pointed tribunals to decide the fact which constitutes the condition, their recital will not be accepted as a substitute for proof. In other words, where the validity of the bonds depends upon an estoppel claimed to arise upon the recitals of the instrument, the question being as to the existence of power to issue them, it is necessary to establish that the officers executing the bonds had lawfu! authority to make the recitals and to make them conclusive. The very ground of the estoppel is that the recitals are the official statements of those to whom the law refers the public for authentic and final information on the subject."

siveness of certain recitals in the bonds sued | sue bonds upon a condition are not the apon in that case. This court said: "The estoppel does not arise, except upon matters of fact which the corporate officers had autaority by law to determine and to certify. It is not necessary, it is true, that the recital should enumerate each particular fact essential to the existence of the obligation. A general statement that the bonds have been issued in conformity with the law will suffice, so as to embrace every fact which the officers making the statement are authorized to determine and certify. A determination and statement as to the whole series, where [266]more than one is *involved, is a determination and certificate as to each essential particular. But it still remains that there must be authority vested in the officers, by law, as to each necessary fact, whether enumerated, or nonenumerated, to ascertain and determine its existence, and to guarantee to those dealing with them the truth and conclusiveness of their admissions. In such a case the meaning of the law granting power to issue bonds is that they may be issued, not upon the existence of certain facts, to be ascertained and determined whenever disputed, but upon the ascertainment and determination of their existence by the officers or body designated by law to issue the bonds upon such a contingency. This becomes very plain when we suppose the case of such a power granted to issue bonds upon the existence of a state of facts to be ascertained and determined by some persons or tribunal other than those authorized to issue the bonds. In that case it would not be contended that a recital of the facts in the instrument itself, contrary to the finding of those charged by law with that duty, would have any legal effect. So, if the fact necessary to the existence of the authority was by law to be ascertained, not officially by the officers charged with the execution of the power, but by reference to some express and definite record of a public character, then the true meaning of the law would be that the authority to act at all depended upon the actual objective existence of the requisite fact, as shown by the record, and not upon its ascertainment and determination by anyone; and the consequence would necessarily follow that all persons claiming under the excrcise of such a power might be put to proof of the fact made a condition of its lawfulness, notwithstanding any recitals in that instrument This principle is the essence of the rule declared upon this point, by this court, in the well-considered words of Mr. Justice Strong, in Town of Coloma v. Eaves, 92 U. S. 484 [23: 579], where he states (p. 491 [23: 582]) that it is 'where it may be gathered from the legislative enactment that the officers of the municipality were invested with the power to decide whether the condition precedent has been complied with,' that 'their recital that it has been, made in the bonds issued by them and held by a bona fide purchaser, is conclusive [267]*of the fact, and binding upon the municipal-putation, to the Constitution or to the stan

ity; for the recital is itself a decision of the
fact by the appointed tribunal.' The con-
verse is embraced in the proposition, and is
equally true. If the officers authorized to is-

In Lake County v. Graham, 130 U. S. 674, 680, 683, 684 [32: 1065, 1067, 1068], the question was as to the validity of certain bonds issued by Lake county, Colorado, under the very statute of that state referred to in the bonds the coupons of which are here in suit, namely, the above act of February 21st, 1881, authorizing the several counties of the state to fund their floating indebtedness. It was recited in each of the bonds sued on in that case that they were issued under and by virtue of and in full complíarce with that act, and that "all the provisions and requirements of said act have been fully complied with by the proper officers in the issuing of this bond." No one of the bonds, let it be observed, contained any recital that it was issued in conformity to the provisions of the state Constitution. This court said: "Nothing is better settled than this rule that the purchaser of bonds, such as these, is held to know the constitutional provisions and the statutory restrictions bearing on the question of the authority to issue them; also the recitals of the bonds he buys; while, on the other hand, if he act in good faith and pay value, he is entitled to the protection of such recitals of facts as the bonds may contain. In this case the Constitution charges each purchaser with knowledge of the fact that, as to all counties whose assessed valuation equals one million of dollars, there is a *maximum limit beyond [268] which those counties can incur no further indebtedness under any possible conditions, provided that in calculating that limit debts contracted before the adoption of the Constitution are not to be counted. The statute, on the other hand, charges the purchaser with knowledge of the fact that the county commissioners were to issue bonds, at par, in exchange for such warrants of the county as were themselves issued prior to the date of the first publication of the notice provided for; that the only limitation on the issue of bonds in the statute was that the bonds should not exceed in amount the sum of the county indebtedness on the day of notice aforesaid; that while the commissioners were empowered to determine the amount of such indebtedness yet the statute does not refer that board, for the elements of its com

dards prescribed by the Constitution, but leaves it open to them, without departing from any direction of the statute, to adopt solely the basis of the county warrants. The

