KELLEY
v.
MILAN.

*148 Mr. Holmes Cummins and Mr. J.B. Henderson for plaintiffs in error cited.

Mr. Sparrel Hill for defendants in error cited.

*149 MR. JUSTICE BLATCHFORD, after stating the case, delivered the opinion of the court.

Two questions arise for consideration in this case, (1) as to the statutory authority for the issue of the bonds; (2) as to the effect of the decree of January 9, 1875, in the suit in the state court of Chancery.

*150 The bonds in question were issued in payment of a subscription made by the town to the stock of the Mississippi Central Railroad Company. On their face, they do not recite any such subscription to stock, but recite, as the consideration for the bonds, the "location of the Mississippi Central railroad by said town." It is well settled, that a municipal corporation, in order to exercise the power of becoming a stockholder in a railroad corporation, must have such power expressly conferred upon it by a grant from the legislature; and that even the power to subscribe for such stock does not carry with it the power to issue negotiable bonds in payment of the subscription, unless the power to issue such bonds is expressly or by reasonable implication conferred by statute. Such is the law as recognized by the Supreme Court of Tennessee, in the case of Pulaski v. Gilmore, decided in 1880, and published in 21 Fed. Rep. 870, and in Taxpayers of Milan v. Tennessee Central Railroad, 11 Lea, 330, decided in 1883. Such is also the law as established by this court. Marsh v. Fulton County, 10 Wall. 676; Wells v. Supervisors, 102 U.S. 625; Ottawa v. Carey, 108 U.S. 110, 123; Daviess County v. Dickinson, 117 U.S. 657, 663.

The grant of authority to a municipal corporation to subscribe for the stock of a railroad company does not carry with it the power to issue negotiable bonds to pay for the subscription, or anything more than the power to raise money by taxation to pay the amount of the subscription. If, in the statute granting the power to subscribe for the stock, no manner of paying the subscription is provided for, it cannot be paid by issuing negotiable bonds. The practice in Tennessee, as shown by its statute books, has been to authorize expressly the issuing of negotiable bonds by municipal corporations to pay for subscriptions to stock, in all cases where it was desired to confer upon such corporations the power to issue such bonds.

By a statute passed in 1852, and carried into the Code of Tennessee of 1857-8, (sections 1142 to 1161,) in force when the bonds in this case were issued, any county, incorporated town, or city was authorized (section 1142) to subscribe for *151 stock to a specified amount of its taxable property "in railroads running to or contiguous thereto," upon certain specified terms and conditions. An election was to be held (section 1143) when ordered (section 1144) in a specified manner, after the entire line of the road (section 1145) had been surveyed, and a certain estimate of the grading, embankment, and masonry had been made, and after a specified notice of the election (section 1146) had been given. The statute (section 1147) prescribed the form of the vote, and provided (section 1148) that the subscription should be made if a majority of the votes cast should be in favor of it. Sections 1150, 1154, 1155, 1156, 1157, 1160, 1161, provided as follows:

"1150. As soon as the stock is subscribed, it is the duty of the county court, or corporate authorities, to levy a tax upon the taxable property, privileges and persons, liable by law to taxation within the county or corporation limits, sufficient to meet the instalments of subscription as made, and the cost and expenses of collection, which tax shall be levied and collected like other taxes."

"1154. Not more than thirty-three and one-third per cent of the stock subscribed as above can be collected in any one year.

"1155. The tax-collector, as fast as he makes collections, shall pay the amounts over to the company.

"1156. He shall also, as he receives the tax, give to each taxpayer a certificate in such form as the railroad company may prescribe, showing the amount of such tax paid by him, of which he shall retain a duplicate to be delivered to the president of the railroad company, and such certificate is negotiable by delivery or assignment, and, with a deduction of its proportion of the cost of collection, is receivable in payment of either freight or passage on the railroad in which the subscription is taken, after the expiration of one year from the completion of such road.

"1157. The holder of such certificates to the amount of one share or more of the stock of such railroad company, is entitled to demand and receive from the company in lieu thereof, a certificate of stock in the capital stock of such company, which will give him all the privileges of any other stockholder."

*152 "1160. For the purpose of meeting unexpected contingencies, the county or corporation authorities may anticipate the collection of the railroad tax by the issuance of warrants, bearing six per cent interest, and payable at such times as may be desired by the railroad company, the warrants to be received as payment of so much stock.

"1161. In such a case a sufficiency of the railroad tax shall be paid into the county treasury to meet the warrants as they fall due."

