1. Acts of incorporation and other statutes granting special
privileges are to be construed strictly, and whatever is not given
in unequivocal terms is withheld.
2. But this principle must be applied with reference to the
subject matter as a whole, and not in such manner as to defeat the
general intent of the legislature.
3. A county or other municipal corporation being authorized by
statute to borrow money and issue bonds for the payment thereof, if
the bonds be made and delivered reciting the facts, which show them
to have been regularly issued, the county is estopped to deny their
regularity or to assert that they were not made in conformity to
the statute.
4. Such bonds, with interest warrants annexed, are commercial
securities; the holder of them has a full title, and as against one
who has taken them in good faith, the county cannot set up the
equities which might have been available against the original
payee.
MR. JUSTICE WAYNE.
This cause has been fully argued. It is an action to recover the
interest in arrears on coupons annexed to bonds which were issued
by Miami County, payable to the Peru & Indianapolis Railroad
Company or bearer, and which is declared in the bonds to be given
for a loan of money. We
Page 67 U. S. 723
are relieved from the task of considering several of the
arguments of counsel and the pleadings on the record, believing, as
we do, that the defendants are estopped from denying the
declarations as to the purpose and cause for which the bonds were
issued, and that the coupon holders had a right to infer from the
face of the bonds that they had been regularly issued by the County
of Miami.
It is not a new case to this Court, either in its facts or the
principle involved. The object of this Court has been in cases of a
like kind, and it is still its purpose, to give to the contracts of
counties for the purchase of railroad stocks and for borrowing
money, to aid in the construction of railroads and other internal
improvements, a strict interpretation of the legislative acts
empowering them to do one or the other; but at the same time to
give protection to the
bona fide holders of such contracts
as have been put on sale in the money market, by corporations or by
counties acting corporately, against their efforts to be relieved
from the responsibilities of official acts, in putting such papers
into circulation, for capitalists to invest money in them, on
assurances that the principal and interest would be paid
accordingly.
We repeat now, as appropriate to the subject matter of the case
in hand, as it was in the case in which this Court said it, that
corporations are as strongly bound as individuals are to a careful
adherence to truth in their dealings with mankind, and that they
cannot by their representations or silence involve others in
onerous engagements, and then defeat the calculations and claims
their own conduct had superinduced.
Zabriskie v. Cleveland,
Columbus & Cincinnati Railroad Company, 23 How.
400. In our construction of the act of Pennsylvania to incorporate
the Northwestern Railroad Company, the Court said, that neither
privileges, powers, nor authorities, can pass, unless they are
given in unambiguous words, and that an act giving special
privileges must be construed strictly. That in case a sentence is
capable of having two meanings, a construction must be given
favorable to the public. However, that in applying those principles
of construction, it must be done with reference to the
Page 67 U. S. 724
subject matter contemplated by the legislature as a whole, so as
not to allow its manifest purpose and design to be defeated by
denying the use of means by which the main object could only be
accomplished.
In our leading case upon the subject, that of the
Commissioners of Knox County
v. Aspinwall, 21 How. 539, the suit having been
brought for the interest due upon coupons annexed to one hundred
and forty-two bonds, in which the main ground of defense was that a
board of commissioners had not power to execute them, and that on
such account they we e not binding upon the County of Knox, our
answer and judgment was that the bonds on their face import a
compliance with the law under which they were issued, and that the
purchasers of them were not bound to look further for evidence of a
compliance with the conditions annexed to the grant of power to
issue them.
In confirmation of such conclusion, we then cited the case of
the
Royal British Bank v. Tarward, 6 Ellis &
Blackburne 327, decided in 1856 in the Exchequer Chambers, in error
from the Court of Queen's Bench, the decision of which we will now
give in full, on account of the principle and its peculiar
application to the pleadings in the case before us. Jervis,
C.J.
"I am of the opinion that the judgment of the Court of Queen's
Bench ought to be affirmed. I am inclined to think the question
which has been principally argued, both here and in that court,
does not necessarily arise, and need not be determined. My
impression is, though I will not state it is a fixed opinion, that
the resolution set forth in the replication goes far enough to
satisfy the requisites of the deed of settlement. The deed allows
the directors to borrow on bond such sums of money as shall, from
time to time, by a resolution passed at a general meeting of the
company, be authorized to be borrowed, and the replication shows a
resolution passed at a general meeting authorizing the directors to
borrow on bond such sums for such periods and rates of interest as
they might deem expedient, in accordance with the deed of
settlement and the act of Parliament; but the resolution does not
otherwise define the amount to be borrowed. That seems to me to be
enough. If that be so, the other question
Page 67 U. S. 725
does not arise. But whether it be so or not, we need not decide,
for it seems to us that the plea, whether we consider it a
confession and avoidance, or a special
non est factum,
does not raise any objection to the advance as against the company.
