1. A., the lawful holder of coupons detached from bonds issued
by a county in Kansas, applied to a court of competent jurisdiction
for a mandamus to compel the county commissioners to pay such of
them as were then due, and levy a tax sufficient to pay those
shortly thereafter falling due. The commissioners denied the
validity of the bonds and the obligation of the county to pay them.
Judgment was rendered for the defendants. Subsequently, A.
delivered the same coupons to B., to be collected for the benefit
of A. B. brought suit.
Held that the judgment was a bar to
the suit.
2. The Court again decides that a
bona fide purchaser
of municipal bonds for a valuable consideration, who had no actual
notice of any defense which could be sat up against them, is not
bound to look further than to see that there was legislative
authority for their issue, and that the officers who were thereunto
authorized have decided that the precedent conditions upon
which
Page 99 U. S. 687
it was allowed to be exercised have been fulfilled. If such
authority was conferred and such a decision made, the bonds are
valid obligations which he may enforce.
3. Where, pursuant to a statute entitled "An Act authorizing
counties and cities to issue bonds to railroad companies," approved
Feb. 10, 1865, as amended Feb. 28, 1888, an election was held in a
county in Kansas upon the question of a county subscription to the
capital stock of "any railroad company" then or thereafter to be
organized which should construct a railroad from a point in
Missouri to a point in the county, and the result having, May 8,
1887, been declared by the proper authorities to be in favor of the
subscription and so entered on their minutes, the bonds were, in
1870, issued in payment of the subscription to a Missouri company,
which caused the road to be built,
held that the
subscription was binding, and that the county in an action on the
bonds by such a purchaser is estopped from asserting that in fact a
majority of the qualified electors had not voted in favor of the
issue of the bonds.
This was an action brought, March 17, 1875, by Block against
the
Board of Commissioners of the County of Bourbon, Kansas, upon
overdue coupons, amounting in the aggregate to $16,800, detached
from bonds issued by that county.
A copy of one of the bonds and coupons is as follows:
"
No. ___] STATE OF KANSAS [$1,000"
"
Stock Bond of Bourbon County"
"Thirty years after date, the County of Bourbon promise to pay
to the Tebo and Neosho Railroad Company, a corporation organized by
authority of the laws of the State of Missouri, and by virtue of an
act of incorporation passed by the legislature of the state
aforesaid, and approved the sixteenth day of January, 1860, or
bearer, the sum of one thousand dollars, for value received, with
interest at the rate of seven percent per annum, payable
semiannually, at the New York National Exchange Bank, in the City
of New York, from and after the first day of January, 1871."
"City of Fort Scott, Kansas, July 1, 1870."
"By order of the Board of County Commissioners of the County of
Bourbon, Kansas, dated March 8, 1867."
"[SEAL] D. GARDNER"
"
Chairman, Board of County Commissioners, Bourbon
County"
"Attest: C. FITCH,
Clerk"
"FORT SCOTT, KANSAS, July 1, 1870"
"Treasurer of Bourbon County will pay bearer thirty-five
dollars, at the New York National Exchange Bank, in the City of
New
Page 99 U. S. 688
York, being semiannual interest due on the ___ day of _____,
18__, on the bond of the County of Bourbon, No. ___, to the Tebo
and Neosho Railroad Company, issued in pursuance of an order of the
board of county commissioners of said county, dated March 8,
1867."
"D. GARDNER"
"
Chairman, Bourbon Board of County Commissioners"
"C. FITCH,
County Clerk"
Under its charter, granted Jan. 16, 1860, the company had power
to construct a road between certain points and to extend and
operate it or its branches beyond the limits of Missouri. It
transferred, in October, 1870, by authority of a statute of that
state, its franchises, rights, and privileges, "including
subscriptions," south of a designated point, to the Missouri,
Kansas, and Texas Railway Company, a Kansas corporation. The latter
company assumed all indebtedness incurred for the construction or
otherwise of the line between Sedalia, Mo., and Fort Scott, the
county seat of said county, and constructed in due time the road
through that county, via Fort Scott, to Texas. The road is now in
full operation.
