The General Assembly of Illinois enacted, March 27, 1869, a
statute as follows
"The acts of the City Council of the City of Quincy, from June
2, 1868, to August 28, 1868, in ordering an election on the
proposition to subscribe $100,000 to the capital stock of the
Mississippi and Missouri River Air Line Railroad Company, and the
subscription of said stock, and all other acts of said council in
connection therewith, are hereby legalized and confirmed."
In conformity with the vote of the citizens of Quincy cast at
such an election, the council had, by an ordinance of Aug. 7, 1868,
subscribed for that amount of said capital stock; but neither the
election nor the subscription was authorized by law. After the
statute took effect, negotiable coupon bonds were, by virtue of it
and the ordinance, issued in the sum of $100,000 to the company by
the city, and the latter received therefor an equal amount of said
stock. In a suit by a
bona fide holder of coupons detached
from the bonds,
held that they are valid obligations of
the city.
MR. JUSTICE HARLAN delivered the opinion of the Court.
On the seventh day of August, 1868, the City Council of Quincy,
Illinois, in conformity with a vote of the people at an election
held under the authority of a resolution adopted by that body on
the ninth day of June previous, passed an ordinance empowering and
directing the mayor to subscribe $100,000, payable in city bonds,
to the capital stock of the Mississippi and Missouri River Airline
Railroad Company, a corporation created under the laws of Missouri.
The object of the subscription was to aid in the construction of a
railroad (lying wholly within the State of Missouri) from West
Quincy northwesterly, connecting, Quincy with the road of that
company. The ordinance made it a condition of the issue and payment
of the bonds that there should be expended the sum of $50,000 in
grading, bridging, and tying the road, commencing at West Quincy,
for a distance of twenty-five miles; further, that due guarantees
be given, before the bonds were
Page 107 U. S. 550
issued that their proceeds should be so expended -- "the City of
Quincy to determine on the compliance with said conditions and
issue of bonds in payment of the subscription."
On the succeeding day, August 8, 1868, the city, by its mayor,
made the subscription upon the required conditions. Subsequently,
March 27, 1869, the General Assembly of Illinois passed a statute
declaring
"That the acts of the City Council of the City of Quincy, from
June 2, 1868, to August 28, 1868, in ordering an election on the
proposition to subscribe $100,000 to the capital stock of the
Mississippi and Missouri River Air Line Railroad Company, and the
subscription of said stock, and all other acts of said council in
connection therewith, are hereby legalized and confirmed."
3 Pri.Laws Ill. 1869, p. 376.
On the 1st day of January, 1870, the city council issued to the
company, in part payment of said subscription, fifty bonds of the
city, of $500 each, numbered from one to fifty, inclusive, and on
May 18, 1870, in further payment, seventy-five additional bonds,
numbered from fifty-one to one hundred twenty-five, inclusive. The
remainder, dated July 1, 1870, were issued on November 12, 1870, in
further and full payment. Upon each delivery of bonds, the city
received in exchange an equal amount at par value of the stock of
the railroad company. The bonds, negotiable in form, were made
payable to the railroad company or bearer at the National Bank of
Commerce in New York. They purport to have been issued under and by
virtue of the ordinance of August 7, 1868, and of the said act of
assembly. The present action was brought to recover the amount of
certain coupons of the bonds so issued.
The special finding shows that all of the coupons sued on,
except one, were of the bonds issued and delivered January 1 and
May 18, 1870; that the bonds from which the coupons sued on were
taken, with and their coupons, were purchased by plaintiff for
value, before maturity, in open market, in the usual course of
business, and without notice of any infirmity therein; that the
railroad company, from the commencement of the construction of its
road, owned and ran its trains from West Quincy into and out of
Quincy over the bridge connecting those two places; that the city,
for six years after issuing the bonds, paid the successive annual
installments of interest,
Page 107 U. S. 551
and by an agent, regularly appointed for that purpose, voted its
stock at one or more meetings of stockholders held after July 2,
1870.
It is not necessary to consider separately the various questions
of law upon which there occurred at the trial, a difference of
opinion between the judges. They are all more or less involved in
the general inquiry as to the existence of legislative authority
for this issue of bonds.
1. Such authority cannot be found in the original charter of the
city or in the Act of February 16, 1857. The former gives the city
council power "to appropriate money and provide for the payment of
the debt and expenses" of the city; the latter authorized that body
"to issue city bonds to any amount not exceeding at one time, in
the aggregate, the sum of $75,000." These provisions manifestly
relate to debts and expenses incurred for ordinary municipal
purposes, and not to railroad subscriptions, the authority to make
which must be expressly conferred by statute. These bonds upon
their face show that they were executed in payment of a
subscription of the latter character, and, consequently, purchasers
were charged with notice that they were not issued for ordinary
municipal purposes under any power conferred by the charter of the
city or by the act of 1857.
