisted upon by counsel is, in the first place, that the statute of March 31, 1871, próviding for the organization of Presque Isle county, was unconstitutional and void, because there was but a single organized township within its limits, and therefore there could not be constituted a board of supervisors,— a prime necessity for the exercise of county functions, — and also because it left some of the inhabitants of the county without an opportunity of voting upon questions affecting their interests; and the case of People v.

Maynard, 15 Mich. 463, (a case which will be discussed in another place,) is cited in support of this proposition. That case does undoubtedly hold that there can be no regular organization of a county, in such conditions; and in that case, where steps were immediately taken after the passage of the act to test the validity of the organization upon a writ of quo warranto by the attorney general to try the right of one assuming to be a public officer in the territory affected by the decision, it was held that the organization was not lawful. The act of March 31, 1871, was provisional only.

It was, in substance, an enabling act. It did not, ipso facto, organize the county. The county continued attached to Alpena county for judicial and municipal purposes as before, until its organization should be completed. It was not shorn off, and left an independent county, without government, in the mean time. The time within which the organization might take place was left indefinite by the statute. Tire validity of the law must depend upon the test whether, when it becomes' operative, it infringes upon some provision of the constitution.

Legislation in prescribed methods is not to be held void unless its operation and effect result in consequences which are forbidden by the supreme law. The law in question was not void upon its face, and would only prove to be so wdien applied to the subject-matter. Cooley, Const. Lim. 163, 164; Golden v. Prince, 3 Wash. C. C. 313, Fed. Cas. No. 5,509. We do not see that it was shown in the court below whether the organization of the county under the act of 1871 took place before or after the organization of fhe township of Presque Isle.

If after, there was then a sufficient number of supervisors to constitute a board, and there is nothing in the record to show that there were in fact, any inhabitants outside of the two townships who were entitled to vote.

Acting upon the rule of the maxim, “Omnia praesu-muntur rite esse acta,”- — a rule peculiarly applicable to this class of questions, — we ought to presume, in the absence of evidence to the contrary, that the facts necessary to the legal organization of the county existed, and, therefore, that there were in the county two organized townships, and that there were no obstacles, arising from any cause. A like presumption was made in Rice v. Ruddiman. 10 Mich. 125, 135, in support of the validity of the organization of the county of Muskegon.

But inasmuch as it may appear, upon a new trial, that the organization of the county of Presque Isle took place while there was yet but One township in it, or under other disabling conditions, it seems .necessary to consider the case upon that aspect. Assuming that under the doctrine of People v.

Maynard, above referred to, the courts of the United States would be bound to hold that such organization wras unlawful and void in its inception, it does not, in our opinion, follow that if the county, assuming it to be valid, went on as such, acquired the capacity to be a county, and exercised for years, with the acquiescence of the state government, the functions and privileges of a county, its status and the validity of its acts are to be tested by such miles as would have been applicable in a direct and prompt, challenge by the state when those powers and privileges were assumed.

In the latter case, the public interests are best subserved by speedy reformation, and no private interest is harmed. In the former, the public interests have been adjusted to the actual condition of things, and private interests have become settled upon the foundations which local authority has laid, with the consent of the state, whose business it was to interfere and prevent the mischief, if any such were feared. It is a matter peculiarly within the province and duty of the state to watch over and prevent the development of political growths which are likely to be prejudicial to the public interests.

When it does not interfere, private individuals are justified in assuming that there is nothing obnoxious in the organization, and that they may treat with it in the character it has assumed.

In the case of a county, after it has gone on for years as such, taxes have been levied and collected under its authority; deeds and mortgages have been registered in its records, and titles have been gained or lost by such registration; the estates of deceased persons have been settled and distributed by its court of probate; the rights of parties have been adjudicated, and remedies awarded, by the circuit, court, in sessions at its county seat, and accused persons have been tried, convicted, and sentenced to imprisonment by that court.

We do not know that, in this instance, all these particular incidents have happened, but it is reasonable to suppose all may have- occurred, and many others of kindred character. May the foundation on which all these things rest for their security or authority be repudiated and denied by the municipality which assumed the character, has been allowed to act in it, and, agreeably to the law governing it in that character, has pledged its faith to repay what it has received and applied to its advantage, and thus disappoint the expectations of those who have trusted in its representations? In the case of People v.

