Commissioners of Johnson County v. Thayer

ERROR to the Circuit Court of the United States for the District of Kansas.

This action was commenced by Nathaniel Thayer, F. W. Palfrey, and George W. Weld, to recover the amount due upon interest coupons attached to certain bonds, originally issued, to the amount of $100,000, by the county of Johnson, in the State of Kansas, to the Kansas and Neosho Valley Railroad Company, in payment of a subscription of like amount made by it to the capital stock of that company. The bonds and coupons, although varying in amounts and in the dates of payment of the several coupons, are in the same form. The following is a copy of one of them:--

'No. 1.] UNITED STATES OF AMERICA. [$1,000.

'STATE OF KANSAS.

'Thirty years after date, Johnson County promises to pay to Kansas and Neosho Valley Railroad Company (a corporation organized and created under a general law of the State of Kansas, by virtue of certificate of incorporation, filed and recorded in the office of the § cretary of the State of Kansas, under date of March the 8th, 1865), or bearer, the sum of $1,000, for value received, with interest at the rate of seven per cent per annum, payable semiannually at the Ninth National Bank in the city of New York, from and after the first day of January, 1867.

'By order of the board of county commissioners of the county of Johnson, State of Kansas.

'OLATHE, KANSAS, Sept. 3, 1866.

'D. M. WILLIAMS,

'Chairman Board County Commissioners, Johnson County.

'[L. S.] Attest: F. E. HENDERSON, Clerk.'

'Coupon.

'OLATHE, KANSAS, Sept. 6, 1867.

'Treasurer Johnson County will pay to bearer thirty-five dollars in the city of New York, being semiannual interest due on the first day of January, 1872, on the bond of the county of Johnson, No. 1, to the Kansas and Neosho Valley Railroad Company, issued in pursuance of an order of the county commissioners of said county, dated Sept. 3, 1866.

'D. M. WILLIAMS,

'Chairman Johnson County Commissioners.

'F. E. HENDERSON, County Clerk.'

The bonds are indorsed as follows:--

'I, A. Thoman, auditor of the State of Kansas, do hereby certify that this bond has been regularly and legally issued; that the signatures thereto are genuine; and that such bond has been duly registered in my office, in accordance with an act of the legislature, entitled 'An act of authorize counties, incorporated cities, and municipal townships to issue bonds for the purpose of building bridges, aiding in the construction of railroads, or other work of internal improvement, and providing for the registration of such bonds, and the repealing of all laws in conflict therewith.' Approved March 2, 1872.

'Witness my hand and official seal this sixteenth day of April, 1872.

'[L. S.] A. THOMAN, Auditor of State.'

The authority to the county to subscribe was conferred by the first section of c. 12 of the laws of Kansas for the year 1865, which is set out in the opinion of the court. The following proposition was submitted to the electors of the county:--

'Whereas, on the fourteenth day of February, A.D. 1865, an act of the legislature of the State of Kansas took effect and became in full force, entitled, 'An Act to authorize counties and cities to issue bonds to railroad companies;' and whereas, by law, the board of county commissioners are authorized to call a special election of the qualified electors of the county, to determine whether the said board of county commissioners shall subscribe, in the name of the county, to any railroad corporation to construct a road into or through the county;

'It is therefore ordered, that a special election of the qualified electors of Johnson County be held at the several voting precincts in said county, on the seventh day of November, 1865; that said election shall, in regard to qualifications of electors, and the manner of receiving votes, and the manner of conducting said election, be according to the laws in force governing elections.