These provisions of the statute do not contemplate or authorize the issue of negotiable bonds. They provide distinctly for the levying of a tax to meet the instalments of the subscription. Section 1160, in authorizing the issuing of warrants made payable at such times as may be desired by the railroad company, and to be received by it in payment for the stock, only contemplates that the warrants shall be issued in anticipation of the collection of the tax, which, under the provisions of section 1154, may be entirely collected in three years, but cannot be collected more rapidly than one-third in each year; and there is no implication that any warrants are to be issued except to anticipate the collection of a tax, after such tax is levied under the provisions of section 1150, and such levy is to be made as soon as the stock is subscribed for, and is to be the levy of a tax sufficient to meet the instalments of subscription as made, and the costs and expenses of collection, subject to the provision of section 1154, that, although the levy of the tax is made, not more than one-third of the stock subscription can be collected in any one year. It is solely to anticipate the collection of the tax, when it is collectible by virtue of the terms of the levy, that the warrants are authorized, by section 1160, to be issued; and there is nothing in the statute which contemplates that the warrants shall be made payable at any time later than the time fixed for the collection of the instalments of the tax. These provisions exclude the power of issuing such negotiable bonds as were issued in this case.

It is contended by the plaintiffs that express authority for issuing the bonds in question is to be found in an act of the legislature of Tennessee, approved January 23, 1871, being *153 chapter 50 of the Acts of 1870-71. In 1870, a new constitution was adopted in Tennessee, section 29 of Article II. of which reads as follows:

"SEC. 29. The general assembly shall have power to authorize the several counties and incorporated towns in this State to impose taxes for county and corporation purposes respectively, in such manner as shall be prescribed by law; and all property shall be taxed according to its value, upon the principles established in regard to state taxation. But the credit of no county, city, or town shall be given or loaned to or in aid of any person, company, association, or corporation, except upon an election to be first held by the qualified voters of such county, city, or town, and the assent of three-fourths of the votes cast at said election. Nor shall any county, city, or town become a stockholder with others in any company, association, or corporation, except upon a like election and the assent of a like majority. But the counties of Grainger, Hawkins, Hancock, Union, Campbell, Scott, Morgan, Grundy, Sumner, Smith, Fentress, Van Buren, White, Putnam, Overton, Jackson, Cumberland, Anderson, Henderson, Wayne, Marshall, Cocke, Coffee, Macon, and the new county herein authorized to be established out of fractions of Sumner, Macon, and Smith counties, and Roane, shall be excepted out of the provisions of this section, so far that the assent of a majority of the qualified voters of either of said counties voting on the question shall be sufficient, when the credit of such county is given or loaned to any person, association, or corporation: Provided, That the exception of the counties above named shall not be in force beyond the year one thousand eight hundred and eighty, and after that period they shall be subject to the three-fourths majority applicable to the other counties of the State."

The act approved January 23, 1871, was entitled "An act to enforce article 2, § 29, of the Constitution, to Authorize the Several Counties and Incorporated Towns in this State to impose Taxes for County and Corporation Purposes." It read as follows:

"SECTION 1. Be it enacted by the General Assembly of the *154 State of Tennessee, That the several counties and incorporated towns in this State may, and are hereby authorized to impose taxes for county and corporation purposes, respectively, in the following manner and upon the following conditions:

"1st. That all taxable property shall be taxed according to its value, upon the principles established in regard to state taxation.

"2d. The credit of no county, city, or town shall be given or loaned to, or in aid of any person, company, association, or corporation, except, first, upon the consent of a majority of the Justices of the Peace of the county, at a Quarterly Term of the County Court of such county, or a majority of the Board of Mayor and Aldermen, as the case may be, of such city or town, and upon an election afterwards held by the qualified voters of said county, city, or town, and the assent of three-fourths of the votes cast at said election. The said County Court, or Board of Mayor and Aldermen, as the case may be, shall spread upon their records the proposition and the amount to be voted upon by the people, and shall have full power to hold and conduct such elections according to the laws regulating elections in this State; and if the assent of three-fourths of the voters of such county, city, or town, is had, then the County Court or Board of Mayor and Aldermen, as the case may be, shall have full power to make and execute all necessary orders, bonds, and payments, in order to carry out such loan or credit voted for as prescribed in this act; nor shall any county, city, or town become a stockholder with others in any company, association, or corporation, except upon a like election, and the assent of a like majority, as prescribed in this Act."

Section 2 of the act enacts the constitutional exception as to the specified counties.

This act was manifestly passed for the object stated in its title, to carry into effect the provisions of section 29 of article 2 of the constitution of 1870, and to prescribe the manner and the conditions, in conformity with the provisions of that section, in and upon which the several counties and incorporated towns in the State should have the right to impose *155 taxes for county and corporation purposes. The second clause of the first section of the act only provides, in the language of the constitution, that "the credit of no county, city, or town shall be given or loaned to or in aid of any person, company, association, or corporation, except" upon the assent of three-fourths of the votes cast at an election held by the qualified voters of the county, city, or town. The clause then goes on to provide, in the exact language of the constitution, as follows: "Nor shall any county, city, or town become a stockholder with others in any company, association, or corporation, except upon a like election and the assent of a like majority."

