1. A town in New York was authorized, upon certain conditions,
to subscribe for railway stock, and sell its bonds at not less than
their par value to raise funds wherewith to pay therefor. The
subscription was made, but the commissioners issued to the company,
in exchange for its stock, bonds in which that fact is recited.
Such an exchange was not authorized by the statute, and, under the
decisions of the courts of that state, a holder of the bonds, who
had notice that they had been so exchanged, could not enforce the
payment of them. After the passage of the Act of April 28, 1871,
infra, p.
103 U. S. 809,
A, purchased them for value and brought suit upon certain coupons
detached therefrom.
Held that the legislature had the
constitutional power to pass the act and that the bonds were
thereby validated.
2. The court declines to follow
Morton v. Town of
Thompson, 71 N.Y. 613, in which the same point is
involved.
3.
County of Warren v. Marcy, 97 U. S.
96, affirmed.
This action was commenced on the first day of May, 1876, by
Perrine against the Town of Thompson, a municipal corporation in
Sullivan County, New York, for the amount of coupons attached to
certain bonds, signed by G. M. Benedict, N. S. Hamilton, and W. H.
Cady, county commissioners, and issued by them in the name of the
town under date of May 1, 1869. They were purchased by him of
Gulick & Van Kleeck, July 20, 1875, he paying cash therefor.
Each bond is payable to bearer on the 1st of March, 1899. It
recites that it
"is a valid security, being issued by virtue of an act entitled
'An Act to authorize certain towns in the Counties of Sullivan and
Orange to issue bonds and take stock in any company now organized
or that may hereafter be organized within three years after the
passage of this act for the purpose of building
Page 103 U. S. 807
a railroad from the Village of Monticello in the County of
Sullivan through the Towns of Thompson and Forestburgh in said
county, and the Town of Deerpark in the County of Orange, to Port
Jervis, Orange County,' passed May 4, 1868, and of the act
amendatory thereof, passed April 1, 1869."
And that the promise to pay that sum is
"by virtue and in pursuance of the acts above entitled and
referred to, and for value received in the stock of the Monticello
and Port Jervis Railway Company."
Those acts authorized the commissioners who might be appointed
in the mode therein prescribed on behalf of any town along the
route of the proposed road from Monticello to Port Jervis, to
borrow, on its credit, such sums of money, not exceeding
thirty-three percent of the valuation of the town, to be
ascertained by its assessment rolls for 1867, for a term not
exceeding thirty years, at not exceeding seven percent interest per
annum, and "to execute bonds therefor under their hands and seals"
-- such debt not, however, to be contracted and such bonds not to
be issued, until there was obtained the written consent of the
majority of the taxpayers appearing upon the last assessment roll
as shall represent a majority of the taxable property, not
including lands owned by nonresidents, nor until a certain amount
of the capital stock of the company had been subscribed in good
faith and paid by individuals or corporations. The statute required
the fact that the persons so consenting represented the proper
number of taxpayers should be supported by the affidavit of one of
the town assessors or the town clerk -- the consent and the
affidavit to be filed in the offices of the county and town clerks
respectively, a certified copy whereof "shall be evidence of the
facts therein contained and certified in any court of this [that]
state, and before any judge or justice thereof."
The third section of the original act provided that the
commissioners thereby authorized
"may, in their discretion, dispose of such bonds or any part
thereof to such persons or corporations and upon such terms as they
shall deem most advantageous for their said town, but not for less
than par, and the money that shall be received by any loan or sale
of such bonds shall be invested in the stock of such company, now
organized
Page 103 U. S. 808
or that may hereafter be organized, within two years after the
passage of this act for the purpose of building or aiding in the
building of a railroad"
from Monticello to Port Jervis.
The entire issue of bonds under the acts referred to was
$148,000, of which $15,000 were delivered to the company on the 4th
of May, 1869, and $133,000 on the 12th of May, 1869.
