Village of Heyburn v. Security Savings & Trust Co.

The Village of Heyburn, respondent, commenced this action against Security Savings Trust Company, appellant, the owner and holder for collection of nine funding bonds of $500 each, aggregating $4,500, which had been issued by respondent June 1, 1922. By such action the village sought to have the bonds canceled and adjudged and decreed void.

On June 1, 1922, the village officers adopted an ordinance (No. 31) providing for the issuance of these bonds "for the purpose of funding a like amount of the outstanding warrant indebtedness of said village." In pursuance of this ordinance the bonds were subsequently issued and sold to five individual purchasers through the agency of a Portland brokerage firm. Some interest coupons were thereafter paid and finally the village refused to pay any further coupons, asserting the invalidity of the bond issue. The purchasers assigned the bonds, together with unpaid coupons, to the appellant herein and it instituted an action on June 26, 1928, against the village to recover the amounts then due on unpaid coupons. In that action the jury returned a general verdict for the village. Thereafter and prior to the entry of judgment, but after the entry of the verdict, the village instituted the present action, praying for a cancelation of the bonds, pleading the facts which it claimed rendered the bonds void and also the previous action against the village and the verdict rendered therein. After the entry of the judgment on the verdict and prior to the trial of the present case the village filed a supplemental complaint, setting up the judgment which had been entered in the former case and alleging that:

"The said judgment has never been vacated, modified or appealed from and is now in full force and effect. That the same constituted an adjudication that the said bonds are illegal and unlawful and unenforceable . . . . and that the said defendant (appellant herein) is thereby estopped from asserting or claiming any defense to the right of the plaintiff to have the said bonds, together with the coupons thereon canceled."

The village also alleged that the bonds incurred an indebtedness exceeding the income and revenue of the village for the year in which they were issued; that they were issued without the assent of two-thirds of the qualified electors voting at an election held for that purpose; that the indebtedness represented by the bonds, with the other outstanding bonds of the village, exceeded in the aggregate ten per cent of the assessed full cash valuation of all the property within the village and that the bonds were issued for the payment of illegal warrants and not for the purpose of paying any valid outstanding indebtedness of the village, and that the bonds were not in the hands of or owned by an innocent purchaser, and that the appellant was not a holder in due course.

The appellant herein answered the complaint and added a further answer "by way of affirmative defense" to plaintiff's cause of action and thereupon set out the warrant and other indebtedness of the village as the same existed at the time of the issuance of these bonds and the claim of the village that the bond issue was unlawful and void because it exceeded the income and revenue of the village for the year in which the bonds were issued; and that they were issued without the assent of two-thirds of the qualified electors voting therefor and that they, together with other outstanding indebtedness, exceeded in the aggregate ten per cent of the full cash value of the real estate within the village; and further that they were issued for payment of illegal warrants, etc.

This present case was thereupon tried to the court and findings of fact, conclusions of law and judgment were thereupon entered in favor of the village, from which the defendant prosecuted this appeal.

Appellant has assigned a large number of errors but in view of their nature and the statement made in opening argument of appellant's brief, we do not think it will be necessary to consider the assignments separately as we feel that the answer to one of the propositions advanced will dispose of the case. The statement in appellant's brief to which we have just referred is as follows:

"By its complaint the village grounded its right to decree canceling the bonds, relieving it from all obligation to make payment upon: (1) The assertion that the judgment entered in the action brought upon the coupons, wherein the parties hereto appeared in converse order, amounted to an adjudication of all questions involved; and (2) invalidity independently pleaded in that: (a) the bonds incurred an indebtedness exceeding the income and revenue for that year without the approval of the voters, (b) that the bonds increased the bonded debt to a total exceeding 10 per cent of the assessed valuation of property, and (c) that the bonds were issued for the payment of illegal and not for the payment of any valid warrants. The village alleged the bonds were not in the hands of a holder in due course.

"Thus by the complaint and responsive answer the following issues were presented: 1. Whether the purchasers were holders in due course; 2. If not, whether the bonds were invalid for the reasons pleaded; and 3, the efficacy of the judgment in the former suit as an adjudication of the two questions just stated."