The enactments in that clause are entirely inhibitory and negative in their character. They do not confer any authority for the giving or loaning of credit upon any municipality, nor confer the right upon any municipality to become a stockholder with others in any corporation; but they only prescribe the condition, that no credit shall be given or loaned, and no ownership of stock be created, unless the prescribed election be first held and the assent of three-fourths of the votes cast at it be first given. But the authority to give or loan credit, and to become a stockholder, under the conditions prescribed in the act of 1871, must be found in an independent grant of authority, in some other statutory provision, either general or special. These were the views taken by the Supreme Court of Tennessee, in the case of Pulaski v. Gilmore, before cited. (See, also, Taxpayers of Milan v. Tennessee Central Railroad, supra.)

It is further contended, that authority to issue the bonds was given by an act of the legislature of Tennessee, approved March 23, 1872, chapter 20 of the Acts of 1872, entitled, "An act to Authorize the Mayor and City Council, or Mayor and Board of Aldermen, of any Incorporated City or Town in the State of Tennessee having a Population of from One Thousand and upwards to Twenty Thousand Inhabitants, to issue Bonds of said City or Town to the amount of Fifteen Thousand Dollars." That act is as follows:

"SEC. 1. Be it enacted by the General Assembly of the State *156 of Tennessee, That the Mayor and City Council or the Board of Mayor and Aldermen of any incorporated city or town in the State of Tennessee, having a population of from one thousand to twenty thousand, are hereby authorized in their corporate capacity to issue the bonds of the said city or town, signed by the Mayor and countersigned by the Recorder of said city or town, with coupons for interest attached, to an amount not exceeding Fifteen Thousand Dollars. The Bonds herein provided for may be executed of denominations from Twenty-five to Five Hundred Dollars, at discretion of said Mayor and City Council or Mayor and Aldermen, and to mature at such times as may be fixed by said Mayor and City Council or Mayor and Aldermen, from one to twenty years after date, and bearing interest at the rate of eight per cent per annum, payable semi-annually; the past-due coupons on which bonds shall be receivable for taxes, and all other dues to the corporation issuing the same: Provided, That the bonds issued under the provisions of this Act shall be alone for the purpose of paying outstanding liabilities against the city or corporation issuing them, and shall not in any case exceed the unsettled and matured liabilities or debts of such city or corporation at the time of issuance thereof; but in no event shall the bonds be issued without the consent of three-fourths of the qualified voters voting at an election to be held for that purpose under the supervision of said Mayor and City Council or Board of Aldermen.

"SEC. 2. Be it further enacted, That the said Mayor and City Council or Mayor and Aldermen of said city or town are hereby authorized to issue at par such coupon bonds as are provided for in this Act, to the holders of bona fide claims against said city or town, in liquidation and discharge of such claims and interest thereon, and to such others as are willing to take them at par, not to exceed in amount said sum of fifteen thousand dollars: Provided, That in no case shall said Mayor and City Council or Mayor and Aldermen of said city or town, as the agent for that purpose, sell under their par value any of the bonds the issuance of which is authorized by this act: Provided further, That the proposed rate of interest *157 the bonds are to bear shall be specified and submitted to the vote of the inhabitants of such corporations, at the time the election is held in regard to the issuance of the bonds."

By the express provision of section 1 of this act, the bonds to be issued under it are to "be alone for the purpose of paying outstanding liabilities against the city or corporation issuing them;" and it is provided that they "shall not in any case exceed the unsettled and matured liabilities or debts of such city or corporation at the time of issuance thereof;" and, by section 2, they are to be issued "to the holders of bona fide claims against said city or town, in liquidation and discharge of such claims and interest thereon, and to such others as are willing to take them at par."