Prior to the delivery of the bonds to the railroad company, it
had made a construction contract with Crowley and Colts by which
the latter were to be paid partly in bonds of towns along the line
of the road. In September, 1869, Gulick & Van Kleeck purchased
for cash eight of the bonds from the National Bank of Port Jervis
at ninety cents on the dollar. In November of the same year, the
Atlantic Savings Bank of the City of New York (subsequently known
as the Bond Street Savings Bank) purchased $50,000 of the bonds at
eighty-two and one-half cents on the dollar and accrued interest
for cash, and from that institution Gulick & Van Kleeck
purchased eighteen of the bonds, Feb. 19, 1875, at seventy-five
cents on the dollar. The town, by means of taxation in conformity
with the provisions of the original and amendatory acts, met the
installments of interest due March 1, 1870, and Sept. 1, 1870. The
road was completed in January, 1871, and has been in operation ever
since.
Such was the condition of the enterprise and such were the
relations which the town held to the holders of its bonds when, on
the 28th of April, 1871, the Legislature of New York passed an act
entitled
"An Act to legalize and confirm the acts of the Commissioners of
the Towns of Thompson and Forestburgh in the County of Sullivan and
of Deerpark in the County of Orange in issuing and disposing of the
bonds of their respective towns to build a railroad from the
Village of Monticello, in the County of Sullivan, to the Village of
Port Jervis in the County of Orange under chapter five hundred and
fifty-three of the laws of eighteen hundred and sixty-eight, and to
legalize and confirm all bonds heretofore issued by such
commissioners under said chapter of laws, now held by or owned by
bona fide purchasers."
As the facts were undisputed, the court directed a verdict for
Perrine and the town sued out this writ.
Page 103 U. S. 809
Since the present case largely depends upon the construction and
effect of the Act of April 28, 1871, it is here given in full:
"SEC. 1. The acts of Nathan S. Hamilton, Giles M. Benedict, and
William H. Cady, Commissioners on the part of the Town of Thompson,
and Silas T. L. Norris, Edwin Hartwell, and James Ketcham,
Commissioners of the Town of Forestburgh, in the County of
Sullivan, and of Orville J. Brown, Samuel O. Dimmick, and Augustus
B. Goodale, Commissioners of the Town of Deerpark, in the County of
Orange, appointed in pursuance of an act entitled"
"An Act to authorize certain towns in the Counties of Sullivan
and Orange to issue bonds and take stock in any company now
organized or that may hereafter be organized, within three years
after the passage of this act for the purpose of building a
railroad from the Village of Monticello in the County of Sullivan
through the Towns of Thompson and Forestburgh in said County of
Sullivan and the Town of Deerpark in the County of Orange to Part
Jervis,"
"passed May fourth, eighteen hundred and sixty-eight, in issuing
bonds upon the faith and credit of their respective towns, and in
exchanging them for the stock of the company, organized for the
purpose of constructing the railroad, contemplated by said act, are
hereby ratified and confirmed."
"SEC. 2. No bond or bonds issued or purporting to have been
issued under the said act and now held, owned, or possessed by any
person or persons, guardian, trustee, or corporation in good faith
or for a valuable consideration shall be void or voidable by reason
of any defect or omission in the consents in writing, of the
taxpayers of the said Towns of Thompson, Forestburgh, and Deerpark
upon which such bonds were or purport to have been issued in or by
reason of said consents not stating the name of the railroad
company in which the taxpayers so signing such consents desired the
bonds or the money arising from the sale thereof to be invested.
But that the said bonds shall be as valid and effectual for every
purpose as if such defect or omission had not occurred,
provided that such or any exchange of bonds by said
commissioners for the stock of said company was made at the par
value of the said bonds,
and provided further that the
respective issues of the said bonds by their commissioners do not
exceed the amount authorized by said act."
"SEC. 3. No action or proceeding at law, commenced or pending at
the time of the passage of this act shall abate or be
discontinued
Page 103 U. S. 810
or be in any was affected by reason thereof, but the same may be
prosecuted or defended and judgment entered therein, and all
proceedings taken to enforce the same in the same manner as now
provided by law and with the like effect as if this act had not
been passed."
"SEC. 4. This act shall take effect immediately."
