Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/308

 § 318.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. of their agents, when the authority of the agent to act is con- ditioned on facts peculiarly within his knowledge. 1 Moreover, the rule that every person dealing -with a corporation, private or municipal, is affected with notice of the corporate powers, is strikingly exemplified in the law of municipal bonds. For these reasons municipal bonds will be the subject of discussion in the next few pages. § 318. Since a large proportion of the suits on municipal bonds are brought in the Federal courts, the deci- dedsions sions of the Supreme Court of the United States upon the validity of municipal bonds are of wide author- ity and application. 2 The Federal courts will follow an un- broken line of decisions of the highest court of a state constru- ing its constitution and statutes. 3 But the rights of bona fide holders of municipal bonds are to be determined by the law as judicially construed when the bonds in litigation were put on the market ; and the United States Supreme Court will not follow the later decisions of a state tribunal in conflict with de- cisions under which the rights of such holders arose. 4 Accord- ingly, when by a series of decisions the highest court of a state has held that the state legislature could competently author- ize municipal corporations to issue bonds in aid of railroads ex- tending beyond the limits of the town or county issuing the bonds, and those decisions have been approved by the Federal Supreme Court, the fact that subsequently the highest court of the same state has held its former decisions erroneous, will, in a Federal court, have no effect on the rights of bona fide hold- ers arising from transactions which occurred before the change in state judicial opinion had been promulgated. Under such circumstances Federal courts will not follow the oscillations of state courts. 5 Moreover, when the question of the validity of i See §§ 203-207. 2 Regarding the jurisdiction of the Federal Circuit Courts, see Bernard's Township v. Stebhins, 109 U. S. 341. "Township of Elm wood v. Marcy, 92 U. S. 289; Claiborne County r. Brooks, 111 U. S. 400. 4 Douglass d. Couuty of Pike, 101 U. S. 677; Green County r. Conness, 109 U. S. 104; Anderson r. Santa 288 Anna, 116 U. S. 356; Knox County v. Ninth Nat. Bank, 147 U. S. 91. 5 Gelpcke v. City of Dubuque, 1 Wall. 175; Haverneyer v. Iowa Coun- ty, 3 Wall. 294. See Columbia Coun- ty v. King, 13 Fla. 451. Compare Wade i Travis Couuty, 174 U. S. 499. See Lock v. Columbia Town- ship Trustees, 179 U. S. 472; Wilkes County v. Coler, 180 U. S. 506.