County of Ray v. Vansycle

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

This was an action by Vansycle to recover the amount due on interest coupons attached to bonds which were issued in 1869 in the name of the County of Ray, Missouri, by each of which it acknowledged itself indebted to the St. Louis and St. Joseph Railroad Company in the sum of $1,000; which it promised to pay to that company or bearer, at the American Exchange National Bank in New York, on the first day of January, 1879, with eight per cent interest, payable annually, upon the presentation and delivery of the coupons.

Each bond contained these recitals:--

'This bond being issued under and pursuant to an order of the county court of Ray County, made under the authority of the Constitution of the State of Missouri and the laws of the General Assembly of the State of Missouri, and authorized by a vote of the people of said county, at a special election held for that purpose.

'In testimony whereof the said county of Ray has executed this bond, by the presiding justice of the county court of said county, under the order of said court, signing his name thereto; and by the clerk of said court, under order thereof, attesting the same, and affixing thereto the seal of said court. This done at the town of Richmond, county of Ray, aforesaid, this second day of _____, 1869.

[L. S.] 'C. W. LARRAMORE,

'Presiding Justice of the County Court of Ray County, Missouri.

'Attest: GEO. N. MCGEE,

'Clerk of the County Court of Ray County, Missouri.'

The coupons were in the form following:--

'RICHARD, RAY COUNTY, MISSOURI, A.D. 1869.

'The county of Ray acknowledges to owe the sum of eighty dollars, payable to bearer on the first day of January, A.D. 1874, at the American Exchange National Bank in New York, for one year's interest on bond No. ___.

'GEO. N. MCGEE,

Clerk of County Court of Ray County, Mo.

Vansycle was a lawful holder for value of the bonds, and received them without actual notice or knowledge of any defects or irregularities in their issue.

The main facts connected with the issue of the bonds cover a period of more than ten years, commencing with the year 1859.

An act of the General Assembly of the State of Missouri, approved Dec. 5, 1859, and amended Jan. 5, 1860, incorporated the Missouri River Valley Railroad Company, with power to construct a railroad from any point on the North Missouri Railroad in Randolph County, by way of Brunswick, in Chariton County; thence, through Carroll, Ray, Platte, and Clay Counties, to Weston, in Platte County; and authorized the county court of any county in which any part of such railroad might be, to subscribe to the stock of the company, invest its funds in such stock, and raise the funds by tax to be voted by the legal voters of the county, in such manner as the county court might prescribe for the purpose of paying such stock. It declared that the provisions of the general railroad law of Missouri, not inconsistent therewith, should be extended to that company.

The general railroad law of Missouri then in force made it lawful for the county court of any county to subscribe to the capital stock of any railroad company duly organized in Missouri, and, for information, to cause an election to be held to ascertain the sense of the tax-payers of such county as to such subscription, and as to whether the same should be paid by issuing county bonds or by taxation. A county, upon its making such subscription, became, like other subscribers to stock, entitled to the privileges granted, and subject to the liabilities imposed, by that law, or by the charter of the company to which such subscription was made. In order to raise funds to pay the instalments which might be called for from time to time by the board of directors of such company, it was made the duty of the county court to issue the bonds of the county, or levy a special tax upon all property taxable by law for State and county purposes, &c.

By an act approved March 30, 1860, amendatory to that of Dec. 5, 1859, and for other purposes, the county courts of Ray and other counties specifically named were authorized to issue and deliver the bonds of their respective counties in payment of any subscription to or purchase of the capital stock of the Missouri River Valley Railroad Company which such counties might respectively make; the bonds to be in the sum of not exceeding $1,000 each bond, having not exceeding ten years to run before maturity, bearing interest at the rate of eight per cent per annum, payable annually at the county seat of the county issuing them, or in the city of St. Louis, as the county court might prefer.

On the 2d of July, 1860, the Ray county court, by an order entered upon its records, directed a vote of the people to be taken on the 13th of August, 1860, on the question whether the county should take $200,000 of stock in the Missouri River Valley Railroad Company, upon the following conditions: That all of said county stock shall be expended on that part of the railroad in that county; that said subscription shall be payable in county bonds, to run ten years, bearing interest, to be paid annually, at the rate of eight per cent; and that no bond shall be issued or delivered to said company until provision shall be made for building the railroad to the eastern boundary of the county.