2. The question of legislative authority is not determinable by
that provision of the Illinois Constitution of 1870 which -- saving
municipal subscriptions made under existing laws by a popular vote
prior to its adoption -- declares that
"No county, city town, township, or other municipality shall
ever become subscriber to the capital stock of any railroad or
private corporation, or make donation to, or loan its credit in aid
of, such corporation,
provided, however, that the adoption
of this article shall not be construed as affecting the right of
any such municipality to make such subscriptions when the same have
been authorized, under existing laws, by a vote of the people of
such municipalities prior to such adoption."
This is quite clear in view of sec. 24 of the schedule of that
constitution, which provides:
"Nothing contained in this constitution shall be so construed as
to deprive the General Assembly of power to authorize the City of
Quincy to create any indebtedness
Page 107 U. S. 552
for railroad or municipal purposes, for which the people of said
city shall have voted, and to which they shall have given, by such
vote, their assent, prior to the thirteenth day of December, in the
year of our Lord one thousand eight hundred and sixty-nine,
provided that no such indebtedness so created shall in any
part thereof be paid by the state, or from any state revenue, tax,
or fund, but the same shall be paid, if paid at all, by the said
City of Quincy alone, and by taxes to be levied upon the taxable
property thereof,
and provided further that the General
Assembly shall have no power in the premises that it could not
exercise under the present constitution of the state."
The Supreme Court of Illinois, in
Q., M. and P. R. Co. v.
Morris, 84 Ill. 412, had occasion to consider the scope and
effect of that section. In that case, an election was held August
7, 1869, under the authority of a resolution of the city council,
to take the sense of the people upon a subscription to the capital
stock of the Quincy, Missouri and Pacific Railroad Company, also a
Missouri corporation, whose road lay wholly within that state. That
election was held without any law authorizing a vote on the
question, or empowering the city to become a stockholder in that
company. But by an act passed July 1, 1871, after the Constitution
of 1870 went into operation, the City of Quincy -- subject to the
terms and requirements embodied in the proposition submitted to the
people -- was authorized to make, upon such conditions as the city
council deemed best, a subscription to the stock of that company,
for which the people may have voted prior to the thirteenth day of
December, 1869. The act further provided:
"Any election held in said city prior to said day, for the
purpose of such vote being taken, and any contract or subscription
made, or to be made, by said city to the capital stock of said
railroad company in pursuance thereof, and any bonds or other
evidence of such indebtedness issued or to be issued by said city,
are hereby declared valid."
Under that act the subscription was made and bonds issued, and
the controlling question was as to their validity. The court --
waiving any expression of opinion as to the validity of that part
of the act which in terms purported to legalize the election --
decided that the obvious effect and intent of the twenty-fourth
section of the
Page 107 U. S. 553
schedule of the Constitution was to leave the action of the City
of Quincy, in assuming, by vote prior to December 13, 1869, to
create indebtedness for a railroad subscription, and the power of
the legislature over it,
"unaffected by the Constitution of 1870; in other words, to
leave the vote and the power of the legislature to confer the right
to take stock precisely as they would have been under the
Constitution of 1848;"
that the city council were the corporate authorities of Quincy,
upon whom, within the meaning of the Constitution of 1848, the
legislature could confer, without the intervention of a popular
vote, authority to make the subscription and issue the bonds; that
sec. 24 of that schedule embraced a vote taken without authority of
law, prior to December 13, 1869, because, had the vote been legal,
the language, "for which the people of said city shall have voted,
and to which they shall have given, by such vote, their assent,"
would have been unnecessary in view of the proviso in the general
section forbidding municipal subscriptions in aid of railroad
corporations; lastly, that the construction of the Quincy, Missouri
and Pacific Railroad, although no part of it lay in Illinois, was a
corporate purpose of the City of Quincy, because thereby its trade
and commerce were increased, its property enhanced in value, and
its welfare promoted.
3. It remains to inquire as to the authority of the city, under
the Constitution of 1848, to issue the bonds in question. Its power
to do so is denied upon these principal grounds: 1. That the
election held under the sanction of the city council, and the
action of that body in directing the subscription to be made, were
of no legal effect, since the election was held without authority
of law, and the subscription was made when there was no legislative
authority to create such indebtedness. 2. That without such
authority no subscription could be legally made. 3. That the
curative Act of March 27, 1869, was invalid, because it assumed to
impose indebtedness upon the city without the consent of its
corporate authorities. The soundness of the first and second of
these propositions cannot be disputed, whether reference be had to
the decisions of this Court or to those of the Supreme Court of
Illinois.
But we are unable to concur in the suggestion that the corporate
authorities of Quincy did not, after the passage of the
Page 107 U. S. 554
Act of March 27, 1869, have authority to issue these bonds. In
support of the position taken by the city, counsel refer to
numerous decisions of the Supreme Court of Illinois construing the
fifth section of the ninth article of the Constitution of 1848,
which provides that
"The corporate authorities of counties, townships, school
districts, cities, towns, and villages may be vested with power to
assess and collect taxes for corporate purposes."
