1. The act of the General Assembly of Illinois approved Feb. 24,
1860, amendatory of an act entitled "An Act to incorporate the
Illinois Southeastern Railway Company," approved Feb. 25, 1867,
removed the limitation of $30,000 imposed upon the amount which, by
the latter act, "any town in any county under township organization
is authorized and empowered to donate to said company."
2. The court reaffirms the ruling in
Harter v.
Kernochan, 103 U. S. 562,
that the duly signed and countersigned township bonds, payable to
the company or bearer, which recite that they are duly issued in
compliance with the vote of the legal voters of the township, cast
at an election held by virtue of the above-mentioned acts of Feb.
25, 1867, and Feb. 24, 1869, are valid in the hands of a
bona
fide holder.
3. An irregularity in conducting the election will not defeat a
recovery on the bonds, or on the coupons thereto attached, nor
overcome the presumption that the plaintiff, in the usual course of
business, became at their date the holder of them for value.
4. A decree
in personam, rendered by a court of the
Illinois, declaring the bonds to be void does not bind a
nonresident holder of them who was not named as a party to the suit
and did not appear therein, and who had no notice of the pendency
thereof other than by a publication addressed to the "unknown
holders and owners of bonds and coupons issued by the Town of
Pana."
6. Coupons after their maturity bear interest at the rate
prescribed by the law of the place where they are payable.
Page 107 U. S. 530
This was an action of assumpsit brought by James H. Bowler and
Isaac H. Merrill against the Town of Pana upon coupons cut from
certain bonds issued by the town dated June 23, 1873. The defendant
pleaded the general issue, and the parties having waived a jury,
submitted the case to the court upon the facts as well as the law.
The court found the issues of fact for the plaintiffs and rendered
judgment in their favor for $7,272.02. This writ of error is
brought by the defendant to review that judgment.
The parties made an agreed statement and the court a special
finding of facts. From these and the pleadings in the case the
following facts appear:
On February 25, 1867, an act was passed by the Illinois
Legislature "to incorporate the Illinois Southeastern Railway
Company." Sections 9 and 10 of this act declared as follows:
"SEC. 9. Any town, in any county under township organization, is
hereby authorized and empowered to donate to said company any
amount, not to exceed $30,000,
provided that no such
donation by any such town to said company shall be made unless the
question of making such donation shall have been first submitted to
the legal voters of such town at an election hereafter to be
provided for,
and provided further that no donation so
made, nor any part thereof, nor any interest accruing thereon, or
upon any part thereof, shall be paid or become due or payable to
said company until said company or its assigns or employees shall
have completed their said railroad or some certain part of said
road or its branch as may have been agreed upon by the contracting
parties."
"SEC. 10. No such election for the purpose of submitting the
question of making a donation by any such town, authorized by
section 9 of this act to donate to this company, shall be held
until the directors of said company shall have filed a proposition
to the inhabitants of said town with the county clerk of the county
wherein such town is situate, and a copy of the same with the clerk
of said town, and if there be a newspaper published in said county,
said proposition shall be published in full in the same, whereupon
it shall be the duty of the clerk of such town to post up printed
or written notices of the time and place of holding such
Page 107 U. S. 531
election in at least ten public places in such town, together
with a copy of such proposition at least twenty days before the day
for holding such election, at which election the legal voters of
such township shall vote for or against such proposition, and if a
majority of all the votes cast be for such proposition, the
trustees of such town shall so certify the same to the clerk of the
county court of the county wherein the town is situated, and such
county clerk shall, upon application of the company, after the
donation so voted by any such town shall have become due and
payable, under the terms and conditions of the proposition under
which said election was rendered, compute and assess upon all the
taxable property in said town an amount sufficient to pay such
donation, or any part or installment of the same so then being due
and payable, which taxes so assessed shall be collected as other
taxes, and the taxes so collected shall be paid to the treasurer of
said company. And the election herein provided for shall be held,
canvassed, and returned as other regular town elections."
