In an action at law in a circuit court of the United States
against a township to recover on bonds issued by the township, the
plaintiff is not entitled to recover on bonds transferred to him by
citizens of the state in which the town is situated for the mere
purpose of being sued in a court of the United States.
Bernard
Township v. Stebbins, 109 U. S. 341,
affirmed and applied.
A municipal bond in the ordinary form is a promissory note
negotiable by the law merchant within the meaning of that term in
the Act of March 3, 1875.
Ackley School District v. Hall, 113 U.
S. 135, affirmed and applied.
The issue of township bonds by commissioners under the Act of
the Legislature of New Jersey of April 9, 1868, "to authorize
certain towns in the counties of Somerset, Morris, Essex and Union
to issue bonds and take stock in the Passaic Valley and Peapack
Railroad Company" was conclusive as to the amount that could be put
out under the statute and estopped the township from setting up
against a
bona fide holder that the issue was in excess of
the amount authorized.
Page 117 U. S. 337
In order to avail to stop costs, an offer to submit to entry of
judgment should be made in open court, and the court be asked to
act thereon after due notice to the other party.
The case is stated in the opinion of the Court.
MR. CHIEF JUSTICE WAITE delivered the opinion of the Court.
This suit was brought by Abraham Halsey, a citizen of
California, to recover the amount due on twenty-six bonds,
amounting in the aggregate, without interest, to $8,200, given by
the inhabitants of the Township of New Providence, New Jersey, for
stock in the Passaic Valley and Peapack Railroad Company. It is
conceded that Halsey holds in his own right but nine of the bonds,
on which there is due, without interest, $900. The rest belong to
citizens of New Jersey, who assigned them to him for collection
only. Of the nine which he holds in his own right, seven belonged
at one time to his father, a citizen of New Jersey, who was a
purchaser before maturity for value without notice. Three of these
seven came to him on the distribution of his father's estate, and
the other four he bought from his brothers and sisters, citizens of
New Jersey, who got them in the same way. The remaining two he
bought from a brother, who had bought from another brother, who was
a
bona fide holder for value, and both these brothers were
citizens of New Jersey. The evidence does not show how much he paid
for what he bought, but it does appear that he paid something.
The bonds were issued under the same statute which was before
this Court for consideration in
Bernards Township v.
Stebbins, 109 U. S. 341, and
is found fully stated on pages
109 U. S.
342-344 of that case.
On the trial several questions arose, but the following are all
that have been brought to the attention of this Court by the
argument for the plaintiffs in error:
1. Whether a recovery can be had in this action for the
bonds
Page 117 U. S. 338
actually owned by citizens of New Jersey and held by Halsey only
to collect for their account.
2. Whether Halsey can recover on the nine bonds he holds in his
own right, inasmuch as he got them by assignment from citizens of
New Jersey, who could not sue in the courts of the United States,
and he is compelled to rely on the title of his assignors to avoid
the matters pleaded in bar to the action.
3. Whether the issue of the bonds under the statute by the
commissioners appointed for that purpose estops the township from
setting up, as a defense against a
bona fide holder, that
the original issue was in excess of the amount authorized.
The circuit court ruled against the township on all these
questions, and gave judgment upon a verdict of the jury for the
full amount claimed, being $15,981.88. To reverse that judgment,
this writ of error was brought.
It is conceded that the ruling on the first of the questions was
wrong, and that the judgment is erroneous to the extent of the
bonds not held by Halsey in his own right. That was decided in
Bernards Township v. Stebbins, above referred to.
The second question is disposed of by the case of
Ackley
School District. v. Hall, 113 U. S. 135,
where it was decided that a municipal bond in the ordinary form was
"a promissory note negotiable by the law merchant," within the
meaning of that term in the Act of March 3, 1875, 18 Stat. 470, c.
137, ยง 1, which allows a suit on instruments of that class to be
brought in the courts of the United States by an assignee
notwithstanding a suit could not have been prosecuted in such court
if no assignment had been made. These bonds are of that character.
Such being the case, it is a matter of no importance that Halsey
makes title to the bonds he owns through assignments by citizens of
New Jersey.
The Court of Errors of New Jersey has recently decided in
Cotton v. New Providence, 47 N.J.Law 401, following the
rule laid down in
Mutual Benefit Life Ins. Co. v.
Elizabeth, 42 N.J.Law 235, that purchasers of bonds of the
issue of those now in suit had the right to rely on the decision of
the commissioners as conclusive in respect to the amount that could
be put out under the statute. The language of the
Page 117 U. S. 339
court is:
"When they [the commissioners] issued bonds, they averred that
the issue was within the limit. Construing the act by the rule laid
down in the case cited [
Ins. Co. v. Elizabeth], the
legislative intent that their decision on this subject should be
final appears. The holder of the bonds had the right to rely
thereon. For this reason, I feel constrained to hold that bonds
issued beyond the limit would be enforceable."
To this we agree, and it is conclusive as to the correctness of
the ruling of the court below upon the third question
presented.
It follows that the judgment of the court below must be
reversed. A question was, however, raised at the argument as to
costs. Annexed to the brief of counsel for the defendant in error
is a copy of what purports to be an offer by the township to
Halsey, after the decision of this Court in
Bernards Township
v. Stebbins and before the record in this case was printed, to
allow the judgment to be reversed at once so far as the bonds not
owned by him were concerned, "with permission to the defendant in
error to discontinue as to those bonds, and to strike from the
record the counts founded thereon," and that as to the other bonds,
it be affirmed,
"and that the court may make such order as to the costs incurred
in this court as it shall deem just . . . or that the court be
requested at once to pronounce judgment on the basis of the
plaintiff being entitled to recover only upon the bonds"
owned by him, "and that as to all the other bonds mentioned in
the record the plaintiff was not entitled to recover" under the
decision in
Bernards Township v. Stebbins. We are asked
now, on account of this offer, to adjudge that the plaintiff in
error pay the costs which have been incurred in printing the
record, including the clerk's fee for supervising. The offer,
although printed in the brief, was not proved at the hearing, but
if it had been, we could not have given it the effect now asked.
Offers of this kind, made out of court, cannot be considered by us.
The offer should have been made in open court, and the court asked
to act thereon after the township had been notified in due form to
show cause against it. The case of
Bernards Township v.
Stebbins was decided at the October term, 1883, and the offer
is said to have been made January 24, 1884. There was abundance
of
Page 117 U. S. 340
time, after the decision in that case had become known, for
counsel to have applied for an order in the premises before the end
of that term, and before the record was printed. This was not
done.
The judgment is
Reversed and the cause remanded for further proceedings not
inconsistent with this opinion.