The charter of the Ohio & Mississippi Railroad Company,
passed by the Legislature of Indiana in 1848, and a supplement in
1849, authorized the county
Page 63 U. S. 365
commissioners of a county through which the road passed to
subscribe for stock and issue bonds provided a majority of the
qualified voters of the county voted, on the 1st of March, 1849,
that this should be done.
The election was held on the appointed day, and a majority of
the voters voted that the subscription should be made.
But before the subscription was made, the state adopted a new
constitution, which went into effect on the 1st November, 1851. One
of the articles prohibited such subscriptions unless paid for in
cash, and prohibited also a county from loaning its credit or
borrowing money to pay such subscriptions.
In 1852, the County Commissioners of Daviess County subscribed
for stock in the railroad company, and issued their bonds for the
amount.
The provisions of the railroad charter authorizing the
commissioners to subscribe conferred a power upon a public
corporation or civil institution of government which could be
modified, changed, enlarged, or restrained, by the legislative
authority, the charter not importing a contract within the meaning
of the clause of the Constitution prohibiting a state from passing
a law impairing the obligation of contracts.
The mere vote to subscribe did not of itself form such a
contract with the railroad company as would be protected by the
10th section of the 1st article of the Constitution of the United
States. Until the subscription was actually made, the contract was
unexecuted.
The bonds were issued in violation of the Constitution of
Indiana, and are therefore void.
The nature of the case and the certificate of division in
opinion are stated in the opinion of the Court.
Page 63 U. S. 374
MR. JUSTICE NELSON delivered the opinion of the Court.
The suit was brought by the plaintiffs against the Board of
Commissioners of the County of Daviess to recover two installments
of interest accruing upon certain bonds issued by the board for
stock subscribed to the Ohio & Mississippi Railroad Company,
and on the hearing, the following questions arose, upon which the
judges of the court divided in opinion:
1. Whether, by the said act of incorporation of the said
railroad company, and the amendment thereto of January 15, 1849,
any such right to county subscriptions vested in said company as
would exclude the operation of the new Constitution
Page 63 U. S. 375
of Indiana, which took effect on the 1st day of November,
1851.
2. Whether, by virtue of the said acts and of the said election
in the declaration set forth, the Ohio & Mississippi Railroad
Company acquired any such right to the subscription of the
defendants as would be protected by the Constitution of the United
States against the new Constitution of Indiana, which took effect
on the 1st day of November, 1851.
The charter of the railroad company, passed February 14, 1848,
provides that it should be lawful for the county commissioners
through which the road passed to subscribe for stock on behalf of
the county, at any time within five years after the opening of the
books of subscription, if a majority of the qualified voters of
said county, at an annual election, shall vote for the same.
The amended Act of January 15, 1849, made the holding of the
election in the county peremptory on the first Monday of March then
next, to determine the question of subscription or not to the
stock.
The election was held in pursuance of this law, and a majority
of the votes of the county cast in favor of the subscription. This
was on the first Monday of March, 1849, and on the 10th September,
1852, the board of commissioners, in pursuance of the acts and of
election aforesaid, subscribed for six hundred shares of the stock
of the railroad company, of the value of $50 per share, in the
whole amounting to $30,000, and in payment of said stock issued
thirty bonds, of $1,000 each, duly signed and sealed by the
president of the board of commissioners and attested by the auditor
of the county, and delivered the same to the president and
directors of the railroad company. By the terms of the obligations,
they were made payable at the North River Bank in the City of New
York, twenty-five years from date, to the railroad company or
bearer, with interest at the rate of six percent per annum, payable
annually on the 1st March, at the bank aforesaid, upon the
presentation and delivery of the proper coupons attached, signed by
the auditor of the said county. The plaintiffs are the holders and
owners of sixty of these coupons.
Page 63 U. S. 376
The new Constitution of the State of Indiana contains the
following provision:
"No county shall subscribe for stock in any incorporated company
unless the same be paid for at the time of such subscription, nor
shall any county loan its credit to any incorporated company, nor
borrow money for the purpose of taking stock in any such
company."
Sec. 6, art. 10, Constitution of Indiana.
This Constitution took effect on the 1st November, 1851. The
subscription was not made nor bonds issued by the board of
commissioners of the county, as we have seen, until the 10th
September, 1852. The question therefore arises whether the
subscription and bonds, thus made and issued after the Constitution
went into effect, were not forbidden by the 6th section of the 10th
article above cited, and therefore null and void.
The precise question first presented by the court below, upon
which the judges divided, is as follows:
Whether, by the said act of incorporation of said railroad
company, and the amendment thereto of January 15, 1849, any such
right to county subscriptions vested in said company as would
exclude the operation of the new Constitution of Indiana, which
took effect on the 1st November, 1851.
The question admits, at least by implication, that this sixth
section of the Constitution applies to the acts of the board of
commissioners in making the subscription and issuing the bonds, but
presents the question whether, at the time it went into effect,
there was not such a right to the subscription and bonds vested in
the railroad company as could be upheld notwithstanding the
constitutional prohibition?
This view is sought to be sustained by force of the 10th section
of the 1st article of the Constitution of the United States, which
provides that no state shall pass any law "impairing the obligation
of contracts."
