LYON COUNTY GENEALOGY
THE DEBT AND LITIGATION
CONCERNING THAT OF THE COUNTY
AND SCHOOL DISTRICTS
By J. M. Parsons
Wherever in legal and financial circles the name of Lyon County is mentioned, it calls to mind the litigation over various phases of county and school district indebtedness that began with the beginning of the county and has lasted until now, though happily the last case is being brought to a finish and the amount involved in this is but small. This litigation has occupied the attention at times of every court having original or appellate jurisdiction over the territory of the county. Practically all of the debt which furnished this vast amount of litigation, resulting in the trial of hundreds of cases and in the using of about a thousand pages of the official reports of the courts, filing opinions and the filing of upwards of forty opinions by these courts, originated in fraud and was without consideration and represented no value received by the county corporations against which the debt was created. Not only that but the debt was the result of deliberate and downright acts of parties calculated to the very end, achieved with no concealment of the purpose of the acts, and many times with an open and shameless avowal of the purposes of the actors.
The county was set off from Woodbury and held its first election in the fall of 1871 and the officers of the new county took charge on the 1st of January 1872, with not a dollar of debt against either the county or against any of the school corporations into which its territory was divided. But so fierce for spoils was the board of supervisors, and others profiting by the frauds, that before six months had elapsed, the run in the courts over the county and school district debts had begun, and before one year was over several cases in which men sought to block the plunderers were on their way to the Supreme Court of the state. That court did what it could to stop the shameless plunder, but without avail, for a drunken and profligate district judge, in utter disregard of law and over the protests of the honest citizens and upright district attorney, C. H. Lewis, refused to let that official defend actions on fraudulent claims against the county, and so hampered the work of those who attempted to compel honest government, that, discouraged, and thinking resistance useless, after a few ineffectual attempts, they stood to one side and let the work of graft go on till the influx of new settlers brought about a new order of things.
The first case from the county in the Supreme Court of the state, Clark & Grant vs. Lyon County, reported in red 37 of the state reports at page 469 illustrates some of the troubles that may be caused to the reformer who undertakes to stop public graft when the court is against stopping it. In that case the county had been sued on a lot of void and worthless warrants, that were fraudulent and issued without any consideration and that in reality belonged to the members of the board of supervisors and others who had formed a combine to plunder the county. C. H. Lewis, the District Attorney, at the instance of several citizens, attempted to appear and defend, but the attorneys for the county, who were in the scheme, as well as the attorneys for the plaintiffs, objected and the court refused to permit the District Attorney to appear and defend, though the law said it was his duty so to do. Mr. Lewis appealed to the Supreme Court and reversed the District Court, but in the meantime several other cases that stood in the same position were put through the courts and when the judgment was entered the board of supervisors would issue bonds and take it up. If the case was reversed or if it was affirmed the result was the same and the grafters won, for the bonds once issued were sold and the proceeds divided among the gang and afterwards an innocent purchaser of the bonds could collect them.
Notwithstanding that the first board of supervisors of the county had as members some men about as crooked as ever sat around one table, had the district Court of the district at that time been presided over by an able, honest and fearless judge instead of by the one it was, the game of graft would have been stopped in the beginning, for without judgments at that time bonds could not be issued in great amounts and warrants not being negotiable, their issuance would have done comparatively little harm as at the first offense they would have been wiped out and the next set of officials would have probably been not so greedy for plunder. But with such a judge, one who instead of trying to assist in stopping the steals made his every ruling against the law and so to compel appeals to the Supreme Court to correct it, by those honestly trying for good government, the burden of fighting the grafters was too great for the settler, poor as he was, to bear.
The first board of supervisors met at Beloit on the 1st day of January 1872, and started the machinery of the county government in motion. There was present J. S. Howell, H. T. Helgerson, and Chas. H. Johnson, members of the board, and Chas. E. Goetz, the county auditor. The board organized by the election of J. S.Howell as chairman and from that time for a couple of years the debt of the county was piled up at a rapid rate. All sorts of pretexts and excesses were made for the creation of the debt.
