County of Cass v. Johnston

ERROR to the Circuit Court of the United States for the Western District of Missouri.

Johnston, a citizen of Iowa, brought this action Sept. 3, 1874, against the 'County of Cass, trustee for Camp Branch Township in said county, State of Missouri,' to recover the amount of certain overdue coupons attached to bonds whereof he alleged that he was the lawful holder. A copy of one of the bonds and of a coupon annexed thereto is as follows:--

'UNITED STATES OF AMERICA,

'State of Missouri.

'CASS COUNTY BOND.

'No. 53.] Interest ten per cent per annum. [$500.

'Know all men by these presents, that the County of Cass, in the State of Missouri, acknowledges itself indebted and firmly bound to the St. Louis and Santa Fe Railroad Company, Missouri division, in the sum of $500, which the said county of Cass, for and on account of Camp Branch Township, for value received, hereby promises to pay said company, or bearer, at the banking-house of Northrup & Chick, in the city of New York, and State of New York, ten years after date, with interest thereon from the date hereof at the rate of ten per cent per annum, payable semiannually on the eleventh days of January and July of each year, on the presentation and delivery at said banking-house of Northrup & Chick, in said city of New York, State of New York, of the coupons of interest hereto attached.

'This bond is issued pursuant to an order of the county court of said County of Cass, made by authority of an act of the General Assembly of the State of Missouri, entitled 'An Act to facilitate the construction of railroads in the State of Missouri,' and approved on the twenty-third day of March, A.D. 1868, and authorized by a vote of more than two-thirds of the voters of said township.

'In testimony whereof, the said County of Cass has executed this bond by the presiding justice of the county court of said county, under the order of said court, signing his name hereto, and by the clerk of said court, under the order thereof, attesting the same and affixing hereto the seal of said court.

'This done at the office of the clerk of said court, this eleventh day of July, A.D. 1870.

[SEAL.] 'JEHIEL C. STEVENSON,

'Presiding Justice of the County Court of Cass County, Mo.

'C. H. DORE,

Clerk County Court Cass County, Mo.

'HARRISONVILLE, CASS COUNTY, July 11, 1870.

'The County of Cass promises to pay the sum of $25 on the eleventh day of January, 1873, being interest on bond No. 53, for $500, payable at the banking-house of Northrup & Chick, in the city of New York, State of New York.

'C. H. DORE,

Clerk of the County Court of Cass County, Mo.

The act referred to in the bond is generally known as 'The Township Aid Act.' The first, second, third, and fifth sections are as follows:--

'SECTION 1. Whenever twenty-five persons, tax-payers and residents, in any municipal township, for election purposes, in any county in this State, shall petition the county court of such county, setting forth their desire, as a township, to subscribe to the capital stock of any railroad company in this State, building or proposing to build a railroad into, through, or near such township, and stating the amount of such subscription, and the terms and conditions on which they desire such subscription shall be made, it shall be the duty of the county court, as soon as may be thereafter, to order an election to be held in such township, to determine if such subscription shall be made; which election shall be c nducted and returns made in accordance with the law controlling general and special elections; and if it shall appear, from the returns of such election, that not less than two-thirds of the qualified voters of such township voting at such election are in favor of such subscription, it shall be the duty of the county court to make such subscription in behalf of such township, according to the terms and conditions thereof, and if such conditions provide for the issue of bonds in payment of such subscription, the county court shall issue such bonds, in the name of the county, with coupons for interest attached, but the rate of interest shall not exceed ten per cent per annum; and the same shall be delivered to the railroad company.

'SECT. 2. In order to meet the payments on account of the subscription to the stock, according to its terms, or to pay the interest and principal on any bond which may be issued on account of such subscription, the county court shall, from time to time, levy and cause to be collected, in the same manner as county taxes, a special tax, which shall be levied on all the real estate lying within the township making the subscription, in accordance with the valuation then last made by the county assessor for county purposes.

'SECT. 3. The county treasurer shall be authorized and required to receive and collect, of the sheriff of the county, the income from the tax provided in the previous section, and to apply the same to the payment of the stock subscription according to its terms, or to the payments of interest and principal on the bonds, should any be issued in payment of such subscription; he shall pay all interest on such bonds, out of any money in the treasury collected for this purpose, by the tax so levied, as the same becomes due, and also the bonds as they mature, which shall be cancelled by the county court; and this service shall be considered a part of his duty as county treasurer.'

