County of Bates v. Winters
97 U.S. 83 (1877)

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U.S. Supreme Court

County of Bates v. Winters, 97 U.S. 83 (1877)

County of Bates v. Winters

97 U.S. 83

Syllabus

On April 5,1870, the County Court of Bates County, Missouri, having received the requisite petition, ordered that an election be held May 3 in Mount Pleasant Township, for the purpose of determining whether a subscription of $90,000 should be made on behalf of the township to the capital stock of the Lexington, Chillicothe, and Gulf Railroad Company, to be paid for in the bonds of the county, upon certain conditions and qualifications set forth in the order. The election resulted in favor of the subscription, whereupon the court, June 14, 1870, made an order that said sum "be, and is hereby, subscribed . . . subject to and in pursuance of all the terms, restrictions, and limitations" of the order of April 5, and that the agent of the court be authorized and directed to make said subscription, on behalf of the township, on the stock books of said company, and, in making it, to have copied in full the order of the court as the conditions on which it was made, and that he report his acts to the court. The agent, Dec. 19, 1870, reported that the company had no stock books, for which, and other reasons, he did not make the subscription, concluding his report with the words, "the bonds of said township are therefore not subscribed," which report was formally adopted by the court. Jan. 18, 1871, the county court made another order reciting that the subscription had been made to said Lexington, Chillicothe, and Gulf Railroad Company; that a consolidation had been made between that and another company, resulting in the Lexington, Lake, and Gulf Railroad Company, and directing that

Page 97 U. S. 84

$90,000 of bonds be issued to the latter company in payment and satisfaction of said original subscription. The order concluded by authorizing the agent of the court "to subscribe said stock" to said Lexington, Lake, and Gulf Rail road Company. The agent made the subscription on the books of that company, which was accepted by it, and a certificate of stock issued to the county. The bonds recite on their face that they are issued to the Lexington, Lake, and Gulf Railroad Company, in payment of the subscription to the Lexington, Chillicothe, and Gulf Railroad Company, authorized by the vote of the people held May 3, 1870, and that the two companies were consolidated, as required by law.

Held:

1. That the action of the county court on June 14, 1870, was not final and self-executing, and did not constitute a subscription to the Lexington, Chillicothe, and Gulf Railroad Company.

2. That the issue of the bonds to the Lexington, Lake, and Gulf Railroad Company was not authorized by the election held May 3, 1870.

3. That there can be no recovery on said bonds, as their invalidity is shown by their recitals.

The County of Bates, in the State of Missouri, brought this writ of error to reverse a judgment rendered against it in favor of Jonathan Winters and Valentine Winters for the sum of $6,251.14, the amount of certain bonds and coupons issued by said county in behalf of Mount Pleasant Township. The bonds were a part of a series amounting to $90,000, purporting to be issued upon an election authorizing a subscription to the capital stock of the Lexington, Chillicothe, and Gulf Railroad Company. They, and the coupons attached to them, are in the following form:

"No. 56 UNITED STATES OF AMERICA $1,000"

"State of Missouri, County of Bates"

"Issued pursuant to articles of consolidation in payment of stock due the Lexington, Lake, and Gulf Railroad Company, consolidated Oct. 4, A.D. 1870."

"Know all men by these presents, that the County of Bates, in the State of Missouri, acknowledges itself indebted and firmly bound to the Lexington, Lake, and Gulf Railroad Company, in the sum of $1,000, which sum the said County of Bates, for and in behalf of Mount Pleasant Township therein, promises to pay the said Lexington, Lake, and Gulf Railroad Company, or bearer, at the Bank of America, in the City and State of New York, on the eighteenth day of January, A.D. 1886, together with interest thereon, from the eighteenth day of January, A.D. 1871, at the rate of ten percent

Page 97 U. S. 85

per annum, which interest shall be payable annually on the presentation and delivery at said Bank of America of the coupons hereto attached."

"This bond being issued under and pursuant to an order of the County Court of Bates County, by virtue of an Act of the General Assembly of the State of Missouri, approved March 23, 1868, entitled 'An Act to facilitate the construction of railroads in the State of Missouri,' and authorized by a vote of the people, taken May 3, 1870, as required by law, upon the proposition to subscribe $90,000 to the capital stock of the Lexington, Chillicothe, and Gulf Railroad Company, and which said railroad company last aforesaid and the former, Pleasant Hill Division of the Lexington, Chillicothe, and Gulf Railroad Company, were, on the fourth day of October, 1870, consolidated, as required by law, into one company, under the name of the Lexington, Lake, and Gulf Railroad Company; and which said last-named railroad company, as provided by law and under the terms of said consolidation thereof, possesses all the powers, rights, and privileges, and owns and controls all the assets, subscription bonds, moneys, and properties whatever, of the two said several companies forming said consolidation, or either one of them."