Afterwards, on February 24, 1869, another act was passed to
amend the act to incorporate the Illinois Southeastern Railway
Company, section 10 of which was as follows:
"SEC. 10. That any village, city, county, or township organized
under the township organization law or any other law of this state
along or near the route of said railway or its branches or that are
in anywise interested therein may, in their corporate capacity,
subscribe to the stock of said company or render donations to said
company to aid in constructing and equipping said railway,
provided that no such subscriptions or donations shall be
made until the same shall be voted for as hereinafter provided.
That whenever twenty legal voters of any such city, village,
county, or township shall present to the clerk thereof a written
application requesting that an election shall be held to determine
whether such village, city, county, or township shall subscribe to
the capital stock of said company or make a donation thereto to aid
in building or equipping said railway, stating the amount, and
whether to be subscribed or donated, and the rate of interest and
times of payment of the bonds to be issued in payment thereof, such
clerk shall receive and file such application, and shall
immediately proceed to post written or printed notices, calling an
election to be held by the legal voters of such village, city,
county, or township, which notice shall be posted in ten of the
most public places of
Page 107 U. S. 532
such village, city, county, or township, for thirty days
preceding an election, and said notices shall state fully the
object of such election, and such election shall be held and
conducted, and returns thereof made, as in general elections
provided by law in this state, and as provided by the charters of
any such village or city,
provided that at any election
held under the provisions of this act, it shall not be necessary to
cause a registration of the voters of such villages, cities,
counties, or townships, and if a majority of the votes cast at such
election shall be in favor of such subscription or donation, then
the corporate authorities of such village, city, county, or
township, organized under the township organization laws of this
state, the supervisors of such township shall subscribe to the
capital stock of said company or donate thereto, as shall have been
determined at such election, the amount so voted at such election
and shall issue the bonds with interest coupons attached, . . .
said bonds to be signed, . . . in case of a township, by the
supervisor thereof, and . . . to be countersigned by the clerk of
said . . . township,"
&c.
Afterwards the Springfield and Illinois Southeastern Railway
Company, to which the bonds in question in this case were issued,
was created by the consolidation of the Pana, Springfield, and
Northwestern Railroad Company and the Illinois Southeastern Railway
Company. The consolidation was authorized by the charters of the
two companies, and the new company succeeded to all the rights,
franchises, and powers of the constituent companies.
Harter v.
Kernochan, 103 U. S. 562. In
pursuance of section 10 of the said Act of February 24, 1869, a
petition was presented to the Town Clerk of Pana Township to order
an election to be held on April 30, 1870, to decide whether said
township should donate to the Springfield and Illinois Southeastern
Railway Company the sum of $100,000 in bonds, to fall due in twenty
years, or at the option of the township, in five years from this
date, with interest at the rate of eight percent per annum, payable
semiannually. On April 30, 1870, an election was held in said
township in pursuance of the petition, and a notice thereof given
according to law. The meeting at which the election was held was
called to order by the town clerk, and one J. W. Stark was, on
motion, chosen moderator, and was sworn in by the town clerk and
presided over the election. At the election
Page 107 U. S. 533
thus held, 438 votes were cast for and 24 against said donation.
In the spring, summer, and fall of the year 1873, the supervisor
and town clerk of said township, in pursuance of said election and
without any other authority of law than said election and the
charter and amendments above referred to, issued to the Springfield
and Illinois Southeastern Railway Company one hundred bonds of the
Township of Pana, of $1,000 each, payable and bearing interest
according to the rate aforesaid. All the bonds were of like tenor
and effect except as to their number. The following is a copy of
one of them:
"
UNITED STATES OF AMERICA"
"
STATE OF ILLINOIS, COUNTY OF CHRISTIAN"
"
No. 6] Pana Township [$1,000"
"Eight percent railroad bond. Registered by Auditor of Public
Accounts. Principal and interest collected and paid by the
Treasurer of State of Illinois."
"Know all men by these presents that the Township of Pana, in
the County of Christian and State of Illinois, acknowledges itself
indebted to the Springfield and Illinois Southeastern Railway
Company or bearer in the sum of one thousand dollars, with interest
from the date hereof at the rate of eight percent per annum,
payable semiannually on the first days of January and July of each
year at the agency of the State Treasurer of the State of Illinois,
in New York City, on the presentation and surrender of the
respective interest coupons hereto attached. The principal of this
bond shall be due and payable after five years and within twenty
years of the date hereof at the option of said township at said
agency in the City of New York."
