County of Warren v. Marcy

ERROR to the Circuit Court of the United States for the Northern District of Illinois.

This was an action brought in the court below by George O. Marcy, the defendant in error, against the County of Warren, to recover the amount of certain coupons, originally attached to certain bonds of the said county, bearing date Jan. 25, 1871. These bonds were in the following form:--

'UNITED STATES OF AMERICA.-STATE OF ILLINOIS.

'No. ___. County of Warren. $1,000.

'On the first day of July, in the year of our Lord one thousand eight hundred and ninety, the county of Warren, and State of Illinois, promises to pay to the Rockford, Rock Island, and Saint Louis Railroad Company, or bearer, the sum of $1,000, and interest thereon, at the rate of eight per cent per annum, payable annually, on the first day of July in each year, on presentation to the treasurer of said Warren County of the respective interest-coupons which are hereto severally adjoined.

'This bond is issued in conformity with the vote of the electors of said county, cast at an election held on the twenty-third day of September, A.D. 1869.

'In testimony whereof, and pursuant to the authority granted by law, and upon the order of the board of supervisors of said Warren County, passed at an adjourned session thereof, begun on the twenty-fifth day of January, A.D. 1871, I, clerk of the county court of said county, have hereunto signed my name as such clerk, and affixed the seal of said county court, this twenty-fifth day of January, A.D. 1871.

WARREN COUNTY COURT, ILLINOIS, SEAL.

'W. G. BONE,

'Clerk of the County Court of Warren County.'

A jury being waived, the court made a special finding of the facts, and thereupon found generally for the plaintiff, and rendered judgment in his favor. The county then brought the case here.

The principal facts of the case, as found by the court, are as follows:--

The Rockford, Rock Island, and St. Louis Railroad Company, having been chartered by an act of the legislature of Illinois, approved Feb. 16, 1865, a supplement to said charter was passed and approved on the 4th of March, 1869, whereby, amongst other things, it was enacted (by sect. 6) that any incorporated city, town, village, or county, through which said railroad might pass, or which might be situated on or near the line thereof, might subscribe to the capital stock of the company any sum not exceeding $100,000, and might issue coupon bonds, not to run more than thirty years. To this enactment was appended the following proviso:--

'Provided, that before said stock shall be subscribed, an election shall be held, in conformity to the laws in regard to ordinary State, city, county, or town elections, thirty days' notice first having been given, by publication in at least one newspaper in the county, and six public notices, printed or written, having been posted in six of the most public places therein during the time above named, and returns to be made in the usual way; at which election a majority of the legal voters, voting on the question, shall have voted in favor of said subscription; and to this end, the. . . board of supervisors. . . may from time to time order elections, specifying the amount proposed to be subscribed.'On the 25th of March, 1869, another act was passed and approved, entitled 'An Act to authorize certain counties and towns therein named to subscribe stock in railroad companies.'

The first section of this act authorized the counties of Rock Island, Mercer, Warren, McDonough, Schuyler, Cass, Scott, and Greene to purchase or subscribe for shares of the capital stock in any railroad company already organized, or thereafter to be organized, which should pass in whole or in part through the said counties, or any or either of them, to such an amount as any of said counties, or either of them, should determine and deem proper. The second section provided that such subscriptions might be made by an agent appointed by the board of supervisors, in counties that might adopt township organization (which it was conceded Warren County had done), upon such terms and conditions as the corporate authorities of any such county might prescribe; and for the payment of such stock the board were authorized to borrow money at interest not exceeding ten per cent, or to pay for the same in the bonds, orders, or warrants of the county, in sums not less than $100, to run not exceeding twenty years, at interest not exceeding ten per cent per annum. The fourth section directed that all such bonds, &c., should be issued by the clerk of the county court, under the seal of his office, upon the order of the county authorities, and the county clerk to make registration thereof, and certify the same on the bonds. The tenth section declared that no such subscription to stock should be made, unless the same was submitted to a vote of the people of such county, and should receive a majority of the votes cast; and that the question should be submitted in such manner as the county authorities might determine.