The said board, March 8, 1867, adopted an order, which was duly
entered on its minutes, as follows:
"Be it ordered by the County Commissioners of Bourbon County,
Kansas, that there be subscribed, in the name and for the benefit
of the County of Bourbon, in the State of Kansas, $150,000 to the
capital stock of any railroad company now organized or that shall
hereafter be organized that shall construct a railroad commencing
at a point on the Tebo and Neosho Railroad, running westward via
Fort Scott, and that the bonds of said county be issued to said
company for the same, said bonds to be payable within thirty years
from the date thereof, and bearing interest at the rate of seven
(7) percentum per annum,
provided that said bonds shall
not be issued until the question shall have been submitted to a
vote of the qualified electors of the County of Bourbon, and shall
have received a majority of the votes cast in favor of the same, in
pursuance of the provisions of an 'Act to authorize counties and
cities to issue bonds to railroad companies,' approved Feb. 10,
1865, and that said question shall be submitted to said electors at
a special election on the seventh day of May, A.D. 1867. "
Page 99 U. S. 689
"At said election, the votes shall be cast 'For railroad bonds'
and 'Against railroad bonds,' and if it shall appear, upon a
canvass of said votes by the proper officers, according to law,
that a majority of the votes cast are in favor of the said
subscription, then the above order shall be carried into practical
operation by the issuing of said bonds to said company whenever the
County Commissioners of Bourbon County are satisfied that the
roadbed of the Tebo and Neosho Railroad is completed to such a
point that the amount of said bonds shall be sufficient and
adequate to construct the roadbed and connect the said point with
the City of Fort Scott."
Said order was duly published, and the election held pursuant
thereto. On canvassing the returns, the board declared, May 10,
1867, that there was a majority of twenty-six votes "for railroad
bonds," and that there was no evidence that an election had been
held in the Township of Franklin.
The poll book from that township did not arrive at the clerk's
office until after the commissioners had adjourned.
The board, July 23, 1869, made a further order providing for a
special election on the twenty-fourth day of the following August.
The election was duly held accordingly, and on canvassing the
votes, the board declared that a majority of them had been cast in
favor of the proposed subscription.
The board thereupon appointed an agent to subscribe, in the name
and for the benefit of the county, $150,000 to the capital stock of
said Tebo and Neosho Railroad Company upon the express condition,
"which was made a part of said subscription," that the county bonds
should not be delivered to the company, nor the county become
liable to pay any portion of its subscription, until the roadbed of
the company should be completed to such a point that the amount of
bonds should be sufficient to complete the road from Sedalia, Mo.,
to Fort Scott. There was a further condition that the subscription
should be void unless the roadbed was completed to Fort Scott, Jan.
1, 1872.
The board, July 2, 1870, ordered that the bonds bearing date
July 1, 1870, of the tenor and effect of the foregoing copy, be
issued and deposited with a certain person as trustee of the
county, for delivery to the company when the conditions
Page 99 U. S. 690
upon which they had been voted should be complied with.
The board, Jan. 2, 1871, upon a report made to it, approved the
delivery, on the fifth day of November, 1870, of the bonds to the
company, the coupons covering interest from July 1 to Sept. 1,
1870, having been detached therefrom.
The board, June 27, 1872, ordered that the poll book of Franklin
Township of the election held May 7, 1867, which had remained
sealed since it had been delivered by the messenger of the
township, should be opened. The board declared, after inspecting
said book, that if the vote then cast by that township had been
computed in canvassing the county vote, the proposition to vote the
bonds would have been rejected.
The board thereupon ordered the treasurer of the county to
withhold the payment falling due on said bonds July 1, 1872, and to
notify the New York National Exchange Bank of the City of New York,
as the fiscal agent of the county, that no more interest would be
paid on them and that the principal would not be paid at
maturity.
The county levied and collected taxes for 1870, 1871, and 1872,
to pay interest on the bonds in suit, and paid the first three
installments of interest thereon.
Certain coupons, on which this suit was brought, numbered four,
originally attached to said bonds, from one to one hundred, had
been in controversy in a mandamus proceeding in the Supreme Court
of Kansas, instituted by one Lewis, then and still the real and
beneficial owner of them. They were in possession of Block for
collection.