We are of opinion that this statute has no application to the present case. Its object was manifestly to enable certain incorporated cities and towns to fund their matured debts, by issuing bonds of the character specified in the act. The debts for which they were to be issued were not only to be unsettled debts, but matured debts, and the bonds were not to be issued in any event without the consent of three-fourths of the qualified voters voting at an election to be held for the purpose. When the election in the present case was held, no debt created by any subscription to any stock had yet been incurred; and it is expressly stipulated, in the agreed statement of facts, that the question of subscribing $12,000 to the stock of the company, and the question of paying such subscription in bonds, were submitted to the voters as a single question, at one and the same time, and were approved by the same vote. Indeed, from the record of the proceedings of the board of mayor and aldermen of the town, there does not appear to have been any submission to the voters of the question of subscribing to the stock of the railroad company, or of issuing the bonds in payment for any such subscription, but only the question of whether the bonds should be issued by the town to the company as a donation or subscription of bonds; and the bonds themselves, on their face, carry out only the same idea. Still, it is agreed that the bonds were issued in payment of a "stock subscription" made by the town to the railroad *158 company. But, even in that view, the liability on the subscription to the stock was not such a matured liability or debt of the town, at the time the election was held, as the act of 1872 refers to. The vote of the people was, at most, a vote to subscribe for the stock. The terms of the vote appear to have been "For subscription," or "No subscription." The vote to subscribe for the stock and the vote to issue the bonds were one and the same vote, comprehended in the words "For subscription." In order to make the liability for the subscription a "matured" liability of the town, it was necessary that the subscription should be actually made, in pursuance of the vote, and that the terms for paying the money in discharge of it should be determined, and that an election should be thereafter held to vote in regard to issuing bonds for the liability, as a matured liability, and in view of all the terms and circumstances of such liability. No such election was held after any liability for the subscription became a matured liability.

In regard to the effect of the decree of the Chancery Court, of January 9, 1875, it is to be said, that it was made in a suit by the town authorities to enjoin perpetually the collection of the bonds, on the ground that they were issued without authority of law. By the decree it was ordered, by consent of the parties, that the preliminary injunction should be dissolved and the demurrer be overruled. This left the bill to stand as it was originally filed. The decree sets forth that the suit had been settled by an agreement, a copy of which is embodied in the decree. That agreement refers to the bonds as having been issued by the town "to aid in the construction of said road," that is, the road of the Mississippi Central Railroad Company. It does not refer to the bonds as having been issued in payment of a subscription to the stock of the company. It then sets forth that it has been agreed by the town and the New Orleans, St. Louis and Chicago Railroad Company, (into which the Mississippi Central Railroad Company had been merged, by contract of consolidation between the last-named company and the New Orleans, Jackson and Great Northern Railroad Company,) that the suit *159 should be compromised by the issue, by the New Orleans, St. Louis and Chicago Railroad Company, to the town, of certificates of stock, in the sum of $500 each, dollar for dollar, for the $12,000 of bonds, the town agreeing, on the receipt of the stock, to let a decree be entered in the cause in favor of the validity of the bonds, which were to be redelivered, with the seal of the town affixed, and the costs of the suit were to be paid by the New Orleans, St. Louis and Chicago Railroad Company.

The substance of this is that, on the bill, it standing good, with the demurrer to be overruled, the plaintiffs agree, notwithstanding the averments of the bill, that the bonds are valid. The decree then states, that, in pursuance of that agreement and by consent of the parties, it is decreed, that the New Orleans, St. Louis and Chicago Railroad Company shall issue to the town the certificates of stock in the company referred to in the agreement; that, on the presentation of those certificates, the town shall have its corporate seal affixed to each of the twelve bonds; and that the bonds and their coupons are declared to be valid and binding on the town and its authorities.

This was no adjudication by the court of the validity of the bonds, on the submission to it, as a judicial tribunal, of the question of such validity. The declaration of the validity of the bonds, contained in the decree, was made solely in pursuance of the consent to that effect contained in the agreement signed by the mayor of the town and the officer of the New Orleans, St. Louis and Chicago Railroad Company. The act of the mayor, in signing that agreement, could give no validity to the bonds, if they had none at the time the agreement was made. The want of authority to issue them extended to a want of authority to declare them valid. The mayor had no such authority. The decree of the court was based solely upon the declaration of the mayor, in the agreement, that the bonds were valid; and that declaration was of no more effect than the declaration of the mayor, in the bill in chancery, that the bonds were invalid.

The adjudication in the decree cannot, under the circumstances, *160 be set up as a judicial determination of the validity of the bonds. (Russell v. Place, 94 U.S. 606; Manhattan Life Ins. Co. v. Broughton, 109 U.S. 121, 125.) This was not the case of a submission to the court of a question for its decision on the merits, but it was a consent in advance to a particular decision, by a person who had no right to bind the town by such a consent, because it gave life to invalid bonds; and the authorities of the town had no more power to do so than they had to issue the bonds originally.

There is nothing inconsistent with this view in Nashville &c. Railway Co. v. United States, (113 U.S. 261,) where it was held, that a decree in equity, by consent of parties, and upon a compromise between them, was a bar to a subsequent suit upon a claim therein set forth as among the matters compromised and settled, although not in fact litigated in the suit in which the decree was rendered. In that case both parties had full power to make the compromise involved.

The judgment of the Circuit Court is affirmed.