Maynard, a question arose upon the act of February 10, 1857, providing for the organization of the township of Teal Lake. It was suggested to the supreme court that the law was unconstitutional, and therefore void, because, as it was claimed, no such .purpose could be connected with the title of the act, which, under the constitution, must indicate the single object to be provided for. But the suggestion was rejected, the court saying: “If this question had been raised immediately, we are not prepared to say that it would have been altogether free from difficulty.

But inasmuch as the arrangement there indicated had been acted upon for ten years before the recent legislation, and, had been recognized as valid by all parties interested, it cannot now be disturbed. Even in private associations, the acts of parties interested may often estop them from relying on legal objections which might have availed them if not waived.

But in public affairs, where the people have organized themselves, under color of law, into the ordinary municipal bodies, and have gone on, year after year, raising taxes, making improvements, and exercising their usual franchises, their rights are properly regarded as depending quite as much on acquiescence as on the regularity of their origin, and no ex post facto inquiry can be permitted to undo their corporate existence. Whatever may be the rights of individuals before such general acquiescence, the corporate standing of the community can be no longer open to question. See Rumsey v. People, 19 N.

Y. 41, and Lanning v. Carpenter, 20 N. Y. 447, where the effect of the invalidity of. an original county organization is very well considered, in its public and private bearings.” In Clement v. Everest, 29 Mich. 19, a bill was filed to restrain the collection by the township collector of school taxes in district No. 3 of the township, and it was alleged that the lands on which the taxes were assessed had been detached from that district, and attached to No. 2.

One of the grounds of defense was that the action of the township board of school inspectors in detaching those lands, which had been recently done, was unlawful, for reasons set forth in the answer. In dealing with that objection, the court say: “It would be dangerous and wrong to permit the existence of municipalities to depend on the result of private litigation.

Irregularities are common and unavoidable in the organization of such bodies, and both law and policy require that they should not be disturbed, except by some direct process authorized by law, and then only for grave reasons.” “In such matters as concern the pirblic, and do not interfere with private property or liberty, such action as creates municipal bodies and gives them corporate existence cannot be questioned without creating serious disturbance.” This doctrine is approved and applied in the case of Stuart v.

School Dist., 30 Mich. 69, where a bill was filed to restrain the collection of taxes which had been assessed for the support of a high school in the district. Only certain districts, which were specially constituted, were authorized to do this, and it was claimed that the special act which had been passed for the benefit, of this district was void for the want of compliance with the constitution in the form of its enactment. But, the district having proceeded for a number of years to exercise the powers attempted to be conferred, the court said they would wholly decline to consider the objection.

Recurring to the case of People v. Maynard, it will be seen that the reason for the decision was drawn from the implications of the constitution in regard to the formation of counties. But if the constitution had expressly .declared the requirements and the method to be pursued, the fact would remain that the organization which the county had taken on under color of the statute, and in the form of which it acted without question by the state, could not be attacked collaterally. Cooley, Const. Lim. 254; City of St. Louis v. Shields, 62 Mo. 247. In State v.

Rich, 20 Mo. 393, a motion was made to quash an indictment found in the circuit court for Stone county, upon the ground that the statute establishing that county was unconstitutional, in that it reduced Taney county, from which the new county was taken, below the ratio of representation required, and therefore that Stone county was not constitutionally established. It was held that while the court did not intend to raise a doubt of the correctness of a decision previously made that the legislature could not reduce an old county in that way, yet the validity of such

an act could not be drawn in question in this way, but only in- a direct proceeding for the purpose of testing the validity of the organization of the county. But it is needless to multiply authorities. They are substantially, if not altogether, agreed upon the proposition that when a municipal body has assumed, under color of authority, and exercised for any considerable period of time, with the consent of the state, the powders of a public corporation of a kind recognized by the organic law, neither the corporation nor any private party can, in private litigation, question the legality of its existence.

But counsel for tbe defendant lays principal stress upon tbe doctrine that there cannot be a county de facto where there can be none de jure; and it is argued that because the law of 1871 was void when enacted, and gaye no authority for organization, there was no law under which Presque Isle county could become de jure a county, and therefore it could not become de facto such. The general proposition is no doubt correct, as a statement of a doctrine of law. But we do not think that proposition, as applied to the case before us, is sound. We doubt whether the premise of the proposition founded on it is true.

