1. Where the legislature of a state passes two acts, one (which
by the constitution it had the power to pass) authorizing a city to
subscribe a
limited amount ($150,000) of stock to a
railroad, another (which, by the constitution, it had no power to
pass) authorizing it to subscribe an unlimited amount, and the
city, professing to act under the one which authorized the
unlimited amount, subscribes the limited amount
($150,000), a subsequent recognition by the legislature of the
subscription as legal, validates the subscription.
2. The legislative recognition may be made by implication.
3. A statute which, in the case of such an issue, creates as
part of the municipal government an officer whose duty it is to
attend to the city's interests
Page 72 U. S. 195
and concerns in regard to the railroad subscribed to and who,
the act declares, "
shall redeem all scrip which has been
issued for it," constitutes a ratification of the originally
irregular issue.
The Constitution of Wisconsin ordains:
"
It shall be the duty of the legislature, and they are
hereby empowered, to provide for the organization of cities and
incorporated villages,
and to restrict their power of taxation,
assessment, borrowing money, contracting debts, and loaning their
credit so as to prevent abuses in assessments and taxation and in
contracting debts by such municipal corporations."
With this provision in force, the legislature of the state, on
the 22d March, 1853, authorized the City of Kenosha "to issue the
corporate bonds of the said city to the Kenosha & Beloit
Railroad Company for the payment of
a sum not exceeding
$150,000." It was provided, however, that no bonds should be
issued under this act unless a majority of the legal voters voted
in favor of it.
By section 8 of an act passed the next day, "An act to amend the
charter of the City of Kenosha," approved March 23, 1853, the
legislature enacted as follows:
"The city council shall have power to levy and collect special
taxes for
any purpose (aside from what may be specially
provided for in the city charter)
which may be considered
essential to promote or secure the common interest of the city, or
may borrow on the corporate credit of the city for such purposes
any sum of money for any term of time at any rate of interest not
exceeding ten percentum, and payable at any place that may be
deemed expedient."
This act also provided that no tax should be levied or money
borrowed unless in accordance with a certain section -- "section 44
of
An act to incorporate the City of Kenosha'" (the original
city charter) -- a section which, like one in the first-named act,
provided for a submission of the matter to a vote of the people;
when the amount and object
Page 72 U. S.
196
of the proposed tax or loan to be voted upon should be
specifically stated.
In this state of statutory enactments, the city, in August,
1855, passed an ordinance:
"That
under and in accordance with section 8 of 'An act to
amend the charter of the City of Kenosha,' approved March 23, 1853,
and section 44 of the 'Act to incorporate the City of
Kenosha,' a question shall be submitted to the legal voters
whether a tax to the amount of one hundred and fifty thousand
dollars shall be levied and collected for the promotion of the
common interest of the city in aid of the Kenosha & Beloit
Railroad."
The question of the tax and loan was thus submitted, the reader
will observe, under the Act of March 23, amendatory of the charter,
and not under that of March 22, authorizing a subscription for a
specific sum, $150,000.
A majority of the voters having voted for the subscription,
under the ordinance just quoted, the city issued scrip, in the form
of small drafts, by the mayor and clerk, on the city treasurer, for
different sums of money payable "out of any funds in the treasury
belonging to the city, the same having been allowed for scrip
in aid of the Kenosha & Beloit Railroad Company."
In 1857, the next year after the city had thus subscribed for
stock and issued its scrip, and so become a stockholder in the new
railroad, the legislature passed an act giving a revised charter to
the city, which it accepted. This new charter provided that a
railroad commissioner should be annually elected thereafter as a
city officer, and, prescribing his duties, proceeded:
"He shall have, generally, the charge and control of all
interest the City of Kenosha now has, or may hereafter have, in the
Kenosha & Beloit Railroad. He shall receive all funds paid into
the hands of the city treasurer, on account of the tax for the
benefit of the Kenosha & Beloit Railroad Company,
and shall
hereafter redeem all scrip which has been issued to said railroad
company, as the same becomes due, making such provision
therefor,
Page 72 U. S. 197
or recommending such measures to the common council as he
may deem necessary for the benefit of the taxpayers of the
city."
The scrip issued as above-mentioned was not paid at its
maturity, and, in 1859, the city councils of Kenosha made
arrangements by which the city obtained from the holders of it an
enlargement of the time of payment. Being at the efflux of the
enlarged term still unpaid, one Campbell, who held a quantity of
it, brought suit in the circuit court for Missouri against the
city.
On the trial the holder of the scrip offered the same in
evidence. The city objected to its reception on the ground that
section 8 of the act to amend the charter of the City of Kenosha,
approved March 23, 1853, and also the ordinance and other
proceedings under it, were void, as being in contravention of the
Constitution of the State of Wisconsin. And that the scrip had not
been validated either by the subsequent act of 1857, making it the
duty of the railroad commissioner to redeem the scrip, nor by the
proceeding of the city council in 1859, procuring an enlargement of
the time; inasmuch as it was not in the power of either the city
council or of the legislature itself, to give validity to that
which was, by the constitution, void.