It is claimed by the defendant in error that the county of Warren derived authority to issue the bonds in question under the last-mentioned act. The road of the Rockford, Rock Island, and St. Louis Railroad Company was partially built north and south of Warren County before the election hereafter mentioned was held, and it was declared by the company that it would go through that county; and it is not disputed that it was, in fact, afterwards laid through the same as proposed.

The proceedings of the board of supervisors and county officers which resulted in the issue of the bonds were as follows: -

On the 23d of August, 1869, the board called an election of the people of the county to be held on Sept. 23, 1869, for the purpose of determining the question of a county subscription of $200,000 to the stock of said railroad company, including the $100,000 previously voted to the St. Louis, Alton, and Rock Island Railroad Company, claimed to have been transferred to the former company by virtue of an act of assembly passed in 1869. Notices of the election were not published until Aug. 27, 1869 (less than thirty days prior thereto), and some of those posted were not posted for the full period of thirty days, and in one township none were posted at all; but in all the others notices were published for periods varying from twenty to thirty days. The election was held pursuant to notice on the 23d of September, 1869; and one thousand seven hundred and seventy-five votes were cast for the subscription, and nine hundred and seventy-five against it, the total vote of the county at the last previous general election being four thousand seven hundred and thirty-one. The vote was duly canvassed, and filed in the clerk's office; and on the 16th of March, 1870, the board declared that the election had resulted in favor of the subscription, and ordered its chairman to make the same accordingly.

On the 18th of July, 1870, one Harding, a tax-payer and citizen of the county, filed a bill in chancery, on behalf of himself and all other tax-payers, against the county officers and the railroad company, in the Circuit Court of Warren County, asking for an injunction to prevent the subscription of stock and the issue of bonds therefor, and that the proceedings of the board be set aside and declared void. The bill set forth the foregoing facts; and a temporary injunction was granted, but was subsequently dissolved on the 23d of January, 1871. The complainant prayed an appeal from the order dissolving the injunction, which was not granted; and the cause went to final hearing on the 2d of February, 1871, when the bill was dismissed. Thereupon the complainant appealed to the Supreme Court of the State. The cause having been heard at the first term thereafter, the decree of the Circuit Court was reversed in 1873, and the cause remanded with directions to enter a decree for the complainant, according to the prayer of the bill. In accordance with these directions, a decree was duly entered in the Circuit Court.

Meantime, pending these proceedings, after the dissolution of the temporary injunction by the Circuit Court, and on the 25th of January, 1871, the bonds in question, to the amount of $200,000, in the form above set forth, were executed under the hand of the clerk of the board of supervisors of Warren County, by order of a majority of the board, at a meeting held on that day. They were then delivered by the clerk, as directed by the board, to the Rockford, Rock Island, and St. Louis Railroad Company, in payment of a subscription to the stock of said company, which purported to be made in March, 1870, in the name of the county, by the chairman of said board, in pursuance of the order of the board, before stated. They were registered in the office of the clerk of Warren County, and so certified by him Jan. 25, 1871, and were registered Jan. 27, 1871, in the office of the State auditor of public accounts, and so certified by him on the bonds.

The defendant in error subsequently became a purchaser of the coupons in question for value, before maturity, and without any actual notice of their alleged invalidity, or of any suit in relation thereto.

Mr. George F. Harding for the plaintiff in error.

The Constitution of Illinois of 1870 prohibits a county from becoming a subscriber to the capital stock of a railroad company, unless authorized by a vote of the people.

The notice for the election not having been given in compliance with the provisions of the act of March 4, 1869, the bonds are void.

The Supreme Court of Illinois, in Harding v. Rockford, Rock Island, & St. Louis Railroad Co. (65 Ill. 90), decided that those provisions were not repealed by the tenth section of the act of March 25, 1869.

The coupons here sued on were issued pending that suit, and it was a notice to purchasers of all matters in litigation, so as to affect and bind them. Murray v. Ballou, 1 Johns. (N. Y.) Ch. 566; Murray v. Lylburn, 2 id. 441; 2 White & Tudor's Leading Cases, 64; Park v. Johnson, 11 Wend. (N. Y.) 453.