But

recitals of the bonds were merely to the ef- of each series, and the total amount in all, fect that the issue was 'under and by vir- estop the county from pleading the constitutue of and in full compliance with' the stat- tional limitation? In our opinion these two ute; 'that all the provisions and require- features are of vital importance in distinments of said act have been fully complied guishing this case from Lake County with by the proper officers in the issuing of v. Graham and Dixon County v. Field, this bond;' and that the issuing was au- and are sufficient to operate as an esthorized by a vote of a majority of the duly toppel against the county. Of course the qualified electors,' etc.; no express reference purchaser of bonds in open market was being made to the Constitution, nor any bound to take notice of the constitutional[270] statement made that the constitutional re- limitation on the county with respect to inquirements had been observed. There is, debtedness which might incur. But when, therefore, no estoppel as to the constitution upon the face of the bonds, there was any al question, because there is no recital in re-express recital that the limitation had not gard to it. Carroll County v. Smith, 111 U. been passed, and the bonds themselves did S. 556" [28: 517]. In disposing of the con- not show that it had, he was bound to look tention that, under the doctrines of certain no further. An examination of any paradjudged cases, the county was estopped to ticular bond would not disclose, as it would deny that the bonds were issued in conform- in the Lake County Case and in Dixon Counity to the Constitution, the court said: "The ty v. Field, that, as a matter of fact, the conquestion here is distinguishable from that institutional limitation had been exceeded in the cases relied on by counsel for defendant the issue of the series of bonds. The purin error. In this case the standard of va- chaser might even know, indeed it may be lidity is created by the Constitution. In that admitted that he would be required to know, standard two factors are to be considered; the assessed valuation of the taxable propone, the amount of assessed value, and the erty of the county, and yet he could not asother the ratio between that assessed value certain by reference to one of the bonds and and the debt proposed. These being exac- the assessment roll whether the county had [269]tions of the Constitution itself, it is not exceeded its power, under the Constitution, within the power of a legislature to dispense in the premises. True, if a purchaser had with them, either directly or indirectly, by seen the whole issue of each series of bonds the creation of a ministerial commission and then compared it with the assessment whose finding shall be taken in lieu of the roll, he might have been able to discover facts. In the case of Sherman County v. whether the issue exceeded the amount of inSimons, 109 U. S. 735 [27: 1093], and oth- debtedness limited by the Constitution. ers like it, the question was one of estoppel that is not the test to apply to a transaction as against an exaction imposed by the legis- of this nature. It is not supposed that any lature; and the holding was that the legis- one person would purchase all of the bonds lature, being the source of exaction, had at one time, as that is not the usual course created a board authorized to determine of business of this kind. The test is, What whether its action had been complied with, does each individual bond disclose? If the and that its finding was conclusive to a bona face of one of the bonds had disclosed that, fide purchaser. So also in Oregon v. Jen- as a matter of fact, the recital in it, with renings, 119 U. S. 74 [30: 323], the condition spect to the constitutional limitation, was violated was not one imposed by the Consti- false, of course the county would not be tution, but one fixed by the subscription con- bound by that recital, and would not be estract of the people." topped from pleading the invalidity of the bonds in this particular. Such was the case in Lake County v. Graham and Dixon County v. Field. But that is not this case. Here, by virtue of the statute under which the bonds were issued, the county commis sioners were to determine the amount to be issued, which was not to exceed the total amount of the indebtedness at the date of the first publication of the notice requesting the holders of county warrants to exchange their warrants for bonds, at par. The statute, in terms, gave to the commissioners the determination of a fact, that is, whether the issue of bonds was in accordance with the Constitution of the state and the statute under which they were issued, and required them[271] to spread a certificate of that determination upon the records of the county. The recital in the bond to the effect that such determination has been made, and that the constitutional limitation had not been exceeded in the issue of the bonds, taken in connection with the fact that the bonds themselves did not show such recital to be untrue, under the law, estops the county from saying that it is untrue. Town of Coloma v. Eaves, 92

This brings us in our reference to the authorities to the important case of Chaffee County v. Potter, 142 U. S. 355, 363, 364, 366 [35: 1040, 1043, 1044]. That was an action upon coupons of bonds issued by Chaffee county, Colorado, under the act of February 21st, 1881, under which the bonds here in suit were issued. The bonds and coupons were in the same form and contained the same recitals as the above bonds issued by Gunnison county, and were of like date. The defense in part in the Chaffee county case was that the bonds, and each of them, were issued in violation of the Constitution of the state. After referring to the decision in Lake County v. Graham (the bonds in which did not contain any express recitals as to the constitutional limit of indebtedness), and stating that it was based largely on the ruling in Dixon County v. Field, this court said: "To the views expressed in that case we still adhere; and the only question for us now to consider, therefore, is: Do the additional recitals in these bonds, above set out, and in the absence from their face of anything showing the total number issued