When the trial court in this case came to make up his findings of fact and conclusions of law he reached the conclusion that all the issues involved in this action were involved in the former action and were judicially determined in the former action in favor of the respondent, the village, and against appellant; that the judgment made and entered in the former action constitutes res judicata of all the issues involved in this action and is, and constitutes, an estoppel by judgment against the appellant to deny or refute any of the issues that were made or considered in the former action. The court likewise concluded that the judgment in the former action constituted an adjudication that the bonds of respondent were void and unenforceable and that the purchasers and holders thereof were not holders in due course.

The state of this case renders it necessary for us to first determine whether or not the case prosecuted by the appellant against the respondent for collection of the amount due on the coupons is res judicata of all the matters and issues involved in this case. For the purpose of ascertaining the rule of resjudicata or estoppel by judgment applicable to this case, we should be guided by the rule as announced in previous decisions of this court. In Elliott v. Porter, 6 Idaho 684, 59 P. 360, this court speaking through Chief Justice Huston, announced the rule as to estoppel by judgment, which has been continuously followed in this state for over a third of a century. It was stated as follows:

"All of the issues passed upon by the probate court were fairly within the pleadings. No appeal was ever taken from the judgment of the probate court. Its judgment settled every question involved in the case before us. We think the law governing this case is properly and fully declared in Marsh v.Pier, 4 Rawle, 273, 26 Am. Dec. 131, as follows: 'A judgment of a proper court, being a sentence or conclusion of the law upon the facts contained within the record, puts an end to all further litigation on account of the same matter, and becomes the law of the case, which cannot be changed or altered, even by the consent of the parties, and it is not only binding upon them, but upon the courts and juries, ever afterward, as long as it shall remain in force and unreversed.' And the court adds in the same case: 'A contrary doctrine, as it seems to me, subjects the public peace and quiet to the will or neglect of individuals, and prefers the gratification of the litigious disposition on the part of suitors to the preservation of the public tranquility and happiness.' "

In Joyce v. Murphy Land etc. Co., 35 Idaho 549, 208 P. 241, the rule was reiterated as follows:

"We think the correct rule to be that in an action between the same parties upon the same claim or demand, the former adjudication concludes parties and privies not only as to every matter offered and received to sustain or defeat the claim but also as to every matter which might and should have been litigated in the first suit. (24 Am. Eng. Ency. of Law, 2d ed., p. 714; Shields v. Johnson, 12 Idaho 329,85 P. 972; King v. Co-operative Sav. etc. Assn., 6 Idaho 760,59 P. 557.)"

The same rule has been repeatedly followed by this court; it was quoted and reaffirmed in South Boise Water Co. v. McDonald,50 Idaho 409, 296 P. 591, wherein previous cases are cited.

We are satisfied with the rule as announced by this court in the above cited cases and will not pause to consider what other courts have held on the subject, and we shall now consider such of the record as may seem important for the purpose of determining whether or not the record of the former case brings the issues in the present case within the purview of the rule as above stated. We find that the parties in the former and present suits are identical. The former was an action at law brought by the holder of the bonds to recover the amount due and unpaid on the interest coupons. The present action is prosecuted by the village against the holder of the bonds from which the coupons were taken, seeking to obtain a decree of the court canceling both the bonds and the unpaid coupons. In the former action the jury and court decided that the bonds were illegally issued and were void and that the coupons were uncollectible. In the present case the city seeks to have the bonds canceled because void. There is really no contention made but that the subject matter is the same in both actions but it is contended by appellant that the case is taken out of the rule res judicata by reason of the different procedure that has been resorted to in this case. In other words, that, since the village has invoked the equity side of the court for a cancelation of the bonds, it has lost the benefit of the plea of res judicata to the extent that it cannot have any affirmative decree of cancelation without doing equity, which appellant asserts would be to tender back the amount of money that the purchasers paid for the bonds, in so far as it can actually be traced into lawful and legitimate expenditures made by the village.

