Lyons v. Munson, 99 U. S. 676,
affirmed to the point that under c. 907 of the laws of New York for
1869, the county judge was the officer charged by law with the duty
to decide whether municipal bonds could be legally issued in
payment of subscriptions to railroad stock, and that his judgment
was conclusive till reversed by a higher court.
Orleans v. Platt, 99 U. S. 684,
affirmed to the point that such a judgment could not be
collaterally attacked.
These judgments are not affected by
Craig v. Andes, 93
N.Y. 405, as that case has since been held by the Court of Appeals
of New York to have been a collusive case, and not to stand in the
way of a reexamination. The attaching a condition to his signature
by a petitioner under that statute of New York does not necessarily
vitiate it.
One who contracts with a corporation as such cannot afterwards
avoid the obligations so assumed by him on the ground that the
supposed corporation was not one
de jure.
If the county judge in a notice issued by him under that act
fails to specify the place at which the hearing on the petition
will be had, it will be presumed that his regular office is the
place intended for it.
Page 158 U. S. 313
When municipal bonds issue in payment of a subscription to
railroad stock recite on their face that all necessary steps have
been taken to justify their issue, the municipality is estopped
from showing the contrary in an action brought by a
bona
fide holder to enforce them.
On September 1, 1871, the Town of Andes, in the County of
Delaware, State of New York, issued $98,000 of its bonds in payment
of a subscription to the capital stock of the Delhi &
Middletown Railroad Company, and received in exchange therefor
stock of said company to an equal amount. The recitals in the bonds
were as follows:
"Issued by virtue of an Act of the Legislature of the State of
New York entitled 'An act to authorize the formation of railroad
corporations and to regulate the same,' passed April 2, 1850, and
an act to amend an act entitled 'An act to authorize the formation
of railroad corporations and to regulate the same,' passed April 2,
1850, so as to permit municipal corporations to aid in the
construction of railroads, passed May 18 (1869), 'sixty-nine,
three-fifths being present."
"These acts authorize any city or town except in the Counties of
New York, Kings, Erie, Greene, Albany, Westchester, Ontario,
Seneca, Yates, Onondaga, and Niagara to subscribe to the stock of
any railroad corporation formed in pursuance of said acts, and
these acts authorize the Town of Andes to subscribe to the stock of
the Delhi and Middletown Railroad Company, and to issue town bonds
in payment thereof, all necessary and legal proceedings having been
taken and had under said acts."
The act of 1869 referred to in these recitals (Laws of New York,
92d Sess. 1869, p. 2303), contains these provisions:
"SEC 1. Whenever a majority of the taxpayers of any municipal
corporation in this state whose names appear upon the last
preceding tax list or assessment roll of said corporation as owning
or representing a majority of the taxable property in the corporate
limits of such corporation shall make application to the county
judge of the county in which such
Page 158 U. S. 314
corporation is situated by petition verified by one of the
petitioners setting forth that they are such a majority of
taxpayers and represent such a majority of taxable property and
that they desire that such municipal corporation shall create and
issue its bonds to an amount named in such petition (but not to
exceed twenty percentum of the whole amount of taxable property as
shown by said tax list and assessment roll) and invest the same or
the proceeds thereof in the stock or bonds (as said petition may
direct) of such railroad company in this state as may be named in
said petition, it shall be the duty of said county judge to order
that a notice shall be forthwith published in some newspaper in
such county, or if there be no newspaper published in said county,
then in some newspaper printed in an adjoining county, directed to
whom it may concern, setting forth that on a day therein named,
which shall not be less than ten days nor more than thirty days
from the date of such publication, he will proceed to take proof of
the facts set forth in said petition as to the number of taxpayers
joining in such petition, and as to the amount of taxable property
represented by them."
