ERROR TO THE CIRCUIT COURT OF THE UNITED STATES FOR THE DISTRICT OF INDIANA.
MR. CHIEF JUSTICE FULLER delivered the opinion of the court.
The case must be treated, so far as the jurisdiction of the Circuit Court is concerned, as though Stanton was alone named as plaintiff. Maryland v. Baldwin, 112 U.S. 490. If the suit could be regarded as founded on the certificates attached to the complaint, there would be a want of jurisdiction, as it does not appear that Pollard could have prosecuted the suit in the Circuit Court, Rev. Stat. § 629; Act of March 3, 1875, c. 137, 18 Stat. 470; Act of March 3, 1887, c. 373, 24 Stat. 552, 553; but as the suit is upon the bond, and Stanton and his cestuis que trust were citizens of other States than Indiana, we think the jurisdiction may be maintained.
But although the suit is upon the bond, the liability asserted under section two of the act of 1883 is to the holder of the certificates "for the amount thereof," and the breach alleged is the execution of the certificates.
Such a liability might be transferable to successive holders of the warrant or certificate, but it would seem quite clear that if the liability did not exist in favor of the payee, subsequent holders would stand in no better position. Certificates, like those exhibited in the case at bar, made and payable in Indiana, out of a particular fund, and purporting to be the obligations of a corporation existing under public laws and endowed only with restricted powers granted for special and purely local purposes of a non-commercial character, are not governed by the law merchant, and are open in the hands of subsequent holders to the same defences as existed against the original payee. Stanton v. Shipley, 27 Fed. Rep. 498; State
ex rel. Cohen v. Hawes, 112 Indiana, 323; Merrill v. Monticello, 138 U.S. 673.
The contention is that where an order of the county commissioners is requisite, under sections 6006 and 6007 of the Revised Statutes of Indiana, to empower a township trustee to contract indebtedness, and has not been obtained, the mere fact of the issue of a warrant or certificate by the trustee, in form the warrant or certificate of the township, authorizes the recovery of the amount thereof of the trustee and his sureties by suit on the official bond. We cannot concur in that view.
The section in question provides that when the trustee contracts a debt in the name or in behalf of the township, without the proper order of the county commissioners, if required, liability on the official bond is incurred to the holder of the contract or other evidence of such indebtedness. The indebtedness thus referred to is manifestly an indebtedness contracted within the line of official duty and authority for something furnished to or obtained for the township, although in disregard of the provisions of sections 6006 and 6007. The sureties were not subjected to liability by the statute for the payment of warrants or certificates which, apart from those sections, it was not within the authority of the trustee to execute, or which were fraudulent in themselves, but only when persons had in good faith parted with money or property to the township on the strength of the official character of the transaction. Such we understand to be the construction put upon the act by the highest judicial tribunal of Indiana. That court in Jeffersonville School Township v. Litton, 116 Indiana, 467, 475, pointed out that by the first section of the act provision was made for the protection of creditors without actual knowledge of the facts where a township trustee had theretofore undertaken to incur debts without an order of the county commissioners, when such an order was requisite; and that by the second section it was attempted to check further extravagance, and at the same time to save innocent creditors. But a writing purporting to be evidence of such indebtedness could not create it. And, in respect of school supplies, the Supreme Court of Indiana has decided
"again and again, that a township trustee has no power, by any form of obligation, to bind the corporation of which he is the agent or trustee by contract for school supplies, unless supplies suitable and reasonably necessary have been actually delivered to and received by the township." Boyd v. Mill Creek School Township, 114 Indiana, 210.
In State v. Hawes, 112 Indiana, 323, the action was brought on the official bond of a trustee to recover for a certificate made to Pollard, purporting to be for school supplies bought and received by the township, it being averred that the same was executed in violation of sections 6006 and 6007. The certificate was in fact issued without any actual consideration, and the Supreme Court said: "The liability imposed by the act of 1883 requires, as a condition precedent, that the township trustee must have contracted a debt, in the name or in behalf of his township, either civil or school, and the debt must have been contracted in violation of the provisions of sections 6006 and 6007. If, therefore, the transaction in which the certificate had its inception was such as to create no debt, or if the debt created was not within the prohibition of the above-mentioned sections, manifestly the statutory liability has not been incurred by any one. . . . The mere delivery of a piece of paper which imports an obligation to pay money, but which is in fact no evidence of an actual existing debt, does not constitute the contracting of a debt. It cannot be supposed that it was the purpose of the statute to enable a holder of a contract, or other evidence of indebtedness, issued by a township trustee in the name or in behalf of his township, to hold the trustee personally liable, and liable on his official bond, whether an indebtedness had been in fact contracted or not. A recovery in any case is limited by the statute to the amount of the ...