A statute of Illinois, by a twelfth section, authorized any
township along the route of a railroad named, to subscribe to its
stock.
But enacted by a thirteenth that no subscription should be made
until notice had been given to the legal voters to meet for the
purpose of voting on the matter,
"provided" that where
elections had been already held "and a
majority of the legal
voters of any township" were in favor of a subscription, no
further election should be necessary to be held.
A fourteenth section enacted that
"if it shall appear that a majority of all the legal voters of
such, townships voting at such election, shall have voted 'for
Subscription,' it shall be the duty of the supervisor to subscribe
to the capital stock &c., the amount so voted to be subscribed,
and to receive from the company the proper certificates
therefor."
A fifteenth section enacted that it should be
"the duty of the clerk of any township in which a vote should be
given in favor of subscription, within ten days thereafter, to
transmit to the county clerk of the respective counties a
transcript of the vote given and the amount so subscribed and the
rate of interest to be paid.
Provided that where elections
may
have been held as aforesaid, it shall be the duty of
the town clerks to file with the county clerks &c., within ten
days after the issuing of said bonds certificates of the votes of
their towns, the amount of stock voted to be subscribed, the amount
of bonds issued, and the rate of interest payable thereon."
Of a minority of the legal voters of St. Joseph Township voting
before the act was passed, at an election called and held, a
majority voted in favor of subscription, and the supervisor and
clerk professing to act for the township, issued bonds to the
amount voted; but no record of any kind was ever kept of the
election, nor was any record or transcript ever transmitted to the
county clerk.
After this an act was passed reciting that
"township officers along the line
Page 83 U. S. 645
of the road had failed to keep a full and perfect record of
elections called and held, and township clerks had failed to file
with the county clerk certificates as required"
by the above-quoted act, and enacting that where such
informalities and neglect may have occurred, and bonds have been
issued to aid in the construction of said railroad, that no such
neglect or omission on the part of township officers shall in any
way invalidate or impair the collection of said bonds.
On this case in favor of a
bona fide holder for value
of the bonds,
Held:
1. That even in the case of an election held
prior to
the passage of the first-mentioned act, a majority of the legal
voters of the township voting at an election was sufficient to
authorize a subscription although all the voters voting on both
sides were together but a minority of all the legal voters of the
township.
2. That if this were not so, yet the second act "entirely
obviated all the mistakes and irregularities in the prior
proceedings."
3. That in addition, the fourteenth section of the original act
made 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 was
clearly too late to question their validity where they were in the
hands of an innocent holder.
Rogers brought assumpsit in the court below against St. Joseph
Township, Champagne County, Illinois, to recover interest on
certain railroad bonds alleged to have been issued by said
township. The township set up that the bonds were not properly
issued, and void.
The case was thus:
On the 28th of February, 1867, the Legislature of Illinois
passed
"An act to amend the articles of association of the Danville,
Urbana, Bloomington & Pekin Railroad Company, and to extend the
powers of and confer a charter upon the same."
In its material parts the act read thus:
"SECTION 12. To further aid in the construction of said road by
said company, any incorporated town or townships along the route of
said road may subscribe to the capital stock of said company in any
sum not exceeding $250,000."
"SECTION 13. No such subscription shall be made until the
question has been submitted to the legal voters of such
incorporation,
Page 83 U. S. 646
town or township in which the subscription is proposed to be
made. And the clerk of each of said towns or townships is hereby
required, upon the presentation of a petition signed by at least
ten citizens who are legal voters, to post up notices &c.,
notifying the legal voters of such town or township to meet at the
usual place of holding elections in such town or township &c.,
for the purpose of voting for or against such subscription,
provided that where elections may have already been held and a
majority of the legal voters of any township or incorporated town
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 subscribed as in this act provided, and such elections are
hereby declared to be legal and valid, as though this act had been
in force at the time thereof, and all the provisions hereof had
been complied with."
"SECTION 14. If it shall appear that
a majority of all the
legal voters of such towns or townships, voting at such
election, have voted 'for subscription,' it shall be the duty
of the president of the board of trustees, or other chief executive
officer, if in incorporated towns, and of the supervisor in
townships, to subscribe to the capital stock of said railroad
company, in the name of such town or township, the amount so voted
to be subscribed, and to receive from said company the proper
certificates therefor. He shall also execute to said company, in
the name of such town or townships, bonds bearing interest at ten
percent per annum, which bonds shall run for a term of not more
than twenty years, and the interest on the same shall be made
payable annually, and which bonds shall be signed by such
president, executive officer, or supervisor and be attested by the
clerk of the town or township in whose name the bonds are issued,
and it shall be his duty to make out a record of the issuing of
said bonds. Said bonds shall be delivered to the president or
secretary of said company for the use of said company. And when any
city or county shall hereafter vote to make subscription, as
aforesaid, the chairman of the board of supervisors of such county
and the mayor of such city shall be required to subscribe to the
capital stock of said company the amount so voted."
"SECTION 15. It shall be the duty of the clerk of any such town
or township in which a vote shall be given in favor of
subscription, within ten days thereafter, to transmit to the
county
Page 83 U. S. 647
clerk of their respective counties a transcript or statement of
the vote given, and the amount so voted to be subscribed, and the
rate of interest to be paid,
provided that where elections
may
have been held as aforesaid, it shall be the duty of
the town clerks to file with the county clerks of their respective
counties, within ten days after the issuing of said bonds,
certificates of the votes of their towns, the amount of stock voted
to be subscribed, the amount of bonds issued, and the rate of
interest payable thereon."
On the 25th of February, 1869, the same legislature passed an
act entitled
"An act to amend articles of association of the Danville,
Urbana, Bloomington & Pekin Railroad Company, and to extend the
powers of and confer a charter upon the same."