The remaining facts are stated in the opinion of this Court. The
circuit court gave judgment in favor of the county on the coupons
in suit which were attached to the bonds numbered from one to one
hundred, inclusive, and against it for the remaining coupons, being
on bonds owned by Block, numbered one hundred and thirty-one to one
hundred and fifty.
Each party sued out a writ of error.
Page 99 U. S. 691
MR. JUSTICE STRONG delivered the opinion of the Court.
These are writs of error complaining of one judgment. The
plaintiff, Block, brought suit against the Board of Commissioners
of the County of Bourbon, Kansas, to recover the amount of $16,800
alleged to be due him upon past-due interest coupons detached from
bonds made and issued by that county. From the findings of fact
made by the court below, it appears that the plaintiff is the
bona fide owner of twenty of the bonds from which part of
the coupons in suit were taken, and that he purchased them in open
market without actual notice of any defense the county now sets up
against them. The remaining coupons are the property of one William
J. Lewis, delivered by him to the plaintiff to be collected not for
the benefit of Block, but for that of Lewis, the true owner.
Whether, in view of such a finding, a recovery for them can be had
in this suit if there were no other objection to it we do not now
determine. There is another and graver question to be considered.
The Lewis coupons had been in litigation before this suit was
commenced. In January, 1873, he applied to the supreme court of the
state for a mandamus, suggesting that he was the owner of bonds of
the county, one hundred in number, and numbered from one to one
hundred, and of the coupons attached to the same; that he was the
holder, bearer, and owner of the one hundred coupons due and
payable July 1, 1872, part of the coupons now in suit; that a tax
had been levied and collected amply sufficient to pay those
coupons, but that the county had refused to pay them. The
suggestion further represented that the proper officers of the
county had neglected and refused to take the necessary steps to
make provision for the payment of the coupons falling due in 1873,
in January and July, and by an alternative writ the board of
commissioners of the county were commanded to pay the coupons due
in 1872, and to provide for levying a tax sufficient to pay the
coupons as they should fall due in 1873.
To this alternative writ the commissioners answered, in
substance denying the validity and obligation of the bonds. Much of
the answer was formal and quite immaterial, but there was also much
of substance. It was denied that there had been any proper
submission to the electors of the county of the question
Page 99 U. S. 692
whether the county should subscribe to the stock or issue bonds
to the railroad company to which the bonds were issued, to-wit, the
Tebo and Neosho Railroad Company. The answer further averred that,
though there was a submission of the question to the electors
whether the county would vote $150,000 to any railroad running east
to connect with the aforesaid road, a majority of the votes cast at
the election ordered was cast against the proposition. It further
avers that though the commissioners canvassed the vote and decided
from the returns before it that a majority had voted in favor of
the proposition, the returns from one township were not brought in
until after the canvass had been completed and until after the
board had adjourned, and that if the return from that township had
been made in season and had been counted, a majority would have
appeared against the proposition submitted. This belated return
remained unopened until years afterwards, until after the bonds had
been issued and after a new submission to the electors had resulted
in the vote of a decided majority in favor of the bonds. This new
submission, it was averred, was made in 1869, and it was not until
after the vote had been taken that a subscription was made to the
stock of the Tebo and Neosho Railroad Company, and the bonds of the
county were issued in payment. At the time when the subscription
was ordered to be made and the bonds were directed to be executed
and delivered to the railroad company, it was also ordered that the
stock of the county in the railroad company should be sold to the
Land Grant and Trust Company of New York for the sum of five
dollars.
Upon the issue thus tendered and made up the case was tried by
the supreme court of the state, and a judgment was given for the
defendant. What the effect of this judgment was has a most
important bearing upon the inquiry whether there can be any
recovery in the present suit for the coupons belonging to Lewis,
the relator in the application for the mandamus.
To obtain a clear appreciation of that, it is necessary to
observe closely what was in issue in the proceeding in the state
court, and consequently what was adjudicated. It was not denied
that Lewis was the owner of the one hundred bonds to which the
coupons now in suit for his use were attached.