'The question submitted to the qualified electors at said election shall be, whether the board of county commissioners shall be authorized to subscribe capital stock in the name and for the benefit of Johnson County, in the sum of $100,000, to aid in the construction of a railroad commencing at or near the Union Depot, on the south side and near the mouth of the Kansas River, and near Kansas City; thence to Olathe, in Johnson County; thence, in a southerly direction, through said county to the southern boundary of the State of Kansas;

'In case a majority of said electors shall vote for subscription to the capital stock of said railroad, the board of county commissioners shall issue the bonds of said county of Johnson, in such amounts as they may deem best, in payment of said stock: Provided, that no part of said bonds shall be issued until work on the said railroad shall be actually commenced in said county, and then only in pro rata assessments as the work progresses; and provided, further, that the whole f said sum of $100,000 shall be expended within the limits of said county; which said bonds shall bear interest at a rate not exceeding seven per cent per annum, and shall be payable within thirty years.

'The ballots of said election shall be written or printed: 'For subscription to railroad;' 'Against subscription to railroad.' If a majority of all the votes cast at said election be for subscription to railroad, the board of county commissioners shall be authorized to subscribe stock to said railroad in the name and for the benefit of Johnson County, and to issue bonds in the manner heretofore stated. All books shall be kept at the several voting precincts by the judges and clerks of said election, showing the whole number of votes polled for and against said subscription to railroad.

'The votes shall be counted by the judges of said election, and the result proclaimed, and the poll-books signed by the judges and attested by the clerks as nearly in accordance with sects. 18 and 23, p. 459, Stat. of 1862, as may be practicable. After canvassing the votes, the judges shall seal up and return the poll-books to the county clerk on or before the Friday next following said election, and within three days after said election deposit one copy of said poll-books with the township trustee, and shall also preserve the ballots used at said election. Sects. 25 and 26, p. 497, and Code 1862.

'The county clerk and commissioners will meet in Olathe on Friday next following said election, to canvass and declare the result, and make a record thereof.

'Ordered, that the foregoing order and notice be published in the 'Olathe Mirror,' twenty days prior to said election.

'DAVID M. WILLIAMS, Chairman.

'Attest: F. E. HENDERSON, County Clerk.'

A majority of the electors voted at the time named, and in the several precincts of the county, in favor of the subscription; and, on the 3d of September, 1866, the county commissioners made it, and it was accepted by the company.

In April, 1867, a call was made by the board of directors of the company, upon all of their subscribers for stock, for the whole amount unpaid upon their subscriptions.

On the sixth and twenty-seventh days of September, 1867, the county commissioners issued and delivered to the company, in part payment of the county subscription, bonds to the amount of $50,000, which are a part of those in question.

On June 19, 1868, the following contract was entered into between the president of the company and the commissioners of Johnson County, to wit:--

'Know all men by these presents, that we, the Board of County Commissioners of Johnson County, in the State of Kansas, in consideration that the Kansas and Neosho Valley Railroad Company shall construct and put into operation a railroad from a point near Kansas City, Missouri, by way of Olathe, to the southern boundary line of said Johnson County, in the direction of Paola, Kansas, within eight months from this date, and in consideration of one dollar to be paid by said railroad company, we hereby agree and bind ourselves, for and in behalf of said Johnson County, to assign and transfer to said railroad company, or their successors, the $100,000 of stock heretofore voted and subscribed by said Johnson County to the capital stock of said railroad company; and we do further agree, in consideration of the premises aforesaid, to cause to be issued, without delay, the $50,000 of bonds of the said county remaining unissued and unpaid on the $100,000 of stock, so as aforesaid voted and subscribed, and place said $50,000 of bonds in the hands of J. E. Hayes, who shall hold said bonds as the trustee and agent both of said Johnson County and said railroad company, to be delivered by said J. E. Hayes to said railroad company, or their successors, on their constructing and putting in operation said railroad from said point near Kansas City to Olathe: Provided, said railroad shall be constructed and put in operation to Olathe within five months from this date.

'And we further agree, in consideration of the premises aforesaid, that in any election of the stockholders of said railroad company which may be held prior to the transfer of the $100,000 of stock as above provided for, and while said railroad company may be engaged in good faith in performing the conditions upon which such transfer of stock is to be made, that we will cast the votes to which said county may be entitled as a stockholder, in such manner and for such persons as said railroad company, or their successors, may request.