MR. JUSTICE HARLAN, after stating the case, delivered the
opinion of the Court.
Although the act of 1868 required all bonds issued under its
authority to be disposed of for not less than par and their
proceeds invested in the stock of the company, the commissioners
exchanged those issued by the Town of Thompson directly with the
railroad company for an equal amount of the latter's stock. This
was in violation of the statute as construed by the Court of
Appeals of New York in several cases to which we had occasion to
refer in
Scipio v. Wright, 101 U.
S. 665. We there held -- following the decisions of the
state court, some of which were made long prior to the passage of
the particular enactment now under examination -- that a purchaser
of town bonds, having notice that they were exchanged for stock in
a railroad company in violation of a statute similar to that of
1863, was not a
bona fide holder and could not enforce the
payment of them. We perceive no reason to qualify that ruling, and
therefore proceed to the consideration of other questions not
embraced by it.
It is apparent upon the face of the act of 1871 that the
legislature was advised of the fact that the commissioners had
departed from the statute of 1868 in exchanging the bonds for stock
in the railroad company. And its manifest intention was not only to
ratify and confirm such exchange, but to protect any holder of the
bonds who became such in good faith for a valuable consideration
against any defense arising out of defects or omissions in the
consents of taxpayers, provided the exchange was at the par value
of the bonds and the issue did not exceed the amount authorized by
law.
Page 103 U. S. 811
The main argument of counsel for the town is embraced by the
following propositions:
First, that the consents of
taxpayers were not such as the acts of 1868 and 1869 required.
Second, that the bonds were exchanged for stock, in
violation of the statute; and since they recite, upon their face,
that they were issued "for value received in the stock of the
Monticello and Port Jervis Railway Company," there could be no
bona fide holders thereof in the commercial sense.
Third, that they were not issued under the seals of the
commissioners, as required by the statute.
Fourth, it was
beyond the power of the legislature, by subsequent enactment, to
make them valid obligations against the town without its assent
given in proper form.
Fifth, that no such assent was
given.
If it be conceded that the consents were insufficient; that a
seal was necessary as evidence of the official authority of the
commissioners; that the recitals on the bonds, reasonably
construed, gave notice to purchasers that they had been illegally
exchanged for stock, when they should have been disposed of or
sold, at not less than their par value, and their proceeds invested
in the stock of the company -- the town is nevertheless liable if
the curative act of April 28, 1871, was within the constitutional
power of the legislature to pass. While this question in some of
its aspects may be one of general jurisprudence -- involving a
consideration of the limits which, under our form of government,
are placed upon legislative and judicial power -- it is proper to
inquire as to the course of decisions in the highest court of New
York upon the authority of the legislature to pass such an act.
This becomes necessary in view of the fact that the Court of
Appeals of that state has adjudged the act in its main features to
be unconstitutional. That adjudication, it is contended, is
conclusive of the rights of parties in this case. As we are unable
to give our assent to this view, it is due to that learned tribunal
that we should state with some fullness the reasons for the
conclusion which we have reached.
Prior to the year 1858, the question arose in several cases
pending in different inferior courts of New York as to the
constitutional power of the legislature to authorize or require
municipal corporations to subscribe for stock in railroad
companies
Page 103 U. S. 812
or to issue bonds therefor. The decisions disclosed a conflict
of opinion among judges of recognized ability. The question finally
came before the Court of Appeals in the year 1858 in
Bank of
Rome v. Village of Rome, 18 N.Y. 38. It was there ruled that
the state constitution did not, in terms or by necessary
intendment, restrain the legislature from conferring upon municipal
authorities the power to subscribe to the stock of a railroad
corporation and by taxation to raise the necessary funds for the
payment thereof. That decision was approved in 19 N.Y. 20. In
People v. Mitchell, 35
id. 551, decided in 1866,
the court quoted with approval our decision in
Thompson
v. Lee County, 3 Wall. 327, where, speaking by Mr.