"SEC. 2. It shall be the duty of the said judge at the time and
place named in the said notice to proceed to take proof as to the
said allegations in said petition, and if it shall appear
satisfactorily to him that the said petitioners, or the said
petitioners and such other taxpayers of said town as may then and
there appear before him and express a desire to join as petitioners
in said petition, do represent a majority of the taxpayers of said
municipal corporation as shown by the last preceding tax list or
assessment roll, and do represent a majority of the taxable
property upon said list or roll, he shall so adjudge and determine
and cause the same to be entered of record. And such judgment and
the record thereof shall have the same force and effect as other
judgments and records in courts of record in this state."
The bonds were issued by virtue of the following proceedings: on
May 6, 1871, a petition of certain taxpayers of the Town of Andes
was presented to the County Judge of Delaware County, upon which an
order was entered and notice given,
Page 158 U. S. 315
as required by the statute, which order and notice were in these
words:
"To Whom It may Concern:"
"Notice is hereby given that a petition purporting to be signed
by a majority of the taxpayers of the Town of Andes, in the County
of Delaware, representing a majority of the taxable property in the
limits of said town, duly verified by one of the petitioners, has
been filed in my office, and that I shall proceed on the 22d day of
May next at 1 o'clock p.m., to take proof of the facts set forth in
said petition as to the number of taxpayers joining in such
petition and as to the amount of taxable property represented by
them."
"Given under my hand at Delhi, in said county, on the 6th day of
May, 1871."
"Edwin D. Wagner"
"
County Judge of Delaware County"
"On reading and filing the annexed petition of a majority of the
taxpayers of the Town of Andes, Delaware County, representing a
majority of the taxable property in the limits of said town,
verified by James H. Davis, one of said petitioners, setting forth
that they are such a majority of taxpayers, and represent such a
majority of the taxable property, and that they desire said Town of
Andes shall create and issue its bonds to the amount of
ninety-eight thousand dollars, and invest the same, or the proceeds
thereof, in the stock of the Delhi & Middletown Railroad
Company, an association formed in said county and state,"
"Now, on motion of White and Jacobs, attorneys for said
petitioners, that a notice be forthwith published in the Andes
Recorder, a newspaper published in said county, directed to whom it
may concern, that on the 22d day of May, 1871, I shall proceed to
take proof of the facts set forth in said petition as to the number
of taxpayers joining in such petition, and as to the amount of the
taxable property represented by them."
"Delhi, May 6th, 1871."
"Edwin D. Wagner"
"
County Judge of Delaware County"
Page 158 U. S. 316
Due publication thereof was made. The petition referred to was
upon nineteen separate sheets of paper, each of them containing the
petition in full, and each signed by different taxpayers. Sixteen
of them were unconditional; to two of them was attached a
condition, "that said road is located by Fish Lake and Shavertown,"
and one of them had this proviso: "Above conditions [consent] shall
be null and void unless said road shall be located by Shavertown
and Lumberville." On the day named in the notice, to-wit, May 22,
1871, two orders were entered. The first, after stating the
presentation of the petition, the order for notice, proof of
publication of notice, and of the allegations in the petition,
ended with this adjudication:
"I do hereby adjudge and determine that said petitioners do
represent a majority of the taxpayers of said Town of Andes,
Delaware County, as shown by the last preceding tax list or
assessment roll, and do represent a majority of the taxable
property upon said list or roll, and do hereby adjudge and
determine that the same be entered of record."
"Given under my hand at Delhi, in said county, on the 22d day of
May, "
"Edwin D. Wagner"
"
County Judge of Delaware County"
The second appointed the three commissioners required by the act
to carry out its provisions. Subsequently, one of the commissioners
having resigned, another was appointed in his place, and the three
thus appointed acted on behalf of the town, in issuing the
bonds.
From the time of their issue down to and including September 1,
1881, the town regularly paid the interest as it fell due upon the
bonds, and also paid and retired $3,000 of the principal thereof.
Thereafter, some question having arisen as to the validity of the
bonds, the town defaulted in payment of further interest, and on
December 30, 1889, the defendant in error brought his action in the
Circuit Court of the United States for the Northern District of New
York on coupons cut from such bonds. Answer having been filed, the
case was
Page 158 U. S. 317
tried December 31, 1890, and the jury, by direction of the
court, rendered a verdict in favor of the plaintiff for the sum of
$32,324.80. To reverse this judgment, the defendant sued out this
writ of error.
