Parkersburg v. Brown - 106 U.S. 487 (1883)
U.S. Supreme Court
Parkersburg v. Brown, 106 U.S. 487 (1883)
Parkersburg v. Brown
January 8, 1883
106 U.S. 487
1. The act of the Legislature of West Virginia, of Dec. 15, 1868, c. 118, authorizing the City of Parkersburg to issue its bonds for the purpose of lending the same to persons engaged in manufacturing, is invalid, and the bonds issued under it are, as against the city, void.
2. As the consideration for bonds to the amount of $20,000, issued by the city to M. under that act, he, to secure the payment to the City of the semiannual interest on $20,000, and of annual installments on the principal, conveyed to J., as trustee, certain real estate and personal property, with a power of sale in case of default. The bonds were payable to M. or order. He endorsed them in blank and sold them to A. and B., who bought them for value, in good faith. M. paid one installment of interest on them to the city. The latter made five payments of interest. It then took into its possession the property, and refused to make further payments. A suit in equity was instituted by the holders of the bonds against the city, but was not brought to a hearing for nearly three years. M., although a party thereto, made no defense. The bill prayed for a receiver of the property, but none was applied for, and the city having been allowed
to control and manage the property meantime, acted in good faith and with reasonable discretion, in taking care of it and disposing of some of it. Held:
1. The bonds are void because the necessary amount to pay them and the interest thereon was to be raised by taxation, which, not being for a public object, the constitution of the state did not authorize, and the legislature had no power to pass the act.
2. Neither the payment of interest on the bonds by the city, nor the acts of its officers or agents in dealing with the property, operate, by way of estoppel, ratification, or otherwise to render the city liable on the bonds.
3. M. had a right to reclaim the property and to call on the city to account for it, in disaffirmance of the illegal contract, the transaction being merely malum prohibitum, and the city being the principal offender. Such right passed to the complainants as an incident to the bonds.
4. This Court orders a decree to be entered declaring that the city exceeded its lawful powers in issuing the bonds, and that they cannot be enforced as its obligations, and providing for a sale of the remaining property, and for an account, wherein the city is to be credited with the sums it had in good faith paid for the acquisition, protection, preservation, and disposition of the property, and for insurance and taxes, and for interest on the bonds, and to be charged with what it had received, but not with any sum for loss of, or damage to, or depreciation of, the property, and ordering the distribution among the complainants of the net proceeds of the sale and the net amount of money, if any, remaining in the hands of the city, received from M. or from the sales by it of any of the property.
The case is stated in the opinion of the Court.