Justice Davis, we said that although a county or other municipal
corporation has no inherent right of legislation, and can exercise
no power not conferred upon it in express terms or by fair
implication, the legislature,
"unless restrained by the organic law, has the right to
authorize a municipal corporation to take stock in a railroad or
other work of internal improvement, to borrow money to pay for it,
and to levy a tax to repay the loan,"
and that such authority "can be conferred in such a manner that
the objects can be attained either with or without the sanction of
the popular vote."
The decision in
People v. Mitchell is important in
other aspects of the present case. The main question was as to the
validity of a confirmatory statute, the object of which was to cure
the defects in certain affidavits filed in proof of the consent of
taxpayers to a proposed municipal subscription of stock in a
railroad company. The statute declared that the affidavits should
be valid and conclusive proof in all courts and for all purposes,
to authorize and uphold the respective subscriptions of the stock
and the issue of bonds to the amount specified therein, and that
the bonds should be valid and binding on the municipality issuing
them, without reference to the form or the sufficiency of the
affidavits. The court, referring to the confirmatory statute,
said
"it was within the scope of legislative authority to modify the
limitations and restrictions in the antecedent acts on this
subject, to dispense with prior conditions, and to change the
commissioners with defined and imperative duties."
And it quotes with approval our
Page 103 U. S. 813
language in
Thompson v. Lee County, where, referring to
a curative statute passed by the Iowa Legislature, we further
remarked, that
"if the legislature possessed the power to authorize an act to
be done, it could, by a retrospective act, cure the evils which
existed, because the power thus conferred had been irregularly
executed."
Thus stood the doctrines of the state court upon the question of
municipal subscriptions and as to the power of the legislature, by
retrospective enactment, to cure defects in the exercise of powers
granted to municipal corporations, when the Act of April 28, 1871,
was passed. But in 1873, the Court of Appeals decided
People v.
Batchellor, 53 N.Y. 128. That was a case of municipal
subscription to a railroad corporation under an act passed in 1867,
similar in its main features to the one passed in 1868 in reference
to the Monticello and Port Jervis Railroad Company. It was claimed
that the statute had not been complied with in obtaining consents
from taxpayers. A subsequent act of the legislature required the
subscription to be made upon the consents filed, which the court
found not to be such as were prescribed by the statute under which
they had been obtained. Without any subscription's having been made
or bonds issued, a mandamus was sued out to compel the town to
become a stockholder in the company and to issue its bonds in
payment of the subscription price of the stock. The court held that
the consents of the taxpayers did not embrace such an issue of
bonds as the subsequent act required, and that the legislature
could not compel a municipal corporation to subscribe stock or
issue bonds in aid of the construction of the road of a company
which, although public as to its franchise, was private as to the
ownership of its property and its relations to its stockholders.
The opinion was concurred in by four of the judges, one concurred
in the result, one dissented, and one did not vote.
In
Town of Duanesburgh v. Jenkins, 57
id. 177,
decided in 1874 by the Commission of Appeals -- of concurrent
jurisdiction and equal authority with the Court of Appeals -- the
court, by Johnson, J., reviewed the prior cases in the Court of
Appeals involving the questions discussed in
People v.
Batchellor. In reference to the latter case, it was intimated
that the
Page 103 U. S. 814
language of the court upon some of those questions was not in
harmony with its previous decisions, and that the opinion should be
limited to the point adjudged upon the facts existing in that case.
