1. There being nothing in the Constitution of the State of New
York which makes unconstitutional an act of the legislature
authorizing the people of a town to decide whether they will donate
its bonds to a railroad company and collect taxes for the amount,
such an act (the same being enabling merely and not mandatory) is
binding.
Page 86 U. S. 84
2. Where a town, issuing bonds to which coupons or interest
warrants are attached, acknowledges in the body of the bond that
the town is indebted to the bearer or his assigns in such a sum of
money, payable at a future day named, "with interest thereon at the
rate of 7 percent, on presentation and delivery of the coupons for
the same thereto attached," it may be sued on the coupons alone,
though they may have been issued by commissioners specially made
agents of the town by the legislature, and by it charged with the
matter of issuing the securities, and not made by the ordinary town
authorities.
3. This liability of the town is not taken away by the fact that
the legislature has directed a special mode in which the money to
pay the principal and interest of the bonds is to be raised, the
directions being given to the town and county agents, and not to
the holders of the bonds or coupons.
4. An act empowered commissioners to dispose of certain town
bonds (whose issue for the benefit of a railroad company named, the
act authorized), "to such persons or corporation and upon such
terms as the commissioners should deem most advantageous for the
town, but not for less than par," and to "donate the money which
should be so raised to the railroad company." The act, however,
required that they should not "pay over any money
or
bonds" except upon certain conditions specified. The
commissioners did not sell the bonds, but handed them over to the
railroad company in discharge of the authorized donation. On suit
against the town by a
bona fide holder of the bonds,
held that there was no violation of the act by the
commissioners in what they had done.
In May, 1857, the State of New York passed
"An act to authorize the Town of Queensbury, in the County of
Warren, to issue bonds to aid in the construction of a railroad
from the Village of Glenn's Falls to interest the Saratoga &
Whitehall Railroad."
The act enacted:
"SECTION 1. On the application, in writing, of twelve or more
freeholders, residents of the Town of Queensbury, it shall be the
duty of the county judge of said county to appoint five
freeholders, residents of said town, to be commissioners of such
town to carry into effect the purposes of this act. A majority of
the said five shall constitute a quorum for the doing of any act
contemplated in this act."
"SECTION 2. It shall be lawful for the said commissioners to
borrow, on the faith of the credit of the town, $100,000 &c., .
. . at a rate of interest not exceeding 7 percent, and to
execute
Page 86 U. S. 85
bonds therefor. The bonds may be in such form as the
commissioners shall deem expedient."
"SECTION 3. The said commissioners may dispose of such bonds to
such persons or corporation and upon such terms as they shall deem
most advantageous for the town, but not for less than par, and the
money which shall be so raised shall be donated to such railroad
corporation or association as has now or shall hereafter file
articles of association to build and operate a railroad from the
Village of Glen's Falls to the Saratoga & Whitehall railroad,
its buildings and necessary appurtenances, and for no other purpose
whatsoever. For the completion of said road and the expenditure of
the sum so donated by said town, said corporation shall give full
and adequate security to said commissioners, and for the more
effectual enforcement of this act, the commissioners shall not pay
over any money or bonds to the said railroad corporation until they
have been furnished with satisfactory assurances that the sum of
$100,000 shall have been subscribed and paid in, and actually
expended in the construction and building of the said road. And
this act shall not be construed so as to make the said town a party
to this corporation, and the said town shall not be taxed hereafter
for any appropriation required for said road beside the amount
donated in the second and third sections of this act, but such
additional amount shall be raised by said corporation."
"SECTION 4. The commissioners shall report annually to the Board
of Supervisors of the County of Warren the amount required to pay
the principal and the interest on the bonds authorized to be issued
under and by virtue of this act, and it is hereby made the duty of
the board of supervisors, and they are hereby authorized and
required to cause to be assessed, levied, and collected of the real
and personal property of said Town of Queensbury, such sum of money
as shall have been reported to the said board of supervisors by the
said commissioners to be necessary, and the same when collected,
shall be paid to such commissioners and by them be applied to the
payment of the bonds, with the interest."
"SECTION 5. No money shall be borrowed or bonds issued until the
question whether or not it is expedient to borrow such money and
issue such bonds for the purpose named in this act shall have been
submitted to the
taxable electors of the Town of
Queensbury and affirmatively determined by them. "
Page 86 U. S. 86
"SECTION 8. The said company so to be formed may charge the sum
of not exceeding six cents per mile for passengers riding over said
road."
