Where the statute of a state provided that the board of
commissioners of a county should have power to subscribe for
railroad stock, and issue bonds therefor, in case a majority of the
voters of the county should so determine after a certain notice
should be given of the time and place of election, and the board
subscribed for the stock and issued the bonds, purporting to act in
compliance with the statute, it is too late to call in question the
existence or regularity of the notices in a suit against them by
the holders of the coupons attached to the bonds, who were innocent
holders, in this collateral way.
In such a suit, according to the true interpretation of the
statute, the board were the proper judges whether or not a majority
of the votes in the county had been cast in favor of the
subscription to the stock.
The bonds on their face import a compliance with the law under
which they were issued, and the purchaser was not bound to look
further for evidence of a compliance with the condition to the
grant of the power.
A suit could be maintained upon the coupons without the
production of the bonds to which they had been attached.
The case is stated in the opinion of the court.
Page 62 U. S. 540
MR. JUSTICE NELSON delivered the opinion of the Court.
The suit was brought in the court below against the Board of
Commissioners of Knox County, to recover the amount due upon two
hundred and eighty-four coupons, each for the sum of sixty dollars,
the whole amounting to the sum of seventeen
Page 62 U. S. 541
thousand and forty dollars. The coupons were payable at the
North River Bank, in the City of New York -- one hundred and
forty-two of them on the 1st of March, 1856, and the remaining
number on the 1st of March, 1857. These coupons were originally
attached to one hundred and forty-two bonds issued by the
defendants, for $1,000 each, the bonds payable at the bank above
mentioned, twenty-five years from date, to the Ohio &
Mississippi Railroad Company or bearer, with interest at the rate
of six percent per annum, payable annually on the 1st of March, at
the bank, upon presentation and delivery of the proper coupons
hereto attached, by the auditor of said county.
The coupons declared upon and sought to be recovered are those
which were attached to these one hundred and forty-two bonds, and
represented the interest due thereon on the first of March, 1856
and 1857. The plaintiffs are the holders and owners of these
The main ground of the defense set up and relied on to defeat
the recovery is that the defendant, the board of commissioners,
possessed no authority to execute, or to authorize to be executed,
the bonds or coupons in question, and hence that they are
obligations not binding upon the County of Knox, which this board
represents. Our chief inquiry, therefore, will be whether or not
these several obligations were executed and put into circulation as
evidences of indebtedness by competent and legal authority.
The defendant is a body corporate, under the laws of the State
of Indiana, by the name of the board of commissioners of the
county, and very large powers are conferred upon it in matters
relating to the police and fiscal concerns of the county. The
auditor of the county is to act as its clerk, and the sheriff is to
attend its meetings and execute its orders. It has a common seal,
and copies of its proceedings, signed and sealed by the clerk, are
evidence in courts of justice. It has power to dispose of the
property of the county; to adjust accounts against it; to raise
revenue, and examine accounts of disbursing officers; and an appeal
lies from its decisions to the circuit court. 1 R.S. of Indiana
Page 62 U. S. 542
On the 14th February, 1848, the Legislature of Indiana
incorporated the Ohio & Mississippi Railroad Company, and by
the 12th section of the charter provided as follows:
"It shall be lawful for the county commissioners of any county
in the State of Indiana through which said railroad passes, for and
in behalf of said county, to authorize, by order on their records,
so much of said stock to be taken in said railroad as they may deem
proper, at any time within five years after opening the books of
subscription to said stock: provided, however,
shall be and is hereby made the duty of said county commissioners
in any county through which said railroad may pass in the State of
Indiana to subscribe for stock for and on behalf of said county if
a majority of the qualified voters of said county, at any annual
election, within five years after said books are opened, shall vote
for the same."
Sess.Laws 1848, p. 619.
This act was amended on the 15th January, 1849, and in the
second section it was declared to be the duty of the sheriffs of
the counties -- and, among others, Knox County, the one in question
-- forthwith to give notice of an election to be held on the first
Monday of March then next to determine whether said county would
subscribe for the stock of the Ohio & Mississippi Railroad
Company &c., and if a majority of the votes shall be given in
favor of the subscription, the county board of commissioners shall
subscribe to said stock &c., for the county to an amount not
less than $100,000,
that the county board of any of said counties
may, within one week prior to the said election, increase or lessen
the amount to be subscribed, of which notice shall be given at the
different precincts of said county on the day of the election,"
The third section provided that
"The county subscription shall be payable in county bonds
bearing interest at the rate of six percent per annum, payable
annually on the first day of March, redeemable at such time and
place as the directors of the company may determine, within thirty
years from the date of the subscription."
The section then provides for the levying of a tax annually upon
the county by the board of commissioners to meet the accruing
interest on the bonds.
Page 62 U. S. 543
The plaintiffs gave in evidence on the trial that at a meeting
of the Board of Commissioners of the County of Knox, on the 26th
February, 1849, it ordered, under the power given in the second
section above referred to, that the county subscribe $200,000 of
the capital stock of the Ohio & Mississippi Railroad Company.
And also that at a meeting on the 25th October, 1850, after
reciting that, in accordance with the wishes of the voters of the
county, as expressed at the election held for that purpose in the
several townships on the first Monday of March, 1849, it is ordered
that the auditor, in the name and for the County of Knox, subscribe
to the capital stock of the Ohio & Mississippi Railroad Company
four thousand shares of fifty dollars each, or the sum of $200,000;
and that the auditor be authorized to vote at all elections and
meetings of stockholders, or to appoint a proxy in his stead. And
that, in pursuance of this direction, the auditor subscribed the
four thousand shares, and received certificates in the name of the
board of commissioners of the county for the same, and also
executed and delivered the bonds of the county, as provided for in
the third section of the act of 1849, attaching thereto coupons for
the interest. The bonds and coupons in question were issued under
This is the substance of the case, as presented on the
The ground upon which the want of authority to execute the bonds
in question is placed, is the alleged omission to comply with the
requisition of the statute of 1849, in respect to the notices to be
given of the election to be held on the first Monday of March, at
which a vote was to be taken for or against a subscription of stock
to the railroad company.