After a careful analysis of those decisions, the conclusions
announced were that the authority of the legislature to enable
towns and other civil divisions of the state to subscribe for stock
and issue bonds in aid of a railroad company, had been established
by numerous decisions of the highest court of the state; that there
was no distinction in principle between a law authorizing a town,
upon a popular vote, to subscribe for such stock and issue bonds
therefor, and a law directing the same thing to be done; that when
the authority to subscribe was made to depend upon the consent of
the town, it was in the discretion of the legislature to prescribe
how such consent shall be given; and that, if it originally rested
with the legislature to fix the terms on which the towns might,
act, the same power could remit a part of the conditions imposed,
or heal any defects which may have occurred in the performance by
the Town of those conditions. Much of the language in that case is
strikingly applicable to the one in hand. Said the court:
"In this case, the commissioner has been regularly appointed
under the statute, by whom bonds were to be issued and stock
subscribed for, provided certain consents were obtained and proofs
filed according to the requirements of the several acts upon the
subject. Consents were obtained, and proofs were made and filed,
which are now on the one side claimed to be, and on the other are
denied to be, in conformity to the law. The commissioner meanwhile
executed the bonds, subscribed for stock, and delivered the bonds
to the company in payment of the subscription, complying with the
requirements of the statute in all respects if the requisite
consents had been given and proof made. The only officer of the
town who had any duty in the premises acted by signing the bonds;
and the legislature, seeing the whole matter, released the
conditions which it had imposed and declared his assent binding
upon the town, if the bonds had been issued and the road had been
built, and the bonds in that case obligatory. As it might have
authorized action in this way and on these conditions by the town
originally, I see no objections to
Page 103 U. S. 815
giving effect to its ratification of the action of the town, and
holding its consent thus expressed effectual."
Again said the court:
"In this case, the proper officer of the town has acted, the
bonds have been issued, and the stock subscribed for. The objection
is that the proof of preliminary consents by taxpayers is
defective. The action of the legislature is, in my judgment
sufficient to heal this defect and to sanction the action of the
town commissioner in binding the town, the whole consideration to
the town having been received in the completion of the road and the
issuing of the stock for its benefit."
In
Williams v. Town of Duanesburgh, 66 N.Y. 129,
decided in May, 1876, the Court of Appeals of New York recognized
the correctness of the principles announced in
People v.
Mitchell and
Town of Duanesburgh v. Jenkins, citing,
among other authorities,
Gelpecke v.
Dubuque, 1 Wall, 175;
Thompson
v. Lee County, 3 Wall. 327;
Beloit v.
Morgan, 7 Wall. 619, and
St. Joseph
Township v. Rogers, 16 Wall. 644. Alluding to the
statutes for bonding towns in aid of railroads, the Court held that
the legislature could overlook the defective execution of the power
conferred, and, by retroactive legislation, cure defects in the
action of municipalities under those statutes. The legislature may,
said the Court,
"by subsequent legislation, when there has been a failure to
perform conditions precedent, and the bonds have been issued,
dispense with such conditions, and ratify and confirm, and make
valid and obligatory upon the municipality, bonds issued without
such performance -- at least it may do so in cases where the
municipality has, through the construction of the road or by the
receipt of the stock of the company in exchange for the bonds,
received the benefit which the statute contemplated as the
equivalent for the liability it was authorized to incur. The
officers authorized under these statutes to issue the bonds are
public agents, and the legislature, looking over the whole matter,
may, when in its judgment justice requires it, ratify and confirm
their acts, which otherwise would be valid. In this case, the
legislature could originally have authorized the bonds of the Town
of Duanesburgh to be issued under the precise circumstances
existing when they were issued, and if the acts of the commissioner
have by subsequent legislation been ratified, it is equivalent
authority
Page 103 U. S. 816
to do what has been done."
It is worthy of remark in this connection that Allen, J., had
held, in
Clark v. City of Rochester, 13 How. (N.Y.) Pr.
204, decided in 1856 that the legislature had no power under the
constitution to delegate to, or confer upon, municipal corporations
authority to subscribe for or to hold stock in railroad
corporations and to issue bonds in payment therefor. Nevertheless,
in
Williams v. Town of Duanesburgh (Church, C.J.,
concurring with him), he recognized
Town of Duanesburgh v.
Jenkins as authority and as declaratory of the law.
But it is contended that the Court of Appeals of New York, in
the later case of
Horton v. Town of Thompson, 71 N.Y. 513,
has decided the identical statute under examination to be
unconstitutional, and that this Court is bound by the decision. The
case was commenced about the time the Circuit Court of the United
states for the Southern District of New York sustained the validity
of that statute and gave judgment against the town for the amount
of some of the bonds embraced in the issue of $148,000.
Cooper
v. Town of Thompson, 13 Blatchf. 434.