About the first start of the debt was in the building of the bridges which would not have been so bad had the county only got the bridges, but it had no bridges and was run in debt on the pretense of building them. The favorite amount for a bridge in those days seemed to be the sum of five hundred dollars. The board would make an appointment for a bridge and award the building to some person who would go out and lay stringers across a stream and perhaps cover the same with planks and the bills would be allowed and the same bridge would be hauled from place to place and made the means of getting more warrants out of the county. It is within bounds to say that more bridges were ordered and paid for in the first two years of the countys existence than were built in any ten years in the history of the county.
Another fruitful source for bills against the county were the swampland propositions. Some genius conceived that the county had only to claim that about the whole area of the county was a swamp and that the general government would either give all that was claimed to be swampy to the county or would indemnify it for that portion which had been patented by the government to others. This being suggested to the supervisors they at once hunted up lawyers and prepared to take in the swag that could be gotten that way. That the land nor the indemnity could not be gotten made no difference, the lawyers could be hired with an agreement to "cut up" and owing to the elastic nature of the bills which can be charged by the profession, there would be good pay for the lawyer and some besides, for it is as easy to write out a bill for six thousand as for six hundred, only taking one more cipher and besides it left a nice margin to divide. So the first bill for attorney fees in the swamp land matter was made six thousand dollars and though allowed on the 19h of June 1872, on the 19th of July following the same had been reduced to judgment and the judgment had been bonded. Bonds were necessary in order to realize the money. They could not be defended against and brought in the market near their face value. When they were sold the division would take place and the different ones in the deal receive their share of the swag. These men kept books of the proceeds of the big and little steals and insisted on a division all around.
But the steals were not confined to swamp land contracts, and bridges. Everything was made the subject of a graft. The sale of an article to the county at a legitimate price was an impossibility. If offered at that no sale was made and the seller would be given to understand that to make a sale he must make it at from two to ten times its value, and then the excess would be divided and the seller would come in for his part of the extra profit. The iron safe in the clerks office, worth then at the outside, about one hundred dollars was bought at twelve hundred dollars. A set of the Iowa reports, then about forty volumes, cost the county one thousand dollars. A quarter section of land for a poor farm, of the value of four hundred dollars, with a contract to erect buildings worth not over eight hundred dollars went to the county at even five thousand dollars and the board paid all the money on the deeding of the land and before the buildings were erected and in fact never got them at all. The newspaper wanted a lift and the board appropriated seven hundred and fifty dollars for an emigration pamphlet. A man wanted to bore a well and the board allowed him five hundred dollars to prospect for coal. An attorney was hired at a salary of nine hundred dollars per year, payable quarterly, and the board then ordered the whole of his bill allowed, and consented that a judgment might be rendered on the warrants and issued bonds to fund the judgment before he entered on the discharge of his duties under the contract.
The district attorney, C. H. Lewis, was a source of disquietude to the boodlers, for he not only annoyed them by trying to get indictments, but by trying to defend the county against the steals when the cases on the warrants came up in court. A resolution was passed allowing the county to be sued in any county in the district, as it was found to be inconvenient for the purposes of the boodling to await the regular sitting of the courts in the county. After the passage of this resolution, it coming to the ears of the board that Lewis was about to make trouble, to head him off a resolution was passed employing attorneys for the county. As the members of the board had two of them a pecuniary interest in all the warrants in suit, because of their expectations of division the resolution passed is a good example of how wrong doers can often put up a plausible reason for action they want taken, and often thus shift the talk from a discursion of the real point at issue to an immaterial matter.
Thus the Lyon County supervisors finding their schemes liable to be frustrated by Lewis, on April 17, 1873, passed the following: Resolved, that this board feels itself confident to defend the county against all suits now pending in the District Court of this county, and having instructed J. F. Eccleston and H. B. Wilson, the attorneys employed by the board, what defences we desire made to these suits and each of them, and believing that the district attorney of the fourth judicial district is seeking, at the instance of certain ill disposed persons, to interpose defences to said suits, that in our judgment if interposed, will work great and irreparable injury to this county, we hereby protest against said district attorney being permitted to control the defence of said suits, and the auditor is hereby instructed to forthwith place a copy of these resolutions in the hands of the judge of said court.