Commissioners (including among them H. R. Wing, D. Peck, and W.
A. Wait) were appointed under the act, and an election was held at
which the majority of those voting were in favor of the project.
The commissioners prepared and executed bonds to the amount
authorized, with interest warrants attached.
The bonds acknowledged
"that the Town of Queensbury was indebted to the bearer in the
sum mentioned for value received in money borrowed, payable on the
6th day of February, 1868, with interest thereon, at the rate of 7
percent,
on presentation and delivery of the coupons for the
same thereto attached."
The warrants were in this form:
image:a
No money was raised by the commissioners upon the bonds or
interest warrants, but both were delivered by the commissioners to
the railroad corporation.
One Culver was a contractor with the corporation for the
construction of its road. He received certain bonds and interest
warrants from the railroad corporation on its contract, and the
warrants not being paid he sued the Town of Queensbury in assumpsit
upon them. Plea, non-assumpsit. The warrants sued on were detached
from the bonds.
Page 86 U. S. 87
The counsel for the defendant requested the court to give
various instructions, as:
1st. That the act was in violation of the Constitutions of New
York and of the United States.
2d. That if valid, assumpsit would not lie against the town on
the interest warrants sued on, they not purporting to be made or
issued by or in behalf of the town and the town not being liable in
assumpsit on them.
3d. That the only remedy to enforce the payment by the town was
to compel an assessment, collection, and payment such as was
contemplated by the fourth section of the act.
4th. That in delivering the bonds and warrants to the railroad
company as they had done, the commissioners had not disposed of
them or raised money on them at not less than par as the statute
required them to do; and that they had thus violated the
statute.
The court refused all of these requests for instructions or to
nonsuit the plaintiff, and verdict and judgment having gone
accordingly for him, the Town of Queensbury brought the case
here.
Page 86 U. S. 90
MR. JUSTICE STRONG delivered the opinion of the Court.
In view of the numerous decisions made by the highest courts of
most of the states, including New York, as also of those made by
this Court, it ought to be considered as settled that a state
legislature may authorize a municipal corporation to aid in the
construction of a railroad in the absence of any express
constitutional prohibition of such legislative action. There is no
such prohibition to be found in the Constitution of New York, and
the courts of that state have many times held that the legislature
has power to authorize cities and towns to subscribe for stock of a
railroad corporation, to incur indebtedness for the subscription,
and to impose taxes for the payment of the debt incurred. It is
true no case in the highest court of that state has determined the
precise question now presented -- namely whether a municipal
corporation may be empowered to donate its
Page 86 U. S. 91
bonds to a railroad company and collect taxes for the payment of
the bonds. But subscriptions for stock, equally with donations, are
outside of the ordinary purposes of such corporations, and the
design of both is the same. It is to aid in the construction or
maintenance of a public highway. It is for the promotion of a
public use. The inducement to a subscription may be greater than
the inducement to a donation. In the one case, there may be a hope
of reimbursement by the stock obtained; in the other, there can be
no such expectation. In both, however, the warrant for the exercise
of the power is the same. It may be that a mandatory statute
requiring a municipal corporation to subscribe for stock in a
railroad company, or to contribute to the construction of the
railroad of such a company is not a legitimate exercise of
legislative power, and that it is not even an act of legislation.
This was decided by the Court of Appeals of New York in the case of
People ex Rel. v. Bacheler. [
Footnote 1] But the present is no such case. The
legislative act by which the Town of Queensbury was authorized to
issue bonds in aid of the railroad from the Village of Glenn's
Falls to intersect with the Saratoga & Whitehall Railroad was
not mandatory. It was merely enabling. It authorized the issue and
donation of the bonds, if approved by a popular vote. It was a mere
grant of power upon conditions, coupled with a prescription of the
mode in which the power granted might be exercised. And that it was
a constitutional exertion of legislative power must be considered
as settled affirmatively by the decisions of this Court in
Railroad Company v. County of Otoe, [
Footnote 2] and
Olcott v. Supervisors of Fond
du Lac County. [
Footnote
3] It cannot, therefore, be maintained, as contended by the
plaintiff in error, that the statute under which the coupons in
suit were issued was transgressive of the power vested in the
legislature. If the Court of Appeals of New York had decided
otherwise, we should feel constrained to follow its decision, but
no such determination has been made.