The argument is that the provisions in the railroad charter and
amendment, conferring power upon the board of commissioners of the
county and making it their duty to subscribe for stock and issue
bonds therefor if a majority of the qualified
Page 63 U. S. 377
voters of the county should determine at an election in favor of
the same, import a contract with the railroad company on behalf of
the state which is protected by the clause referred to in the
Constitution of the United States, and hence the state
constitutional prohibition is inoperative to annul the subscription
or the bonds. That this right to the subscription and bonds,
resting upon a contract in the charter, is unaffected by any
subsequent statute or organic law of the state.
Without stopping to inquire whether or not the power conferred
upon the board of commissioners in the charter and amendments of
the railroad company, in the form and with the conditions therein
mentioned, constitutes a contract, the Court is of opinion that in
view of the body upon which the power is conferred and of the
nature of the power itself, no such contract existed, if any, as is
contemplated by this clause of the federal Constitution. The power
or authority contained in the charter, and out of which the right
in question is claimed to arise, is conferred upon the county, a
public corporation or civil institution of government, and upon
public officers employed in administering its laws, and the power
or authority itself concerns this body in its public political
capacity.
Chief Justice Marshall observed, in
Dartmouth College v.
Woodward, 4 Wheat. 627, that the word "contract,"
in its broadest sense, would comprehend the political relations
between the government and its citizens; would extend to offices
held within a state for state purposes and to many of those laws
concerning civil institutions which must change with circumstances
and be modified by ordinary legislation, which deeply concern the
public, and which, to preserve good government, the public judgment
must control. But, he observes, the framers of the Constitution did
not intend to restrain the states in the regulation of their civil
institutions adopted for internal government, and that the
instrument they have given us is not to be so construed, p.
17 U. S. 629.
And Mr. Justice Washington observed, in the same case, p.
17 U. S. 663,
in respect to public corporations, which exist only for public
purposes, such as towns, cities &c., the legislature may, under
proper limitations,
Page 63 U. S. 378
change, modify, enlarge, or restrain them, securing, however,
the property for the use of those for whom and at whose expense it
was purchased.
See also pages
17 U. S.
693-694
It would be difficult to mention a subject of legislation of
more public concern or in a greater degree affecting the good
government of the county than that involved in the present inquiry.
The power conferred upon the board of commissioners by the
provisions in the charter, among other things, embraced the power
of taxation, this being the ultimate resort of paying both the
principal and interest of the debt to be incurred in the
subscription and issuing of the bonds.
The second question presented upon which the judges differed is
as follows:
Whether, by virtue of said acts, and of the said election in the
declaration set forth, the Ohio & Mississippi Railroad Company
acquired any such right to the subscription of the defendants as
would be protected by the Constitution of the United States against
the new Constitution of Indiana, which took effect the 1st
November, 1851.
The acts of 1848 and 1849, already referred to, made it the duty
of the board of commissioners to subscribe for the stock if a
majority of the qualified voters at an election determined in favor
of the subscription.
The election took place on the first Monday of March, 1849, when
a majority of the votes was cast for the subscription. The
Constitution of Indiana took effect 1 November, 1851. But the
subscription was not made till the 10th September, 1852, and the
bonds were issued after this date. It is insisted that the contract
of subscription became complete when, at the election, a majority
of the votes was cast in its favor, and did not require the form of
a subscription on the books for the stock of the railroad company
to make it obligatory upon the parties, and which, if true, it is
agreed the contract would be protected within the Constitution of
the United States, as it would then have been complete before the
constitutional prohibition of Indiana. But the Court is unable to
concur in this view. It holds that a subscription was necessary to
create a contract binding upon the county, on one side, to take
the
Page 63 U. S. 379
stock and pay in the bonds, and upon the other to transfer the
stock and receive the bonds for the same. Until the subscription is
made, the contract is unexecuted, and obligatory upon neither
party.
We have arrived at the conclusion that both of the questions
presented to us by the court below must be answered in the negative
with some reluctance, as for aught that appears in the case, the
subscription to the stock by the board of commissioners was made
and the bonds issued in good faith to the railroad company, and
also sold by it, and purchased by the plaintiff in confidence of
their validity; but after the best consideration the Court has been
able to give the case it has been compelled to hold, for the
reasons above stated, that the subscription was made and the bonds
issued in violation of the Constitution of Indiana, and therefore
without authority and void.
We have not been able to find that the courts of Indiana have
passed upon this clause of their constitution, and have therefore
been obliged to expound it with the best lights before us. We
should have felt very much relieved if a construction had been
given to it by the judicial authorities of the state, and have
readily followed it.
ORDER
This cause came on to be heard on the transcript of the record
from the Circuit Court of the United States for the District of
Indiana, and on the points or questions on which the judges of the
said circuit court were opposed in opinion, and which were
certified to this Court for its opinion agreeably to the act of
Congress in such case made and provided, and was argued by counsel.
On consideration whereof, it is the opinion of this Court:
1. That by the act of incorporation of the Ohio &
Mississippi Railroad Company of the 14th February, 1848, and the
amendment thereto of January 15, 1849, no such right to county
subscriptions vested in said company as excluded the operation of
the new Constitution of Indiana, which took effect on the 1st day
of November, 1851.
Page 63 U. S. 380
2. That by the virtue of the said acts and of the said election
in the declaration set forth, the Ohio & Mississippi Railroad
Company acquired no such right to the subscription of the
defendants as would be protected by the Constitution of the United
States against the new Constitution of Indiana, which took effect
on the 1st day of November, 1851. Whereupon it is now here ordered
and adjudged by this Court, that it be so certified to the said
circuit court.