Bissell v. Township of Spring Valley (110 U.S. 162)/Opinion of the Court

ontends that this judgment is erroneous on several grounds, which we proceed to consider in their order.

1. It is claimed, in the first place, that the defense is not sufficient, because the signature of the county clerk is not essential to the validity of the bonds, nor that the county seal should have been affixed thereto by him. The statute of Kansas, (Laws Kan. 1870, c. 90, p. 189,) under which the bonds in question purport to have been issued, contains the following provisions:

'Section 1. Whenever fifty of the qualified voters, they     being freeholders, of any municipal township in any county in      the state, shall petition in writing the board of county      commissioners of such county to submit to the qualified voters of such      township a proposition to take stock, in the name of such      township, in any railroad proposed to be constructed into or      through such township, and shall in such petition designate      the railroad company and the amount of stock proposed to be      taken, and the mode and terms of payment for the same,      together with the conditions of such subscription, if any, it      shall be the duty of such board of county commissioners to      cause an election to be held by the qualified voters of such      township, to determine whether such subscription shall be      made: provided, that the amount of bonds voted by any      township shall not be above such an amount as will require a      levy of more than one per cent. per annum on the taxable     property of such township to pay the yearly interest on the      amount of bonds issued.

'Sec. 5. If three-fifths of the electors voting at such     election vote for the subscription of the stock, the board of      county commissioners shall order the county clerk to make      such subscription in the name of the township, and shall      cause such bonds as may be required by the terms of said vote      and subscription to be issued in the name of such township to      be signed by the chairman of the board, and attested by the      clerk, under the seal of the county: provided, that the      commissioners shall not cause such bonds to be issued until      the railroad shall have been completed through the township      voting such bonds, or to such point in said township as may      be conditioned in said bonds.'

It is argued, as the board of county commissioners is the prescribed authority which orders every step to be taken to issue the bonds, and as the clerk acts only as directed by it, and signs and seals the bonds merely as a witness of its orders and acts, that it is only what that board does and directs which becomes important, and that if it issues bonds with the name of the clerk signed and the seal of the county attached, it is not material whether the clerk writes his name or affixes the seal, or whether it is done by another. It is alleged in the petition that the defendant corporation, the municipal township, made, issued, and delivered the bonds on which the suit is founded, and that it was done under, and in pursuance of, an order of the board of county commissioners of the county of Cherokee. But it is sufficient to say, that the power of the board of county commissioners to bind the township is conferred by the statute to be exercised only in the mode pointed out, and the attesting signature of the clerk is as material to the integrity and validity of the bonds as is that of the chairman of the board of county commissioners. The township had no power to bind itself for the purpose of aiding in the construction of a railroad, by subscription to its capital stock and the issue of bonds to pay for the same, except as authorized by this statute; the board of county commissioners of the county did not represent the township for any other purpose, and could not execute its power to issue bonds by instruments not conforming to the substantial requirements of the law. That law required the bonds to be executed in a particular manner, and the signature of the clerk is essential to the valid execution of them, even though he had no discretion to withhold it. Anthony v. County of Jasper, 101 U.S. 693-697; McGarrahan v. Mining Co. 96 U.S. 316. Admitting that the board could cause his signature to be affixed, without his assent, by another specially or generally appointed to do so; still, that it was so affixed in the present case does not appear as matter of fact, and if the fact could be supplied by supposition, the signature would still, in law, be the signature of the clerk. But the answer denies that fact, and the demurrer admits the truth of the denial. So that the defense set forth in the answer is, in law, that the bonds sued on are not the bonds of the township, and that is admitted by the demurrer to be true.

2. This disposes of the second ground of the contention of the plaintiff in error, which is that the township defendant is estopped by the bonds, and the recitals contained in them, to dispute their validity. But there can be no ground for such an estoppel, unless the bonds, which are supposed to effect it, are the bonds of the defendant. We have just seen that, by the pleadings, they are admitted not to be such; and the position of the plaintiff in error is not improved by the supposition that he is an innocent holder for value. If the bonds are not the act and deed of the defendant, they do not bind it at all, and cannot be made obligatory by their own contents.

3. It is argued, however, finally, that the defendant township is estopped to dispute the validity and obligation of these bonds by the fact and certificate of registration. The statute of Kansas, (Laws Kan. 1872, c. 68, p. 110,) to authorize counties, etc., to issue bonds, and providing for their registration, etc., contained ample and specific provisions, according to which municipal corporations were authorized to lend their credit to aid in the construction of works of internal improvement. It required that when bonds were to be issued for such purpose, the opfficers of the municipal body making them, should deliver them in the first instance to the treasurer of the state, to be held by him in escrow, or to an agent agreed on, until full compliance with the conditions of the agreement on which they were to issue, when the treasurer or agent was required to deliver them to the parties entitled to them. The officers of the municipal corporation were also required to make registration thereof, in a book kept for that purpose, and to certify a statement of the same to the auditor of the state; and, if within 30 days after their issue the holder of such bonds should present them to the auditor of state for registration, he was required, upon being satisfied that such bonds had been issued according to the act, and that the signatures thereto of the officers signing the same were genuine, to register the same in his office, in a book kept for that purpose, in the same manner that such bonds were required to be registered by the officers issuing the same, and also, to certify upon such bonds the fact that they had been regularly and legally issued, that the signatures thereto were genuine, and that such bonds had been registered in his office according to law. The act also makes provision for the registration of bonds not issued under it, but issued either before its enactment or in pursuance of agreements entered into before it took effect. The fifteenth section is as follows:

'Sec. 15. That the holder of bonds heretofore issued, or that may hereafter be issued, in pursuance of any contract     heretofore made under any law of this state, may have the      benefits of this act by having such bonds registered in the      office of said auditor of state as provided herein for the      registration of bonds (issued) by virtue hereof. It shall be     the duty of the auditor of state, upon the registration of      any bonds not issued under the provisions of this act, within      ten days thereafter, to notify the officers issuing the same      of such registration, which fact shall be entered by such      officers in a book wherein the record of such bonds is kept,      and such bonds shall thereafter be considered registered      bonds.'

Under this section it is claimed that the bonds sued on were registered, having been issued prior to the passage of the registration act of 1872; and it is insisted, upon the authority of the case of Lewis v. Com'rs Barbour Co. 105 U.S. 739, that the registration is conclusive of their validity, as against the defense made in the answer. It is shown, however, by a comparison of the fifteenth section with the other sections of the act in reference to registration, that distinct and diverse provisions are made for different classes of bonds,-those issued under the act and those previously issued or agreed to be issued under prior acts. As to the former class, the bonds authorized are to be registered, in the first instance, according to the mandate of the twelfth section, by the officers of the municipality acting in that behalf, who are required to transmit to the auditor of state a certified statement of the number, amount, and character of the bonds so issued, to whom issued, and for what purpose, which statement is required to be attested by the clerk of the municipal corporation issuing the same under its corporate seal. The registration thus provided for consists of two parts,-that which is recorded by the officers of the corporation in their books, and that which the auditor records in his own,-and in that case the last step is taken by the auditor, who certifies it on the bonds themselves, presented by the holder for that purpose. This certificate is intended to be based not merely upon what the auditon himself has done, but upon the knowledge officially certified to him of what had previously been done by the officers of the municipal corporation issuing the bonds. But as to the other class of bonds, those not issued under the act of 1872, the order of the steps in registration is reversed. The first record is made by the auditor on presentation of the bonds by the holder for that purpose. Within 10 days thereafter he is required by the fifteenth section of the act to notify the officers issuing the same of such registration by him, which fact, it is provided, shall be entered by such officers in a book wherein the record of such bonds is kept, and such bonds, the statute then proceeds to declare, shall thereafter be considered registered bonds. That necessarily means that they shall not be so considered until the happening of that event; and it is that complete and perfected registration, and that alone, which confers upon the holder of such bonds the benefits of the act.

The bonds that were in controversy in the case of Lewis v. Com'rs, supra, were issued under the act of 1872, and their registration was governed by the provisions of the statute relating to that class. The bonds on which the present suit is based were issued under the act of 1870, and belong to the class the registration of which is governed by the provisions of the fifteenth section of the act.

It is alleged in the petition that 'each of said bonds, with all the interest coupons thereto attached, was duly registered in the office of the auditor of the state of Kansas, according to law, and the fact that each of the said bonds was so registered was then and there, under the hand and official seal of the said auditor, in writing, duly certified and indorsed upon each of the said bonds,' and a copy of the certificate and indorsement is set out as already exhibited. But it is not alleged that the auditor notified the officers of Cherokee county of this record, nor that these officers entered the fact in the record kept by themselves; and without these additional steps, what was done by the auditor was incomplete and ineffective. Without showing compliance with these requisitions, the bonds cannot be considered registered bonds, nor entitled as such to the benefits of the act.

If complete and conclusive effect were, on the contrary, given to the ex parte record of the auditor of state, as is claimed for it, the obvious design and just purpose of the statute would be not secured, but subverted; and municipal corporations might be subjected to liability for bonds purporting to be issued by them, which in fact and in law were not their obligations by virtue of a proceeding of which they had no notice, resulting in an adjudication which they had no opportunity of contesting. A construction of the statute that necessarily leads to that conclusion is not warranted by its terms, and would be repugnant to fundamental principles of common right. If the registration of bonds issued under the act itself is to have the force of an adjudication by the auditor, the preliminary record by the officers of the municipal corporation transmitted to him must be the indispensable foundation of his jurisdiction, without which he cannot lawfully act; and as to bonds issued, as were these now in suit under previous statutes, the action of the auditor is itself but the preliminary proceeding of which confirmation by the subsequent record of the officers issuing them is essential to its efficacy as a registration. If these officers refuse to recognize the registry of the auditor, whether rightfully or wrongfully, the holder loses no rights. He has the bonds as he acquired them, and may test the liability of the corporation by judicial proceedings. If, on the other hand, the statute is construed to allow him by a proceeding before the auditor conclusively to fix the liability of the municipal corporation without notice and without a hearing, certainly, in respect to bonds previously issued, it would be open to the gravest objections on constitutional grounds, for if a law cannot impair the obligation of a contract, neither can it create one, or by a mere fiat take from a party an existing and meritorious defense. It appears then, by the record in this cause, that the bonds sued on are the obligations of the defendant in error.

The judgment in its favor is therefore affirmed.