In order that there may be no misapprehension as to just what occurred in the original action and what issues were presented, discussed and passed upon, resort must be had to the record of the first case which was introduced upon the trial and is a part of the record here. The complaint contained the following allegations inter alia:

"That on the 1st day of June, 1922, the defendant, at Heyburn, Idaho, made and issued its nine certain funding bonds of the denomination of $500 each, numbered consecutively from 1 to 9, both inclusive, dated on said day, whereby for value received it promised to pay to the bearers the sum of $4,500 in lawful money of the United States of America, on the first day of June, A.D. 1942, with interest thereon at the rate of 6% per annum, payable semi-annually on the first day of January and the first day of July in each year, beginning July 1, 1922, at the office of the Village Treasurer in Heyburn, Idaho, or at the American Exchange National Bank in the City and State of New York, at the option of the holder, according to divers coupons thereto attached, numbered consecutively from 1 to 40, both inclusive, on each of said bonds, a copy of which said coupons (except Coupons #1 and #40 and except as to number and due date) is in words and figures as follows:

"That as and when the coupons attached to said bonds became due and payable the same were presented at the place of payment, to-wit: the office of the Village Treasurer in Heyburn, Idaho, and payment demanded, but payment of coupons numbered 4, attached to bonds numbered 1, 7 and 8, as aforesaid, and coupons numbered 3, attached to bonds numbered 2, 3, 4, 5, 6 and 9, as aforesaid, was and still is refused, and the said coupons and bonds and the indebtedness represented by them were then and ever since have been repudiated by the defendant on the alleged ground that said bonds and coupons are null and void."

The answer of the village denied most of the allegations of the complaint and alleged affirmatively as follows:

"That if any funding bonds were issued or attempted to be issued by this defendant or any board of trustees of this defendant, the said bonds were not issued in accordance with law, and were not issued to provide for funding, refunding, purchase or redemption of outstanding indebtedness of the Village of Heyburn; that if any funding bonds were issued, the same were issued for the purpose of funding, refunding, purchase or redemption of warrants that were illegally and unlawfully issued by the said Village of Heyburn, and that the said warrants so purported to be funded were not legal or valid obligations of the said village.

"That at the time of the issuance of said bonds, if any bonds were issued, the same constituted incurring additional liability of the said Village of Heyburn, and increased the indebtedness of said village, and the same were issued without submitting the question of issuing the said bonds or incurring said indebtedness, to the qualified electors of the said Village of Heyburn. That the indebtedness incurred thereby, if any indebtedness was incurred, exceeded the income and revenue provided for the Village of Heyburn for the year in which the said bonds are alleged to have been issued.

"That if the said bonds were issued, or attempted to be issued by said Village of Heyburn, as alleged in the complaint of the plaintiff, the same were not sold by the said. Village in accordance with the provisions of the statutes of the State of Idaho, for their par value, but were sold for less than their par value, and the said village did not receive for the same the par value of the bonds alleged to have been issued and sold."

The instructions given by the court to the jury in that case, 42 in number, comprising some 45 typewritten pages, cover every issue that was either alleged or inferable from the pleadings, and consequently all the issues that have been tendered or discussed in the present case. For the purpose of illustrating and showing that every issue that arises or has been discussed here was presented to the jury in the first case, we are setting out Instructions 4, 8, 9, 19, 20, 29 and 30 in the footnote. We are not concerned here with the question as to whether the instructions were all correct statements of the law or contained contradictions or misstatements of the law. If any error was committed in that respect or in any other respect on that trial, the party against whom it was committed had a right of review by appeal to this court. No appeal was taken and the judgment