Horton v. Town of
Thompson was decided in the supreme court of the state after
the present action was instituted. It was a suit upon two interest
coupons of $35 each, belonging to the same issue of bonds. It was
finally determined in the Court of Appeals shortly before the trial
of this case in the court below. The questions raised were whether
the consent of the taxpayers was defective in not naming the
railroad to the construction of which the fund should be applied
and whether the validating Act of April 28, 1871, insofar as it
declared the exchange of bonds for stock to be legal, was not
unconstitutional. Upon the first question, the court said that as
the consent was sufficiently comprehensive in its terms to embrace
the road in question, and inasmuch as the legislature might legally
have authorized it to be in the form in which it was actually
given, the act of 1871 "probably cured the defect in its form." But
the court, passing that question as one that need not be finally
determined, held, upon the authority of
People v.
Batchellor, that the legislature had no power to authorize, or
direct, the commissioners originally to contract the debt without
any consent
Page 103 U. S. 817
or action upon the part of the town, and that since the consent
of the taxpayers was not given for an issue of bonds to be
exchanged for stock, the legislature could not validate the bonds
and make them binding obligations upon the town, in the hands at
least of those who were informed, by their recitals, that, in
violation of the statute, they had been exchanged for stock in the
railroad company. Four of the judges concurred in the opinion, and
three dissented.
It is to be observed that the court does not refer to or
overrule
Bank of Rome v. Village of Rome, People v. Mitchell,
Town of Duanesburgh v. Jenkins, or
Williams v. Town of
Duanesburgh, supra.
We are unable to reconcile
Horton v. Town of Thompson,
upon the points now raised, with the doctrines of those cases or of
others decided in the Court of Appeals prior to
People v.
Batchellor. It certainly cannot be said that there is such an
established, fixed construction by that court of statutes similar
to those of 1868 and 1869, or to the confirmatory act of 1871, as
obliges us to follow
Horton v. Town of Thompson, or that
will justify anyone in saying that the present question is finally
at rest in the courts of that state. But independently of any such
consideration, there are conclusive reasons why we cannot, in
opposition to our own views of the law as expressed in numerous
cases, accept the principles of that case as decisive of the rights
of the present parties. When the Act of April 28, 1871, was passed,
it was the established doctrine of the highest court of New York,
as it was of this Court, that the legislature, unless restrained by
the organic law of the state, could authorize or require a
municipal corporation, with or without the consent of the people,
to aid, by a subscription of capital stock, in the construction of
a railroad, having connection with the public interests of the
people within the limits of such municipality, and to provide for
payment by an issue of bonds or by taxation; that defects or
omissions, upon the part of such municipal corporation or its
officers in the execution of the power conferred or in the
performance of the duty imposed could be cured by subsequent
legislation -- certainly where the corporation had received the
benefits which the original subscription was designed to secure. As
therefore the legislature
Page 103 U. S. 818
might, in the original act under which these bonds were issued,
have authorized or required the bonds to be exchanged directly with
the railroad company for capital stock, it could ratify and confirm
such exchange, even where originally illegal, so as to make them
binding obligations upon the town in favor of all who then held, or
might thereafter acquire, them, in good faith or for a valuable
consideration. It is therefore an immaterial circumstance that the
recitals in the bonds may have furnished notice that they were
issued originally in violation of the statute. That was the very
difficulty which the act of 1871 was designed to remove, and, as
matter of law, it was removed, if regard be had to the settled
doctrines of this Court, or to the decisions of the highest court
of the state rendered previously to, and which were unmodified at,
the passage of that act. It results that from that moment the
bonds, by whomsoever held, whether by the railroad company or by
others, became binding obligations upon the town, as much so as if
they had originally been sold and their proceeds invested in the
stock of the railroad company, as required by the acts of 1868 and
1869. If the rights of those holding the bonds were in any degree
affected by the subsequent decision in
People v.
Batchellor, the later decision in
Town of Duanesburgh v.
