Supreme Court of United States.
*648 Messrs. William Lawrence and C.B. Smith, for the plaintiff in error.
Mr. H.C. Burchard, contra.
*659 Mr. Justice CLIFFORD delivered the opinion of the court.
Bonds, payable to bearer, issued by a municipal corporation to aid in the construction of a railroad, if issued in pursuance of a power conferred by the legislature, are valid commercial instruments; but if issued by such a corporation which possessed no power from the legislature to grant such aid, they are invalid, even in the hands of innocent holders.
Such a power is frequently conferred to be exercised in a special manner, or subject to certain regulations, conditions, or qualifications, but if it appears that the bonds issued show by their recitals that the power was exercised in the manner required by the legislature, and that the bonds were issued in conformity with those regulations and pursuant to those conditions and qualifications, proof that any, or all, of those recitals are incorrect will not constitute a defence to the corporation in a suit on the bonds or coupons, if it appears that it was the sole province of the municipal officers who executed the bonds to decide whether or not there had been an antecedent compliance with the regulation, condition, or qualification which it is alleged was not fulfilled.
On the 28th of February, 1867, the legislature amended the articles of association of the Danville, Urbana, Bloomington and Pekin Railroad Company, and enacted that any incorporated town or township, in counties acting under the township organization law, along the route of said railroad, may subscribe to the capital stock of said company in any sum not exceeding $250,000.[*] No such subscription, however, it was enacted shall be made until the question has been submitted to the legal voters of such town or township *660 in which the subscription is proposed to be made. Regulations are also enacted for taking the sense of the legal voters upon such a proposition, which provide that the clerk of the town or township, upon the presentation to him of a petition stating the amount proposed to be subscribed, signed by at least ten citizens who are legal voters and taxpayers therein, shall post up notices in at least three public places in the municipality, not less than thirty days before the day of holding such election, notifying the legal voters thereof to meet at the usual place of holding elections, or some other convenient place named in the notice, for the purpose of voting for or against such subscription. Prior to the passage of that act, however, an election was held in that township to determine whether the municipality would subscribe $25,000 to the capital stock of that railroad company, and the proofs show that a majority of all the legal voters of the township voting at the election voted for the subscription sixty-two votes being cast in favor of the subscription and seventeen against the proposition. Pursuant to the vote at that election the supervisor of the township subscribed, in the name of the municipality, $25,000 to the capital stock of that railroad company, and executed, in the name of the township, the bonds held by the plaintiff, bearing interest at ten per cent. per annum, payable in ten years from date, which bonds were signed by the party issuing the same as such supervisor, and were attested by the clerk of the township
Objection is made to the preliminary proceedings because the election approving the subscription was held before the act was passed giving such authority to such municipalities, but two answers are made to that objection, either of which is decisive:
1. By the act conferring that authority it is provided that where elections may have already been held, and a majority of the legal voters of the township were in favor of a subscription to said railroad, then and in that case no other election need be had, and the amount so voted for shall be *661 subscribed as in the act is provided; and the provision is that such elections are legal and valid as if the act had been in force at the time thereof, and that all the provisions had been fulfilled.[*]
2. Because the legislature passed a subsequent act declaring such subscriptions legal and obligatory. Some of the township officers, it seems, failed to keep a full and perfect record of elections called and held to authorize such subscriptions, and that the clerks of the townships failed in some instances to file the necessary certificate with the county clerk, as required by the fifteenth section of the prior act. Omissions and defects of the kind becoming known, the legislature, on the 25th of February, 1869, enacted that where such informalities and neglect may have occurred and bonds have been issued, or may hereafter be issued, to aid in the construction of said railroad, that no such neglect or omission shall in any way invalidate or impair the collection of said bonds, principal or interest, as they may respectively fall due, and that all assessments that are now made for the payment of the principal or interest are hereby legalized, and the township collectors and county treasurers are hereby authorized and empowered to enforce the collection and payment of said tax as is now provided by law for the collection of all other taxes.
Bonds to the amount of the subscription were accordingly issued, bearing date October 1st, 1867, signed by the supervisor and countersigned by the clerk, and each bond contains the recital that it is issued under and by virtue of the aforesaid law of the State, entitled an act to amend the articles of association of the said railroad company, and to extend the powers of and confer a charter upon the same, and in accordance with the vote of the electors of said township at the special election held August 14th, 1866, pursuant to said act, and pledges the faith of the township for the payment of the said principal sum and interest as stipulated in the instrument.