We have already given some reasons for thinking it is not. But we also think the premise is insufficient. The supreme law of the state recognizes counties as political bodies corporate. Their existence is not only permitted, but is essential to' the government which is organized. Their corporate character is not given by the legislature. That body, if it deems the organization consistent with public policy, prescribes a method of organization in form.

This law, whether operative or not, signified the approval of the legislature of the formation of the new county, and in so far was in execution of its authority under the constitution; and we apprehend the rule to be that an unconstitutional and void law may yet be color .of authority to support, as against anybody but the state, a public or private corporation de facto, where such corporation is of a kind which is recognized by, and its existence is consistent with, the paramount law, and the general system of law in the state. In the case of State v.

Carroll, 38 Conn. 449, it was held that an unconstitutional law constituted a valid' support to official action performed under it before the law had been authoritatively pronounced void. And in the case of Donough v. Dewey, 82 Mich. 309, 46 N. W. 782, that doctrine Avas affirmed, and applied to a case where the legislature had passed a law for the election of a second township school inspector, in the face of the constitutional provision that there should be but one. Under that law the toAvnship elected a second inspector, and she was a woman.

The validity of the action of the board of which she was a member being called in question, the court held that the rule that there could be no de facto officer where there was no de jure office was modified by the further rule that an office created by the legislature must be deemed one de jure, so long as the law is treated by the public as valid, though it should afterwards be held otherwise; and, applying that rule, the court held the proceedings valid.

This case declaring the rule in Michigan, which is applicable to the construction and efficacy of its statutes, in furtherance of its local policy, if not binding upon us, is yet entitled to very high respect and consideration. Much reliance was placed in argument upon the case of Norton v. Shelby Co., 118 U. S. 426, 6 Sup. Ct. 1121, as supporting the application of the rule invoked to the present case. But an examination will show that it does not declare or indicate anything inconsistent with the views above stated.

It was an action against the county upon certain bonds which had been issued in its name by a board of county commissioners. This board had been created by a special act of the legislature of Tennessee, and empowered to execute the duties which, by the constitution of the state, were devolved upon the county court, composed of the justices of the peace of the county.

Within a month after its passage the justices of the peace assailed the validity of the act by filing a bill in their official character, in the name of the state, against the commissioners, charging them with unlawful usurpation of the power of the justices, and praying that they should be enjoined. The case went to the supreme court of the state, where it was held that the act was void. This was in conformity with a decision which had already been made by that court in another case of the same kind from the same county.

The board of commissioners was a body not known to the constitution of the state, and was an anomaly in its system of administration of county affairs. For the plaintiff it was contended, in the case of Norton v. Shelby Co., that, although the commissioners did not hold their offices de jure, they were nevertheless officers de facto, and, being such, their acts were valid. The supreme court held oiher-wlse, upon the ground that the commissioners could not be incumbents of an office which could not exist.

They could not fill a place which was unknown to the constitution of the state, and which was made in the room of a board expressly authorized by that instrument to discharge the duties of the same office. And the court took pains to distinguish such a case by saying, at page 441, 118 U. S., and page 1125, 6 Sup. Ct.: “The doctrine which gives validity to neis of officers de facto, whatever defects there may be in the legality of their appointment or election, is founded upon considerations of policy, and necessity for the protection of the public and individuals whose interests may be affected thereby.

Officers are created for the benefit of the public, and private parties are not permitted to inquire into the title of persons clothed with the evidences of such officers, and in apparent possession of their powers and functions. For the good and peace of society, their authority is to- be respected and obeyed until, in some regular mode prescribed by law, their title is investigated and determined. It is manifest that endless confusion would result, if, in every proceeding before such officers, their title could be called in question.

But the idea of an officer implies the existence of an office which he holds.” And the court distinguishes the case of State v. Carroll, supra, which is cited with apparent approbation, by the test wfiiich it had indicated, and by pointing out that in that ease there was an office; to fill. Similar reasons and the like rule apply in the case of officers as to that of municipal corporations de facto. Clement v. Everest, supra.