That rule applies to personal as well as to real property, and to personal property of every description. McCutcheon v. Miller, 31 Miss. 83; Bishop of Winchester v. Paine, 11 Ves. Jr. 200; Same v. Beaver, 3 id. 314; Kellogg et al. v. Fancher et al., 23 Wis. 1; Scudder v. Van Amburgh, Edw. (N. Y.) Ch. 30; Haddens v. Spaders, 20 Johns. (N. Y.) 573; McRary v. Fries, 4 Jones (N. C.), Eq. 234; Fletcher v. Ferrell, 9 Dana (Ky.), 377; Leitch v. Wells, 48 Barb. (N. Y.) 650; Murray v. Lylburn, supra.

The only exception to the rule is unmatured negotiable paper, in existence when the suit was brought; but that exception cannot extend to paper executed pendente lite.

Mr. Charles M. Osborn and Mr. Sanford B. Perry, contra.

The statutes of 4th and 25th March, 1869, are ample authority to the county of Warren to subscribe for stock in the Rockford, Rock Island, and St. Louis Railroad Company, and to issue bonds, like those in question, in payment therefor, an affirmative vote of the county having been first given in favor thereof.

The board of supervisors was invested with full power to submit to the voters of the county the question of subscribing to the stock of the railroad company, and to decide whether the election was properly held, and the majority vote cast in favor of the subscription. The board having ordered the bonds in question to be issued, with a recital therein that they were issued in conformity with the vote of the electors of said county, they are, in the hands of a bona fide holder for value, conclusive proof that such an election was legally called and held, and are binding on the county. Commissioners of Knox County v. Aspinwall et al., 21 How. 539; Bissell v. City of Jeffersonville, 24 id. 287; Moran v. Commissioners of Miami County, 2 Black, 722; Van Hostrup v. Madison City, 1 Wall. 291; Grand Chute v. Winegar, 15 id. 355; Lynde v. The County, 16 id. 6; Kenicott v. The Supervisors, id. 452; St. Joseph Township v. Rogers, id. 644; Town of Coloma v. Eaves, 92 U.S. 484; Marcy v. Town of Oswego, id. 637; Humboldt Township v. Long et al., id. 642; County of Calloway v. Foster, 93 id. 567; Commissioners, &c. v. Thayer, 94 id. 631; Commissioners, &c. v. January, id. 202, Commissioners, &c. v. Clark, id. 278; Town of East Lincoln v. Davenport, id. 801.

Such a holder is required only to ascertain whether the county was authorized by law to subscribe for stock in the railroad company named in the bonds, and to issue them in payment therefor. Commissioners of Knox County v. Aspinwall, supra; Moran v. Commissioners of Miami County, supra; Mercer County v. Hacket, 1 Wall. 83; Meyer v. City of Muscatine, id. 384; Supervisors v. Schenck, 5 id. 772; Pendleton County v. Amy, 13 id. 297; Nugent v. The Supervisors, 19 id. 241; Lynde v. The County, supra; Kenicott v. The Supervisors, supra; Town of Coloma v. Eaves, 92 U.S. 484; County of Moultrie v. Savings Bank, id. 631.

Such bonds, with the interest coupons attached, are in the hands of such a holder negotiable securities, having all the properties of commercial paper: White v. Vermont & Massachusetts Railroad Co., 21 How. 575; Moran v. Commissioners, &c., supra; Mercer County v. Hacket, supra; Gelpcke v. Dubuque, 1 Wall. 175; City of Lexington v. Butler, 14 id. 282; St. Joseph Township v. Rogers, supra; Humboldt Township v. Long et al., supra; Commissioners, &c. v. Clark, supra; Cromwell v. County of Sac, 96 U.S. 51; and the doctrine of lis pendens is not applicable to them. Leitch v. Wells, 48 N. Y. 586; Stone v. Elliott, 11 Ohio St. 252; Kieffer v. Ehler, 18 Pa. St. 388; Durant v. Iowa County, 1 Woolw. 69; Winston v. Westfeldt, 22 Ala. 760; National Bank of Washington v. Texas, 20 Wall. 72; Olcott v. Supervisors, 16 id. 678; 2 Lead. Cas. in Eq. (ed. of 1877) 196; 2 Powell, Mortgages, 618.

MR. JUSTICE BRADLEY, after stating the case, delivered the opinion of the court.