*662 Evidence was introduced by the defendants showing that there is no record of the supposed election, when it is alleged that the question of the proposed subscription was submitted to the legal voters of the township, and that no such certificate as that required by the act conferring the authority to subscribe for the stock of the said company is on file in the office of the county clerk, but the plaintiff proved that the alleged meeting was notified, called, and held, and that sixty-two votes were given in favor of the subscription and seventeen against it, as announced at the election.
Two instructions were given by the court to the jury, to which the defendants excepted: (1.) That the election held as described in the evidence was validated by the act of the 28th of February, 1867, so as to authorize the defendants to subscribe for the stock of the railroad company and to issue the bonds in question, and that the bonds having been issued for the stock subscribed, are binding on the defendants in the hands of a bonâ fide holder. (2.) That the recitals in the bonds estop the defendants from denying the fact of a valid election as against a bonâ fide holder of the bonds or coupons thereto annexed.
Under the instructions of the court the jury returned a verdict for the plaintiff, and the court rendered judgment on the verdict.
Repeated decisions of the State courts have established the rule that the legislature has the constitutional right to authorize municipal corporations to subscribe for the stock of a railroad company, and to issue their bonds to aid in the construction of such an intended improvement; that the supervisors of the municipality have the power, in case such a subscription is authorized, to subscribe for the stock of the railroad company, and to call an election to ascertain the will of the legal voters in that behalf.[*] Such corporations are created by the legislature and they derive all their powers *663 from the source of their creation, and those powers are at all times subject to the control of the legislature. Every where the construction and repair of highways within their limits are regarded as among the usual purposes of their creation, and the expenses of accomplishing those objects are among their usual and ordinary burdens. Railways also, as matter of usage founded on experience, are so far considered by the courts as in the nature of improved highways and as indispensable to the public interest and the successful pursuit, even of local business, that the legislature may authorize the towns and counties of a State through which the railway passes, to borrow money, issue their bonds, subscribe for the stock of the company, or purchase the same to aid the railway company in constructing or completing such a public improvement. Legislation of the kind may be prohibited by a State constitution, but it is settled everywhere that such an act is not in contravention of any implied limitation of the power of a State to pass laws to promote the usual purposes of municipal corporations.[*]
Argument to show that defective subscriptions of the kind may in all cases be ratified where the legislature could have originally conferred the power is certainly unnecessary, as the question is authoritatively settled by the decisions of the Supreme Court of the State, and of this court, in repeated instances.[]
Suppose that is so, still it is insisted by the defendants that the election held to ascertain whether the legal voters of the township would authorize the subscription, was irregular and a nullity: (1.) Because a majority of the legal voters of the township did not vote at the meeting notified and held for that purpose. (2.) Because the meeting was notified and held before the act was passed providing for such an election.
*664 Responsive to the first objection, it is insisted by the plaintiff that the legislature in adopting the phrase "a majority of the legal voters of the township," intended to require only a majority of the legal voters of the township voting at the election notified and held to ascertain whether the proposition to subscribe for the stock of the company should be adopted or rejected, and the court is of the opinion that such is the true meaning of the enactment, as the question would necessarily be determined by a count of ballots.[*]
Tested by these considerations, it is clear that an election was held within the meaning of the act of the legislature, and that a majority of the legal voters of the township did vote in favor of the subscription, as the proofs show that a meeting was called and held, and that the majority of the legal voters voting at the meeting, voted in favor of the proposition.
Sufficient has already been remarked to show that the second objection cannot avail the defendants, as the same act provided to the effect that if the election had already been held and a majority of the legal voters had voted in favor of the subscription, no other election need be held, and that the amount so voted shall be subscribed, as provided in the same act. Mistakes and irregularities are of frequent occurrence in municipal elections, and the State legislatures have often had occasion to pass laws to obviate such difficulties. Such laws, when they do not impair any contract or injuriously affect the rights of third persons, are never regarded as objectionable, and certainly are within the competency of the legislative authority.
Even if the legislature may by a subsequent act validate and confirm previous acts of a municipal corporation otherwise invalid, still the defendants insist that a prior legislative act will not have any such effect, which cannot be admitted, *665 as it would be competent for the legislature to authorize a municipal corporation to make such a subscription without requiring any such preliminary election.