We may here take 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 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 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."
At an ensuing term of this Court, we had under consideration the
case of
Bissell v. City of Jeffersonville, and it was
fully discussed by us in connection with the English and our own
case of
Aspinwall &c. We said there:
"When the contract has been ratified and affirmed, and the bond
issued and delivered to the railroad company in exchange for stock,
it was then too late to call in question the fact determined by the
common council -- and
a fortiori it is too late to raise
that question in a case like the present, where it is shown that
the plaintiffs are holders for value. Certified copies of the
proceedings were exhibited to the plaintiffs at the time they
received the bonds &c., and whether we look to the bonds or
recorded proceedings, there is nothing to indicate any
irregularity, or to raise a suspicion that the bonds had not been
issued pursuant to lawful authority. We hold that the company and
its assigns, under the circumstances of the case, had a right to
assume that they imported verity."
It would be difficult to find cases more controlling of that
before us than those which have just been cited.
The same ruling was made by the court in the case of the
Commissioners of the County of
Knox v. Wallace, 21 How. 546. It was substantially
repeated in
Aspinwall v. Commissioners of the County of
Davis. That was brought to this Court from the Circuit Court
of Indiana upon a certificate of a
Page 67 U. S. 726
division of opinion between the judges. The points were, whether
by the act of incorporation of the Ohio & Mississippi Railroad,
and the amendments to it of January, 1849, and right to county
subscriptions had been vested in the company, to exclude the
operation of the Constitution of Indiana, which took effect on the
1st of November, 1851, and whether the railroad company had
acquired any such right to subscription of the defendant as was
protected by the constitution of the state. Both question were
answered negatively. But we said it was done reluctantly, for the
subscriptions to the stock by the board of commissioners were made
in good faith to the railroad company, and also sold by it, and
purchased by the plaintiff in confidence of their validity.
With these cases on our minds, we will now proceed to give the
facts and circumstances of the present case, that it may be seen
whether there is anything in them to take it out of our
decisions.
The abstracts of it by both counsel, are so similar that either
may be used without giving to the other any advantage.
It is an action of assumpsit, brought by the plaintiff in error,
on interest warrants or coupons, annexed to fifteen bonds of the
County of Miami for $1,000 each, bearing date the 21st of August,
1851, redeemable in ten years from the 1st of September following.
The bonds were payable to the Peru & Indianapolis Railroad
Company, or bearer, at the office of the Treasurer of Miami County,
in Peru, bearing an interest of ten percent per annum, payable
semiannually at the same place. The suit is for a failure to pay
coupons for the years 1857 and 1858, amounting to $3,000, the
interest accrued before having been paid by the railroad company.
It is averred in the declaration that the bonds had been issued by
Miami County, in pursuance of powers conferred on its board of
commissioners by the laws of Indiana, and particularly by an Act
approved January 6, 1849, entitled an act to authorize the
Commissioners of Hamilton, Miami, and Tipton Counties to borrow
money. Howard County was afterwards permitted to borrow money. The
language of the act authorizes the loaning of
Page 67 U. S. 727
money to the board to any amount not exceeding $50,000, from
time to time, at any rate of interest, not more than ten percent
per annum. The second section is that all persons loaning money to
the counties or either of them, are authorized to receive any rate
of interest upon such loans as may be agreed upon, not exceeding
ten percentum.