"This bond is one of a series amounting to one hundred thousand
dollars issued by said township in compliance with the vote of the
legal voters thereof at an election held on the thirtieth day of
April, A.D. 1870, under and by virtue of the authority conferred by
an act of the General Assembly of the State of Illinois, entitled
'An act to incorporate the Illinois Southeastern Railway Company,'
approved February 25, 1867, and an act amendatory thereof, approved
February 24, 1869, and in accordance with the provisions of an act
of said General Assembly entitled 'An act to fund and provide for
paying the railroad debts of counties,
Page 107 U. S. 534
cities, townships, and towns,' in force April 16, 1869. And for
the payment of said sum of money and the accruing interest thereon
in the manner aforesaid the faith of the said Township of Pana is
hereby irrevocably pledged, as is also its property, revenue, and
resources."
"In testimony whereof, the said Township of Pana has caused
these presents to be signed by its supervisor and countersigned by
its clerk, this twenty-eighth day of June, A.D. 1873."
"GROVE P. LAWRENCE,
Supervisor"
"EDWIN SANDERS,
Clerk"
At the time the bonds and coupons were issued, Grove P. Lawrence
was the Supervisor of said Township of Pana, and Edwin Sanders was
its Clerk, and their signatures to the bonds and coupons are
genuine.
The coupons attached to said bonds were all of the same tenor
and effect except in respect of their numbers. The following is a
copy of the coupon attached to the above-recited bond:
"$40. The Township of Pana, Christian County, Illinois, will pay
the bearer forty dollars on the first of January, 1882 at the
agency of her state treasurer in the City of New York, it being six
months' interest on bond No. 6."
"GROVE P. LAWRENCE"
"
Supervisor of said township"
On the back of every bond was the following endorsement:
"AUDITOR'S OFFICE, ILLINOIS"
"SPRINGFIELD, June 28, 1873"
"I, Charles E. Lippincott, Auditor of Public Accounts of the
State of Illinois, do hereby certify that the within bond has been
registered in this office this day pursuant to the provisions of an
act entitled 'An act to fund and provide for paying the railroad
debts of counties, townships, cities, and towns,' in force April
16, 1869."
"In testimony whereof I have hereunto subscribed my name and
affixed the seal of my office the day and year aforesaid."
"[Seal] C. E. LIPPINCOTT,
Auditor P.A."
The act referred to in this certificate provided that certain
taxes, therein specified, should be applied to the payment of the
principal and interest of bonds registered in the office of the
Page 107 U. S. 535
Auditor of Public Accounts, and that no bonds should be so
registered until the railroad in aid of which the bonds had been
issued should have been completed near to or in the township
issuing the bonds, and unless the subscription or donation creating
the debt to pay which the bonds were issued had been first
submitted to an election of the legal voters of said township under
the provision of the laws of the state and a majority of the legal
voters living in such township had been in favor of such aid,
subscription, or donation. And it was made the duty of the
supervisor of the township, upon the completion of the railroad
near to or through the township by which the bonds were issued, to
certify under oath to the state auditor that all the preliminary
conditions required by the act to be done to authorize the
registration of the bonds and to entitle them to the benefits of
the act had been complied with.
See Hurd's Rev.Stat. 1880,
p. 807, sec. 17.
The record in this case showed that the certificate above
mentioned in reference to the issue of the bonds in question had
been made by Grove P. Lawrence, the Supervisor of Pana Township,
and transmitted by him to the Auditor of Public Accounts. The
interest on said issue of $100,000 of bonds was levied and
collected and paid for three years by the state treasurer as
provided by law.