The defences that were about to be interposed to the suits by the district attorney were that the warrants sued on were all steals and that the board members were interested in them. The great and irreparable injury that would have been worked to the county and which was feared by the members of the board was the killing of the infant industry of grinding out fraudulent bonds.
From July 29, 1872, to July 28,1873, $55,000.00. of judgment bonds were issued under a statute then in force. The bond industry of the county then stopped for awhile and no more bonds were issued till October 1874, when a ten thousand dollar issue of funding bonds was made and from that time to June 4, 1879, $55,300,00 of funding bonds were issued. July 1, 1879 an issue of $100,000.00 of refunding bonds was made and these were used to take up nearly all the outstanding bonds of previous issues. This issue was known as the Shade issue, from the fact that Jeremiah Shade was then the treasurer of the county and sold the bonds. These bonds did not in any way increase the debt of the county and reduced the interest from two to eight percent. After the issue of the Shade bonds, from time to time as the county warrants accumulated they were put into funding bonds there being a total of these issued from January 8, 1880, to July 1, 1885, of $60,000.00. On May 1, 1885 the county issued, for the purpose of taking up the outstanding bonds of the Shade and other issues an issue of $120,000 in refunding bonds and these were exchanged for old bonds, or sold at par and the proceeds used to pay off the old bonds. This issue did not increase the debt of the county and reduced the interest on about all the outstanding debt to six per cent. These operations left the county with a debt of about $467,000.00, when the litigation over the debt began by the filing of a petition in the case of Anderson vs. Bowers, an action to restrain the payment of the county debt. This suit was begun in the district court of the county on the 12th of May 1887, by A. VanWagemen as attorney for the plaintiff and was defended by Henderson, Hurd, Daniels & Kiesel, of Dubuque, and Cummins & Wright, of Des Moines, as attorneys for the defendant bond holders. It was carried through to the supreme court and is there reported as Anderson vs. Orient Fire Insurance Company. The case resulted in a declaration that the bonds were void, but as the court had no jurisdiction of any of the bondholders it was useless as a means of defeating any of the bonds.
Holders of the $120,000 issue then assigned their coupons, past due, to the Aetna Life Insurance Company, of Hartford, Connecticut, which commenced an action in the United States Court at Sioux City. This case was tried before Judge Shiras with Cummins & Wright and Henderson Hurd, Daniels & Keisel , attorneys for the bondholders and Kauffman & Guernsey, of Des Moines, and Van Wageman & McMillan for the county, and resulted in a victory for the county, the Court holding in its opinion in the 44 Fed. Reporter, page 329, that the bonds having been issued at a time the county was indebted in excess of 5 per cent of the assessed value of the property, could not enforced as legal obligations and that the suit must be dismissed without prejudice to the rights of the bondholders to begin proceedings in equity to determine what, if any part of the bonds were legal. The decision on this case was made in December 1890, and was taken to the Supreme Court of the United States and affirmed by a divided court, four judges holding one way and four another and no opinion was filed.
A suit in equity was then begun on the $120,000 issue by the non-resident bondholders in the Circuit Court of the United States at Sioux City, in which the holders of these bonds residing within the state intervened and that suit was pushed to a conclusion and finally resulted in the Court holding that something over $50,000 of the original amount of bonds with enough interest added to more than double the amount, should be paid by the county on this issue.
While the suit in equity was pending and after the decision by the Supreme Court of the United States of the law suit on the $120,000 issue, the Asheulot National Bank of Keene, New Hampshire, began an action in the United States Court of Sioux City to collect $2,400 of funding bonds which were issued on the 12th day of November 1880. J. M. Parsons appearing for the plaintiff and Kauffmann & Guernsey and Van Wagenam & McMillan appearing for the county. This case was tried to Judge Shiras without jury and on the 1st day of June 1897, he rendered an opinion which is reported in the 81, Fed, page 127, holding the county liable and entering judgment on bonds for about $5,000. The grounds upon which the county was held liable were that on the Shade bonds of $100,000 issued July 1, 1879, were themselves in excess of the limit and were issued at the time that the county was otherwise indebted in excess of the limit, they were sold and hence could not be counted by the county to throw the bonds in the suit beyond the limit of debt as fixed by law, and that it made no difference if the Shade bonds had been paid by the county as to this phase of the case. These grounds were considered at the time, somewhat novel as they introduced the principle that the holders of municipal bounds in litigation to determine the validity of the bonds, had the right of raising the question of validity on any prior issue, if necessary to bring his bonds within the limit of indebtedness. This case was affirmed by the Circuit Court of Appeals for the 8th circuit.