The Peru & Indianapolis Railroad Company was incorporated in
January, 1846. The 28th section of the charter authorizes the
county commissioners of each county through which the road shall
pass to take, by an order for either county, as much stock in it as
they may think proper. After the act permitting the counties to
borrow money had been passed, the railroad company, urged by the
condition of its finances, appointed a committed to apply to the
auditors of the Counties of Hamilton, Miami, and Howard to call
special sessions of the boards of the commissioners of their
respective counties to consider proposals which they wished to
make. In a meeting afterwards held, the committee stated that they
were required to ask from the counties additional subscriptions to
the stock of the railroad company. From the Counties of Hamilton
and Miami respectively, twenty thousand dollars, and from Howard
County ten thousand dollars. The committee then said that their
subscriptions would be received, if the respective counties would
issue bonds bearing ten percent interest per annum, redeemable in
ten years, with coupons annexed to them, which the railroad would
receive if the bonds were made payable to the company, or bearer,
for the purpose of borrowing money upon them, to be applied to the
payment of the stock which either of the counties should subscribe
for. As a further inducement to the counties to do so, the
committee stated that upon the subscription being made, and the
bonds being issued, that the railroad would issue stock to the
county for its subscription, credited in full to the amount of its
bonds; and for the issue of the bonds, that the president of the
railroad would execute an obligation binding the company to pay the
interest annually upon the bonds as it became due, until the
principal became payable and then the principal also; but that
when
Page 67 U. S. 728
both principal and interest had been paid by the railroad
company, that the counties would return to it the stock
certificates which they had received when the bonds were issued if
it did not with to retain it. And it was further agreed between the
parties, if the counties, or either of them, should at any time
before the redemption of the county bonds by the railroad company
elect to surrender to it its obligation, and assume the payment of
the interest that shall accrue afterwards, and the principal also
when it became due, that the stock issued to the counties should
become absolute in their favor, entitling them to all future
dividends on the stock. But that until such assumption had been
undertaken and performed, that the stock was merely to be held as a
security by the counties for the performance of the stipulation of
the railroad company, but not entitling them to dividends, though
it would give them the right to vote the stock in elections for
directors. These proposals were considered by the Auditor and Board
of Commissioners of Miami County. It resulted in an issue by them
of twenty bonds, one thousand dollars each, in which it is declared
in the bonds
"that there is due to the president and directors of the Peru
& Indianapolis railroad company, or bearer, one thousand
dollars from the County of Miami, payable in ten years from the
first of September, 1851,"
this bond being issued for a loan of the amount to the county,
as authorized by an act of the State of Indiana, permitting the
Commissioners of Hamilton, Miami and Tipton Counties to borrow
money. The coupons or interest warrants annexed to the bonds are in
these words:
"AUDITOR'S OFFICE, Miami County, Peru, Indiana"
"The Treasurer of said county will pay the legal holder hereof
one hundred dollars on the first day of September, 1857, on
presentation thereof, being for interest due on the obligation of
said county, No. 16, given to the Peru and Indianapolis railroad
company. By other of the commissioners."
"IRA MENDENHALL,
County Auditor"
The interest warrants, payable on the 1st September, 1858, are
like the preceding, and others of the same kind, are annexed to the
other fifteen bonds legally held by the plaintiff in error.
Page 67 U. S. 729
The bonds were delivered to the railroad company, were received
by it in payment of the certificate of stock, and the County of
Miami was credited with $20,000 upon the certificate. The railroad
company then offered them for sale, transferred them to purchasers
as commercial securities by endorsement, and the plaintiff in error
bought them in the full confidence that the consideration for which
they had been issued was truly expressed on the face of the bonds.
The county retained the stock certificate and voted it on the
election for directors as its own. Thus matters stood between the
railroad company and the County of Miami, both being satisfied with
what had been done, and that they had acted conformably to their
respective powers, until the railroad ceased to pay to the holders
the interest warrants.
Upon the trial of the case, the defendants filed a plea of
non-assumpsit, and the plaintiff joined issue by a
similiter. At the same time the defendants put in several pleas,
affirming that several irregularities had been committed by the
Board of Commissioners of Miami County and the railroad company, in
their negotiation and proceedings for the issue of the bonds and
interest warrants, by the force of which it is declared that the
bonds were void at law, and that they were purchased by the
plaintiff with notice of these irregularities.
We have examined these pleas critically, and find the facts
stated in each to be imputations, only calculated to raise supposed
equities between Miami County and the railroad company, in which
the plaintiffs in error, as the legal holders of the bonds and
coupons, can in no event have any concern, even if it be admitted
that they had notice of such irregularities when they bought, as
all of them relate to circumstances contradictory to the
declarations upon the face of the bonds.
Though the proposals, or contract as it is termed in the record,
for additional subscriptions of stock are confusedly expressed,
there can be no doubt that it was its intention to solicit
subscriptions, and that it was so understood by the Board of
Commissioners of Miami County when it issued the bonds, and that in
furtherance of such purpose, the parties proceeded to devise
the
Page 67 U. S. 730
means to pay for the subscription by borrowing money. In doing
that there was nothing irregular in the transaction. Both parties
seem to us to have acted within their respective powers; the
railroad within its charter to allow the counties to subscribe for
stock in it, and the County of Miami to do so and according to the
power given to it to borrow money. When the Railroad undertook to
pay the interest upon the Treasury bonds and the principal also
when that became due, it was substantially a loan to the county
from the time of the execution of the bonds until their maturity,
though it was provided that the county might then upon the
cancellation of these bonds decline to return the certificate of
stock which had been issued to it.