It further appeared that in the year 1876, the Town of Pana and
three taxpayers filed, in behalf of themselves and all other
taxpayers of the town, a bill in the Circuit Court of Christian
County against the Auditor of Public Accounts of the State of
Illinois, the Treasurer of the State of Illinois, the Treasurer and
the Clerk of Christian County, Illinois, the Town Collector of the
Town of Pana, and H. N. Schuyler, William E. Hayward, John Vedder,
and William Houston, and "the unknown holders and owners of said
bonds and coupons issued by the Town of Pana," as defendants, in
which the complainants prayed that said public officers might be
perpetually enjoined from levying a tax with which to pay said
bonds and coupons, and that said bonds might be declared void, and
that said holders and owners of said bonds might be perpetually
enjoined from selling or negotiating or suing upon said bonds or
the coupons attached
Page 107 U. S. 536
to them, or pretending or insisting in any court of law or
equity, or elsewhere, in any manner whatsoever, that said town was
liable upon said bonds or coupons.
The parties made defendant by name were neither served with
process nor voluntarily appeared in the case. It was assumed that
"the unknown holders and owners of said bonds and coupons" were
brought in by publication of a notice to them under that
designation in a newspaper, according to the laws of the State of
Illinois. The Circuit Court of Christian County dismissed the bill,
but the appellate court, upon appeal, reversed its decree and
directed it to grant the prayer of the bill, and the decree of the
appellate court was affirmed by the supreme court, to which the
case was carried by the defendants. Afterwards, at its November
term, 1879, to-wit, on December 17, the circuit court, upon
receiving the mandate of the appellate court and of the supreme
court, entered a decree in favor of the complainants in accordance
with the prayer of the bill.
The coupons offered in evidence, being those upon which the suit
was brought, were at the time of the trial and before the
commencement of the suit held and owned by the plaintiffs, who were
citizens of the State of Maine.
Such were the material facts of the case. The Town of Pana,
plaintiff in error, by its assignments of error, insisted:
1. That there was no authority in the charter of the Springfield
and Illinois Southeastern Railway Company to hold an election and
issue bonds to the amount of $100,000.
2. That the election held on April 30, 1870, was illegal and
void because it was presided over by a moderator, and not by the
supervisor, assessor, and collector, as required of general
elections by the law of the state, and therefore conferred no
authority upon the supervisor and town clerk to issue said bonds
and coupons.
3. That it was incumbent on the plaintiffs below, the bonds
having been illegally issued, to prove that they were
bona
fide holders of the coupons for value, which they failed to
do.
4. That no judgment could be rendered for the plaintiffs on said
coupons after they and the bonds to which they belonged
Page 107 U. S. 537
had been declared void by the decree of the Circuit Court of
Christian County;
5. That in any event the judgment was too large by $572.22.
MR. JUSTICE WOODS delivered the opinion of the Court, and after
making the foregoing statement, proceeded as follows:
The people of the Township of Pana voted almost unanimously for
the donation to pay which the bonds in this case were issued. There
is no pretense of any fraud in their issue. It is not disputed that
the railroad company complied on its part with all the conditions
upon which the bonds were to be issued to it, or that the township
has received all it bargained for in consideration of the issue of
the bonds. The bonds were registered in the office of the Auditor
of Public Accounts, where no bonds could be registered according to
law unless the election authorizing the donation for which the
bonds were issued had been held in pursuance of the statute, and
the sworn certificate of the supervisor of the township to that
effect had been filed with the auditor. The township has paid the
interest on the bonds for three years. Under these circumstances,
if the bonds and coupons are in the hands of
bona fide
holders for value, the defenses through which the township can
escape liability will be reduced to narrow limits. The charter of
the Illinois Southeastern Railway Company declared that any town in
any county under township organization might donate to said company
any amount not to exceed $30,000. The question is raised by the
first assignment of error whether this limit was removed by the
Amendatory Act of February 24, 1869. We think it was.
Section 10 of the act last named is an entire revision of
sections 9 and 10 of the original charter of the company. The
original charter authorized townships only to make donations to the
railroad company, and it required that the railroad, or some part
of it or its branches, should be completed before the donation was
paid. It did not authorize the issue of bonds to pay the donations,
but required the assessment and collection
Page 107 U. S. 538
of a tax upon all the taxable property of the town for that
purpose.