MR. JUSTICE BREWER, after stating the facts in the foregoing
language, delivered the opinion of the Court.
The act of 1869 has been heretofore presented to this Court for
consideration, and the effect of a judgment of a county judge
determined.
Orleans v. Platt, 99 U. S.
676;
Lyons v. Munson, 99 U. S.
684. In the former case, it was said:
"The county judge was the officer charged by law with the duty
to decide whether the bonds could be legally issued, and his
judgment was conclusive until reversed by a higher court."
And in the latter:
"The county judge unquestionably had jurisdiction to decide upon
the application made by the taxpayers. His judgment, until
reversed, was final. If there were errors, the proceedings should
have been brought before a higher court for review by a writ of
certiorari, and, if need be, the issuing and circulation of the
bonds should have been enjoined subject to the final result of the
litigation. The judgment rendered can no more be collaterally
attacked in this case than could any other judgment of a court of
competent jurisdiction, rendered with the parties, as in this case,
properly before it."
It is objected that since those decisions, the Court of Appeals
of the State of New York has pronounced the very judgment on the
strength of which these bonds were issued invalid.
Craig v.
Town of Andes, 93 N.Y. 405. In that case, the Court of
Appeals, by a bare majority, held that the petition was fatally
defective because it was, as to some of the petitioners,
conditional, and that by reason thereof it warranted no action by
the county judge. But in the subsequent case of
Calhoun v.
Millard, 121 N.Y. 69, it was developed that
Craig
Page 158 U. S. 318
v. Town of Andes was a collusive action, the town
owning the coupons sued on and paying for the services of counsel
on both sides. And it was held that the decision so obtained could
not be considered as an adjudication binding the bondholders in any
subsequent controversy between them and the town, the court
saying:
"We fully assent to the claim of the counsel for the bondholders
that an adjudication obtained under such circumstances ought not to
stand in the way of a reexamination by the court of the grounds
upon which it proceeded."
It is true that the court did not reexamine the proposition
affirmed in the former opinion, but after thus indicating that the
question was open for further consideration, disposed of the case
upon other grounds. The question must therefore be considered an
open one in the courts of New York, and there is nothing in the
decisions of those courts to compel a reexamination by us of our
prior rulings.
Several objections, however, to the validity of this judgment
are called to our attention and require notice. The first and
principal one arises out of the fact, considered vital by the Court
of Appeals in the case of
Craig v. Town of Andes, supra,
that the petition was, as to some of the petitioners, conditional.
It is admitted that if the names of the conditional petitioners
were stricken from the list, the remainder would not constitute a
majority of the taxpayers or represent a majority of the taxable
property. The argument is that a conditional petition amounts to
nothing. The unconditional petitioners were neither a majority of
the taxpayers nor representing a majority of the taxable property.
The statutory petition was never filed. The condition upon which
action by the county judge could legally be had did not exist. He
therefore never acquired any jurisdiction, and his judgment was
coram non judice, and void.
We are unable to assent to this contention. The petition, as
presented, alleged that the petitioners were a majority of the
taxpayers, and represented a majority of the taxable property. It
thus stated the facts necessary to invoke the action of the county
judge. It nowhere disclosed the amount of the
Page 158 U. S. 319
taxable property in the town, or the number of the taxpayers,
and nowhere stated how much of such taxable property belonged to
the petitioners, either separately or altogether. There was but a
single verification, and that at the bottom of one of the nineteen
sheets upon which the petition was written. That sheet was signed
by over forty names, and signed unconditionally. It is fair,
however, to regard the nineteen sheets, though in form separate, as
really constituting but one petition, and a single verification,
which was made on May 6, 1871 -- the day of presentation to the
judge -- as applicable to such petition as a whole. Otherwise this
single verified sheet was a perfect petition, open to no objection,
and compelling action by the county judge, and, if this case is to
turn on narrow grounds, then each sheet may be considered a
separate petition, and, one being technically beyond objection, the
others may be ignored, and the jurisdiction of the county judge
rested upon that one.