As a result of this case several others were started on the bonds which were issued subsequent to the Shade issue, July 1, 1879, and resulted in practically all the bonds of the county, other than the $120,000 issue of May 1, 1879, being held legal and judgments being rendered on them against the county. The amount of the litigation was such that in 1900 the county issued $145,000 of bonds which were sold to Cincinnati parties and the proceeds used to pay off the judgments on the old bonds. In all the cases of the county after the decision of the Ashuelot National Bank case at Sioux City. E. C. Roach and E. Y. Greenleaf appeared and conducted the litigation on behalf of the county and J. M. Parsons for the bondholders.
Another case of considerable interest for the county of the legal proposition presented, growing out of these bonds was tried in the State Court of Iowa being entitled Reynolds vs. Lyon County and was on $2500 of bonds at one time owned by the Equitable Life Insurance Company of Iowa and by it transferred to the plaintiff the cashier of the Chicago Bank. Reynolds had been plaintiff in one of the suits against the county in United States Court at Sioux City and in that suit had recovered a judgment on some bonds issued in March 1885, the suit standing in the United States Court on the question of whether or not the Shade bonds were valid. If valid the Reynolds bonds would have been beyond the limit. The United States Court had made the finding that the Shade bonds were void and in the State Court the plaintiff pleaded that fact as what is known in law as res adjudicata along with other matters relied on by him as reasons why the county should pay. The case was tried in the Lyon County District Court by Judge F. R. Gaynor, who held the bonds good without reference to the res adjudicata plea. Upon appeal to the Supreme Court that body held that the bonds were in fact void when issued, but by reason of the former litigation in the United States Court the matter had been put at rest and the plea of res adjudicata was good and the county was held to pay the bonds.
As a result of this litigation over the county indebtedness the county paid out in settling with the bondholders about $160,000 in money. In settling with the various attorneys the county paid out in the neighborhood of $60,000. Of the amounts recovered by the bondholders the sum paid out in attorneys' fees must have exceeded the sum of $100,000, and the litigation extended over a period, from the filing of the petition in the Orient Fire Insurance Company to the final affirmance in the Reynolds case, of over eighteen years.
The history of three of the School Districts of Lyon County presents a record of graft unparalelled in the annals of any locality. These three school districts were the District Township of Doon, the Independent District of Rock Rapids and the Independent District of Riverside.
The District Township of Doon furnishes a case entitled "Cummins vs. District Township of Doon" and decided originally by Judge Shiras in May, 1890, and reported in the 42, Fed. Reporter, page 644, and subsequently decided by the Supreme Court of the United States, in the 142, W.S. at page 366, January, 1892, which has perhaps been criticised, doubted, directly affirmed and otherwise mentioned in the opinions of Courts on bond cases, more than any other one case concerning bonds within the last twenty-five years. The case was by a divided Court, Justices Brown, Harlan and Brewer dissenting. The district township of Doon had a debt out-standing in excess of the constitutional limitation and issued bonds which were sold on the market to raise the money necessary to pay the out-standing debt, and these refunding bonds the Supreme Court of the United States held to be void although there was no evidence of the invalidity of the debt which they were really issued to take up. The holding was on the ground that as the District already had a debt exceeding the limit the floating of a new issue, otherwise than by trading bond for bond, for the time being doubled the debt, and hence, without reference to whether or not the money realized by the sale of the last issue was used to retire the former issues, the last debt was void being created at the time the District was indebted in excess of the limit. As a result of the debt of the old District of Doon, the District Township of Garfield, carved out of Doon, has been held to pay about $30,000 of indebtedness which it inherited by reason of its connection with the old Doon District.