Page 99 U. S. 693
It was not denied that the coupons were due and unpaid, as
averred in the suggestion and alternative writ. Nor was it denied
that the officers of the county had power, and that it was their
duty to levy a tax to pay them and to make payment, if they were a
lawful debt of the county. In legal effect, all this was admitted.
The only issue tendered and the only issue tried was that tendered
by the answer, namely that the bonds and coupons were unauthorized
by law because a majority of the voters of the county, voting at
the election in 1867, had not sanctioned a subscription to the
stock of the railroad company and approved the proposition
submitted for the issue of the bonds. If they had not, the bonds
were unauthorized, and the coupons, of course, constituted no debt
of the county. Then the relator was not entitled to his mandamus.
If, on the other hand, the bonds and coupons were lawfully issued,
either in pursuance of the vote of 1867 or that of 1869, they did
constitute a debt of the county, and a mandamus to enforce their
payment necessarily followed. The court gave judgment for the
defendant, as we have seen, and thus decided that the bonds and
coupons held and owned by Lewis were invalid. Such was the
necessary effect of the judgment. The issue tried was a material
one, and the judgment could not have been rendered without deciding
it. Now that a judgment in a suit between two parties is conclusive
in any other suit between them or their privies of every matter
that was decided therein and that was essential to the decision
made is a doctrine too familiar to need citation of authorities in
its support. A few cases go farther and rule that it is conclusive
of matters incidentally cognizable if they were in fact decided. To
this we do not assent. But it is certain that a judgment of a court
of competent jurisdiction is everywhere conclusive evidence of
every fact upon which it must necessarily have been founded. As
between Lewis, therefore, and Bourbon County the judgment of the
state supreme court finally established that the coupons which he
held, and which he subsequently placed in the hands of Block, the
plaintiff in the present suit, were invalid, and constituted no
part of the debt of the county. As that judgment was pleaded in the
present case, it was a conclusive answer to the suit so far as it
was founded upon those
Page 99 U. S. 694
coupons. The plaintiff's writ of error consequently cannot be
sustained.
The coupons held and owned by Block are in a different position.
As between him and the county, there is no estoppel. He was not
party to the suit in which the Lewis coupons were adjudged invalid
and he is unaffected by the judgment therein. Of the coupons which
he holds he is a
bona fide holder, having purchased them
for a valuable consideration, without actual notice of any defense
which could be set up against them. When he bought, he was under no
obligation to look farther than to see that there was legislative
authority for the issue of the bonds, and that the condition upon
which it was allowed to be exercised had been fulfilled. If there
was such authority, and the precedent conditions had been
performed, the bonds and coupons are valid obligations of the
county which he, as their owner, may enforce.
The bonds are dated July 1, 1870, and on their face they purport
to have been issued by order of the Board of County Commissioners
of the County of Bourbon, Kansas, dated March 8, 1867, and they are
made payable to the Tebo and Neosho Railroad Company or bearer.
The authority under which it is claimed they were issued was an
act of the legislature of the state of Feb. 10, 1865, amended by an
act passed Feb. 26, 1866. By that it was enacted
"That the board of county commissioners of any county to, into,
from, or near which, whether in this state or any other state, any
railroad is or may be located may subscribe to the capital stock of
any such railroad corporation in the name and for the benefit of
such county, not exceeding in amount the sum of $300,000 in any one
corporation, and may issue the bonds of such county, in such
amounts as they may deem best, in payment of said stock, . . . but
no such bonds shall be issued until the question shall first be
submitted to a vote of the qualified electors of the county at some
general election, or at some special election to be called by the
board of county commissioners, . . . and in submitting such
question, said board of directors shall direct in what manner the
ballots shall be cast. If a majority of the votes cast at such
election shall be in favor of issuing such bonds, the board of
commissioners of the county shall issue the same. "
Page 99 U. S. 695
In this act several things are to be noticed. The bonds were
allowed to be issued in payment for subscriptions to stock of any
railroad company, whether its road was then located, or might be
thereafter, whether it
was in the state or out of it, in
the county or out of it, provided the question of subscription to
the stock and issuing the bonds was first submitted to a vote of
the qualified electors, and a majority was found in favor of
issuing the bonds. Another thing is manifest. It was the
legislative intention that the board of commissioners should be the
body which should submit the question of subscription and issue of
he bonds to popular decision, and they were also deputed to
determine the result of the election -- we mean the board as it was
constituted at the time when an election might be held.