Instruction No. 4. "It is claimed by the defendant that there is a defect in the issuance of the said bonds and coupons in that the defendant did not sell said bonds for par, and further that the said bonds being funding bonds or bonds issued for the paying of outstanding obligations that they are void for the reason that the defendant claims they increased the indebtedness of the city and for the further reason that some of the indebtedness taken up by said bonds was illegal and void, and that said bonds were illegal and void for other reasons set out in instruction number one herein. I instruct you as a matter of law that these defenses are not maintainable in this action if you find under all the evidence that the plaintiff had no actual knowledge of any alleged defects or infirmities existing or claimed by the defendant to exist at the time it became the owner and holder of said bonds, or had knowledge of such facts that its action in taking the instruments amounted to bad faith. In connection with this instruction you are instructed that the plaintiff is merely the holder for the purpose of collection and that in determining this question you will apply the same rule to the actual owners of the bonds who have made an assignment of their bonds and coupons to the plaintiff for the sole purpose of bringing this action." Instruction No. 8. "Some contention has been raised in this case relative to filing or recording of such bonds with the county recorder. I instruct you as a matter of law that there is no law in this state requiring bonds of the character in controversy here to be recorded with the county recorder, but there is a statute requiring the treasurer of a city to file a list of bonds with the county recorder advising him of the outstanding obligations of the city particularly describing the bonds by number, amount, rate of interest, and due date, but this statute has nothing to do with the validity of the bonds. It is a misdemeanor for the officials of a village to fail to give such information to the county recorder, but it does not vitiate or in any sense invalidate the bonds if the village treasurer fails to properly discharge his duties. You are, therefore, instructed to disregard any evidence or statements you have heard during this trial on this phase of the case, because such facts would have nothing to do with plaintiff's right to recover in this action. There are two questions for you to determine in this case:

"(1) Whether or not there were defects in the proceedings had in the issuance of the bonds which would render them invalid, or create a defect in the title thereto.

"(2) Whether or not the plaintiff when it purchased said bonds had actual knowledge of such defects, if any, or knowledge of such facts that its acts in taking the bonds amounted to bad faith.

"If you find that defects in the proceedings render the bonds invalid or any defects of the title thereto, your verdict will be nevertheless for the plaintiff unless you further find that plaintiff had actual knowledge of such defects or knowledge of such facts that its acts in taking the bonds amounted to bad faith. In other words, you must be satisfied by the evidence as herein elsewhere defined that both of the above questions are answered in the affirmative before you can find for the defendant."

Instruction No. 9. "The bonds in controversy are funding bonds and the village of Heyburn had a right under the statutes of this state to issue funding bonds without a vote of the people; hence there is no merit in the contention made by the defendant that the bonds are void because they were issued by the trustees of the defendant village without a vote of the people, unless you also find in this connection that said funding bonds so issued created an additional debt to the village." Instruction No. 19. "The court instructs the jury that section 3 of article 8 of the Constitution of the State of Idaho provides:

" 'Limitations on county and municipal indebtedness. No county, town, township, board of education or school district, or other subdivision of the state shall incur any indebtedness, or liability in any manner, or for any purpose, exceeding in that year, the income and revenue provided for it for such year, without the assent of two-thirds of the qualified electors thereof, voting at an election to be held for that purpose, nor unless, before or at the time of incurring such indebtedness, provision shall be made for the collection of an annual tax sufficient to pay the interest on such indebtedness as it falls due, and also to constitute a sinking fund for the payment of the principal thereof, within twenty years from the time of contracting the same. Any indebtedness, or liability incurred contrary to this provision shall be void: PROVIDED, That this section shall not be construed to apply to the ordinary and necessary expenses authorized by the general laws of the state.' "

Instruction No. 20. "The court instructs the jury that Section 4109 of the Compiled Statutes of Idaho (I. C. A., Sec. 49-2401), in part provides:

" 'Every municipal corporation incorporated under the laws of the territory of Idaho or of the State of Idaho, shall have power and authority to issue municipal coupon bonds not to exceed at any time in the aggregate 10 per cent of the assessed full cash valuation of the real estate and personal property in said municipal corporation, according to the assessment of the preceding year, for any or all of the purposes specified in subdivisions 1 to 8, inclusive, as follows: . . . .