The narrative of the negotiation which led to the issue of the
bonds and interest warrants, brings the case, by the declaration in
the bond as to the object and purpose for which they were issued,
to entirely within that we have shown to the law in such cases as
to the inference which may be made from the face of the bond, of
its having been regularly executed by the party having authority to
do it, that we are relieved from the task of considering much of
the argument made to us by counsel; and from examining the special
pleas which were put in by the defendant, or the reasoning of the
court upon the third and fourth pleas upon which it rested its
judgment for the dismissal of the plaintiff's case. If the contract
and bonds are considered in connection with the authority of the
Board of Commissioners of Miami County to issue them, it must be
obvious that several of the points presented to us by the counsel
of the defendant do not arise in the case. For instance, whether
the Board of Commissioners of Miami County had power to issue them
at the time and for the purpose for which in was done, or that the
bonds and interest warrants, by having been endorsed to the
plaintiff by the railroad company were subjected to the revised
statutes of Indiana, making certain promissory notes &c.,
negotiable by endorsement thereon, so as to vest the interest in
the contract to the assignee, and permitting the obligor to set up
any defense to the obligation against the assignee, that he could
have done against the original obligee, or that it was necessary to
them
Page 67 U. S. 731
that the bonds were issued by virtue of a special statute, and
if that did not exist, that the bonds may be held to be void.
It is true that all of these points were as well argued by the
counsel of the defendants as the circumstances of the case
permitted, but in the every instance, either of argument or of
pleading, the point of estoppel, as made by the plaintiff's counsel
in the court below, and renewed here by him with vigor by the
citation of many cases, was not directly met by the counsel of the
defendant. The first point of the plaintiff's counsel was that even
if the bonds had been issued irregularly, and not in strict
conformity with the power of the county to borrow money, that the
defendant is, nevertheless, estopped by the bonds themselves,
which, on their face, express that they were issued for a loan of
the amount to the county, as authorized by the act of the general
assembly to borrow money, and that such bonds being habitually
received and passed as commercial securities, and being
bona
fide in the hands of the plaintiff, that they were entitled to
recover the amount of interest sued for, notwithstanding there
might be equities between the original parties to the transaction.
It is not necessary for us to follow out the plaintiff's argument
in this particular, thinking it, as we do, conclusive. We think
that the bonds in this case, with interest warrants annexed, are
commercial securities, though they are not in the accustomed forms
of promissory notes or bills of exchange; that the parties intended
them to be passed from hand to hand to raise money upon them, so
that a full title was intended to be conferred on any person who
became the legal holder of them, and that the original maker under
such circumstances has no equity to prevent the recovery of the
interest.
But the real point in this case, as made by the counsel of the
plaintiff in error, and sustained in argument by numerous
adjudicated cases, was that as it is declared in the bonds that
they were issued by the Board of Commissioners of Miami County by
order or resolution, pursuant to the statute authorizing the County
to borrow money, passed at a regular meeting of the Board, to be
used by the Peru and Indianapolis Railroad, payable to the company,
or bearer, for a loan to the county; that
Page 67 U. S. 732
the
bona fide holders of the bonds, whether so by
endorsement or delivery, had a right to infer that the bonds had
been lawfully issued, by which the County of Miami is estopped in a
suit for the recovery of the interest from denying by pleas that
its bonds had been issued to the Peru & Indianapolis Railroad
for a loan of money to the County of Miami. We think and adjudge
that the recitals in the bonds are conclusive, constituting an
estoppel
in pais upon the defendants in this suit. In
support of this conclusion, we cite the following cases:
Girard
v. Bradley, 7 Ind. ยง 600;
Reeves v. Andrews, ibid.,
207;
Frances v. Porter, 213;
May v. Johnson, 3
Ind. 448;
Trimble v. State, 4 Black 435; 8 Blackford 258;
Ryan v. Vanladingham, 7 Ind. 416;
65 U. S. 24
How. 375;
64 U. S. 23 How.
381; 29 Conn.;
Society of Saving v. City of New London,
103; 1 Ves.Sr. 123, 8 Blackf. 47. It is the opinion of this Court
that the defendant is estopped from setting up the defenses taken
as set forth in the transcript of the record of this case, and that
the judgment of the court below sustaining the demurrer should be,
and is hereby reversed and annulled, and that the case should be
remanded to that court, with directions to award a
venire
facias de novo.