It was thus:
"WHEREAS, certain township officers along the line and through
which the Danville, Urbana, Bloomington & Pekin Railroad passes
have failed to
keep a full and perfect record of elections
called and held, and township clerks have
failed to file
with the county clerk certificates as required by section fifteen
of the amended articles of association of said railroad,
therefore,"
"SECTION 1.
Be it enacted, where such informalities and
neglect may have occurred, and bonds have been issued to aid in the
construction of said railroad, that no
such neglect or
omission on the part of township officers shall in any way
invalidate or impair the collection of said bonds, both principal
and interest, as they may respectively fall due,"
&c.
So far as to the legislation in the case.
On the trial, the plaintiff gave in evidence different bonds,
dated October 1, 1867, issued by the supervisor and clerk of the
township, purporting that the township acknowledged itself to owe
so much money, which it promised to pay the bearer, with interest,
at ten percentum per annum, yearly on the 1st of October.
The bond recited that it was issued by virtue of a law of the
state of Illinois, entitled:
"'An act to amend the articles of association of the Danville,
Urbana, Bloomington & Pekin Railroad Company, and to extend the
powers of and confer a charter upon the same,' approved
Page 83 U. S. 648
February 28, 1867, and in accordance with the vote of the
electors of said township at the special election held August
fourteenth, 1866, in accordance with said act."
On the other hand evidence was given by the township tending to
show that the election held for the purpose of deciding whether the
township would subscribe stock was held on the
fourth of
August, 1866, and, of course, before the passage of the Act of
February 28, 1867, incorporating the company, and that at the time
of the election, there were three hundred legal voters in St.
Joseph Township, of whom only seventy-five persons voted at the
election, a majority of the seventy-five only voting in favor of
the issuing of the bonds; that no poll book or record of any kind
was made or kept of the election, and that no record or transcript
of the proceedings at it was ever transmitted to the county
clerk.
The plaintiff, in reply, relied on the recitals in his bonds, on
the fourteenth section of the act, and on the amendatory or
curative act.
The question, of course was, whether under the two acts above
quoted, and the facts of the case, the bonds were valid.
The court gave these instructions:
"1st. The election held in August, 1866, as declared in the
evidence, was validated by the Act of February 28, 1867, so as to
authorize the defendant to subscribe for stock in the Danville,
Urbana, Bloomington & Pekin Railroad, and to issue the bonds in
question; and when the stock was subscribed and the bonds issued,
the bonds are binding on the defendant in the hands of a
bona
fide holder."
"2d. The recitals in the bond estop the defendant from denying
the fact of a valid election as against a
bona fide holder
of the bonds or coupons attached thereto."
Verdict and judgment having gone accordingly, the township
brought the case here.
Page 83 U. S. 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 defense 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 &
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. [
Footnote 1] 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
Page 83 U. S. 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 percent 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
Page 83 U. S. 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. [
Footnote 2]
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 1, 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 14, 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.
Page 83 U. S. 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
bona fide holder.
(2) That the recitals in the bonds estop the defendants from
denying the fact of a valid election as against a
bona
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. [
Footnote 3] Such
corporations are created by the legislature and they derive all
their powers
Page 83 U. S. 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. [
Footnote 4]
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. [
Footnote 5]
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.
Page 83 U. S. 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. [
Footnote
6]
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 be 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,
Page 83 U. S. 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. [
Footnote 7] 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. [
Footnote 8]
Knox County v. Aspinwall. [
Footnote 9] Noncompliance 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
Page 83 U. S. 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
bona fide holder of the bonds in a collateral way,
which is attempted to be done in the case before the court.
[
Footnote 10]
Exactly the same principles were applied in the case of
Royal British Bank v. Turquand, [
Footnote 11] 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
prima facie case is made for the plaintiff, as the
defendants having executed the bond have no defense 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. [
Footnote 12]
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,
Page 83 U. S. 667
cannot be cast upon the
bona fide creditors of the
township. [
Footnote 13]
Judgment affirmed.
MR. JUSTICE MILLER and MR. JUSTICE FIELD did not sit in this
case.
[
Footnote 1]
2 Private Laws (1867), 761.
[
Footnote 2]
2 Private Laws (1867) 762.
[
Footnote 3]
Prettyman v. Supervisors, 19 Ill. 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 St. 260.
[
Footnote 4]
Rogers v.
Burlington, 3 Wall. 663;
Freeport v.
Supervisors, 41 Ill. 495;
Butler v. Dunham, 27
id. 474
[
Footnote 5]
Cowgill v. Long, 15 Ill. 203;
Keithsburg v.
Frick, 34
id. 405;
Thomson v.
Lee County, 3 Wall. 327;
City v.
Lamson, 9 Wall. 477;
Watson
v. Mercer, 8 Pet. 111;
Bissell v.
Jeffersonville, 24 How. 295.
[
Footnote 6]
People v. Warfield, 20 Ill. 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 Conn. 475;
Talbot
v. Dent, 9 B. Monro 526;
State v. Mayor, 37 Mo,
272.
[
Footnote 7]
3 Private Laws (1869) 274;
Thomson v. Lee
County, 3 Wall. 327;
Gelpcke v.
Dubuque, 1 Wall. 220;
People v. Mitchell,
35 N.Y. 551.
[
Footnote 8]
Private Laws (1867) 762.
[
Footnote 9]
62 U. S. 21
How. 544.
[
Footnote 10]
Supervisors v.
Schenck, 5 Wall. 783.
[
Footnote 11]
5 Ellis & Blackburne 259.
[
Footnote 12]
Same Case, 6 Ellis & Blackburne 331.
[
Footnote 13]
Maclae v. Sutherland, 25 English Law & Equity
114.
