taxes as may be necessary to pay the stock so by them respectively subscribed; and said county courts may if they shall deem it prudent, issue the bonds of said counties respectively for the amount of stock subscribed, or any part thereof; said bonds to be in such sums, and payable at such times, as said county courts may determine upon. But before such stock shall be subscribed by said county courts, the said county courts shall submit to the voters of said counties the proposition to subscribe stock and the amount thereof (to be suggested and fixed by the commissioners named herein in each of said counties), at an election to be held on the third Monday in April, 1867, in each of the counties aforesaid, due notice of which shall be given by the sheriffs in each of said counties, by written advertisements posted in each of the voting precincts thereof for at least thirty days before said day of election; and said stock shall not be subscribed unless a majority of all the votes cast at such election be in favor of such propo[659] sition; and said county courts shall have power to appoint suitable and necessary officers to conduct such election, and to provide for the collection of the tax aforesaid, if a majority of the votes cast at such election is in favor of the proposition aforesaid." At the trial the following facts were ad mitted: At March Term, 1867, of the Daviess County Court, upon the suggestion of the five commissioners named in the charter of the railroad company, that court ordered to be submitted to the voters of the County, on the third Monday in April, 1867, this proposition: "Shall or shall not the County Court of Daviess County subscribe ten thousand shares, being the sum of $250,000, to the capital stock of said Owensboro and Russellville Railroad Company?" At April Term, 1868, George W. Triplett, presiding judge, and a majority of the justices of the peace of the County being present, the county court, upon motion of Edward C. Berry, one of those justices, adopted the following order: "In obedience to the will of the majority of the voters and taxpayers of this County, as expressed and recorded in the poll book at the election held on the 15th day of April, 1867, it is now ordered that this court do subscribe $250,000 to the capital stock of the Owensboro and Russellville Railroad Company; and George W.Triplett, presiding judge of this court, is ordered and directed to make said subscription of said stock in manner and form as prescribed by the charter incorporating said company." At July Term, 1888, of the county court "It is ordered that George W. Triplett, presiding Judge of Daviess County Court, William B. Tyler (who was the treasurer of the railroad company) and E. C. Berry be and are hereby appointed a committee on behalf of the County Court of Daviess County, to have bonds executed and prepared of a sufficient amount to satisfy and pay off the subscription on the part of the County of Daviess to the Owensboro and Russellville Railrord Company; that said bonds be executed and made payable as as follows, viz.: "Fifty thousand dollars, five years from date. date. Fifty thousand dollars, ten years from "Seventy-five thousand dollars, fifteen years from date. Seventy-five thousand dollars, twenty years [660] from date. "The county reserving the right to pay at any time after five years; the interest on the same, at the rate of 6 per cent per annum, to be due and payable semi-annually at such place or places as the committee may determine upon; and that such bonds shall be of such denominations as said committee shall deem best, with interest coupons attached, and said bonds shall be signed by the presiding judge of Daviess County and the clerk of the County Court of Daviess County, and have the seal of the County impressed on each; and said committee or a majority of the same may sell and dispose of said bonds either to the Owensboro and Russellville Railroad Company, or to individuals or other corporations, on such terms as said committee may deem best and most advisable to the interests of the County of Daviess in paying the subscription of said County to the said Owensboro and Russellville Railroad Company; and they are hereby authorized to raise funds from said bonds, either by sale to individuals or corporations, or by contract with said railroad company, so as to pay off and meet all calls made by the Owensboro and Russellville Railroad Company by reason of the subscription of stock on behalf of the County of Daviess to said railroad company. "It is further ordered that whenever any bond shall be sold or otherwise disposed of by said committee for the purposes aforesaid, that a list of said bonds shall be made, giving the amount, number and denomination of same, with the amount of coupons attached to each at the time of their disposal; and said list so furnished shall be entered upon the records of the County Court of Daviess by the clerk of same." " George W. Triplett, the presiding judge, and Thomas C. Jones, the clerk of the county court, claiming to act under the authority of this order, signed as such judge and clerk bonds of the county, and under the seal of the county court, as follows: Bonds payable in five years, to the Bonds payable in ten years, to the $51,250 65,200 76,500 127,500 $320,450 The bonds of each class had distinct letters and were numbered in a series; and each bond, omitting the letter and number, the sum and the time of payment, and the coupons annexed, was as follows: "United States of America, County of Daviess, State of Kentucky: "On account of stock subscribed in the Owensboro and Russellville Railroad Company years after date the County of Daviess in the State of Kentucky promise