" '3. To provide for the funding, refunding, purchase and redemption of the outstanding indebtedness of such municipal corporation. Bonds may be issued under this section for the purpose of funding, refunding, purchase or redemption of the outstanding indebtedness of any such municipal corporation when the same can be done to the profit and benefit of such municipal corporation, and without incurring any additional liability, without the submission of the question of issuance of such bonds to the electors of the municipal corporation.' "

Instruction No. 29. "You are further instructed, gentlemen of the jury, that the board of trustees of the Village of Heyburn had no authority to issue warrants for the purpose of taking up, paying off or discharging other warrants, and if you find from the evidence that the board of trustees of the Village of Heyburn did at any time issue warrants for the purpose of taking up other warrants, and such warrants so issued were included as a part of the funding bond, then you are instructed, as a matter of law, that the said bonds increased the indebtedness of the Village of Heyburn and under the provisions of the Constitution of the State of Idaho, would be void, unless you find that the plaintiff is a holder in due course, as elsewhere explained in these instructions." Instruction No. 30. "The court instructs the jury that the power of a municipal corporation to issue bonds depends upon a grant of authority from the legislature and while a municipality has discretion to issue such bonds as will best accomplish the general object to secure which their issue was authorized, yet the legislature in granting authority therefor may impose such conditions as it may choose, and unless the conditions are complied with the issue is unauthorized and the bonds are invalid. If you find from the evidence in this case that the original or invalid warrants were funded by this bond, then you are instructed as a matter of law, that the bonds were not issued in accordance with the provisions of the statute, and the same are void, unless you find from all of the evidence that the plaintiff is a holder in due course." was allowed to become final. So we must accept the judgment in the first case as a final judgment and the law of the case.

From these instructions it will be seen that the jury was advised as to the law and their duty bearing upon the validity or invalidity of the bond issue as it was affected by the debt limitation section of the constitution and statute, by the property valuation limitation and also as to whether the bonds were issued in payment of pre-existing warrant indebtedness or were the creation of a new debt.

It was not only the privilege but the duty of the holder of these bonds at the trial for collection of the coupons to present all its evidence and every reason existing that would justify or compel a verdict and judgment in its favor. The allegations of the complaint and the denials and affirmative allegations of the answer tendered issues which rendered admissible any and all possible evidence bearing on the validity of these bonds and the instructions of the court verify the contention that every defense here presented or mooted was given to the jury by the court. It is indisputable that the jury found some or all of the defenses true and that by their verdict they found that the bonds created no debt orliability against the village. The finality of that judgment and its effect as res judicata in this case is in no respect escapable or lessened by reason of the adoption of a different form of action or a plea for equitable relief. One form of action is as conclusive on the parties as any other if it involves the same state of facts. (Lawrence v. Corbeille,32 Idaho 114, 178 P. 834; Hilton v. Stewart, 15 Idaho 150,96 P. 579, 128 Am. St. 48.)

No different fact whatever is in issue in this case from what was in issue in the former case. The difference exists only in the prayers of the respective complaints and answers and in that respect no substantial difference exists. In the former case plaintiff asked for judgment for the amount of the past due interest coupons and for general relief; in the present suit the same party as defendant "prays that the plaintiff take nothing by its complaint on file herein and that the same be dismissed, for costs of suit and for such other and further relief as may be just and equitable." The defendant (the village) in the former case prayed that plaintiff's action be dismissed and "this defendant wholly relieved and discharged therefrom, . . . . for such other and further relief as to the court may seem meet and proper." In the present case the same party (the village), as plaintiff, prays for a decree adjudging the bonds and remaining coupons void and for their cancelation and for general relief.

The contention made by appellant that these were mere funding bonds and did not increase the municipal debt liability within the constitutional inhibition (Sec. 3, art. 8, Const., quoted in footnote, ante, p. 743) as construed by this court in Butlerv. City of Lewsiton, 11 Idaho 393, 83 P. 234, Veatch v. Cityof Moscow, 18 Idaho 313, 109 P. 722, 21 Ann. Cas. 1332, andSebern v. Cobb, 41 Idaho 386, 238 P. 1023, is effectually and legally answered by reference to the instructions and verdict in the former case. By Instruction No. 9 (footnote, ante, p. 743) the court told the jury that "the bonds in controversy are funding bonds and the village had a right . . . . to issue funding bonds without a vote of the people; . . . . unless youalso find that said funding bonds created an additional debt tothe village." It must be conceded that under this instruction it was necessary for the jury to, and we must assume that they did, find that the bond issue did create "an additional debt to the village." So for the purposes of this case that issue isres judicata. It is conceded that the issuance of these bonds was not submitted to a vote of the people of the municipality. If the judgment entered upon the verdict of the jury in the former case became the law of the case in all subsequent litigation between the same parties over the same issues then, under the pleadings and instructions, we have no authority or power here to further inquire into or investigate the amount, character, nature or purpose of issuance of the warrants that were outstanding at the time of this bond issue.