'It is hereby expressly understood, that if said railroad company shall fail to comply with the conditions above mentioned, then this agreement shall be null and void; but, if the said company, or their successors, shall fully comply with all of said conditions, then this agreement shall be binding and in full force.

'Witness our hands at Olathe, this nineteenth day of June, A.D. 1868.

'B. F. HOLLENBACK,

'Chairman Board of County Commissioners.

'JOHN BRADY, Associate Commissioner.'

The county commissioners of Johnson County executed, June 22, 1868, the remaining bonds, to the amount of $50,000, and placed the same 'in escrow' with Josiah E. Hayes, to be delivered to said railroad company, upon its compliance with the terms of this contract.

On Oct. 5, 1868, the county commissioners, at the instance of the president of the railroad company, made the following order extending the time for completion of the road to Olathe:--

'Whereas, by mutual agreement, the commissioners of the county of Johnson have granted to the Kansas and Neosho Railroad Valley Company an extension of time, from the nineteenth day of November next to the fifth day of December next, within which to construct their said road to the town of Olathe, according to the provisions, in other respects, of a resolution, ordinance, or agreement passed or entered into on the nineteenth day of June, A.D. 1868, by the said county commissioners, entitling the said railroad company to the bonds and stock of said county voted and subscribed to said company. It is therefore resolved by the commissioners of Johnson County, that, in the event said railroad company shall so construct to the town of Olathe their said road on or before the fifth day of December, in manner prescribed in the resolution, ordinance, or agreement passed June 19, 1868, the trustee or commissioner named therein shall, and is hereby instructed and empowered to, deliver and assign to said railroad company the said stock and remaining bonds of said county as heretofore authorized and instructed, the same in all respects as though the said road had been constructed to the town of Olathe on or before the nineteenth day of November, 1868.

'B. F. HOLLENBACK, Chairman Board.

'JOHN BRADY.

'K. COATES, President Railroad Co.'The company completed its road according to the terms of the agreement; and, on the fifteenth day of December, 1868, said Hayes delivered to it the remaining bonds. They were signed by said Hollenback as chairman; but in other respects, except as to said date, are similar to the bond, of which a copy is above given.

On or about March 29, 1869, and before the maturity of any of the coupons in suit, the company, having previously changed its corporate name to 'Missouri River, Fort Scott, and Gulf Railroad Company,' executed a mortgage or deed of trust, bearing date Jan. 1, 1868, upon its railroad and other property, including the bonds in question, to the plaintiffs as trustees, to secure the payment of five thousand negotiable bonds, of $1,000 each, bearing the same date as the deed of trust, which the company, before the maturity of any of the coupons now in suit, had issued and transferred, for value, to various persons, by whom they are still held.

Immediately after the execution of the deed, the company delivered the county bonds in question to the plaintiffs, who have ever since held them.

All of the coupons for interest that matured prior to those in suit were regularly paid by the county with funds raised by the levy and collection of a tax for that purpose.

Thayer, one of the plaintiffs, had notice of all the facts connected with the issue of the county bonds; of the agreement of June 19, 1868; of the assessment of the stock by the company, and of its non-payment; and of the issue of stock as a bonus to the purchasers of the bonds of the railroad company, and of the facts connected with the completion of the road to Olathe: but the other plaintiffs had no such notice, nor had the purchasers of the railroad bonds.

The Curative Act, as it is termed, of Feb. 25, 1868, is set forth in the opinion of the court. The action was tried by the court without a jury, and a special finding of facts made. The court found, as a conclusion of law, that the plaintiffs were entitled to recover the amount of the coupons declard on. Judgment was entered accordingly. The defendants sued out this writ of error.

Mr. Nelson Cobb for the plaintiffs in error.

Mr. Wallace Pratt, contra.

MR. JUSTICE HUNT delivered the opinion of the court.