At an election held, as ordered, one thousand three hundred and thirty-seven votes were cast in favor of the subscription, and six hundred and twenty-three votes against it. The records of the county court state that the vote cast for the subscription was by 'a majority of the people and tax-payers of the county of Ray.' The court appointed agents to subscribe and vote the stock upon the conditions mentioned in the order. Such subscription was legally made.

An act of the General Assembly, approved Feb. 10, 1864, the provisions of which were accepted by the North Missouri Railroad Company, provided that the Chariton and Randolph Railroad Company and the Missouri River Valley Railroad Company might, by a vote of a majority of their stockholders in interest, transfer and assign to the North Missouri Railroad Company all of their effects, assets, rights, and privileges, under their charters, and all the work that had been done in the construction of their respective roads. The two companies, when the authorized transfer by them made should be accepted by the North Missouri Railroad Company, were to cease to have any corporate existence, and to be styled and known thereafter as the West Branch of the North Missouri Railroad. The act declared that said west branch should commence at the town of Moberly, in the county of Randolph, on the North Missouri Railroad, and extend west along the route adopted by the Chariton and Randolph Railroad Company, to the city of Brunswick; thence on or near the survey of the Missouri Valley Road to Richmond, in Ray County; and thence, by the most advantageous and practicable route, to some point on the north side of the Missouri River, at or below St. Joseph. The act also provided that all the franchises vested in the Chariton and Randolph Railr ad Company and the Missouri Valley Railroad should become, by such transfer and acceptance, fully and completely vested in the North Missouri Railroad Company.

The county court of Ray, at its April term, 1864, appointed agents to vote two thousand shares of stock in the then approaching election for directors of the Missouri River Valley Railroad Company, with instructions also to vote in favor of transferring and assigning to the North Missouri Railroad Company all the effects, assets, rights, and privileges of the Missouri River Valley Railroad Company, and all the work done upon the Missouri River Valley Railroad, as provided in the act of Feb. 10, 1864. The agents thus appointed reported to the court, at its July term, 1864, that in accordance with instructions they had cast the vote of the county. Their report was approved, and ordered to be filed and recorded.

On the 13th of December, 1866, a written agreement was made between the North Missouri Railroad Company and the county court; which provided, among other things, that the company, for the consideration of $150,000 to be paid in the bonds of Ray County, should build, run, and operate its west branch to the city of Richmond, in that county, by a spur of said west branch, and complete the connection within ninety days after the main or straight line of the west branch should be completed to a point opposite Richmond. It is not necessary to set out that agreement. It is sufficient to say that it secured to the county all the railroad facilities which it would have received had the main line of the west branch passed in the immediate vicinity of the city of Richmond; and, in consideration of its consenting to accept the building, operating, and running of said west branch, as thereby provided, and releasing the North Missouri Railroad from its former obligations, the latter agreed to release the county from the sum of $50,000 of the stock theretofore subscribed for the construction of the said west branch of the North Missouri Railroad. The company agreed to build and construct the spur branch or connection from the main line 'to the said city of Richmond aforesaid, so far as the grading is concerned, when said county of Ray issues its bonds for the said sum of $150,000 to said North Missouri Railroad Company, so that it may be ready for the iron by the time the said west branch of said North Missouri reaches a point opposite the said city of Richmond.' This agreement was promptly ratified of record, and signed by the justices of said court, with the seal of the county affixed. An order was at the same time made upon the records of the court, directing that bonds of the county amounting to $150,000 be issued 'according to the orders of the county court of said county of Ray heretofore made and the stipulations of this contract.'

At the same term of the court an agent was appointed to vote the county stock at the next election of directors for the North Missouri Railroad Company.

In January, 1868, the St. Louis and St. Joseph Railroad Company was organized, under the general railroad law of Missouri, for the purpose of constructing and operating a railroad through Ray, Clinton, and Buchanan Counties, from a point on the west branch of the North Missouri Railroad, at Richmond, by the most practicable route, through Plattsburg, to the city of St. Joseph.

On the 15th of April, 1868, the North Missouri Railroad Company authorized its president and executive committee to make such contracts with the St. Louis and St. Joseph Railroad Company, to aid in building the latter road, as might be consistent with the interest of the former company; and also 'to release the county of Ray from its subscription of $200,000 to aid in building the west branch of the North Missouri Railroad, upon the condition that this (the North Missouri) company is released from constructing a spur from the west branch to Richmond; and also upon the further condition, that Ray County will subscribe $250,000 stock, and secure the same, to be paid toward the building of the St. Louis and St. Joseph Railroad.'