The allegation of appellant's affirmative defense herein seeking equitable relief for the amount paid for these bonds is as follows:

"That if it should be held and determined that the said bonds were irregularly issued and do not constitute valid or subsisting or enforceable obligations against the Village of Heyburn either in the hands of said Charles Cleveland, Joseph T. Peters, G.C. McCulloch, R.H. Avann and A.M. Graef or this defendant (assignee) and for that, or any other reason, said bonds should be canceled, the said Village of Heyburn should, in equity and good conscience, be required to pay, as a condition precedent to the cancelation of said bonds the amount by which the valid and outstanding warrants of said village were reduced and paid through the proceeds realized from the sale of said bonds, to-wit, the sum of $4,500 together with interest thereon at the rate of seven per cent per annum from the first day of June, 1922."

It is therefore clear that appellant is not seeking to pursue specific property (either cash or chattel) and have the same restored to it, but rather seeks to have equity direct an accounting and fix a general debt liability against the village in a case where the law has already refused to do so; where in truth and fact the court of law has already adjudged that the alleged indebtedness was created in violation of the prohibition of both the constitution and statute.

The bonds having been issued in violation of constitutional prohibitions are void and never created any municipal indebtedness. Being void they could never become valid or collectible in the hands of a purchaser. Negotiation could give them no validity or legal status as evidence of indebtedness. Nor could a purchaser be an innocent purchaser for the reason that he would be chargeable with knowledge of the constitutional and statutory restrictions and limitations under which the municipality was acting.

In Page v. Oneida Irr. Dist., 26 Idaho 108, 141 P. 238, this court said:

"The authorities are unanimous in holding that negotiable bonds issued by a public or municipal corporation without legislative or constitutional authority are void, even in the hands of bona fide purchasers, as is evidenced by the following cases": (citing cases and quoting with approval from Townshipof East Oakland v. Skinner, 94 U.S. 255, 24 L. ed. 125).

It is therefore wholly immaterial whether or not the court enters an order canceling the bonds. Under the previous judgment and in the present state of the case it would be a mere idle gesture for the court to hold that the bonds are illegal and void and have been so adjudged by a previous judgment and still to say, notwithstanding they are illegal and void, we will not decree their cancelation. They would still remain uncollectible.

Furthermore, this is not the kind of case where the question of doing equity as a condition precedent to obtaining equitable relief can arise. Equity cannot and will not afford relief against violations of constitutional prohibitions.

When properly analyzed and the facts are understood, it will be found that the cases relied upon by appellant either expressly or impliedly recognize the distinction betweenvoid and voidable contracts. For illustration: Tarr v. WesternLoan Sav. Co., 15 Idaho 741, 99 P. 1049, 21 L.R.A., N.S., 707, cited by appellant, was an action for the cancelation of a mortgage on the grounds of noncompliance of a foreign corporation with the corporation laws of this state. The court called attention to the fact "that such contracts are not absolutely void, but that the corporation making such contracts is left without a remedy." The same principle was recognized inWeber v. Pend d'Oreille Min. etc. Co., 35 Idaho 1, 203 P. 891, a kind of case in which the statute had withheld a legal remedy and the court said: "The plaintiff may not avoid doing equity because the defendant may be without right to actively pursue his remedy."

The case of Williams v. City of Emmett, 51 Idaho 500,6 P.2d 475, relied upon by appellant does not support the contention made here. This court affirmed the judgmentenjoining carrying out the provisions of the contract but reversed that part of the judgment authorizing the city torecover the money it had paid as rental on a street sprinklerwhich it had used, where no contention was made that the amount paid for the use of the sprinkler was unreasonable or excessive; the court saying:

"The city, however, did use the street sprinkler and there was nothing unlawful in that use."