'SECT. 5. In all cases hereafter, where a railroad or branch railroad in this State shall be built, in whole or in part, by subscriptions to its stock, by counties, cities, or townships, the proceeds of all State and county taxes, levied upon such railroad company or branch so built, or the property thereof, shall be paid into the treasury of the counties where collected, and the county treasurers shall apportion the same, according to their several subscriptions, to such counties, cities, or townships so subscribing stock, until the whole amount of such subscription is refunded to them; and such sums so apportioned shall be paid over to the county or city treasurer, and applied to the payment of the interest and principal of the bonds issued by such county or city on account of their subscription stock as aforesaid, if any are outstanding, and, if not, it shall by them be placed to the credit of the school fund in such county, city, or township.'

The remaining sections do not affect any question here involved. They declare when the act shall take effect, and provide for granting to tax-payers certificates convertible into railway stock.

The Constitution of Missouri took effect July 4, 1865; and sect. 14, art. 11, is as follows:--

'The General Assembly shall not authorize any county, city, or town to become a stockholder in, or to loan its credit to, any company, association, or corporation, unless two-thirds of the qualified voters of such county, city, or town, at a regular or special election, to be held therein, shall assent thereto.'

In 1871, the legislature of Missouri so amended sect. 2 of the Township Aid Act of 1868 as to make the tax therein provided for a tax upon all the real estate and personal property within the township. The county answered, that said bonds were issued in payment of a pretended subscription by said county in behalf of said Camp Branch Township, to the St. Louis and Santa Fe Railroad Company, under the authority of the act of March 23, 1868, and that prior to the date of them the township had no authority to subscribe for stock in said co pany or issue bonds therefor, or to have the same done for it by the county court; that prior to April 20, 1869, said company had not been organized, that on March 13, 1869, twenty-five voters of said township filed a petition, setting forth the desire of said township to subscribe _____ dollars to the capital stock of the St. Louis and Santa Fe Railroad Company, proposed to be organized, to build a railroad through said township, said subscription to be paid in bonds to be issued by said county court for and on account of the township; that on that day the court ordered an election in said township to be held on April 20, 1869; that on April 20, 1869, articles of incorporation were filed in the office of the secretary of state as provided by law, and thereby said company in said State became incorporated; that at the election so held two-thirds of the qualified voters of the township did not vote in favor of the subscription, although more than two-thirds of them voted at such election; and that by reason of the premises said bonds were null and void.

The plaintiff demurred to the answer; and, the demurrer having been sustained, judgment was rendered that the plaintiff recover of 'said county, trustee for said township,' the amount of said coupons, with interest thereon and costs, and that said county do pay the same 'out and from taxes levied on the taxable property of said township.'

The county thereupon sued out this writ of error.

The case was argued by Mr. Willard P. Hall and Mr. John C. Gage for the plaintiff in error, and by Mr. John B. Henderson for the defendant in error.

The plaintiff in error submitted the following propositions:

1. The Township Aid Act of 1868, under which the bonds in suit were issued, is repugnant to the Constitution of Missouri of 1865. It authorizes a municipal subscription to the capital stock of railroad companies, if two-thirds of the qualified voters voting at an election held under its provisions are in favor of it, whereas the Constitution requires the assent of two-thirds of all the qualified voters to render such subscription valid. Sufficient notice of this objection appears in the recitals of the bonds to put the holder on inquiry. State v. Winkelmeier, 35 Mo. 103; State v. Sutterfield, 54 id. 391; Harshman v. Bates County, 92 U.S. 569.

2. The record shows that the bonds were issued in payment of a subscription, by the township, to the capital stock of a railroad company which had no existence when the tax-payers petitioned for an election to take the sense of the people upon the question of the subscription, and when the election was ordered. They are, therefore, invalid, even in the hands of an innocent holder. Rubey v. Shain et al., 54 Mo. 207; The People v. Franklin, 5 Lans. (N. Y.) 129.

3. The bonds are to all intents and purposes township, not county, bonds. The county has incurred no liability to pay them. They are to be paid out of a special fund, derived from a tax upon the real and personal property within the township. The levy of that tax is imposed on the county court. A mandamus to compel the requisite levy is the appropriate and exclusive remedy of the bond-holder. An action on them will not lie against the county, and the judgment rendered in this case is evidently erroneous. The State v. Linn County, 44 Mo. 504; State v. Justices of Bollinger County, 48 id. 475.

MR. CHIEF JUSTICE WAITE delivered the opinion of the court.