This proposition was submitted to the county court and rejected. That court, however, on the 19th of May, 1868, entered of record an order from which the following is an extract: 'In order that said $200,000 may be applied to the purpose and object of constructing a railroad from the west branch of the North Missouri Railroad, through the city of Richmond, in said county of Ray, to St. Joseph, it is, therefore, ordered by the court that the said sum of $200,000 be, and the same is hereby, transferred to the St. Louis and St. Joseph Railroad Company, to be applied in building, constructing, and operating that portion of the St. Louis and St. Joseph Railroad in Ray County, north of the west branch of said North Missouri Railroad, upon the following express conditions,' &c. These conditions provided that the county should be released in writing from its subscription of $200,000 to the North Missouri Railroad Company; that, upon the filing of such release in the proper office, the presiding justice should subscribe the sum of $200,000 as stock in the St. Louis and St. Joseph Railroad Company; that bonds for that amount should be issued to the company, $50,000, when the court was satisfied that five miles of the road in Ray County, north of the west branch of the North Missouri Railroad, and beginning at the said branch, was under contract, and for the building of which the bonds and their proceeds were to be applied; and $50,000 as each additional five miles of the road was graded and ready for the ties, and not then unless the court should be satisfied that all the bonds previously issued had been properly applied.

In accordance with this order, the North Missouri Railroad Company, by its president, executed in June, 1868, and filed for record, its written release to Ray County of the latter's subscription to it of $200,000; 'the consideration of this release being the entire cancellation of the existing contracts between the county of Ray and the North Missouri Railroad Company, and also the subscription by the county of Ray to the capital stock of the St. Louis and St. Joseph Railroad Company.'No election was held at which the citizens of the county voted in favor of a subscription to the capital stock of the St. Louis and St. Joseph Railroad Company; but, before the court made the order of May 19, 1868, it received the petition of from twelve hundred to fourteen hundred citizens of the county, asking it to transfer its subscription to the St. Louis and St. Joseph Railroad Company.

At the November term, 1868, of the court, an order was made and complied with, directing that $50,000 of the county bonds be issued to the St. Louis and St. Joseph Railroad Company; $50,000 more of them were directed by the court, at its September term, 1869, to be issued; and $50,000 additional, at its November term, 1869. The last $50,000 of the bonds were issued in pursuance of an order entered at its February term, 1870. None of them were delivered until after satisfactory proof had been made of the construction of each five miles of road, as stipulated in the agreement of the parties. The county received and still retains the requisite certificates of stock in payment for which the bonds were issued.

Sect. 14, art. 11, of the Constitution of Missouri ordains that '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 pursuance of that constitutional provision, the General Assembly, by general statute, declared, that 'it shall be lawful for the county court of any county, the city council of any city, or the trustees of any incorporated town, to take stock for such county, city, or town in, or loan the credit thereof to, any railroad company duly organized under this or any other law of the State; provided, that two-thirds of the qualified voters of such county, city, or town, at a regular or special election to be held therein, shall assent to such subscription.'

The court below made a special finding, embracing the facts above set forth, and others stated in the opinion of this court, and rendered judgment in favor of the plaintiff. The county thereupon brought the case here by writ of error.

The case was submitted, on behalf of the plaintiff in error, by Mr. Francis M. Cockrell, on the brief of Mr. William S. Everett, who contended that

1. The county court had but a specially delegated authority, and could not subscribe for corporate stock, so as to bind the county, except with the assent of two-thirds of the qualified voters thereof, expressed in the mode prescribed. As no election was held or ordered, at which such voters, or any of them, had an opportunity of declaring their assent to the county subscription made in the year 1868, for stock in the St. Louis and St. Joseph Railroad Company, that subscription, and the orders for the issue of bonds in payment of it, were in manifest violation of the Constitution and the statutes of Missouri, the provisions whereof the plaintiff below was bound to take notice.

2. The county, in resisting a recovery upon the coupons, is not estopped from showing that the county court, by reason of the absence of a popular vote, had no jurisdiction in the premises; and that its orders were void, as unauthorized and prohibited acts.

3. The coupons are void in the hands of the plaintiff below, although the had no actual notice of the lacts which establish their nullity. The records of the county court, in the matter of the subscription in question, furnish conclusive proof that the condition precedent to the lawful issue of the bonds had not been performed.

Mr. John B. Henderson, contra.

MR. JUSTICE HARLAN, after stating the facts, delivered the opinion of the court.