as part of one transaction, or if the contract calls for the payment of a gross sum, which in part only exceeds the constitutional limit of indebtedness, the just and equitable rule as we regard it has been adopted that each obligation should be void in a sum in proportion to the excess and valid as to the remainder.1 In an action at law in

county was for the construction of the road in six different sections, and the bonds were apportioned to and delivered as each section was completed. The entire issue of bonds exceeded the constitutional limit by something over $15,000, the bonds to be used for the completion of the last section of the road amounting to $25,000. On the ground that the proposition was in a degree separable and apportionable, the court held that the issue of the bonds upon the completion of the first five sections of the road was valid, and for the last section invalid. In Catron v. La Fayette County, 106 Mo. 659, the court held that when bonds were issued at different times under an act limiting the total amount to be issued, the fact that bonds were afterward issued beyond the limit did not invalidate such bonds as were issued before the limit was exceeded.

proportionate amount of the excess and valid as to the remainder. In Francis v. Howard County, 54 Fed. Rep. 487, 13 U. S. App. 126, aff'g 50 Fed. Rep. 44, the county had authority to issue its bonds to the amount of about $15,000. It issued bonds aggregating $35,000, and delivered them at one time. The court held that the proportion of the bonds exceeding its power to issue was invalid, but the remainder valid.

In Culbertson v. Fulton, 127 III. 30, the city contracted to pay $11,619 for the construction of water works. At the time when it made the contract it could only incur debt to the amount of $10,453. It was held that the contract was valid and enforceable up to $10,453, but invalid as to the excess of $1,166. It was also held in this case that the levy of a tax to pay the unlawful excess would be enjoined, but that the tax to pay the lawful amount would not be restrained. In Herman v. Oconto, 110 Wis. 660, the city contracted for a sewer system. The contract price partly exceeded the constitutional limit. The contract was in a sense entire, but it divided the sewers into several districts. The contractor was to build the sewer at so much per foot, depending upon the material used.

Etna Life Ins. Co. v. Lyon County, 44 Fed. Rep. 329; Mass. & S. Const. Co. v. Cane Creek Township, 45 Fed. Rep. 336; Ætna Life Ins. Co. v. Lyon County, 95 Fed. Rep. 325; Keene Five Cent Sav. Bank v. Lyon County, 97 Fed. Rep. 159; Columbus v. Woonsocket Inst. for Sav., 114 Fed. Rep. 162; Chicago v. McDonald, 176 Ill. 404; Griswold v. East St. Louis, 47 Ill. App. 480; School Town of Winamac It was held that the contract v. Hess, 151 Ind. 229; Stockdale v. was of such a nature that it might be Wayland School Dist., 47 Mich. 226; severed and held valid up to the limit Schmitz v. Zeh, 91 Minn. 290; Citizens within which the city was authorized Bank v. Terrell, 78 Tex. 450; Nolan under the Constitution to contract, and County v. State, 83 Tex. 182. See that, the city having failed to furnish Hedges v. Dixon County, 150 U. S. 182, the proper data on which to apportion referred to infra. See also Finlayson the invalid part, it would be scaled v. Vaughn, 54 Minn. 331; Seymour v. Tacoma, 6 Wash. 427. See infra, § 212. In McPherson v. Foster, 43 Iowa, 48, the defendants contracted to build a school house and to receive in payment bonds of the district to the amount of $15,000, but by reason of prior existing indebtedness the district could only contract additional debt amounting to $2,057.50. The bonds all bore the same date and were issued, though at different times, as a part of one transaction. The court held that each bond was void as to its

down to the limit within which the city had power to contract and held valid within that limit. A contract by a town to pay more than it has the power to collect by taxes is not void in toto, but obligates the town to exhaust its power if necessary, and to collect such tax as it may within the limit. Raton Water Works Co. v. Raton, 9 New Mex. 70.

In Hedges v. Dixon County, 150 U. S. 182, bonds were issued by the county in aid of a railroad in excess of the ten per cent limit contained in the Nebraska

the Federal Court brought by the owner of a part of an issue of bonds to recover judgment for the amount of the bonds or for past due interest, it is beyond the power of the court to hear and determine the question of the order in which the series of bonds was sold, or the application of the proceeds realized from the sales thereof, and whether the facts are such that a certain number of bonds can be held valid in law or whether it should not be held that each owner of a bond is equitably entitled to demand a share of the total sum which may be adjudged to be collectible from the municipality. In these circumstances a resort must be had to equity to determine that question.' When the action has been brought at law to recover the amount of certain bonds or coupons, it has been held that if all the bonds are a part of a single issue or are based upon an indivisible contract, exceeding the constitutional limit, no recovery can be had in such action, and the statement has been made that the bonds are void as to the whole issue.2 This declaration that the bonds must be deemed void as to the whole issue probably arose from the form of the action, and from the fact that a court of law had no jurisdiction