It is insisted that an irregularity or omission in these notices
had the effect to deprive the board of this authority, or rather
furnish evidence that the power had never vested in it under the
act, and further, that the plaintiffs are chargeable with a
knowledge of all substantial defects or irregularities in these
notices of the election, and not therefore entitled to the
character of bona fide
holders of the securities.
The act in pursuance of which the bonds were issued is a public
statute of a state, and it is undoubtedly true that any
Page 62 U. S. 544
person dealing in them is chargeable with a knowledge of it; and
as this board was acting under delegated authority, he must show
that the authority has been properly conferred. The court must
therefore look into the statute for the purpose of determining this
question, and upon looking into it, we see that full power is
conferred upon the board to subscribe for the stock and issue the
bonds when a majority of the voters of the county have determined
in favor of the subscription, after due notice of the time and
place of the election. The case assumes that the requisite notices
were not given of the election, and hence that the vote not has
been in conformity with the law.
This view would seem to be decisive against the authority on the
part of the board to issue the bonds, were it not for a question
that underlies it, and that is, who is to determine whether or not
the election has been properly held, and a majority of the votes of
the county cast in favor of the subscription? Is it to be
determined by the court, in this collateral way, in every suit upon
the bond, or coupon attached, or by the board of commissioners, as
a duty imposed upon it before making the subscription?
The Court is of opinion that the question belonged to this
board. The act makes it the duty of the sheriff to give the notices
of the election for the day mentioned, and then declares, if a
majority of the votes given shall be in favor of the subscription,
the county board shall subscribe the stock. The right of the board
to act in an execution of the authority is placed upon the fact
that a majority of the votes had been cast in favor of the
subscription, and to have acted without first ascertaining it would
have been a clear violation of duty, and the ascertainment of the
fact was necessarily left to the inquiry and judgment of the board
itself, as no other tribunal was provided for the purpose. This
board was one, from its organization and general duties, fit and
competent to be the depository of the trust thus confided to it.
The persons composing it were elected by the county, and it was
already invested with the highest functions concerning its general
police and fiscal interests.
We do not say that the decision of the board would be conclusive
in a direct proceeding to inquire into the facts previously
Page 62 U. S. 545
to the execution of the power, and before the rights and
interests of third parties had attached; but after the authority
has been executed, the stock subscribed, and the bonds issued and
in the hands of innocent holders, it would be too late, even in a
direct proceeding, to call it in question. Much less can it be
called in question to the prejudice of a bona fide
of the bonds in this collateral way.
Another answer to this ground of defense is that the purchaser
of the bonds had a right to assume that the vote of the county,
which was made a condition to the grant of the power, had been
obtained, from the fact of the subscription, by the board, to the
stock of the railroad company, and the issuing of the bonds.
The bonds on their face import a compliance with the law under
which they were issued. "This bond," we quote,
"is issued in part payment of a subscription of two hundred
thousand dollars, by the said Knox County, to the capital stock
&c., by order of the board of commissioners,"
in pursuance of the third section of act &c., passed by the
General assembly of the State of Indiana and approved 15 January,
The purchaser was not bound to look further for evidence of a
compliance with the conditions to the grant of the power. This
principle was recently applied in a case in the court of Exchequer
in England. 6 Ellis & Blackburn 327, The Royal British Bank
It was an action upon a bond against the
defendant as the manager of a joint stock company. The defense was
a want of power under the deed of settlement or charter to give the
bond. One of the clauses in the charter provided that the directors
might borrow money on bonds in such sums as should from time to
time by a general resolution of the company be authorized to be
borrowed. The resolution passed was considered defective. Jervis,
Ch.B., in delivering the judgment of the court, observed:
"We may now take it for granted that the dealings with these
companies are not like dealings with other partnerships, and that
the parties dealing with them are bound to read the statute and the
deed of settlement. But they are not bound to do more. And the
party here, on reading the deed of settlement, would find not a
prohibition from borrowing, but a permission
Page 62 U. S. 546
to do so on certain conditions. Finding that the authority might
be made complete by a resolution, he would have a right to infer
the fact of a resolution authorizing that which, on the face of the
document, appeared to be legitimately done."
5 Ellis and Bl. 245, S.C., and 25 E. L. &
Eq. 114, Macle v. Sutherland.
The principle we think
sound, and is entirely applicable to the question before us.
A question was made upon the argument that the suit could not be
maintained upon the coupons without the production of the bonds to
which they had been attached. But the answer is that these coupons
or warrants for the interest were drawn and executed in a form and
mode for the very purpose of separating them from the bond and
thereby dispensing with the necessity of its production at the time
of the accruing of each installment of interest, and at the same
time to furnish complete evidence of the payment of the interest to
the makers of the obligation.
Some other minor points were made in the case upon the argument,
which we have considered but which it is not important should be
particularly noticed. We are satisfied the judgment below is right,
and should be
MR. JUSTICE DANIEL dissenting.
In the case of the Knox County commissioners v.
it is my opinion in the first place that the
circuit court had not jurisdiction of the cause, one of the parties
being a corporation, and secondly I think that the commissioners
being known to be a party, it was the duty of those who dealt with
them to ascertain the extent of their powers.