Page 86 U. S. 92
It is next insisted that even if the statute under which the
bonds were issued be valid, an action of assumpsit cannot be
brought to recover the sums due on the coupons. The reasons given
in support of this proposition are that the coupons do not purport
to be, and that they were not, made in the name of the town, and
that the town is not liable to an action at law for the failure to
pay the instruments made and issued by the commissioners designated
by the statute. Neither of these reasons is well founded. The bonds
to which the coupons were attached do purport to bind the town.
They acknowledge that the Town of Queensbury is indebted to the
bearer or his assigns in the sum mentioned, for value received in
money borrowed, payable on the 6th day of February, 1878, "with
interest thereon at the rate of seven percent, on presentation and
delivery of the coupons for the same, thereto attached." They are
signed by the commissioners who were by the statute made agents of
the town for issuing them, and they are countersigned by the clerk
of the Town of Queensbury. The coupons attached are all headed
"Town of Queensbury Interest Warrant." They are in the form of
orders drawn upon a bank, but signed by the commissioners as
commissioners and attested by the town clerk. Very plainly,
therefore, both the bonds and the interest warrants are evidence of
indebtedness by the town. They appear to have been issued in strict
compliance with all the requisitions of the statute. It is vain to
say the statute imposed no duty upon the town or its officers. No
one can doubt that it is competent for the legislature to determine
by what agents a municipal corporation shall exert its powers. The
statute in question did designate the agents, and their acts,
within the authority conferred, are binding upon their principal,
upon the town of which they had been constituted the agents.
Equally untenable is the position that an action at law is not
maintainable because the holders of the bonds and coupons are
entitled only to that remedy for a default of payment which is
provided by the statute. There are cases, it is true, which hold
that where a statute creates a right
Page 86 U. S. 93
and enjoins a duty, nothing may be done agreeably to the
provisions of the common law to enforce the duty or assert the
right further than is necessary to give effect to the statute. But
we do not perceive that this principle has any bearing upon the
present case. The fourth section of the act requires the
commissioners designated as the agents of the town to report
annually to the board of supervisors of the county the amount
required to pay the principal and interest on the bonds authorized
to be issued, and makes it the duty of the supervisors to assess,
levy, and collect of the real and personal property of the Town of
Queensbury such sum or sums of money as shall have been reported to
them by the commissioners. The money thus collected the supervisors
are required to pay to the commissioners, to be applied by them to
the payment of the bonds and interest. These are all directions
given to the town and county officers and agents -- not to the
holders of the bonds and coupons. They prescribe duties to be
performed after the amount of the debt due by the town has been
ascertained, either by agreement or by judgment. That amount may be
contested. It has been in this case. It could only be determined by
an action at law. Only after such a determination could the
commissioners report how much was required to be levied by
taxation. The action, then, does not take the place of any remedy
provided by the legislature. At most, it is a step to give effect
to the statutory provision.
The only other error assigned which requires notice is that the
court refused to direct a verdict for the defendants because the
bonds were not disposed of by the commissioners at not less than
par, because no money was received for them by the commissioners,
and because they were delivered directly to the railroad company.
But a delivery to the railroad company was plainly authorized by
the Act of the legislature. True, the commissioners were not at
liberty to dispose of them for less than their par value, and they
did not. Had they done so and had the plaintiff not been a holder
-- without notice and for a valuable consideration -- there might
have been a defense to the action. The third section, however,
Page 86 U. S. 94
empowered the commissioners to "dispose of the bonds to such
persons or corporation as they should deem most advantageous for
the town, but not for less than par." And it required them not to
pay over "any money or bonds" to the railroad corporation until
certain satisfactory assurances should be furnished them. Thus it
appears that delivery of the bonds to the railroad company was
contemplated and authorized.
There is therefore no error in the record, and the judgment
is
Affirmed.
[
Footnote 1]
8 Albany Law Journal 120.
[
Footnote 2]
83 U. S. 16 Wall.
667.
[
Footnote 3]
83 U. S. 16 Wall.
678.