"In testimony whereof, the said County of Bates has executed this bond by the presiding justice of the county court of said county under the order thereof, signing his name hereto, and by the clerk of said court under the order thereof, attesting the same and affixing the seal of said court."

"This done at the City of Butler, County of Bates, this eighteenth day of January, A.D. 1871."

"COUNTY COURT"

"BATES COUNTY, MO., SEAL"

"B. H. THORNTON"

"Presiding Justice of the County Court"

"of Bates County, Mo."

"Attest:"

"W. J. Smith"

"Clerk of the County Court of Bates County, Mo."

"$100 BUTLER, BATES COUNTY, MO. [$100"

"Jan. 18, A.D. 1871"

"The County of Bates acknowledges to owe the sum of $100, payable to bearer, on the eighteenth day of January, 1872, at the Bank of America, in the City and State of New York, for one year's interest on bond No. 56."

"W. J. SMITH"

"Clerk of the County Court, Bates County, Mo."

Page 97 U. S. 86

The Constitution of Missouri, sec. 14, art. 11, prescribes:

"The General Assembly shall not authorize any county, city, or town to become a stockholder in, or to loan its credit to, any company, association, or corporation, unless two-thirds of the qualified voters of such county, city, or town, at a regular or special election to be held therein, shall assent thereto."

The statute of that State of March 23, 1868, enacted, that whenever twenty-five persons, taxpayers and residents of a municipal township, should set forth their desire to subscribe to the capital stock of a railroad company proposing to build a road into or near said town, it should be the duty of the county court to order an election, to determine if such subscription should be made, and, if it should appear that two-thirds of the qualified voters voting at such election were in favor of such subscription, it should be the duty of the county court to make such subscription in behalf of the township according to the terms and conditions thereof, and . . . to issue bonds in the name of the county. Wagner, Stat. p. 313, sec. 551; Laws Mo., 1868, p. 92.

The authority on the part of Bates County to issue its bonds to the Lexington, Lake, and Gulf Railroad Company is based upon the following proceedings:

On the fifth day of April, 1870, the County Court of Bates County, having received such a petition, ordered an election, at which the electors of Mount Pleasant Township should determine whether they would subscribe $90,000 to the Lexington, Chillicothe, and Gulf Railroad Company, to be paid in bonds, upon the terms and with the numerous conditions and qualifications in the said order particularly set forth.

The election resulted in favor of making the subscription; and on the 14th of June, 1870, the county court made an order

"That the sum of $90,000 be, and is hereby, subscribed to the capital stock of the Lexington, Chillicothe, and Gulf Railroad Company, in the name and behalf of Mount Pleasant Township, subject to and in pursuance of all the terms, restrictions, and limitations . . . of the order of the court"

"so made as aforesaid; and that the agent be authorized to make such subscription on the books of the company, and in making it he be

Page 97 U. S. 87

directed to have copied in full the order of the court, as the conditions on which the subscription is made, and that he report his acts to the court."

One of these conditions was that from the proceeds of the sale of said bonds there should be paid to said company, monthly, ninety percent of the monthly estimate of the work done on said road in Mount Pleasant Township; and it authorized said bonds to be issued when all of the said road south of Lexington to the north line of Mount Pleasant Township should have been located and put under contract.

The agent went to Lexington for the purpose of making the subscription, and carried with him a copy of the records of the county court, as he says, "for the purpose of showing his authority to act in the premises;" but the company had no books, by reason whereof he did not make the subscription; he sought to withdraw or reclaim his papers, but the company refused to allow him to do so. He went again for the same purpose but, being dissatisfied with the condition of the company, did not make the subscription; and on the nineteenth day of December, 1870, reported his doings to the county court, ending in the words, "the bonds of said township are, therefore, not subscribed." This report was formally approved by the county court.

Seven months after making the order above set forth, and on the 18th of January, 1871, the county court made another order, which recited that the subscription had been made to said Chillicothe Company, that a consolidation had been made between that and another company, resulting in the Lexington, Lake, and Gulf Railroad Company; and it directed that $90,000 of bonds be issued to the latter company, in payment and satisfaction of the original subscription as aforesaid, and concluded: "Said James M. Boreing (their agent to receive and dispose of the bonds) is hereby authorized to subscribe said stock to said railroad company," the Lexington, Lake, and Gulf Railroad Company.

Boreing did make the subscription on the books of the new company, which was accepted by that company; and then, for the first time, a certificate of stock was issued to the county.

The court below found that the defendants in error were

Page 97 U. S. 88

bona fide holders, for value, of the bonds and coupons in suit, before maturity, without notice of any defect in the issue of the bonds, except such as they were bound in law to take notice of, and such as the face of the bonds imparted to them.

Page 97 U. S. 89

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