From those decisions the following propositions, among others,
may be deduced: that the clause was intended to define as well the
class of municipal officers upon whom the power of taxation, for
local purposes, might be conferred, as the purposes for which such
power could be constitutionally exercised; that by the phrase
"corporate authorities" must be understood those municipal officers
who were selected with some reference to the creation of municipal
indebtedness, and who were either directly elected by the
population to be taxed, or appointed in some mode to which they
have given their assent; that the construction of a railroad at
least one within or near a county, township, town, village, or
city, was a corporate purpose of such municipality, and that a debt
for a subscription to the stock of a railroad corporation, or for
bonds in payment thereof, could not be imposed upon a municipal
corporation without the consent or against the will of its
corporate authorities. But it has been quite as distinctly ruled by
the Supreme Court of Illinois that the city council, and not the
voters, of an incorporated city were its corporate authorities,
within the meaning of the Constitution of 1848, and, if empowered
by legislative enactment, could, under that instrument, subscribe
to the stock of a railroad corporation, and issue bonds in payment
thereof, without submitting the matter to a popular vote. Such was
the decision in
Q., M. & P. R. Co. v. Morris, where
the court reaffirmed the ruling upon this point in
Keithsburg
v. Frick, 34 Ill. 421, 422. In the latter case, a subscription
made by a town to the capital stock of a railroad corporation --
without authority of law, as was alleged -- was, by an act passed
after the town was incorporated under a special charter, declared
to be legal, and bonds authorized to be issued therefor. The court
said:
"It is by no means a necessary element in these subscriptions
that there
Page 107 U. S. 555
should be a vote of the inhabitants of the town or city
authorizing them. It is competent for the legislature to bestow the
power directly on the corporation without any intermediary, as they
did in this case."
In
Marshall v. Silliman, 61 Ill. 225, the right of the
legislature to grant such an authority to the trustees of an
incorporated town was conceded. And in
Williams v. Town of
Roberts, 88 Ill. 21, the court, speaking by Chief Justice
Scholfield, said:
"County boards, such as boards of supervisors, county
commissioners, and the municipal authorities of incorporated
cities, towns, and villages, may, when empowered so to do by proper
legislation, subscribe to the capital stock of railroad
corporations without first submitting the question to the electors
of the municipality. They are elected as representatives of the
electors, and theoretically, in appropriate cases, their acts are
the acts of those they represent. Hence, it has been held, where a
vote of the electors has been required as a precedent condition to
the making of a subscription for stock in a railroad company, and
the law prescribing the mode of calling and holding the election
has not been observed, inasmuch as the legislature might have
empowered the municipal authorities to make the subscription
without first submitting the question to the electors, it may, by a
subsequent enactment, declare the noncompliance with the law in the
holding of the election of no consequence, and validate the
subscription -- in other words, validate the subscription without
reference to the election. This, however, it will be observed, is
upon the theory that power to make the subscription does not in any
degree necessarily depend upon a vote of the electors of the
municipality upon that question, but solely upon the will of the
legislature."
The authorities to which we have referred sustain the judgment
against the city. This case is clearly distinguishable from those
in which the legislature has attempted to impose upon a municipal
corporation, without the consent of its corporate authorities, an
indebtedness for subscription to the capital stock of a railroad
corporation.
The cases mainly relied on by counsel for the city are those in
which certain officers of limited authority were, in terms or in
effect, required by legislative enactment to issue bonds or incur
indebtedness in the name of a municipality, without the
Page 107 U. S. 556
the consent, expressed in legal form, of those who were, in the
constitutional sense, its corporate authorities. Here there can be
no question but the city council are the corporate authorities of
Quincy. And there is no ground whatever upon which to rest the
suggestion that the indebtedness was created without their consent.
In no just sense were they compelled to issue bonds in exchange for
stock in the railroad company. If, as claimed by the city, the Act
of March 27, 1869, was inoperative insofar as it assumed to
legalize and confirm what had been previously done without the
sanction of the law, nevertheless by that act, it was intended to
confer upon the city council power, in execution of the expressed
will of the voters, to issue bonds to the amount of $100,000 for
stock in this railroad company. The vote of the electors, we have
seen, was not essential to the validity of bonds issued, under
legislative sanction, by the corporate authorities of the city. The
city council was not required or directed, but only empowered, to
proceed as if they had been originally invested with authority to
make the subscription. The legislature in substance declared, as it
might constitutionally have done, that the corporate authorities of
the city had its consent to issue bonds to be exchanged for stock
in the railroad company. If the corporate authorities could have
been compelled by legal proceedings to issue the bonds, that is
only another form of saying that the curative act was
constitutional, and consequently that the bonds are valid. If,
however, they could not have been so compelled, then the execution
and delivery of the bonds, under the authority of the Act of March
27, 1869, was a voluntary creation of indebtedness for a corporate
purpose by the corporate authorities of the city.
What has been said disposes of all the questions certified,
including that one relating to the coupon of a bond delivered to
the railroad company after the Constitution of 1870 went into
effect. In
Q., M. & P. R. Co. v. Morris, all the bonds
there involved were executed and issued under an act passed in
1871. They were sustained upon the ground that the validity of that
act depended upon the power which the legislature possessed under
the Constitution of 1848. That decision, it would seem, determines
the present case as to the coupon of the bond delivered in
November, 1870.
Judgment affirmed.