The court sustained the objection, and judgment was given for
the city.
Page 72 U. S. 199
MR. JUSTICE DAVIS delivered the opinion of the Court.
The species of securities on which this suit is brought has been
frequently before this Court for consideration, and there are very
few questions connected with them that have not been decided. This
action involves the validity of the bonds or scrip issued by the
defendant in aid of the Kenosha & Beloit Railroad Company. In
Wisconsin there is nothing in the organic law restraining the
legislature from
Page 72 U. S. 200
conferring on municipal corporations the power to subscribe for
stock in a railroad or other work of public improvement, and the
highest court of the state has sustained the validity of securities
given for such purposes by towns and cities benefited by their
construction, where the power to do so had been granted by the
General Assembly. [
Footnote
1]
But it is insisted the bonds in controversy were executed and
issued without the authority of law previously conferred, and
therefore the City of Kenosha must be relieved from their
payment.
The question presented is an important one, but in our opinion
easily solved, when the whole legislation on the subject is taken
into consideration. On the 22d day of March, 1853, an act of the
legislature was passed authorizing the city, if a majority of the
people voted for it, to issue its corporate bonds, not exceeding
$150,000, to aid in the construction of the Kenosha & Beloit
Railroad, and to levy taxes to pay for them; and provision was made
that the railroad company should secure the city, by a lien on its
property, when the bonds were executed and delivered to them. This
law conferred full power on the city to contract an indebtedness
(limited in amount) for the promotion of a work of internal
improvement, of common benefit to all its inhabitants. A majority
of the people did vote to extend the required aid, and the city
issued its obligations and delivered them to the company, taking in
exchange certificates of stock and indemnity against loss. All
parties rested in the belief that these proceedings were according
to law, and the securities were negotiated in good faith, and the
city received the benefit of them. So far as the corporate
authorities could ratify them, they have done it, by a series of
unmistakable acts: by voting to levy taxes' redeeming a portion of
the securities first issued, and exchanging the residue for new
ones; issuing scrip in settlement of unpaid interest, and selling
the securities obtained from the company by way of indemnity.
Page 72 U. S. 201
The city also, in pursuance of an express act of the
legislature, evidently passed to protect the very interests created
by the subscription to the capital stock of the road, elected a
commissioner to represent it in the meeting of the board of
directors, vote its shares of stock, and exercise a general
oversight over its affairs in connection with the road.
But it is insisted, that the holders of these bonds or scrip
(which is the form the securities assumed) cannot recover, because
the common council, in submitting to the legal voters the question
of whether a tax of $150,000 should be levied and collected to aid
the Kenosha & Beloit Railroad, declared, by ordinance, that the
question was submitted in accordance with the provisions of section
eight of "an act to amend the charter of the city," approved March
23, 1853, and section forty-four of "an act to incorporate the
city," approved February 8, 1850. It is unnecessary to notice the
latter-named section, as the consideration of the first one is
alone material to the subject of this inquiry.
Section eight of the amended charter authorizes the City Council
of Kenosha to levy and collect special taxes to any amount, and for
any purpose, which may be considered essential to promote or secure
the common interest of the city; and it is contended that
it is in conflict with the third section of the eleventh
article of the Wisconsin Constitution, and that the proceedings of
the common council under it cannot be sustained. The Wisconsin
Constitution provides that the legislature, in organizing municipal
corporations, shall restrict their power to tax, assess, borrow
money, contract debts, and loan their credit. The provision was a
wise one, and has undoubtedly tended to prevent abuses on the part
of incorporated cities and villages, in levying taxes and raising
money.
The supreme court of the state, in the interpretation of the
foregoing provision of the constitution, [
Footnote 2] has declared that the legislature could not
confer on a municipal corporation unlimited power to levy taxes and
raise money, beyond
Page 72 U. S. 202
what was proper for purely municipal purposes; and as this was
attempted to be done in section eight of the amended charter of the
City of Kenosha, that the taxes levied under it, to aid the Kenosha
& Beloit Railroad, were unauthorized, and the city authorities
could be restrained from collecting them at the instance of a party
interested. This is the extent of the decision. The learned court
expressly declined to decide whether the scrip issued by the common
council to aid the road was valid or not.
In fact, the whole decision is based on the unconstitutionality
of section eight, above referred to, which, as it purported to
confer upon the city unlimited powers to levy taxes and borrow
money, was in violation of the constitution of the state. The court
said that
"the suit was by Foster in his own behalf, and in behalf of
other land owners, to restrain the City of Kenosha from collecting
a special tax of $18,625, levied by the city upon the real estate
therein situated, for the purpose of paying a debt originally
contracted by the stock subscriptions of the city to the Kenosha
& Beloit Railroad Company."