The same principle has been recognized by courts of equity in cases where it was sought to have mortgages and other liens canceled of record on the ground that they were usurious or barred by the statute of limitations. Courts refuse to do so on the ground that the statute does not pay the debt but merelywithholds any remedy in case the statute is pleaded as a defense. The same principle controlled the decision in Kelleyv. Clark, 23 Idaho 1, 129 P. 921, Ann. Cas. 1914C, 665.

It seems to us that the reasoning indulged, in reaching the conclusion that the municipality is liable to the extent of the money received from the sale of these void bonds and applied by the municipality to lawful purposes, fails to take note of this distinction between void and voidable contracts which runs through all the cases. The one class of cases holds that municipalities are bound by moral obligations as well as individuals to pay an obligation or return property where the transaction was irregular or voidable because of failure to observe some statutory or constitutional requirement; while the other class of cases holds that where the contract was absolutely void by reason of express constitutional or statutory provisions no liability arises and no relief can be granted. In the former cases courts of equity have in many cases required the money or property to be restored. In the latter cases the courts have almost uniformly denied relief of any kind. Denial of relief in such cases by courts of equity has been predicated either upon the express or implied grounds that equity cannot and will not interpose its power to relieveanyone against the violation of express constitutionalprohibitions.

A careful reading of the authorities will reveal the distinction to which we refer, running through all the cases, marked of course with a greater degree of clarity in some than in others, but present in all.

These principles have been quite uniformly adhered to and followed by this court. In Independent School Dist. v. Collins,15 Idaho 535, 98 P. 857, 128 Am. St. 76, action was prosecuted on behalf of an independent school district to recover for the district certain moneys paid upon a void contract made in violation of an express statute, and this court said:

"The rule contended for by appellant to the effect that neither party to a transaction will be permitted to take advantage of its invalidity while retaining the benefits, applies only to voidable contracts and not to a transaction that is absolutely void."

In Deer Creek H. Dist. v. Doumecq H. Dist., 37 Idaho 601,218 P. 371, followed in Mittry v. Bonneville County, 38 Idaho 306,222 P. 292, this court considered the right of one highway district to collect from another highway district money paid out by it at its instance and request for the construction of a bridge under contract made in violation of art. 8, sec. 3, of the Constitution. This court said:

"It is elementary that there can be no recovery on a void contract. . . . . Article 8, Sec. 3, of the constitution, referred to in Allen v. Doumecq Highway District, supra, declares 'any indebtedness incurred contrary to this provision shall be void.' It does not merely say that a contract entered into in violation of its provisions shall be void, but extends such invalidity to any indebtedness or liability incurred contrary to its provisions. The contract has been declared void for that reason. Indebtedness or liability may be incurred expressly or impliedly. The making of the contract was an attempt to incur indebtedness expressly and this the court held void. If the debt could not be incurred expressly it certainly could not be incurred impliedly, and if appellant was not entitled to recover upon the contract he could not recover uponquantum meruit. It would simply be an attempt to do indirectly what could not be done directly."

There the bridge had already been constructed. In that case the court cited Gillette-Herzog Mfg. Co. v. Canyon County, 85 Fed. 396, with approval and quoted from the opinion at length. In the latter case the late Judge Beatty of the federal court, in discussing the question now under consideration and the distinction between void and voidable contracts, said:

"Plaintiff's counsel further say that, if the contract was not authorized, yet, as the defendant made it, as the bridges were constructed in pursuance of it, as there was no fraud in the transaction, and as defendant accepted the bridges, and has since had the benefit thereof, it must pay for them their fair value as upon an implied contract, . . . . If such is the law, it follows that this constitutional provision is utterly useless. In open defiance of it, reckless officials could burden the people with bankruptcy. Surely, the fundamental law of the state cannot be so easily overthrown. Will the authorities cited be found, upon careful examination, to sustain counsel's views? By such examination it will be found that there was reason in each case why the contract was not absolutely ultra vires; that, while there was authority for making, only some irregularity occurred in the mode of compliance or payment. . . . . The distinction between the two classes of cases is that when there is authority to make the contract, but some irregularity has occurred in its provision for payment or any other irregularity, which does not turn upon the power to make it, and a corporation has received the benefit of the work done, it may be compelled to pay for it;but, when the contract is absolutely and directly prohibited bysome statutory or constitutional enactment, the contract isvoid, and it cannot be enforced either as an express or implied contract; and so it must now be held of the one in question."