On March. 28, 1873, the legislature passed a special act attaching township 37 north, 2 east, “to the organized county of Presque Isle.” If is said that this act cannot he held to he a legislative recognition of the county’s previous organization, because, as is argued, that act was itself unconstitutional, in that, by its -title, it had more iban one object.

We are not prepared to admit that the statute would not have the effect of a legislative recognition, even if it was invalid for the reason stated; but as we are of the opinion that the validity of the original organization of the county cannot be, by itself, assailed in this collateral way, we do not deem it necessary to decide whether the statute of 1873 was valid or not, or, if invalid, whether it would still operate as a recognition of what had been done. We do not construe the act of April 9, 1875, as in any sense a repudiation of the original organization. Doubts had arisen in regard to its legality.

The public interests required that those doubts should be put at rest, and the legislature proceeded to clothe the county with an unquestionable title. Having regard to what had transpired, it would seem that this statute should be regarded as effecting a reorganization, and giving express sanction for the continuance of a body whose origin was clouded with doubts of its lawfulness. However that might be, the statute could not, upon any construction, operate to divest rights which had been'acquired while the county was exercising the powers it had assumed.

We are therefore of the opinion that, upon the facts presented by this record, the bonds issued in 1871 were valid. But, if this were not so, we should still think, in the circumstances of this case, that the bonds issued in 1885 to refund the supposed indebtedness are binding obligations upon the county. The former bonds were more than colorable obligations. Recoveries had been had in the United States circuit court against the reorganized county upon some of them, and the validity of the remaining ones was, to say the least, a fair question for controversy.

The county chose hot to make further defense to the bonds, and to avail itself of the opportunity to defer the payment of the indebtedness, and to obtain a reduction of the interest from 10 to 7 per cent. It sought and obtained from the legislature authority to refund its debt. It procured the surrender of the former bonds, and issued in their stead, and in consideration of them, the new bonds.

If the legislature did not assume the former bonds to be valid, it devolved upon the board of supervisors of the county to determine what were valid obligations of the county, in exercising the authority to issue the new bonds conferred by the act, and such determination would bind the county. In the case of City of Cadillac v. Woonsocket Institution, (argued at the same term with this, and recently decided,) 58 Fed. 935, bonds had been issued, under the guise of a loan authorizing public improvements, for the actual purpose of aiding a railroad comr pany.

The bonds weré in the hands of one who knew of the fraudulent evasion of the constitution of the state, and no action could have been maintained upon them by him. But they were negotiable, and might have been put upon the market by him. In this state of affairs, the common council of the city, upon the request of a large number of its citizens, and upon considerations deemed by the council to justify it, issued new bonds to take up the former ones under the provisions, of the Michigan, statute for refunding municipal indebtedness.

The new bonds were exchanged for the old, and passed into the hands of bona fide holders, who brought suit upon them. .One question involved in the case was whether a buyer of the bonds — which, on their, face, were refunding bonds — was bound to go back of the issue of tbe new bonds, which were regular on their face, and contained recitals that they were issued in conformity with law, and ascertain the nature of the refunded indebtedness. The refunding statute did not, in terms, declare who should determine the fact of previous indebtedness.

But Judge Lurton, in delivering the opinion of the court, said: “Power was conferred upon the common council to issue new bonds to take up old ones falling due. The question as to whether there were any such bonds is referred to the council. The old bonds, on the facts found, were at least colorable obligations. The council determined to issue new bonds to take them up. It seems to me that, under these circumstances, it did not devolve upon the purchaser of the new bonds to look into the validity of the funded old bonds;” citing Coloma v. Eaves, 92 U. S. 484; Hackett v. Ottawa, 99 U. S. 86; and Chaffee Co. v.

Potter, 142 U. S. 355, 12 Sup. Ct. 216. In the present case the force of these suggestions is augmented by tbe fact that, by an express provision of the constitution of Michigan, hoards of supervisors are empowered to adjust all claims against their respective counties, and from their decision there is no appeal. This jurisdiction is not exclusive, hut, as against the county, any one having demands against it could obtain from the board a conclusive determination upon them.