This is all that appears in the report of the case as to the
character of the suit. It is apparent that the special act of the
legislature authorizing the subscription, and the further amendment
to the charter of the city substantially ratifying it, were not
before the court. They are not referred to in the opinion of the
court, and the fair presumption is, that they were not referred to
in the pleadings, as the purpose which the complainant had in view
did not require that they should be. We are therefore unembarrassed
by any adverse decision upon the character of the securities in
suit, and the question of their validity is an open one for
discussion and decision.
It is manifest, that the Common Council of Kenosha did not
attempt the exercise of the unlimited power to raise money
conferred on them, because they limited the amount to be raised to
the exact sum, which the legislature, by an express act,
authorized. Under the provisions of this act, ample power was given
to accomplish the object which the city had in view -- aiding to
build a railroad which would
Page 72 U. S. 203
bring trade and travel to it. By the very terms of this act, the
subscription of $150,000 could be made, and taxes levied to pay for
it, if the people voted in favor of it. It is conceded, if the
submission had been in words under the special act, instead of the
amended charter, all controversy would be at an end.
It is argued, notwithstanding there was complete authority to
raise the money and levy the taxes under a valid law, yet, as the
common council, in taking the vote, named a provision of their
charter, which is invalid, that therefore not only the payment of
the tax can be avoided, but also the payment of the scrip.
Whether this position is well taken or not the necessities of
the case do not require to be decided, for in our opinion
subsequent legislation has cured all antecedent irregularities.
In 1857, after the scrip had been issued to the railroad company
under the proceedings of the common council, the legislature passed
a revised charter for the city. Among other things, provision was
made for the election of a railroad commissioner, annually, as a
city officer. There had been previous legislation in relation to
this officer, but his duties and powers by the revised charter were
much enlarged. He was constituted
ex officio a member of
the board of directors of the Kenosha & Beloit Railroad, with
power of voting as an individual stockholder, and in addition was
required to receive from the city treasurer all moneys which were
paid on account of the tax for the road, and commanded to redeem
all script which had been issued to the company as the same became
due, making such provision for it, or recommending such measures to
the common council as he should deem necessary for the benefit of
the taxpayers of the city.
This is not in terms a curative act, but it has that effect by
fair implication. It is not doubted the legislature could, by a
direct act of confirmation, legalize the issue of this scrip,
notwithstanding the submission of the question to the vote of the
people was under the wrong law. If by a direct
Page 72 U. S. 204
act, equally in any other way, if the intention of the
legislature to legalize, clearly appears.
It is conceded the legislature had the right to authorize the
City of Kenosha to take stock in a railroad, issue bonds to pay for
it, and provide for their redemption by the levy and collection of
a tax. It did authorize these things to be done if the people
approved them, but as their sanction was obtained in the wrong way,
thereby involving the legality of their proceedings, good faith and
sound policy required, at the hands of the legislature, a full
legislative recognition of the legality of the subscription and the
issue of the scrip. This was done by the provisions of the revised
charter of 1857.
Of such importance did the legislature consider the interests of
Kenosha in the railroad to Beloit that a commissioner, of the
dignity of a city officer, was deemed necessary to look to them.
And that the legislature intended to ratify the proceedings of the
common council, which resulted in the subscription of stock to the
railroad and issue of scrip is very clear, else why was the
commissioner directed to provide for the payment of the scrip as it
matured? The words of the law are imperative. The commissioner
shall redeem the scrip. Surely the legislature would not command
this to be done unless it intended to recognize the validity of the
scrip.
"To redeem all scrip which had been issued to said railroad
company as the same became due" -- the very words of the law -- can
mean nothing else than that such issue of scrip had received
legislative sanction, and, in the opinion of the lawmakers, ought
to be paid.
If this is so, the ratification of the disputed proceedings of
the common council is as complete as if they had been particularly
named, and their issue of scrip is relieved from all taint of
illegality.
After the revised charter was given to the city, the common
council, at different times, and in various ways, recognized the
validity of the scrip, and finally, in June, 1859, settled with
some of the holders of it, who were willing to
Page 72 U. S. 205
extend the time for payment -- taking up the old securities and
issuing new.
This suit is brought upon the scrip received on that settlement,
and we think the learned court below erred in excluding it from the
jury.
The judgment of the circuit court is reversed with costs,
and the cause is remanded to the court below, with instructions to
issue a venire de novo.
[
Footnote 1]
Clark v. City of Janesville, 10 Wis. 136;
Bushnell
v. City of Beloit, id., 195.
[
Footnote 2]
Foster v. City of Kenosha, 12 Wis. 616.