*

The remaining five bonds owned by the plaintiff corporation were also purchased from Stanley, who received them directly from the county in exchange for warrants that he owned and held. There is no reason why upon the surrender of county warrants for county bonds he was not entitled to the benefit of the rule above declared as to the conclusiveness of the recital in the bonds, or why he may not be regarded as much an innocent holder of the bonds exchanged for county warrants as of the other bonds purchased by him in open market. There is no proof that at the time of such exchange he had or was chargeable with knowledge or notice that the debt created by the bonds exceeded the constitutional limit; consequently, in taking the bonds in exchange he was entitled, for the reasons heretofore given, to rely upon the truth of the recitals contained in them. When the board of county com

of our former decisions. This course has also been pursued in order to bring out clearly the fact that the present case is controlled by the judgment in Chaffee County v. Potter. The views of the circuit court, as expressed [274]in its charge in this case and as enforced by its peremptory instruction to find for the defendant, cannot be approved without overruling that case. It was expressly decided in the Chaffee county case that the statute under which the bonds there in suit (the bonds here in suit being of the same class) authorized the county commissioners to determine whether the proposed issue of bonds would in fact exceed the limit prescribed by the Constitution and the statute; and that the recital in the bond to the effect that such determination had been made and that the constitutional limitation had not been exceeded, taken in connection with the fact that the bonds themselves did not show such recital to be untrue, estopped the county, un-missioners, proceeding under the act of 1881, der the law, from saying that the recital was not true. We decline to overrule Chaffee County v. Potter, and upon the authority of that case, and without re-examining or enlarging upon the grounds upon which the decision therein proceeded, we adjudge that as against the plaintiff the county of Gunnison is estopped to question the recital in the bonds in question, to the effect that they did not create a debt in excess of the constitutional limit, and were issued by virtue of and in conformity with the statute of 1881, and in full compliance with the requirements of law.

We have assumed thus far that the plaintiff corporation was a bona fide purchaser or holder of the bonds to which the coupons in suit were attached. Upon this question we concur in the views expressed by the circuit court of appeals. Speaking by Judge Thayer, that court said: "The testimony contained in the present record shows, we think, without contradiction, that the plaintiff was a bona fide holder when the suit was brought of at least five of the bonds which are involved in the present controversy, because it holds the title of Joseph Stanley, who was himself an innocent purchaser of said bonds before maturity, for the price of ninetyeight cents on the dollar. The rights which Stanley acquired by virtue of such purchase inure to the plaintiff, by virtue of its purchase of the bonds from Stanley in June, 1892, and this without reference to any knowledge which the plaintiff may have had at the latter date affecting the validity of [275]the securities. *A bona fide holder of commercial paper is entitled to transfer to a third party all the rights with which he is vested, and the title so acquired by his indorsee cannot be affected by proof that the indorsee was acquainted with the defenses existing against the paper. Commissioners of Marion County v. Clark, 94 U. S. 278, 286 [24: 59, 62]; Hill v. Scotland County, 34 Fed. Rep. 208; Dan. Neg. Inst. 4th ed.) § 803, and cases there cited." 49 U. S. App.

399, 413.

698

offered to exchange county bonds for the warrants held by him, he was entitled under the circumstances disclosed to assume it to be true, as recited in the bonds, that the constitutional limit was not being exceeded.

It is insisted with much earnestness that the principles we have announced render it impossible for a state by a constitutional provision to guard against excessive municipal indebtedness. By no means. If a state Constitution, in fixing a limit for indebtedness of that character, should prescribe a definite rule or test for determining whether that limit has already been exceeded, or is being exceeded by any particular issue of bonds, all who purchase such bends would do so subject to that rule or test, whatever might be the hardship in the case of those who purchased them in the open market *in[276] good faith. Indeed, it is entirely competent for a state to provide by statute that all obligations, in whatever form executed by a municipality existing under its laws, shall be subject to any defense that would be allowed in cases of non-negotiable instruments. But for reasons that everyone understands no such statutes have been passed. Municipal obligations executed under such a statute could not be readily disposed of to those who invest in such securities.

It follows that the circuit court erred in directing the jury to return a verdict for the defendant.

What has been said renders it unnecessary to consider various questions arising upon exceptions to specific rulings in the circuit court as to the admission and exclusion of evidence, and as to those parts of the charge to which objections were made. Those rulings were inconsistent with the principles herein announced.

As neither the circuit court nor the circuit court of appeals proceeded in accordance with the principles herein announced, the judgment of each court is reversed, and the cause is remanded for further proceedings consistent with this opinion.

It is so ordered.

173 U. S.