Constitution upon donations to railroad companies. The only consideration received by the county in the transaction was the incidental benefit derived from the construction of the railroad, the proceeds of the bonds when negotiated being received directly by the railroad company. Payment of the bonds was refused by the county officials, who alleged that they were invalid. The holders of nearly the entire issue filed a bill in which they offered to surrender up for cancellation such amounts of bonds as exceeded ten per cent of the assessed value of the property, each holder surrendering his proportionate share of the excess, and prayed that an account be taken to ascertain the excess, that such excess might be distributed among the holders of the bonds or applied to reduce the amount of each bond taxable, and that the residue be declared good and valid, and the county decreed to pay the same. It was held that this offer to surrender and cancel the excessive bonds did not vest a court of equity with jurisdiction to ascertain the amount of the excess, to declare the residue of the bonds valid, and enforce the payment thereof, against the county. The opinion distinguished the cases where the municipality received the pecuniary or money consideration of the indebtedness, and the

city was held to be liable as for the money had and received. It also distinguished the case of the Daviess County v. Dickinson (117 U. S. 657), supra. In deciding the case the court, arguendo, said: "What the county authorized and carried into execution in the present case both by the vote and the donation was one entire transaction, and if it should be so reformed as to curtail the entire excess of bonds to such an amount as was within the constitutional limitations of the county to donate, it would be something different from that which was voted by the county, and carried into effect by the issue of the bonds. This would involve the making of a different donation from what the county voted, and intended to make to the railroad company.' See supra for cases in which, where there was a pecuniary consideration received, an apportionment has been made where the transaction has been carried into execution and where part of the bonds only is in excess of the debt limit.

1 Etna Life Ins. Co. v. Lyon County, 44 Fed. Rep. 329.

2 Prickett v. Marceline, 65 Fed. Rep. 469; Thornburg v. School Dist. No. 3, 175 Mo. 12; Millerstown v. Frederick, 114 Pa. St. 435. See also Lake County v. Standley, 24 Colo. 1.

to determine the question of the validity of a part. Where suit is brought in advance of the issue of the bonds to restrain an issue which is partly in excess of the amount authorized by law, the proceedings authorizing the issue by the vote of the electors must be regarded as an act in excess of the authority, and it is the duty of the court to restrain the whole issue.1

$204. Estoppel by Recitals as to Debt Limit.2 It is apparent, from the discussion of the principles involved in applying the constitutional limitation upon the power of a municipality to incur indebtedness, that there is no absolute test, unless one has been expressly provided, by which a person purchasing a bond issued by the municipality may ascertain whether it is within the powers of the municipality. Even if bonds be issued in an amount exceeding the constitutional limit, they may still be valid if issued for some of the purposes or under some of the circumstances which do not create indebtedness under the decisions of the courts. It is true that the Constitution creates a standard of validity in which two facts are to be considered, one the amount of the assessed value, and the other the ratio between that assessed value and the debt proposed, including all other indebtedness; but, as we have seen, the applicability of these standards is only relative, and much is left to the good faith and discretion of the municipal authorities. If a State Constitution in fixing a limit for municipal indebtedness, or the legislative enabling act in authorizing the debt, 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 bonds 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 good faith. But the usual provisions of

Reineman v. Covington, &c. R. Co., 7 Neb. 310.

* As to estoppel by recitals in bonds, see post, chapter on Municipal Bonds, where this important subject is fully treated, the cases examined at length, and the general result of the cases stated.

3 Lake County v. Graham, 130 U. S. 674, 684.

⚫ Gunnison County v. Rollins, 173 U. S. 255, 275, s. c. more fully considered in the chapter on Municipal Bonds, post. The Constitution of Pennsylvania declares that municipal debt shall not exceed seven per cent of the assessed value of taxable property, and

that no municipality shall incur any new debt exceeding two per cent without a previous vote of the electors. By statute, municipal officers were required, before issuing bonds and as part of the procedure for the issue, to make and file in a court of record a statement of indebtedness. In an action on a municipal bond, it was held that even a bona fide holder was bound not only by the statement so made and filed, but also was affected with notice of that which the statute required the statement to disclose. Millerstown v. Frederick, 114 Pa. St. 435. But if no record of existing indebtedness is kept as required by a general statute, there

the Constitutions as to debt limit do not prescribe any such definite rule or test. Municipalities long ago discovered that the means by which they can best procure money for their needs is to issue negotiable bonds running for a term of years, bearing a definite rate of interest, and which are attractive to investors by reason of the certainty of the annual return and of the payment of the principal at maturity, and comparative freedom from attack. They resort to methods similar to those adopted by the general government, by the States and railroads and other corporations, and under legislative authority issue their bonds and securities and sell them on the market at the best price which can be procured. To make their bonds inviting and thereby secure a greater price, they cast them in the form of negotiable instruments; insert recitals that they are issued under the authority of a statute; that all the provisions and requirements of the statute have been fully complied with by the proper officers; and if a vote be required that the issuance of the bonds is authorized by a proper vote, and that the debt limit fixed by the Constitution and laws has not been exceeded, etc.