Concede, however, that a prior act is insufficient to dispense with the preliminary election, still the concession cannot benefit the defendants, as it is clear that the subsequent act entirely obviates all the mistakes and irregularities in the prior proceedings, as it provides that where such informalities and neglect may have occurred, and bonds have been issued, or may hereafter be issued, to aid in the construction of said railroad, no such neglect or omission on the part of township officers shall in any way invalidate or impair the collection of said bonds, principal or interest, as they may respectively fall due.[*] Authorities to support that proposition are hardly necessary, but another answer may be given to the objection quite as satisfactory as either of the others, which is that the fourteenth section of the act makes it the duty of the supervisor who executed the bonds to determine the question whether an election was held, and whether a majority of the votes cast were in favor of the subscription, and inasmuch as he passed upon that question and subscribed for the stock and subsequently executed and delivered the bonds, it is clearly too late to question their validity where it appears, as in this case, that they are in the hands of an innocent holder.[]
Knox County v. Aspinwall.[] Non-compliance with one of the conditions was clearly shown in that case, as the notices of the election as required by law had not been given in any form, but the decision was that the question as to the sufficiency of the notice and the ascertainment of the fact whether the majority of the votes had been cast in favor of the subscription was necessarily left to the inquiry and judgment of the county board, as no other tribunal was provided for the purpose, and the court held that after the authority had been executed, the bonds issued, and they had passed into *666 the hands of innocent holders, it was too late, even in a direct proceeding, to call the power in question, and that it was beyond all doubt too late to call the power in question to the prejudice of a bonâ fide holder of the bonds in a collateral way, which is attempted to be done in the case before the court.[*]
Exactly the same principles were applied in the case of Royal British Bank v. Turquand,[] in which the opinion was given by the chief justice. He said the bond sued upon in the case is allowed to be under the seal of the company and to be their deed, consequently a primâ facie case is made for the plaintiff, as the defendants having executed the bond have no defence under the plea of non est factum, and consequently the onus is cast upon them of showing that the bond is unlawful and void. No illegality appears on the face of the bond or condition, which shows that the plea, in order that it may be supported, must allege facts to establish illegality, but the plea makes no charge of fraud against the plaintiff and states no facts from which fraud may be inferred. Want of authority to execute the bond, it was conceded, would be an answer to the action, but it was denied that a mere excess of authority by the directors would have that effect, unless it appeared that the plaintiff had knowledge of that fact, as the presumption would be, from what appeared on the face of the bond, that it was issued by lawful authority, and the court held that the plaintiff was entitled to recover, as he had advanced his money in good faith for the use of the company, giving credit to the representations of the directors that they had authority to execute the instrument. Dissatisfied with the judgment the defendant brought a writ of error in the Exchequer Chamber, where the case was reargued, but the Court of Errors unanimously affirmed the judgment.[]
Viewed in any reasonable light the court is of the opinion that the plaintiff is an innocent holder for value, and that the loss, even if the supervisor failed in his duty to his constituents, *667 cannot be cast upon the bonâ fide creditors of the township.[*]
JUDGMENT AFFIRMED.
Mr. Justice MILLER and Mr. Justice FIELD did not sit in this case.
[*] 2 Private Laws (1867), 761.
[*] 2 Private Laws (1867), 762.
[*] Prettyman v. Supervisors, 19 Illinois, 406; Robertson v. Rockford, 21 Id. 451; Perkins v. Lewis, 24 Id. 208; Johnson v. Stark, Ib. 85; Keithsburg v. Frick, 34 Id. 405; Commissioners v. Nichols, 14 Ohio State, 260.
[*] Rogers v. Burlington, 3 Wallace, 663; Freeport v. Supervisors, 41 Illinois, 495; Butler v. Dunham, 27 Id. 474.
[] Cowgill v. Long, 15 Illinois, 203; Keithsburg v. Frick, 34 Id. 405; Thomson v. Lee County, 3 Wallace, 327; City v. Lamson, 9 Id. 477; Watson v. Mercer, 8 Peters, 111; Bissell v. Jeffersonville, 24 Howard, 295.
[*] People v. Warfield, 20 Illinois, 163; People v Garner, 47 Id. 246; People v. Wiant, 48 Id. 263; Railroad v. Davidson County, 1 Sneed, 692; Angell & Ames on Corporations, 9th ed., §§ 499-500; Bridgeport v. Railroad, 15 Connecticut, 475; Talbot v. Dent, 9 B. Monro, 526; State v. The Mayor, 37 Missouri, 272.
[*] 3 Private Laws (1869), 274; Thomson v. Lee County, 3 Wallace, 327; Gelpcke v. Dubuque, 1 Id. 220; People v. Mitchell, 35 New York, 551.
[] Private Laws (1867), 762.
[] 21 Howard, 544.
[*] Supervisors v. Schenck, 5 Wallace, 783.
[] 5 Ellis & Blackburne, 259.
[] Same Case, 6 Ellis & Blackburne, 331.
[*] Maclae v. Sutherland, 25 English Law and Equity, 114.