The amendatory act authorized not only townships but also
villages, cities, and counties along the route of the railroad to
make donations to the company. It prescribed an entirely different
condition precedent to the making of a donation, and required the
issue of bonds to pay the donation when made, and it did not
require the completion of the railroad, or any part of it, before
the bonds were issued. It did not limit the amount which might be
donated to $30,000, but declared that if a majority of the votes
cast at the election provided for by the act should be in favor of
donation, the corporate authorities of the village, city, county,
or township, as the case might be, should donate to the company the
amount so voted at said election and issue bonds in payment
thereof. It thus appears that the section 10 of the amendatory act
covered the entire subject embraced by sections 9 and 10 of the
original act. It related to the same railroad company; it
prescribed different methods of procedure in reference to the same
subject, and embraced entirely new provisions, thus plainly showing
that it was intended as a substitute,
pro tanto, for the
original act. Section 10 of the amendatory act therefore operated
as a repeal by implication of sections 9 and 10 of the original
act, and removed the restriction limiting to $30,000 the amount
which could be donated by a township to the railroad company.
United States v.
Tynen, 11 Wall. 88;
Henderson's
Tobacco, 11 Wall. 652;
Murdock v.
Memphis, 20 Wall. 590;
King v. Cornell,
106 U. S. 395.
The next question raised by the assignments of error relates to
the power of the Township of Pana, under the circumstances of this
case, to issue the bonds in question. This Court has decided in the
case of
Harter v. Kernochan, 103 U.
S. 562, that bonds issued by the township of Harter,
dated April 1, 1880, signed by the supervisor and countersigned by
the clerk of the township, reciting that they were issued in
pursuance of the Acts of February 25, 1867, and February 24, 1869,
which are the acts relied on in this case, and in pursuance of an
election of the legal voters of the township held on November 10,
1868, were valid obligations of the township.
Page 107 U. S. 539
The power of the Township of Pana, under the same acts, to issue
bonds to pay its donation to the same railroad company is therefore
settled beyond dispute unless what the plaintiff in error insists
was a defect in the method of conducting the election by which the
donation was voted is fatal to the authority of the officers of the
township to issue the bonds. This defect was that the election was
presided over and the returns made not by the supervisor, assessor,
and collector of the township,
ex officio judges of
elections, but by a moderator chosen by the electors present.
It is insisted by the plaintiff in error that, as the
Constitution of Illinois, adopted July 2, 1870, by its second
additional section, cut off the power of any township or other
municipality to subscribe to the capital stock of, or make a
donation to, any railroad company except when such subscription or
donation had been authorized under existing laws by a vote of the
people of the municipality prior to the adoption of the
Constitution, and as, by reason of the defect just mentioned, there
was no legal election, it follows that there was no authority in
the officers of the Township of Pana to make the donation or issue
the bonds in question in this case, and that the bonds are not
binding on the township. We cannot assent to this conclusion.
It is clear that this case in nowise differs from other cases
where the holding of an election and a vote of the people in favor
of an issue of bonds is made by law a condition precedent upon
which the authority to issue bonds rests.
The bonds in question in this case recite on their face that
they were issued by the township, in compliance with the vote of
the legal voters thereof at an election held on April 30, 1870,
under and by virtue of the authority conferred by acts of the
General Assembly of the State of Illinois, specifying the Acts of
February 26, 1867, and February 24, 1869, above mentioned.
This Court has again and again decided that if a municipal body
has lawful power to issue bonds or other negotiable securities,
dependent only upon the adoption of certain preliminary proceedings
such as a popular election of the constituent body, the holder in
good faith has the right to assume that such preliminary
proceedings have taken place if the fact be certified
Page 107 U. S. 540
on the face of the bonds by the authorities whose primary duty
it.
Lynde v. The
County, 16 Wall. 6;
Town of Coloma v.
Eaves, 92 U. S. 484;
Commissioners v. January, 94 U. S.
202;
Commissioners v. Bolles, 94 U. S.
104;
County of Warren v. Marcy, 97 U. S.
96.
The authority to issue the bonds in question in this case,
resting upon the fact that an election was held in pursuance of law
before a certain date, namely, the date when the Constitution of
1870 was adopted, and the bonds reciting on their face the fact
that the election was so held before the date mentioned, the
circumstance that the election was irregularly conducted can be of
no avail as a defense to the bonds in a suit brought by a
bona
fide holder.
