County of Cass v. Gillett/Opinion of the Court

This case is almost precisely similar to that of County of Henry v. Nicolay (95 U.S. 619), the authority for issuing the bonds being claimed under the same charter (that of the Tebo and Neosho Railroad Company), and being pursued under the same general act of March 21, 1868, as in that case; and the same defence (amongst others) being set up, to wit, that the subscription to the capital stock of the company was made and the bonds were issued by the act of the county court alone, without a vote of the people, as required by the Constitution of 1865. This is the ground relied on in the first assignment of error.

The only material difference between the present case and that of Henry County, in reference to the point in question, arises from the circumstance that in this case the order of the county court for making the subscription was not adopted until after the assignment by the Tebo and Neosho Railroad Company of a portion of its franchises to the Missouri, Kansas, and Texas Railway Company; whilst in the Henry County case the order for a subscription was prior in date to the said assignment. But we do not regard this difference as material. In both cases, the branch railroad was authorized to be constructed by a resolution of the board of directors of the Tebo and Neosho Railroad Company before the assignment, and a committee was appointed to take charge of its construction and solicit subscriptions therefor; and in both cases the bonds of the county were issued after the said assignment. The authority of the Tebo and Neosho Railroad Company to establish independent branches under its charter, and pursuant to the provisions of the act of March 21, 1868, entitled 'An Act to aid in the building of branch railroads in the State of Missouri,' was considered in the Henry County case, and need not be again discussed. The resolution for establishing the branch road, to aid which the bonds now in question were given, was adopted on the 6th of June, 1870, and was as follows:--

'Resolved, by the board of directors of the Tebo and Neosho Railroad Company, that it is the desire of this company to build a branch railroad from a point on the main line of the road of said company, at or near the town of Clinton, Henry County, northwestwardly in the general direction of Kansas City, to a point either on the Pacific Railroad easterly of said city, or to a point at said city on the line of road lately known as the Cameron and Kansas City Railroad, said branch railroad to be designated and known as the Clinton and Kansas City Branch of the Tebo and Neosho Railroad, and that the same is designated and established under the provisions of the charter of this company and the act of the General Assembly of Missouri, entitled 'An Act to aid in the building of branch railroads in the State of Missouri,' approved,' &c.

The findings also show that the Tebo and Neosho Railroad Company authorized a committee to take charge of the construction of said branch road, and to use the name of the company, and to solicit subscriptions in its name to the use of said branch. As far, therefore, as depended upon the Tebo and Neosho Railroad Company proper, its powers were exerted, before the assignment of its franchises, in the establishment and organization of the branch road. The branch being thus organized and set in operation, became invested with the powers and privileges conferred by the charter of the company, to enable it to lay out and construct its road, and to procure the requisite means of accomplishing these objects; and the counties through which it was located thereupon became authorized to subscribe stock in aid of its construction. These powers, having thus been brought into existence, were not extinguished by the subsequent partial assignment of its franchises by the parent company to the Missouri, Kansas, and Texas Railway Company. Whether the application to the county for aid was made before or after said assignment could make no difference. As stated in the Henry County case, the Tebo and Neosho Railroad Company still continued in existence, invested with a large portion of its franchises.

The county of Cass thus having the power to subscribe capital stock in aid of the branch road, the county court, on application made to it for that purpose, on the 28th of February, 1871, did order and adjudge 'that the county of Cass do subscribe for and agree to take three thousand shares of the capital stock of the Tebo and Neosho Railroad Company (now in part the Missouri, Kansas, and Texas Railway Company), in the name of and for the use and benefit of the Clinton and Kansas City Branch of the Tebo and Neosho Railroad, and to aid in the construction thereof, each share being of the denomination of $100, and amounting in the aggregate to the sum of $300,000, under and by virtue of the authority in the charter of the Tebo and Neosho Railroad Company contained, and under the act of the General Assembly of the State of Missouri, entitled 'An Act to aid the building of branch railroads in the State of Missouri,' approved March 21, 1868, and in accordance with the resolutions and orders of the board of directors of said Tebo and Neosho Railroad Company establishing said branch railroad and authorizing subscriptions to said capital stock to aid in the construction thereof, adopted on the sixth day of June, 1870; the said stock to be paid for by the issue and delivery to the committee appointed to construct said branch railroad, or to their successors in office, of the coupon bonds of the county of Cass of the denomination of $1,000 each, bearing date the first day of February, 1871, with interest at the rate of ten per cent per annum, payable semi-annually,' &c.

