The growth of the law relative to municipal bonds has kept pace with the rapid increase of municipal indebtedness.
Only in comparative recent times has the subject been treated by the text writers exclusively; the older text writers having considered the subject under the head of "Public Corporations" or "Municipal Corporations."
At the present time, the text writers upon municipal bonds and the pertinent articles in the encyclopedias treat of the general requisites and characteristics of municipal bonds, including the general doctrine of estoppel, as applicable to recitals in the bonds.
It is the purpose of this treatise to still further specialize beyond the setting forth of the general requirements of a valid bond issue, in an attempt to establish rules of law applicable to recitals in bonds that are in the hands of a bona fide purchaser, and to deduce therefrom general propositions upon the effect of different kinds of recitals.
It is interesting to note that the doctrine of estoppel as applied to recitals in municipal bonds has received its development within the last fifty years. In the earlier cases the doctrine was based rather upon the equitable rules applicable to all negotiable securities.
The other branch of the doctrine - that of municipal decisions - was practically established in the leading case of Knox Co. v. Aspinwall. Its scope was probably intended to embrace mere irregularities and informalities in the issuance of bonds, and its application was purposed to extend to all recitals alike importing compliance with matters involving mere irregularities. But since that leading case the doctrine has greatly expanded. The federal courts have zealously protected the rights of bona fide purchasers, and in a few extreme cases have so extended the doctrine as to afford protection to the holder of bonds where there was an absolute want of power in the issuance. In the expansion of this doctrine, there have sprung up many distinguishments in its application in accordance with the nature and character of the recitals contained in the bonds. The bona fide purchaser may receive full protection from one class of recitals, even where the irregularity in the issuance approaches that of a want of power; while, in another class of recitals, he may be subjected to the defense of a mere irregularity in the issuance.
It is here attempted to classify and collate the principles of estoppel applying to the various forms of recitals in accordance with the interpretation placed thereon by our federal courts. No attempt is made to incorporate into the formulae of the doctrines the particular exceptions made by the state courts. This can be ascertained by reference to Appendix B, where the state cases are separately summarized.
In inducing these propositions the author has investigated all the pertinent cases in the supreme court of the United States, the circuit court of appeals, and in the supreme courts of the various states, and he acknowledges the aid received in his investigations from Dillon on Municipal Corporations, Simonton on Municipal Bonds, Burroughs on Public Securities, Burhans on the Law of Municipal Bonds, Elliot on the Elements of Municipal Corporations, and Beach on Public Corporations.