In the Deer Creek case this court also quoted with approval from Judge Field's opinion in Zottman v. San Fran. cisco,20 Cal. 96, 81 Am. Dec. 96, the following:

"The law never implies an agreement against its own restrictions and prohibitions; it never implies an obligation to do that which it forbids the party to agree to do."

In City of Litchfield v. Ballou, 114 U.S. 190,5 Sup. Ct. 820, 29 L. ed. 132, the Supreme Court of the United State had under consideration a provision of the Constitution of Illinois very similar to sec. 3, art. 8, of our Constitution, and held that the constitutional provision was as binding in equity as at law and that the court of chancery had no jurisdiction to grant relief. Justice Miller, speaking for the court, said:

"The language of the Constitution is that no city, etc., 'shall be allowed to become indebted in any manner or for anypurpose to an amount, including existing indebtedness, in the aggregate exceeding five per centum on the value of its taxable property.' It shall not become indebted, shall not incur any pecuniary liability; it shall not do this in any manner, neither by bonds, nor notes, nor by express or implied promises. Nor shall it be done for any purpose, no matter how urgent, how useful, how unanimous the wish. There stands the existing indebtedness to a given amount in relation to the sources of payment as an impassable obstacle to the creation of any further debt in any manner or for any purpose whatever.

"If this prohibition is worth anything it is as effectual against the implied as the express promise, and is as bindingin a court of chancery as a court of law."

The foregoing was quoted with approval and followed in an opinion by Mr. Justice Gray in Doon Township v. Cummins,142 U.S. 366, 12 Sup. Ct. 220, 35 L. ed. 1044. It was approved by the same court in Hedges v. Dixon County, 150 U.S. 182,14 Sup. Ct. 71, 37 L. ed. 1044, the court again saying:

"Courts of equity can no more disregard statutory and constitutional requirements and provisions than can courts of law. They are bound by positive provisions of a statute equally with courts of law, and where the transaction, or the contract, is declared void because not in compliance with express statutory or constitutional provision, a court ofequity cannot interpose to give validity to such transaction or contract, or any part thereof."

In Balch v. Beach, 119 Wis. 77, 95 N.W. 132, 135, the supreme court of Wisconsin said:

"The bar of the constitution against excessive municipal indebtedness would be very weak indeed to protect the taxpaying public if, when plainly overstepped, the resulting obligation could be enforced upon equitable grounds; or if a taxpayer, upon invoking the jurisdiction of equity to prevent its enforcement, were to himself meet the arm of equity raised in defense of an invasion of constitutional rights. No one can occupy a position of defiance to the fundamental law and defend himself successfully thereunder by invoking the jurisdiction of equity. That principle was clearly declared in Thomson v. Townof Elton, 109 Wis. 589, 85 N.W. 425, and McGillivray v. SchoolDist., [112 Wis. 354, 88 N.W. 310, 88 Am. St. 969, 58 L.R.A. 100] supra, in the holding that if a municipality obtains money of a person upon a contract which it not only has no power to make but is prohibited from making, such person has no equitable right to recover the same even though he may be able to show that it was in fact used for legitimate municipal purposes. Courts, in such a situation, both of law and equity, upon grounds of public policy, leave both parties where they have placed themselves."

It should be borne in mind that this case does not raise or involve the question as to whether or not the purchaser ofvoid bonds may follow and claim return of specific, identified property delivered to a municipality on a void contract. We are expressing no opinion on any such an issue.

This case is decided upon the rule of estoppel by judgment. The discussion herein indulged by the writer on equity issues is only considered of importance by reason of the contention advanced and so ably urged by appellant's counsel that appellant is entitled to equitable relief. We deem it proper to state here that counsel who represent appellant in this case did not appear in the original case, the judgment in which is held to be res judicata in the present case.

Judgment affirmed with costs to respondent.

Morgan and Holden, JJ., concur.

Petition for rehearing denied.