The City v. Lamson - 76 U.S. 477 (1869)
U.S. Supreme Court
The City v. Lamson, 76 U.S. 9 Wall. 477 477 (1869)
The City v. Lamson
76 U.S. (9 Wall.) 477
1. A holder of coupons which have been cut off from the bond to which they were originally attached may bring suit on them if they represent interest already due, notwithstanding he be no longer holder of the bond to which they belonged. He need not, if he declares properly, produce the bond.
2. In suing on the coupons in such case, it is proper enough to recite the bonds in such general way as explains and brings into view the relation which the coupons originally held to the bonds, and in some respects still hold.
3. The suit does not by such recital-that is to say, by one in the nature of inducement and by way of preamble only -- become a suit upon the bond. It is still a suit on the coupons.
4. A coupon, if of the ordinary sort, being but a repetition, as respects each six months or other stated term, of the contract which the bond itself makes on that subject and but a device for the convenience of the holder, a suit upon it is not barred by the statute of limitations unless the time prescribed in the statute be sufficient to bar also suit upon the bond.
5. A debt for a specific sum contracted by a city, and invalid because a statute which authorized the city to contract a debt did not also limit the extent of it, is made valid by a subsequent statute recognizing the validity of the debt as contracted.
6. Where bonds issued to bona fide holders for value are valid by the judicial decisions of a state when issued, subsequent decisions in the same state cannot destroy their validity in such hands. Gelpcke v. City of Dubuque, 1 Wall. 175, affirmed.
The 3d section of the 11th article of the Constitution of Wisconsin ordains that
"It shall be the duty of the legislature to provide for the organization of cities and incorporated villages and to restrict their power of borrowing money, contracting debts, and loaning their credit so as to prevent abuses in contracting debts by such municipal corporations."
With this provision in force as fundamental law, the legislature of the state, on the 2d March, 1857, by an act [Footnote 1] which amended and consolidated the several acts relating to the city charter, authorized the common council of the City of Kenosha to
"borrow on the corporate credit of the city any sum of money, for any term of time, at any rate of interest, and payable at any place deemed expedient, issuing bonds or scrip therefor."
The city accordingly did borrow $100,000 to aid
in the construction of the Kenosha & Rockford Railroad, and it issued bonds in sums of $500 and $1,000 each for payment. T hey were headed,
"Issued according to law to the Kenosha & Rockford Railroad Company, to aid in the construction of their railroad,"
and were made payable twenty years from date at the People's Bank in the City of New York, with interest at the rate of ten percent per annum, to be paid semiannually upon the presentation of the proper coupons for said interest. For the payment of the bonds and interest the faith of the city was declared to be pledged. The bonds were certified by the mayor and city clerk to have been issued under an act of the legislature, passed March 2, 1857, giving authority to the city to lend its credit for the sum specified, and also in pursuance of a vote of the freeholders of the city taken for the purpose of the loan of the $100,000 to the railroad company.
Attached to each bond were a series of coupons, like those now usually attached to railroad bonds, for the semiannual interest as it should become due in each year. The following was the form of those on the bonds for $500:
"$25. The City of Kenosha, Wis., will pay to the bearer twenty-five dollars on the 1st day of September, 1860, at the People's Bank, in the City of New York, on presentation of this coupon, being the interest due on the day on the bond of said city, numbered 1, dated this 1st day of September, 1857."
"G. H. PAUL, Mayor"
"H. T. WEST, Clerk"
Subsequent to the issue of the bonds, the name of "The Kenosha & Rockford Railroad Company" was changed to "The Kenosha, Rockford & Rock Island Railroad Company," and a statute of 1859 provided that
"the common council of the City of Kenosha should have generally the charge and control of all interest the City of Kenosha now has, or may hereafter have in that railroad."
The act then provided that the common council should appoint a railroad
commissioner, that when duly appointed, he should be ex officio a member of the board of directors of the railroad, and a statute of 1862 authorized the city
"to issue new bonds in exchange for the bonds and scrip heretofore issued by said city on railroad account now outstanding and unredeemed for the purpose of compromising the indebtedness of said city on such terms as may be agreed upon between the city and its creditors."
One Lamson, having one hundred and seventy-two coupons for the interest due on the bonds in 1860 and 1861 and unpaid, brought suit against the city to recover it. The declaration recited in very general terms the several bonds to which the coupons that the plaintiff held had been originally annexed, setting forth that these bonds themselves had been sold and disposed of to bona fide purchasers, and had since passed from hand to hand in the stock market like other negotiable securities, so that the plaintiff could not produce them to the court; that the interest had accrued on the same; that the city had neglected and refused to pay it at the time and place designated; and that the interest and coupons were owned by the plaintiff, and that he brought the coupons into court to be cancelled.
The defendant pleaded 1st, nil debet; 2d, that the several supposed causes of action had not accrued to the plaintiff within six years from the commencement of the suit; the statute of limitations. The plaintiff took issue on the first plea and demurred to the second, which demurrer was sustained.
From the bill of exceptions it appeared that the plaintiff gave in evidence the one hundred and seventy-two coupons, his doing which was objected to, but that the objection was overruled. It was admitted that all the coupons with the exception of four, which were annexed to a bond produced, were coupons of different bonds of the same issue, but the bonds were not given in evidence. It was admitted also that more than six years had elapsed since the interest accrued on them.
After the plaintiff rested, the counsel for the defendant
prayed the court to charge the jury 1st that the bonds declared on, as well as the coupons, should have been produced in order to sustain the declaration under the issue, and 2d that the City of Kenosha had no authority to issue the bonds. Both prayers were refused.
The jury found a verdict for the plaintiff on the first issue to the amount of the several coupons, and judgment having been given accordingly, the city brought the case here.