The District of Rock Rapids was organized in 1872 and it immediately began a career of getting into debt and by the time the old district went out of existence in 1884 it had collected in taxes about three times as much money as was needed to pay its current expenses and pay for all improvements made, and had incurred an indebtedness in excess of $50,000, this on a valuation at no time exceeding $130,000. However, the litigation over this debt was such that it resulted in not over about $50,000 of the original indebtedness being paid, the balance being defeated by the Courts.
Last, but not least, in the iniquities of the bonding periods of the county, came the Independent district of Riverside, organized in 1872 and continuing its organization until 1885, never at any time having an assessed valuation of taxable property exceeding $72,175. This district issued refunding bonds alone, $160,400. Many of these bonds, by the records at least, purport to have been issued for old bonds of the district at the rate of ten cents on the dollar and from that up. The writer once made a calculation and if the record in reference to this were true, the district must have during the course of its existence, issued over one million dollars of bonds. There was but little consideration, even nominal, for any of these bonds. The first school house which was built in the district, probably worth $500 was made the occasion for issuing $5000 of bonds to build it. Another $5000 was issued for the claimed purpose of putting a well and no well was ever sunk; and another $5,000 of bonds was issued for the purpose of putting trees and shrubbery about the premises and nothing was ever planted. The balance of the old bonds of this district, other than the refunding bonds, were issued by the Martin family. When the district was first organized one of the Martins was president of the board and another was secretary, and for years Martin bonds kept turning up from every quarter. The Martins, it seemed, made them up in bales and scattered them everywhere. But notwithstanding, they were responsible for the issuance of so many fraudulent bonds, none of the Martins seemed to have profited by their fraudulent doings, for when last heard of they were next door to the poor house and still on the frontier of civilization.
The pressure from the old Martin bonds on the District of Riverside was so great that in 1877 the Board of Directors of the district began issuing refunding bonds and from July 12, 1877, until March 11, 1882, issued $160,400 of refunding bonds. A great many suits were tried in the courts and generally resulted in the refunding bonds being held void by reason of being in excess of the constitutional limitation of indebtedness.
In the case of Eleanor G. Fairfield vs. the two Districts, Allison and Jackson, into which Riverside was divided in 1885, Judge Shiras of the United States Court at Sioux City, held in November 1901, in a suit on some of the refunding bonds issued June 21, 1881, that the bonds were void as they exceeded the constitutional indebtedness and a like entry was made in several other cases being tried at the same time. This case was taken to the Circuit Court of Appeals and tried at St. Paul, Minnesota, and Judge Shiras was there reversed on the ground that the bonds, reciting that they were issued to refund valid outstanding indebtedness, the district could not contest its liability and on a proceeding brought to reverse this decision the Supreme Court of the United States held likewise and refused to disturb the decision of the Circuit Court of Appeals. This case was conducted on the part of the plaintiff by Parsons & Riniker and on the part of the defendants by E. C. Roach and O. J. Taylor, of Sioux City, and it resulted in the district being held liable for the payment of something over $30,000 Luckily for the districts involved the opinion of the Circuit Court of Appeals in the Fairfield case was not filed until after the statute of limitations had run on all of the bonds of the district of Riverside not then in suit, else it might have resulted in a practical confiscation of about one township and a half of land originally embraced in the Riverside district.
Such, in brief, is the records of the inception of and the litigation over the bonded indebtedness of Lyon County and its school districts. No attempt has been made to enumerate the hundreds of suits which were pending in the various courts at from shortly after the organization of the county up to the present writing; nor to go into the details of the creation of the debt, but happily that day is past and the last of the suits has been tried, although one against Garfield District is still pending on appeal in the courts.
The history of this county and its municipalities should serve as a warning to legislators making laws for the creation of debts by counties and municipalities, to make it impossible for new communities like Lyon County was at its organization, to create any incontestable debt whatever, for a period of several years after its organization and until the county was fairly well settled. The great debt of the county and the school districts was created while the county was yet new, while there was less than 2000 people in the county, in fact the major part, while there was less than 1000 people and a few grafters and designing men under those conditions were enable to get possession of the machinery of the government and practically do with it as they pleased, and this they did by using the fraudulent bonds, by the county and school districts far in excess of the value of all the property in the county. It may be asked why were not the officers punished criminally. The reason was that no jury, grand or peer, could be called, without containing in its membership men who were related in the steals.
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