To require a purchaser of refunding bonds to scrutinize the successive issues in which the debt has been refunded, to its root, would seriously impair the market value of the bonds, and thus work injuriously to the interests of the municipality issuing them. It is further objected that the act of 1885 did not authorize the issue of bonds negotiable in form, the contention being that that requires express authority, whereas this statute authorizes the issue of bonds, without more; and the cases of Merrill v. Monticello, 138 U. S. 673, 11 Sup. Ct. 441, and Brenham v. Bank, 144 U. S. 173. 12 Sup.

Ct. 559, are cited, in which it was held that a statute authorizing a municipality to borrow money did not, by implication, carry with that authority the power to issue negotiable bonds. In the present case the power is given to issue bonds running for a long period of time, and hearing interest, and it appears on the face of the act that the bonds might he put upon the market and sold. We cannot doubt that negotiable bonds were intended.

The same question was made in the Cadillac Case, above referred to; and it was held by this court, upon a statute of like kind, though not quite so clear in its implication, that the power to issue bonds, must he taken to authorize bonds in the usual form of such well-known commercial obligations, and that the doctrine of Brenham v. Bank did not apply.

The act of 3885 is also attacked upon the ground that it is unconstitutional, in that it attempts to confer special powers upon the hoard of supervisors of a single county, and also because it authorizes them to borrow more than a thousand dollars in a year for constructing public buildings without a vote of (he people. As to the first ground of objection, we find nothing in the constitution of the state which clearly, or by any necessary implication, limits the power of the legislature in the manner supposed. Therefore, by a familiar rule on this subject, we cannot, upon that ground, hold the act invalid.

The cases in Wisconsin (State v. Riordan, 24 Wis. 484, and State v. Supervisors, 25 Wis. 889) were decided upon the special provision of the constitution of that state, requiring a uniform system of local government, and have no application. And, in regard to the second, the bonds were issued to refund a debt, and not to raise money to erect public buildings. The purchaser, as we have already held, was not bound, in the face of the recitals borne by the bonds, to go back, and trace the indebtedness refunded.

We do not find it necessary to decide whether the judgments upon some of the first issue of bonds rendered by the circuit court of the United States created an estoppel against the county of Presque Isle, precluding it from denying the validity of the other bonds of that issue.

Nor is it necessary to express any opinion upon the contention of counsel for defendant that the plaintiff, having taken the bonds and coupons in suit after their maturity, is, notwithstanding- he derived them through one who was a bona fide holder for value and without notice, exposed to the assertion of any equities which the county had in reference to the bonds, for we conclude that it had none to assert. There are a number of assignments of error relating to the admission and rejection of testimony; but, as they are not likely to arise upon a new trial, we think it best to pass them.

Another matter requiring attention is presented by the evidence recited in the bill of exceptions which was introduced by the parties upon the Subject of the bona fides of the transfer of the bonds in suit as affecting the jurisdiction of the court. No issue of any sort was framed in the court below on the subject, but a question arose for the action of the court under the fifth

section of the judiciary act of March 3, 1875, which requires the court, on its own motion, to dismiss the action, if it shall appear at any time that it has been collusively brought. The circuit court declined to make any express decision .of the question, but it must be deemed, in legal effect, to have negatived the suggestion of collusion; otherwise, it could not properly have gone on, in the exercise of the jurisdiction, to the taking of the verdict and the rendition of the judgment.

It is clear that such a question is an independent one, and cannot properly be confused with the issue on the merits; otherwise, it could not be determined from the verdict, whether it was founded on a question of jurisdiction,, or of the cause of action. It was not a question for the jury, as the pleadings stood, but was one which the court was bound to decide before submitting the case upon its merit On the face of the record, the court had jurisdiction, and the question may not arise upon another trial.

It Avould seem that, in a case of fair doubt, the question was one for the trial court, though, undoubtedly, the court of appeals could and would deal with it, if the fault clearly appeared. ' ■ In the present case, upon reversing the judgment, we shall direct the circuit court to permit, ip its discretion, an amendment of tbe pleading of defendant by appending to the plea a plea in abatement, in accordance with the rules of practice of the circuit courts of the state, of the matter touching the jurisdiction, whereon a separate verdict can be taken; or, if it should be deemed best, to leave the question for its own disposition under the act of 1875.

The judgment must be reversed, and the case remanded to the court below, with directions to award a new trial, and for further proceedings in conformity with this opinion. 7 C. C. A. 574.