But we are not disposed to rest our conclusion upon this narrow
ground. There was but the one petition, signed by about 200
parties, of whom 50 attached a condition to their signatures. Was
that sufficient to defeat the jurisdiction? The conditions named
were the location of the road by Fish Lake, Shavertown, and
Lumberville. The various sheets composing the petition were all
dated November 23, 1870, but the verification and the filing were
May 6, 1871. Intermediate these two dates, and on March 4, 1871,
the railroad company filed in the office of the Clerk of Delaware
County a map of the route selected by it, certified by its
president and chief engineer to be "a correct map and profile of
the route intended to be adopted by said company for their
railroad." An examination of the route thus located shows that it
passes by the three places named, so that, at the time the petition
was filed, the conditions had been performed by the railroad
company. Is it not fair to hold that the petition was at the time
of its presentation an unconditional petition on the part of all
the signers? There was in fact no limitation or restriction on the
express request of all the petitioners for the issue of the bonds.
At least when such a petition was presented,
Page 158 U. S. 320
it was within the competency of the county judge to hear and
determine whether or no the conditions named had been performed.
The petition called for some action. The duty of judicial inquiry
arose, and there can be no judicial inquiry without jurisdiction.
He was compelled to examine and determine whether the verification
was in proper form, whether there were in fact the signatures of
any petitioners on the paper, whether any railroad company was
named, and whether there was an application for the issue of bonds,
and, if there were any limitation or qualification to a signature,
whether such limitation or qualification affected substantially the
merits of the application. If he found a condition of a substantial
character, he was then called upon to ascertain and decide whether
the condition had been waived, or so far performed since the
signature as to cease to be any limitation upon the petition. An
error in his rulings upon any of these matters did not oust him of
jurisdiction. This, it must be borne in mind, is not the case of a
total failure in respect to any particular matter required by the
statute to be stated in the petition.
But we may go further and hold that attaching a condition to a
petition does not always and necessarily vitiate it. A subscription
by a municipality to the stock of a railroad company stands upon a
different footing from one made by an individual. In the latter
case, it is a mere transaction for purposes of pecuniary gain, and
there is no limitation on the right of the individual to subscribe
to the stock of any railroad corporation, no matter where such
corporation proposes to build its road. But a municipal
subscription requires something more than the mere prospect of
pecuniary gain. It can be upheld only on the theory that, by the
construction of the road, some public benefit to the municipality
is secured, and that public benefit may justify, and sometimes
require, the insertion in the subscription of a condition in
respect to the matter of location. A railroad corporation naming
the termini of its road has large latitude in respect to the
location of the intermediate route. One location may be so far from
a particular town between the termini as to make indefensible a
subscription by such town in aid of the construction,
Page 158 U. S. 321
and to incorporate a condition in the subscription which makes
the location one of public benefit to the town cannot be held
absolutely void. Suppose the entire petition had been for the issue
of bonds on condition that the road should be located through the
Town of Andes. Could it be adjudged that such a petition was a
nullity, and laid no foundation for action by the county judge? We
think not.
While courts may properly see to it that proceedings for casting
burdens upon a community comply with all the substantial
requisitions of a statute, in order that no such burden may be
recklessly or fraudulently imposed, yet such statutes are not of a
criminal character, and proceedings are not to be so technically
construed and limited as to make them a mere snare to those who are
encouraged to invest in the securities of the municipality. These
considerations are appropriate to this case. The proceedings on the
part of the town and the railroad company were carried on in
evident good faith. No one questioned their validity; no effort was
made to review the action of the county judge; the bonds were
issued; more than $100,000 was spent within the limits of the town
in the construction of the road, and years went by, during which
the town paid the interest and part of the principal, before any
question was made as to their validity. We think there is eminent
wisdom and justice in the observations of the Court of Appeals in
the case of
Calhoun v. Millard, supra:
"The town and the taxpayers permitted the bonds to be dealt with
and taken by savings banks and others for nearly ten years, not
only without, so far as appears, a word of warning or protest, but,
by affirmative acts of recognition, encouraged investment therein,
as safe and valid securities. The bonds, resting on the
adjudication of the county judge, were apparently valid. The
legislature has still the power to ratify them, and make them valid
obligations of the town.