Our attention has been called to the decision of the Supreme
Court of Illinois in the case heretofore mentioned and reported as
Lippincott v. Town of Pana, in 92 Ill. 24, which it was
held that the election relied on in this case as the authority for
the issue of the bonds was absolutely void, and the issue of the
bonds was therefore without authority. Our attention is also called
to the cases of
People v. Santa Anna, 67 Ill. 57, and
People v. Town of Laenna, 67 Ill. 65, where similar
elections under a like statute were held void. These last two cases
were decided before the bonds in this case were issued. They were,
however, suits brought to restrain the issue of bonds by the
township officers on account of the irregularities in the election.
The rights of
bona fide holders could not, therefore,
arise, and were not passed on in those cases. But in the case first
mentioned, the bonds had been issued, and were presumptively in the
hands of
bona fide holders. Nevertheless the Supreme Court
of Illinois held the bonds to be void in whosoever hands they might
be.
It is insisted that this Court is bound to follow this decision
of the Supreme Court of Illinois and hold the bonds in question
void. We do not so understand our duty. Where the construction of a
state constitution or law has become settled by the decision of the
state courts, the courts of the United States will, as a general
rule, accept it as evidence of what the local law is. Thus we may
be required to yield against our own judgment to the proposition
that, under the charter of the
Page 107 U. S. 541
railway company, the election in this case, which was held under
the supervision of a moderator chosen by the electors present, was
irregular and therefore void. But we are not bound to accept the
inference drawn by the Supreme Court of Illinois that, in
consequence of such irregularity in the election, the bonds issued
in pursuance of it by the officers of the township, which recite on
their face that the election was held in accordance with the
statute, are void in the hands of
bona fide holders. This
latter proposition is one which falls among the general principles
and doctrines of commercial jurisprudence upon which it is our duty
to form an independent judgment and in respect of which we are
under no obligation to follow implicitly the conclusions of any
other court, however learned or able it may be.
Swift v.
Tyson, 16 Pet. 1;
Russell v.
Southard, 12 How. 139;
Watson v.
Tarpley, 18 How. 517;
Butz v.
Muscatine, 8 Wall. 575;
Boyce v.
Tabb, 18 Wall. 546;
Oates v. Nat. Bank,
100 U. S. 239;
Railroad Company v. National Bank, 102 U. S.
14.
See also Burgess v. Seligman, ante, p.
107 U. S. 20, where
the question how far the courts of the United States are bound by
the decisions of the state courts is carefully reexamined, and the
rule on the subject stated with precision.
We cannot follow the decision of the Supreme Court of Illinois
in
Lippincott v. Town of Pana, ubi supra, without
overruling a uniform current of the decisions of this Court,
beginning with the case of
Commissioners of Knox County
v. Aspinwall, 21 How. 539, and continuing down to
the present time. The rights of the
bona fide holder of
negotiable municipal bonds, as we have stated them in this opinion,
are too firmly settled by the decisions of this Court to be
shaken.
Our conclusion is therefore that the bonds in question in this
case are valid in the hands of a
bona fide holder
notwithstanding the irregularity in the conduct of the election by
which they were claimed to be authorized.
The next question presented by the assignments of error is does
the irregularity in the conduct of the election throw on the
plaintiffs the burden of proving that they are holders for
value?
It is a general rule that when the holder of a negotiable
instrument,
Page 107 U. S. 542
regular on its face and payable to bearer, produces it in a suit
to recover its contents, and the same has been received in
evidence, there is a
prima facie presumption that he
became the holder of it, for value at its date, in the usual course
of business.
Murray v.
Lardner, 2 Wall. 110;
Bank of
Pittsburgh v. Neal, 22 How. 96;
Collins v.
Gilbert, 94 U. S. 753;
Brown v. Spofford, 95 U. S. 474. And
municipal bonds, payable to bearer, are subject to the same rules
as other negotiable paper.
Cromwell v. Sac County,
96 U. S. 51.
But the plaintiff in error insists that this case falls within
an exception to that rule, and cites to sustain his position the
cases of
Smith v. Sac
County, 11 Wall, 139, and
Stewart v.