Authorized by this statute, the board of county commissioners,
on the 8th of March, 1867, submitted to the electors of the county
the question whether there should be subscribed for the county
$150,000 to the stock of any railroad company then organized, or
that might thereafter be organized, that should construct a
railroad commencing at a point on the Tebo and Neosho Railroad
running westward, via Fort Scott (in Bourbon County), and should
issue bonds to the company for the same. Pursuant to this
submission, an election was held, the returns of which were
canvassed at the proper time by the board, and the result declared
to be that a majority of the votes had been cast in favor of the
subscription and the issue of the bonds. This was on the 10th of
May, 1867. The declaration of the result was duly entered upon the
minutes of the board. Subsequently an additional return was made
from one township which was not before the board when the canvass
was made. Had it been, the result would have been different. But
this return was not opened until June 27, 1872, long after the
bonds had been issued. Upon the records of the board, nothing
appeared to impeach the canvass made in 1867, though in the files
of the office the belated poll book remained unopened. It is hardly
necessary to say that the board,
as it was in 1872, had no
authority to make a new canvass of the election held in 1867, after
the bonds had been issued and purchasers had bought on the faith of
the canvass first made.
Page 99 U. S. 696
The bonds, it is true, contain no recitals. If they did contain
a recital that an election had been held and that a majority had
voted for the issue of the bonds, the recital would have been
conclusive upon the county and a purchaser would have needed to
look no farther than to the act of the legislature. This is
according to all our decision. But in the absence of any recital,
it may be conceded he was bound to inquire whether a majority vote
had been returned for the issue of the bonds. But where was he to
inquire? Plainly only of the board whose province it was to
ascertain and declare the result of the election. Had he gone to
their records, they would have shown that the popular vote was in
favor of the bond issue. They showed nothing else until 1872. He
was not bound to canvass the vote for himself or to revise and
correct a mistaken canvass, any more than he was bound to inquire
into the qualification of the electors. And if, relying upon the
canvass of the board and the declared result, he accepted the
obligations of the county, it would be a strange doctrine were we
to hold that a second canvass, made many years afterwards, could
reverse the first and annul rights that had been acquired under it.
There is no such law. For all legal purposes, the result of an
election is what it is declared to be by the authorized board of
canvassers empowered to make the canvass at the time when the
returns should be made, until their decision has been reversed by a
superior power, and a reversal has no effect upon acts lawfully
done prior to it. The County of Bourbon is therefore estopped, in a
suit by a bondholder whose bonds were issued in 1870, from
asserting that the canvass of 1867 was incorrect and that in fact
no majority of the qualified electors had voted in favor of the
issue of the bonds. All that took place afterwards, all the new
evidence that was discovered, the new election ordered and held in
1869, and the action of the board after the bonds were issued, are
immaterial. It follows that much of the argument of the learned
counsel for the county who has argued against the validity of the
bonds and coupons is unsound. It assumes what cannot be admitted,
that a majority of the votes cast at the election in 1867 was
against the issue of the bonds, when it was conclusively
established by the decision of the tribunal appointed by law to
Page 99 U. S. 697
determine the result of the election, that the contrary was the
fact.