Williams v. Town of Duanesburgh,
66 N.Y. 129;
Horton v. Town of Thompson, 71 N.Y. 513;
Rogers v. Stephens, 86 N.Y. 623. They are now in the hands
of
bona fide holders -- that is, of persons who have paid
value for them without notice. . . . The denial of relief in this
case may result practically
Page 158 U. S. 322
in the enforcement of the bonds in question, and also of other
town bonds issued and held under similar circumstances. But in
contrasting the relative conduct and situation of the town and the
taxpayers, on the one side, and the purchasers of bonds, on the
other, we cannot say that such a result will be repugnant to any
principle of justice or equity."
Again it is objected that there was no legal incorporation of
the Delhi & Middletown Railroad Company. The statutory
provisions of the State of New York in respect to the formation of
railroad corporations are found in chapter 140, Laws of 1850;
Rev.Stat.N.Y. 6th ed., vol. 2, p. 519. The record shows that the
articles of association, duly verified, were filed and recorded in
the office of the Secretary of State, as required by section 2 of
the act. The objection is that the statute requires that there
shall be subscribed at least $1,000 of stock for every mile of
railroad proposed to be laid, and that, as appears from the
articles, certain subscriptions were made on condition that the
road was located through Lumberville, and others, provided the road
went to Shavertown. These subscriptions, being conditional, it is
claimed, amount to nothing, and, as the unconditional subscriptions
are less than $1,000 per mile of the proposed road, it is insisted
that the attempted incorporation was a failure. We deem it
unnecessary to consider this question, for it is familiar law that
one who contracts with a corporation, as such, cannot afterwards
avoid the obligations assumed by such contract on the ground that
the supposed corporation was not one
de jure.
Leavenworth v. Barnes, 94 U. S. 70;
Commissioners v. Bolles, 94 U. S. 104;
Casey v. Galli, 94 U. S. 673;
Chubb v. Upton, 95 U. S. 665.
Further, after the contract had been made, the bonds issued, and
the stock received by the town, the Legislature of the State of New
York passed, in two successive years, acts authorizing the town to
sell and dispose of such stock. At a special town meeting held
after the passage of the first act, the town voted not to sell, and
at a meeting held after the second act, it voted to sell. These two
acts of the legislature were distinct recognitions of the existence
of the corporation known as the Delhi & Middletown Railroad
Company,
Page 158 U. S. 323
whose stock, held by the town, the latter was permitted to sell.
Comanche County v. Lewis, 133 U.
S. 198;
State ex Rel. v. Commissioners,
&c., 12 Kan. 426;
State v. Stevens, 21 Kan. 210;
State v. Hamilton, 40 Kan. 323. There is no evidence of
any challenge on the part of the state of the validity of the
corporate franchises assumed to exist and exercised by the company.
In view of these considerations, it is impossible now to recognize
as valid the claim that, by reason of the supposed defect in the
original incorporation all the acts of the town in respect to the
issue of bonds, the subscription to and the receiving of stock were
void.
Again, it is objected that the proceedings before the county
judge were absolutely void on the ground that the notice does not
specify the place at which the hearing on the petition is to be
had. It is enough to say in reply to this objection that where a
notice fails to name any other place, it will be presumed that the
place intended is the regular office of the county judge. No
particular specification is required unless the hearing is to be
had at some place other than that at which his judicial work is
customarily done. The statute under which these proceedings were
had recognizes this. The section which provides for notice
prescribes that the county judge shall order the publication of a
notice "setting forth that on a day therein named, . . . he will
proceed to take proof," etc. Nothing is said in respect to naming a
place for the hearing, and yet the next section commences, "it
shall be the duty of the said judge at the time and place named in
the said notice," etc. Any seeming discrepancy between these
sections is removed by the consideration that in the absence of
other specification, the law writes into the notice the office of
the county judge as the place of hearing.