Lansing, 104 U. S. 505. The
exception relied on by plaintiff in error is well settled, and is
this: if, in a suit brought by the endorsee or transferee of a
negotiable instrument, the maker or acceptor, or any party who is
primarily bound by the original consideration, proves that there
was fraud or illegality in the inception of the instrument, the
burden of proof is thrown on the plaintiff to show that he is a
holder for value.
Smith v. Sac County and
Stewart v.
Lansing, ubi supra; Commissioners v. Clark, 94 U.
S. 285;
Collins v. Gilbert, 94 U. S.
753;
Fitch v. Jones, 5 El. and Bl. 238;
Smith v. Brane, 16 Q.B. 244;
Hall v.
Featherstone, 3 Hurls. & Nor. 284;
Bailey v.
Bidwell, 13 Mee. & W. 73;
Vathir v. Zane, 6
Grattan 246;
Hutchinson v. Boggs, 28 Penn.St. 294;
Perring v. Noyes, 39 Me. 384;
Cottle v. Cleaves,
70 Me. 256;
Sistermans v. Field, 9 Gray 331;
Woodhull
v. Holmes, 10 Johns. 231;
Thompson v. Armstrong, 5
Ala. 383;
Harbison v. Bank of Indiana, 28 Ind. 133;
Fuller v. Hutchings, 10 Cal. 526;
Redington v.
Wood, 45 Cal. 406;
Conley v. Winsor, 41 Mich. 253;
Sloan v. Union Banking Company, 67 Penn.St. 470;
Holme
v. Karsper, 5 Binn. (Pa.) 469;
Vallett v. Parker, 6
Wend. 615;
Munroe v. Cooper, 5 Pick. 412; 1 Daniel on Neg.
Inst. (3d ed.) sec. 815.
In most of the cases above cited, the defense relied on was
fraud in the inception of the instrument. Thus, in the case of
Smith v. Sac
County, 11 Wall. 139, the report shows that the
bonds were issued to a contractor to pay for the building of a
courthouse; that the county judge who executed and delivered the
bonds
Page 107 U. S. 543
was bribed to do so, and that the courthouse never was
built.
In the case of
Stewart v. Lansing, 104 U.
S. 505, the county judge, assuming to act under
authority of a law of the state, rendered a judgment appointing
commissioners to execute bonds of the Town of Lansing. This
judgment was carried by certiorari to the supreme court and there
reversed. The county judge, the commissioners, and the railroad
company to which the bonds were ordered to be issued, all had
notice of the writ of certiorari and of the subsequent proceedings
under it. Before the judgment of reversal, however, the
commissioners, notwithstanding the pendency of the writ of
certiorari, issued the bonds in suit in the case, taking from the
railroad company an obligation for their personal indemnity. This
Court held that as between the railroad company and the town, the
judgment of reversal was equivalent to a refusal by the county
judge to make the original order, and invalidated the bonds.
There is no pretense of any fraud in the inception of the bonds
in question in this case. It is not denied that they were issued in
good faith and for a valuable consideration. The question, then, is
was the irregularity in the conduct of the election such an
illegality as throws on the plaintiff the burden to show that he
paid value for the coupons? We are clearly of opinion that it is
not.
It will appear from an examination of the cases above cited, in
which the defense was illegality in the inception of the
instrument, that the illegality which shifts the burden of proof on
the holder to prove that he paid value must be something which
relates to the consideration of the paper sued on. It must appear
that the consideration arose out of a transaction contrary to law
or against public policy. Thus, in the case of
Sistermans v.
Field, 9 Gray (Mass.) 333, the illegality which the court held
threw the burden on the plaintiff of proving that he gave value for
the notes sued on was the fact alleged by the defendant that they
were given in payment for intoxicating liquors sold by the payees
of the notes to the defendant in violation of law. Precisely the
same illegality was held in the case of
Cottle v. Cleaves,
70 Me. 256, to throw upon the plaintiff, who was endorsee, the
burden of showing that he paid value for the note.
Page 107 U. S. 544
So in
Fuller v. Hutchings, 10 Cal. 526, the paper sued
on was given for losses at a public banking game called "faro."
Gaming was prohibited by statute. It was declared by the laws of
California to be a felony in the keeper of the game and a
misdemeanor in the player. In this case, the court held that, the
illegal consideration being admitted, it devolved upon the
plaintiff to show that he took the paper without notice and for
value.