We pass now to the consideration of some of the objections made
to the order of the county board of March 8, 1867, submitting to
the qualified electors the question whether there should be a
subscription made to the stock of any railroad organized, or that
might thereafter be organized, that should build a railroad
commencing at a point on the Tebo and Neosho Railroad and running
westward to Fort Scott, and whether county bonds should be issued
to said company therefor. It is said this did not authorize a
subscription to the stock of the Tebo and Neosho Railroad Company
or the issue of bonds to it. The objection, in view of the facts
that appear in the record, is of no weight. When the order was
made, that company had been incorporated by the Legislature of
Missouri, and had projected its road along and near the northern
boundary of that state through a county adjoining Bourbon. The
order of the county board contemplated a connection of Fort Scott
with that road and the issue of bonds to any company that would
make that connection. A part of the connecting road was necessarily
in Missouri and a part in Kansas. The Missouri corporation could
only build, by its own direct action, to the state line, and a
Kansas corporation could only build the part in Kansas; but the
Tebo and Neosho Company could and did cause the entire line to be
constructed. It had power by its charter to extend, construct,
maintain, and operate its railroad and branches beyond the limits
of the state, so far as Missouri could give it that power. In 1869,
that company, under legislative authority, sold all its privileges,
rights, powers, and franchises to the Missouri, Kansas, and Texas
Railway Company, organized under the laws of Kansas, stipulating
that the vendee should assume all indebtedness incurred for the
construction, or otherwise, of the line between Sedalia, Mo., and
Fort Scott (in Bourbon County, Kansas). Accordingly the road begun
by the Tebo and Neosho Company was constructed and extended to and
beyond Fort Scott, and is now in operation. There can be no doubt
that this was a compliance by the Tebo and Neosho Company with the
conditions prescribed by the order of the county board. It built
the road
Page 99 U. S. 698
through the agency of the Kansas corporation, and it therefore
answered the description made in the order of submission. The
county commissioners subscribed to its stock and issued the bonds
to it or bearer, and their action was warranted, as we have said,
by the terms of the submission and its approval. It was not a case
of authority given to issue bonds to one railroad company and their
issue to another.
We have said enough in refutation of the argument that because
the Tebo and Neosho Railroad Company was a Missouri corporation,
and could not, therefore, extend its road into Kansas, it was
excluded from the roads contemplated in the order and election. If
it was, then every railroad company was excluded, for even a Kansas
company could not build a road into Missouri. Yet the order and
election meant something. No company was named in the order. None
could be. But a description was given that pointed unmistakably to
the company that caused the work to be done. In
Commissioners
of Johnson County v. Thayer, 94 U. S. 631, this
Court held that under the Kansas statute of 1865, it is not
necessary to name any particular company in the submission to the
popular vote. A description of a railroad company may well be made
without mentioning its corporate name.
This is all that, in our judgment, these cases require. We have
not deemed it necessary to invoke in aid of our conclusions the
provisions of the curative act of 1868, for we think it is not open
to question that a majority of the qualified electors of the county
approved the subscription that was made and the issue of the bonds.
That was finally determined by the board, whose duty it was to
canvass the result of the election and declare the result. Their
decision has never been reversed by any competent authority, and it
cannot be impeached collaterally. Nor do we place any reliance upon
the second order made in 1869, and the election held thereunder,
resulting in a large majority in favor of the subscription and
issue of the bonds. The bonds stand on the order and vote of 1867,
as determined by the canvassing board at that time.
Nor can we yield assent to the claim that the acts of 1865 and
1866 were repealed by the General Statutes of 1868. Certainly there
was no express repeal, and we can discover no
Page 99 U. S. 699
necessary implication of a repeal. And it may be added that the
supreme court of the state seems to regard those acts as still in
force.
Lewis v. The Commissioners, 12 Kan. 186, gives no
intimation to the contrary, though the court had before it the
questions we are now considering. In
Morris v. Morris
County, 7
id. 576, decided in 1871, the court
said:
"The acts of 1865-66 have never been expressly repealed, and if
they have ever been impliedly repealed, all rights, power, and
authority that had accrued under them prior to their repeal had at
least been impliedly reserved."
And again:
"Whatever was done under the acts of 1865 and 1866, prior to the
passage of the acts of 1868, continued in force the same as though
the acts of 1868 had never been passed."
We have not overlooked the opinion delivered by the supreme
court of the state in
Lewis v. The Commissioners, supra.
The judgment in the case was not given until after the bonds were
issued and after the rights of the holders thereof had become
fixed. We are therefore at liberty to follow our own convictions of
the law. To those expressed by the state court we cannot assent.
They are not in harmony with many rulings of this Court made and
repeated through a long series of years, and they are not such as
in our opinion would administer substantial justice if applied to
this case.
Judgment affirmed.
MR. JUSTICE CLIFFORD dissented from the opinion of the Court in
the first and concurred in it in the second case.