A further objection is that the county judge was disqualified on
the ground that he was at the time a stockholder in the Delhi &
Middletown Railroad Company, and this provision of the Revised
Statutes of the State of New York is cited:
"That no judge of any court can sit as such in any cause to
which he is a party, or in which he is interested, or in which he
would be excluded from being a juror by reason of
Page 158 U. S. 324
consanguinity or affinity to either of the parties."
The name of the county judge appears on the articles of
association, filed with the Secretary of State, as a subscriber to
one share of stock, but his testimony, which is not contradicted,
is as follows:
"I signed for one share of stock, and the next day I stated to
the person with whom I took the stock that I would not take it, and
he agreed to take my name off. I don't know who it was, and I can't
tell as I signed my name or not. I know I saw the proper person,
and cancelled my agreement to take the stock, and I never took it.
It was agreed that I should not. I think it was the same person I
saw first when I made the agreement. The bonding proceedings of the
Town of Andes were had before me as county judge. The talk as to my
taking stock was sometime before the proceedings were had before
me. The certificate of stock was never tendered or offered to
me."
Obviously he was not a party interested, and therefore there is
no need to inquire whether, if interested, the fact could now be
shown in a collateral attack so as to avoid the judgment.
But further, in view of the recitals in the bonds, are these
questions open for inquiry? Ample authority was given by the
statutes of the state referred to. Whether the various steps were
taken which in this particular case justified the issue of the
bonds was a question of fact, and when the bonds, on their face,
recite that those steps have been taken, it is the settled rule of
this Court that, in an action brought by a
bona fide
holder, the municipality is estopped from showing the contrary.
See the multitude of cases commencing with
Knox County v.
Aspinwall, 21 How. 544, and ending with
Citizens' Savings Association v. Perry County,
156 U. S. 692. It
may be said that those decisions are not wholly in point, inasmuch
as these bonds were signed not by regular officers, but by
commissioners specially appointed, and that before a recital made
by them can be held to conclude the town, it must appear that they
were duly appointed, and thus had authority to act. Doubtless this
distinction is not without significance. Yet
Page 158 U. S. 325
they were acting commissioners and their authority was
recognized, for each bond was registered in the office of the
county clerk and attested by the signature of the county clerk with
the seal of the county, and if we go back of that, to the records
of the county judge -- the appointing power -- there appears a
separate order, in due form, appointing them commissioners, which
order recites a prior adjudication of all the essential facts.
Giving full force to the distinction which exists between the
action of general and special officers, there must be, even in
respect to the latter, some point in the line of inquiry back of
which a party dealing in bonds of a municipality is not bound to go
in his investigations as to their authority to represent the
municipality, and that point it would seem was reached when there
is found an appointment in due form made by the appointing tribunal
named in the statute. However, as our examination of all the
proceedings in fact had in respect to the issue of these bonds
satisfies us of their validity, it is unnecessary to rely upon the
mere recitals.
Finally, the jurisdiction of the trial court is challenged on
the ground that under the act of Congress of 1887, c. 373, 24 Stat.
552, as amended by the Act of August 12, 1888, c. 866, 25 Stat.
433, a subsequent holder of negotiable paper payable to bearer
cannot invoke the jurisdiction of the federal courts unless the
original holder was also entitled to sue therein. But the statute
excepts from this provision instruments made by a corporation, and
a town, under the laws of the State of New York, is a corporation
so far as respects the making of contracts, the right to sue, and
the liability to be sued.
Lorillard v. Town of Monroe, 11
N.Y. 392.
These are the only questions which are of sufficient importance
to require notice. We see no errors in the rulings of the circuit
court, and its judgment is therefore
Affirmed.
