Board of Comm'rs of City and County of Denver v. Home Savings Bank

Background

A company that sold ballot machines held a certificate of indebtedness and a coupon showing interest due. The certificate said the county board had allowed a claim and, under state law, issued the certificate promising to pay the company in one year with interest and attached coupons. The company endorsed the certificate, bought it in good faith before maturity, and sued the county to collect when payment was not made. The county argued it never had authority to issue the instrument in negotiable form and raised failure of consideration as a defense.

Reasoning

The Court addressed whether the county board had power to issue the certificates in a negotiable form that would be marketable to purchasers. The state constitution and statute authorized issuance of interest-bearing bonds, certificates of indebtedness, or other obligations to pay within ten years, and contemplated sale to raise money. The Court explained that where a municipality may raise money by selling bonds, it may put those instruments in the usual negotiable form necessary to attract buyers. The Court rejected the argument that negotiability was barred, treated certificates and bonds as functionally the same, and enforced the certificate against the county because the buyer purchased in good faith.

Real world impact

The decision lets counties issue negotiable certificates to sell in the ordinary market and protects buyers who acquire them in good faith. Municipalities cannot avoid payment by claiming the instrument’s negotiable form was unauthorized when the law permits interest-bearing obligations. The ruling affirms ordinary business expectations for municipal fundraising.