In the case of
Bailey v. Bidwell, 13 Mee. and W. 73, it
was alleged as a matter of defense that the consideration for the
note sued on was an agreement that the payee should not oppose a
petition in bankruptcy filed by the defendant, the maker of the
note, and that the note was endorsed to the plaintiff without
value. The court, by Baron Parke, held the rule to be that if the
note was proven to have been obtained by fraud, or affected by
illegality, that afforded a presumption that the person who had
been guilty of the illegality would dispose of it, and place it in
the hands of another person to sue on it, and that such proof casts
upon the plaintiff the burden of showing that he was a
bona
fide endorsee for value.
In
Fitch v. Jones, 5 El. and Bl. 238, the note which
was sued on by an endorsee was given for a wager on the hop duty.
This, the court said, was not within the statute of Anne or any
other statutes which prohibit wagers. There was no penalty imposed
for such a wager, and therefore as between the maker and payee,
there was no illegality or violation of law, but it was a mere
nudum pactum. And the court held that the defendant was
bound to prove his plea by showing that the plaintiff did not give
value for the note.
The authorities illustrate the rule and show that it does not
apply to this case. There was no illegality whatever in the
consideration of the bonds in question in this suit. The mere
irregularity in the conduct of the election was not such an
illegality as is contemplated by the rule, and does not deprive the
holder of the coupons of the presumption that he acquired them for
value.
The next contention of the plaintiff in error is that the decree
of the Circuit Court of Christian County, Illinois, by which the
bonds in question were declared void is binding upon the
Page 107 U. S. 545
plaintiffs in this case, and is a bar to the action upon the
coupons sued on.
The plaintiffs in this case are citizens of the State of Maine.
It is sought to bind them by a decree rendered in a proceeding
purely
in personam in a case in which they were not named
as parties, when there was no personal service upon or appearance
by them and when the only pretense of notice to them of the
pendency of the suit was a publication addressed to the "unknown
holders and owners of bonds issued by Town of Pana."
It is contended that under the statutes of Illinois, parties may
be thus brought in and a valid personal decree rendered against
them. Whatever may be the effect of such a decree upon citizens of
the State of Illinois, this Court has held that as to nonresidents,
it is absolutely void.
Cooper v.
Reynolds, 10 Wall. 308;
Pennoyer v. Neff,
95 U. S. 714;
Brooklyn v. Insurance Company, 99 U. S.
362;
Empire v. Darlington, 101 U. S.
87.
In a case decided at the present term, it was declared by this
Court, speaking by MR. JUSTICE FIELD, that
"The courts of the United States only regard judgments of the
state courts establishing personal demands as having validity or
importing verity when they have been rendered upon personal
citation of the party, or upon his voluntary appearance."
St. Clair v. Cox, 106 U. S. 350,
106 U. S.
353.
These authorities settle the rule which is conclusive of this
question. It would be a reproach to jurisprudence if the rights of
citizens of Maine to recover the contents of a chose in action held
and owned by them could be cut off by a suit in Illinois to which
they were not made parties by name and in which there was no
personal service or appearance.
It is insisted by counsel for plaintiff in error that the decree
of the appellate court recites the fact that the persons made
defendant under the designation of "the unknown holders and owners
of bonds and coupons of the Town of Pana," which includes the
defendants in error, appeared in that court, and that they are
therefore concluded by the decree in the case.
There is no pretense that there was any appearance in fact
Page 107 U. S. 546
of the parties referred to. It is sought to conclude them by a
loose expression in the decree which, in our opinion, was clearly
not intended to recite their appearance and is not fairly open to
such a construction.
Lastly, it is assigned for error that in computing the amount
due upon the coupons described in the declaration, the court
allowed seven percent interest, the legal rate in New York, where
the coupons were payable, instead of six percent, the legal rate in
Illinois, where they were made. There was no error in this. The
coupons, after their maturity, bore interest at the rate fixed by
the law of the place where they were payable.
Gelpcke v.
Dubuque, 1 Wall. 175. What we have said covers all
the assignments of error. We find no error in the record.
Judgment affirmed.