These recitals are in general use, and are inserted for the purpose of making the securities more marketable and removing any hesitation which may arise in the minds of investors by reason of the constitutional or statutory limitations upon the power to incur debt, and to this end recitals are frequently made that the total amount of the issue does not exceed any constitutional or statutory limit, or that the bonds are issued for the purpose of funding or refunding valid outstanding indebtedness of the municipality, etc. It is apparent that if these recitals be given effect as estoppel, bonds containing them are not subject to any defence by the municipality as respects matters covered by the recitals, and constitute one of the most certain and desirable forms of public investment. Municipalities are frequently authorized to acquire or construct water works, electric or other light plants, and to make expensive and permanent public improvements, the cost of which is too large to be paid out of current revenues and which ought to be distributed over a series of years. Municipal credit in the shape of negotiable bonds is the usual means resorted to, and it is in the interest of the municipality to get the highest price for its bonds, and this can only be done by investing them with the qualities of negotiable paper. Upon conis no notice to a bona fide purchaser of bonds of the aggregate indebtedness of the municipality when the bonds were issued and the purchaser is entitled to

rely on the recitals in the bonds. Dudley v. Lake County Com'rs, 80 Fed. Rep. 672.

siderations such as these rests the doctrine of recitals in such bonds which has been declared and established by the courts.

Underlying the question of estoppel is the question of the authority of the municipal officers to make the recitals. These officers are by the enabling acts the representatives of the municipality entrusted with the duty of passing upon its needs and powers, of determining whether the issue of bonds should be made, and of making the issue. In making the issue, and as a part of their official duty, they must determine whether all the steps prescribed by the Constitution and statute preliminary to the issue have been taken. Being the agents of the municipality for the purpose of disposing of the bonds, it is their duty to furnish to all parties dealing with the municipality full information as to all facts affecting the validity of the bonds, and it is only equitable and just that if these officers in the exercise of their official duties make representations by recitals in the bonds as to the existence of facts which are a prerequisite to their own authority, which they must have determined to exist before they could issue the bonds, the municipality should be bound by these representations.' Arising from considerations

Dudley v. Board of Com'rs, 80 Fed. Rep. 672; Waite v. Santa Cruz, 184 U. S. 302, 314; Gunnison County v. Rollins, 173 Ú. S. 255; Hughes County v. Livingston, 104 Fed. Rep. 306, 311; Chaffee County v. Potter, 142 U. S. 355; County of Hamilton v. Montpelier Sav. Bank, &c., 157 Fed. Rep. 19, referred to supra, § 202, 7th Cir., April, 1907; more fully post, chapter on Municipal Bonds. In Independent School District v. Rew, 111 Fed. Rep. 1, the action was brought on certain refunding bonds, and it was held that the district township issuing the bonds was estopped by a recital therein. The statute under which the bonds were issued provided that any district township, against which unsatisfied judgments had been rendered prior to its passage, might issue negotiable bonds for the purpose of paying off such judgment, and that they should be in substantially the same form prescribed for county bonds. The form prescribed for county bonds contained a certificate that they were issued by the board of supervisors of the county pursuant to the provisions of the law authorizing their issue and in conformity to the resolution of the board. It was held that this statute authorized the board of directors of the township to determine whether there

were valid judgment debts against the township, and upon such determination to issue funding bonds. The court said: "It is well settled that, if the laws are such that there might, under any state of facts or circumstances, be lawful power in a municipality or quasi municipality to issue its bonds, it may by recitals therein estop itself from denying that those facts or circumstances exist, unless the Constitution or the act under which the bonds are issued prescribes some public record as the test of the existence of some of those facts or circumstances. In this case there might have been a state of facts under which the district township would have had the power to issue these bonds notwithstanding the fact that the constitutional limit of its indebtedness had been passed when they were issued. There might have been unsatisfied judgments rendered before the passage of chapter 51, which evidenced unimpeachable obligations of the district township incurred before its indebtedness reached its constitutional limitation. Neither the Constitution nor the act under which the bonds were issued pointed out any public record as the test of the existence of this state of facts. The district township, therefore, had the power to issue the bonds, if such judg