Opinion
No. 33710.
October 23, 1939. Suggestion of Error Overruled November 20, 1939.
MUNICIPAL CORPORATIONS.
In action on bearer bonds issued by municipality, pleas that title to bonds was not in plaintiff but in another were insufficient where pleas contained no allegation of mala fides of plaintiff or that municipality had a defense to the bonds against the one alleged to be the owner thereof which could not be set up against plaintiff (Code 1930, sec. 2707).
APPEAL from the circuit court of Smith county; HON.E.M. LANE, Judge.
Currie Currie, of Hattiesburg, for appellant.
The pleas of the appellant which were stricken from the file averred, in legal effect, that neither of the banks had possession of said bonds and coupons and that possession of the same had been removed from said banks, and both of them by the receiverships, and further averred, in legal effect, that the possession of said bonds and coupons was in the Chancery Court of Smith County, Mississippi, and further averred, in legal effect, that the custody or possession of said bonds and coupons by P.H. Gardiner, the receiver of The Peoples Bank of Mize, was, in legal effect, in the possession of the Chancery Court of Smith County, Mississippi, and that the said receiver, P.H. Gardiner, could not dispossess the Chancery Court of Smith County, Mississippi of said bonds and coupons without the order or decree of the Chancery Court of Smith County, Mississippi, authorizing him to part with possession of the same.
This is bound to be the law. If it were not the law, receiverships would be futile. The objects of receiverships would fail. A receivership could not have the effect of vesting in the Chancery Courts the possession and control of the property involved in a receivership and in the administration of the affairs of defunct or failing businesses or institutions. One of the main objects of a receivership and of the appointment of a receiver is to take possession, charge and control of the property and hold it for the court, subject to administration and disposition under the orders and decrees of the Chancery Court. Property in the hands of a receiver appointed by a Chancery Court of competent jurisdiction, and there was in this case no denial of the jurisdiction of the Chancery Court of Smith County, Mississippi, is in the custody of the law and is held by the receiver of the court, as the officer of the court, and the possession of the receiver is the possession of the court itself, in legal effect, and the court cannot be deprived of the possession of property by the act of its receiver, without the order or decree of the court. We lay this down as fundamental. That is precisely what happened in this case, and we assert that the transfer of the possession of these bonds from the Chancery Court of Smith County, Mississippi to the Board of Supervisors of Smith County, or to Smith County itself, without the order or decree of the Chancery Court of Smith County was absolutely void, and that the possession of said bonds, to every intent and purpose, remained in and still is in the Chancery Court of Smith County where said receiverships are still pending, under the averments of the pleas filed by the appellant, which were not denied.
34 Cyc. 183, Paragraph D.
The bonds, according to the special pleas, were the property of The Peoples Bank of Mize, and The Peoples Bank of Mize was undertaking to pay its debt to Smith County by a delivery of these bonds to Smith County without authority of the Chancery Court of Smith County. That is the fact, as averred in the special pleas, which was not denied, and which the record on its face shows to be true. If this Court upholds that transaction it will lay down a precedent under which no Chancery Court could protect its possessions and jurisdiction of negotiable instruments of any sort, payable to bearer on the face. We deny the existence of any such authority in a receiver who holds possession as the agent and officer of the court and for the court and subject to the orders and decrees of the court.
23 R.C.L., pages 7 and 8, Par. 2.
There were 21 of these bonds. The par or face value of each bond was $100.00. They were accepted by Smith County, or the Board of Supervisors of Smith County, in part payment of public funds belonging to Smith County and lost in The Peoples Bank of Mize, its depository, when it closed, and Smith County, or the Board of Supervisors of Smith County, undertook to sell these bonds for the sum of $315.00 only. Smith County sold these bonds to one J.S. Rogers named in the special pleas and in the notice filed by the appellant, and the appellee, the Honorable H.M. McIntosh, acquired possession of these bonds, so these pleas averred, from the said J.S. Rogers.
It is averred in said special pleas and the notices filed by the appellant that the pretended sale of these 21 bonds to J.S. Rogers for the aggregate sum of $315.00 was contrary to Section 100 of the State Constitution and utterly void.
Section 2, Chapter 243, Page 485, General Laws of Mississippi, 1936.
The act of P.H. Gardiner in transferring or delivering these bonds and coupons to the Board of Supervisors of Smith County, or to Smith County, was absolutely void and contrary to law, contrary not only to the statutes but contrary to the whole law of receivers and receiverships.
The possession of a receiver is the possession of the court making the appointment, the property being regarded, while in the hands of the receiver as in the custody of the law.