The order then prescribed certain conditions as to the time and circumstances under which the bonds were to be delivered, which are not relevant to the point under consideration.

In pursuance of this order, the bonds were signed by the officers of the county, and were issued in August, 1871; and the court finds that the plaintiff is an innocent holder for value of the coupons sued on.

We think that the case is entirely within the decision in County of Henry v. Nicolay (supra), and that the constitutional provision does not apply to it.

But the defendant, in its second assignment of error, relies on the act of the Missouri legislature passed Jan. 14, 1860, which required as a condition precedent to the subscription of stock to a railroad company, and the issue of bonds to pay therefor, that an election should be held in the county to test the sense of the tax-payers on the question of subscription.

The same objection was raised in County of Schuyler v. Thomas (98 U.S. 169), and we overruled it on the authority of Smith v. The County of Clark, 54 Mo. 58. We see no reason to change that opinion. The act of 1860 was an amendment to the general railroad law, and is held not to apply to companies having special charters, in which special power is given to counties and townships to subscribe stock in aid thereof.

The third assignment of error relates to the supposed effect of the assignment by the Tebo and Neosho Railroad Company of its franchises to the Missouri, Kansas, and Texas Railway Company, which has already been sufficiently discussed.

The fourth assignment is based on the fact that the bonds were issued pending and in violation of an injunction of the Circuit Court of the county of Cass, directed to the justices of the county court; and it is argued that this was notice to all the world of the objections to the regularity and validity of the bonds. It seems that the bonds were in the keeping of the National Park Bank of the city of New York, which was not made a party to the injunction suit. It also appears by certain proceedings of the county court of Cass County, had on the twenty-fifth day of September, 1871, and set forth in the findings of fact, that the bonds were delivered to the construction committee of the branch railroad; but under what circumstances they were delivered is not shown. The coupons subsequently came into the hands of the plaintiff as an innocent purchaser for value. The question of lis pendens as applicable to negotiable securities was fully considered by us in the case of County of Warren v. Marcy (97 U.S. 107), and we there held that a bona fide purchaser before maturity is not affected with constructive notice of a suit respecting such paper. That decision applies to the present case, and the objection cannot prevail to invalidate the plaintiff's title.

To the fifth and last assignment of error it may be answered, that it does appear that the county court on behalf of the county made an order to subscribe to the capital stock of the Tebo and Neosho Railroad Company for the use of the Clinton and Kansas City branch; that it dealt with the construction committee of the branch road, and that the bonds in question were issued to the said committee in payment of said stock. That this was a transaction which entitled the county to the amount of stock subscribed cannot be doubted. An actual manual subscription on the books of the company was not necessary to entitle the county to the stock, or to bind it as a subscriber thereto. In County of Moultrie v. Rockingham Ten Cent Savings Bank (92 U.S. 631), where the board of supervisors of the county ordered that a subscription to the stock of a railroad company be made by the county, and that bonds should be issued in payment thereof; and the order was recorded in the minutes of the board, and bonds were actually issued to the railroad company in pursuance thereof, though no subscription to the stock was actually made on the books of the company,-we held that, whether the action of the board was in substance and legal effect a subscription, or only an undertaking to subscribe, accepted by the company, a valid contract existed between the county and the company. The committee of construction in the present case represented the branch railroad as a separate interest from that of the parent company, and the acts of the committee were, as to the branch, the acts of the company which the latter could not control or gainsay. The stock subscribed, or agreed to be subscribed, for the use of the branch, was separate stock, not under the control of the parent company, but under the control of the committee. As the dealings of the county court were with the committee, though the name of the company was used, the transaction was complete without any confirmatory action of the company, and the county was entitled to its stock whether certificates therefor were actually issued or not. We think that this assignment of error cannot be sustained.

Judgment affirmed.

MR. JUSTICE HARLAN dissented.