Jenkins restored the law, so far as the courts of New York
were concerned, as it undoubtedly was declared to be at the time
the act of 1871 was passed. The defendant in error acquired the
bonds in suit in 1875, before the decision in
Horton v. Town of
Thompson, and when, according to the principles announced in
Town of Duanesburgh v. Jenkins and many prior cases in the
Court of Appeals, the act of 1871 must have been sustained as a
valid exercise of legislative power. He purchased them for value at
public auction in the City of New York, without notice of any
defense thereto or of the pendency of any suit involving their
validity. If the recitals in the bonds gave notice that the acts of
1868 and 1869 forbade their exchange for stock and required them to
be sold and their proceeds invested in such stock, the purchaser is
also presumed to have known not only that such exchange had been
legalized by the act of 1871, but that the authority of the
legislature to pass that act was sustained by the decisions of the
highest court of the state rendered prior to
Page 103 U. S. 819
its passage. His rights, therefore, should not be affected by a
decision rendered after they accrued, which decision is in conflict
with the law, as declared not only by this Court in numerous cases,
but by the highest court of the state at and before the time he
purchased the bonds.
The assignments of error present another question which it is
our duty to notice.
The town pleaded in bar of the action a judgment of the supreme
court of the state in an action commenced in June, 1869, by the
attorney general of the state, on the relation of Charles Kilbourne
and others, taxpayers, against the Commissioners of the Town of
Thompson, F. C. Crowley, C. L. Colt, William D. Colt, the
Monticello and Port Jervis Railway Company, and the Town of
Thompson. A temporary injunction was obtained on 24th June, 1869,
restraining the respondents and each of them from using, loaning,
or selling the bonds and from executing any other bonds based upon
the consents given by the taxpayers. But that injunction was
vacated and set aside on 27th July, 1869. A final decree was
rendered in 1872 by which the bonds were declared to be null and
void, and they as well as the certificates of stock exchanged
therefor directed to be delivered up by the respective parties and
cancelled. The general ground upon which the decree rested was that
the provisions of the act under which they were issued were not
complied with. From that judgment no writ of error or appeal seems
to have been prosecuted. We have already seen that the entire issue
of bonds was delivered to the railroad before the commencement of
that action -- that is, in May, 1869 -- and that after the
dissolution of the injunction, to-wit, in September and November,
1869, a large portion of the bonds and found their way into the
hands of others who purchased them for value and without any notice
of the pendency of the suit in the supreme court.
There is an insuperable difficulty in the way of plaintiff in
error using the judgment in that case to defeat the present action.
The bonds were negotiable securities, which had passed from the
town before the action in the supreme court of the state was
commenced. Those who purchased them in the market pending that
litigation or after it terminated,
Page 103 U. S. 820
without notice of the suit and in good faith, for value, could
not be affected by the final decree. Had the complaints caused them
to be surrendered to the custody of the court pending the suit,
they could have been cancelled in pursuance of the directions
contained in the final decree. But the actual custody of the
railroad company was never disturbed nor sought to be disturbed.
The knowledge by its officers of the objects of the action or of
the terms of the final decree could not affect a
bona fide
purchaser for value who had no such knowledge. Our decision in
County of Warren v. Marcy, 97 U. S.
96, which is partly based upon adjudications in the
courts of New York (
Murray v. Lylburn, 2 Johns. (N.Y.) Ch.
441, and
Leitch v. Wells, 48 N.Y. 585), is conclusive upon
this branch of the case.
It is scarcely necessary to say that the decree of the supreme
court of the state can derive no special force, as against the
defendant in error, by reason of the third section of the Act of
April 28, 1871. That section only protected from the operation of
the act any action or proceeding at law, commenced or pending at
the time of its passage. That provision furnishes, perhaps, an
explanation of the failure of the supreme court, in its opinion, to
refer to the act of 1871, which had passed before its final decree
was entered. The purpose of the third section was only to require
existing actions or proceedings at law to be determined without
reference to that act, and does not affect the rights of a
bona
fide purchaser who was not a party to the suit, and was
without notice of its pendency.
We perceive no error in the record.
Judgment affirmed.