23 R.C.L., 54, Par. 58; Porter v. Sabin, 37 U.S. Sup. Ct. Rep. (L.Ed.), 815; Morril v. Noyes, 56 Me. 458, 96 Am. Dec. 486; People ex rel. Tremper v. Brooks, 40 Mich. 333, 29 Am. Rep. 534; Henry v. Kaufman, 24 Maryland 1, 87 Am. Dec. 591.
The Circuit Court of Smith County could not acquire jurisdiction or possession of these bonds and coupons. They were in the custody of the law and in possession of the Chancery Court of Smith County, a court of competent jurisdiction, when this suit was filed in the Circuit Court of Smith County.
34 Cyc. 187, par. C; Mays v. Rose, Freem. (Miss.), 703.
In support of our contention that the judgment of the Circuit Court of Smith County is a nullity and ought to be reversed and the suit dismissed, we cite the following authorities:
Griffith's Chancery Practice, page 507, paragraph 477; Miss. Code of 1930, Sec. 440; General Laws of Miss., 1936, Section 2, Chapter 243, Page 485; Comer v. Felton, 61 Fed. 731, 10 C.C.A. 28, 22 U.S. App. 313; 10 Bank. Reg. 517; In re Tyler, 149 U.S. 164, 13 Sup. Ct. 785, 37 L.Ed. 689; Beverly v. Brook (Va.), 4 Grat. 208; 34 Cyc. 205, 206, par. C; Bayly v. Gaines (Va.), 2 S.E. 739, 741, 742 (quoting Edw. Rec. 2, 3; Kerr, Rec. 2; Heigh, Rec. 824, 825, 832). Hugh M. McIntosh, Jr., of Collins, for appellee.
The production of municipal bonds and coupons by plaintiff which are properly executed and valid obligations on their face coupled with proof of execution and receipt of consideration raises the presumption of validity and the burden is upon the defendant to show invalidity.
Aberdeen v. Sykes, 59 Miss. 240.
A municipality has statutory authority to issue bonds for the erection of buildings and maintenance of county agricultural high schools and junior colleges.
Miss. Code of 1930, Section 6685.
A municipality cannot avoid its liability under its bonds payable to bearer by admitting the validity of the bonds but denying the ownership in the holder without showing that a meritorious defense could be plead to avoid the obligations against some other person other than the holder who institutes suit.
Jones v. Central Hanover Bank Trust Company (Fla.), 147 So. 896; 8 C.J. 822, Section 1084.
Title of the holder of municipal bonds cannot be questioned by the obligor except for the purpose of proving fraud or illegality in the inception of the instrument.
Town of Pana v. James H. Bowler, 107 U.S. 425, 27 L.Ed. 542; City of Hialeah v. Groves (Fla.), 101 Fed. 951; City of Lakeland v. Sellect Tenures, Inc. (Fla.), 176 So. 274; Equipment Finance Corp. v. Atkins (La.), 139 So. 154; Quick v. Littlejohn (La.), 100 So. 531, 156 La. 369; Archee v. Williams, 6 La. Appeal, 316; Durham v. Myer (Fla.), 154 So. 702.
Public policy demands that municipal bonds be unrestricted as to sale and transfer on the open market and that the holders of such obligation be highly favored.
Moore v. Vaughn, 157 Miss. 758.
The receiver or liquidating agent acting under the jurisdiction of the Chancery Court cannot be sued except by consent of such tribunal but the holder of municipal bonds is not required to trace his title through the courts and receivership and proceedings of the Board of Supervisors, when no objection is raised by such governmental instrumentalities and when the legality of the obligations are admitted by the municipality.
Argued orally by Neal T. Currie, for appellant, and H.M. McIntosh, Jr., for appellee.
This is an action by the appellee against the appellant on several bonds, payable to bearer issued by the appellant. By several special pleas which the court below held to be insufficient, the appellant alleged that the title to the bonds was not in the appellee but in another. These pleas contain no allegation of mala fides on the part of the appellee, or that the appellant had a defense to the bonds against the one alleged to be the owner thereof, which could not be set up against the appellee. This being true, the court below committed no error in holding the special pleas presented no defense to the action.
Under Section 2707 of the Code of 1930, the holder of an instrument payable to bearer may sue thereon in his own name, and "It is not a good plea to allege that the note sued on is the property of another, and not of the plaintiff, without showing some substantial matter of defense against the one asserted to be the owner, and which could not be set up against the plaintiff. It is enough that the plaintiff's title is good as against the defendant." 8 Am. Jur. 579, and authorities there cited. What would be the effect of an allegation of mala fides on the part of the plaintiff is not before us.
Affirmed.