to pay to bearer the sum of dollars, with interest thereon at the rate of 6 per cent per annum, payable semi-annually, upon presentation of the [661] proper coupons hereto attached, the principal | coupons held by the plaintiff was demanded by George W. Triplett, Upon a bill filed May 12, 1875, by taxpayers of the County against the county court, the railroad company, and various bondholders by name (not including the present plaintiff), the circuit court of the County, on January 24, 1876, adjudged that the issue of bonds beyond $250,000 was unlawful and void, and that the county court be restrained by injunction from levying any tax to pay the excess of $67,350, or [663] interest thereon; and on March 30, 1876, the decree was affirmed by the court of appeals. Daviess Co. Court v. Howard, 13 Bush, 101. In testimony whereof, the judge of the County Court of Daviess County has hereunto set his hand and affixed the seal of the said court, and caused the same to be countersigned by the clerk of the said court, who has also signed the coupons hereto attached, this day of 18-. [Seal.] "T. C. Jones, County Clerk." Each bond had the following certificate, The defendant moved the court to instruct plainly printed on the back thereof: "This bond the jury to find for the defendant. But the is issued as authorized by an Act of the Ken-court overruled the motion; and, at the plainttucky Legislature, approved February 27, 1867, iff's request, instructed the jury that if they entitled An Act to Charter the Owensboro and believed that the plaintiff purchased the bonds Russellville Railroad Company,' and by an or- and coupons sued on, before their maturity and dinance of the County Court of Daviess in pur- for value, and without notice that more than suance thereof;" and signed "George W. Trip- $250,000 of bonds had been issued by the delett, Judge of the County Court of Daviess." fendant, the law was for the plaintiff; and that All the bonds so issued (except bonds to the the plaintiff, before purchasing the bonds, was amount of $800, payable in five years, and of not bound to examine the records of the county $200, payable in ten years, which were sold and court, and cannot be presumed to have known delivered to individuals by Triplett, Tyler and what the records contained when he made the Berry, committee as aforesaid, in September, purchase. The defendant excepted to these 1879) were delivered by Triplett to the railroad rulings and instructions and, after verdict for company in various amounts on different days the plaintiff, sued out this writ of error. from June 5, 1869, to March 22, 1870. The last [662] two deliveries were as follows: on February 17, 1870, were delivered bonds payable in ten years, to the amount of $12,500, like bonds to the amount of $53,700 having been delivered previously; on March 22, 1870, were delivered bonds payable in twenty years, to the amount of $92,500, the amount of like bonds previously delivered being $35,000, and the amount of all bonds previously delivered being $227,950. Of the bonds delivered to the railroad company before February 17, 1870, there were afterwards returned by the company, and canceled and destroyed by the County, bonds payable in five years to the amount of $100, and bonds payable in fifteen years to the amount of $3,000, leaving the excess issued $67,350. Among the records of the county court was a register, open to public inspection, in which were registered all the bonds as they were delivered. The coupons on all the bonds were paid by the County up to and including January 1, 1877. The County also paid, before July 1, 1877, all or nearly all the bonds payable in five years, as well as five bonds of $100 each payable in ten years. The other bonds have not been paid. The court, against the defendant's objection, admitted testimony of the plaintiff that at various dates from February 1, 1870, to July 9, 1875, he purchased, before maturity and for value, the bonds and coupons sued on. These consisted mostly of bonds payable in ten years to the amount of $9,000, being some of those delivered to the railroad company on February 17, 1870, and the unpaid coupons annexed; and of coupons for $1,380, detached from some of the bonds payable in twenty years, which had been delivered to the railroad company on March 22, 1870. Payment of the bonds and Messrs. J. D. Atchison and Geo. W. Jol ly, for plaintiff in error: The county judge was not authorized by the Act to determine the amount of stock, or submit the question to the voters, or decide whether the vote had resulted in favor of a subscription, or to determine the amount of bonds to be issued, or to issue the bonds; and he has no general authority to do any of these things. The bonds, on the face, do not profess to be issued under any Act of the Legislature or other authority; the Act is not referred to in any way. The county judge has no power, from any source whatever, to determine whether the bonds were issued "as authorized" by the Act. The certificate is not countersigned by the county clerk, nor is the seal of the county court attached to it; and of course it is not the certificate of the committee. As a separate and independent instrument it is entitled to no consideration, for the reason that it was made without authority. See Kenicott v. Supervisors, 16 Wall. 452 (83 U. S. bk. 21, L. ed. 319); Knox County v. Aspinwall, 21 How. 529 (62 U. S. bk. 16, L. ed. 208). It is only where the bonds on their face recite the circumstances which bring them within the power, that the corporation is estopped to deny the truth of the recital. County of Moultrie v. Rockingham Savings Bank, Marcy v. Oswego, Town of Coloma v. Eaves and Humboldt Township v. Long, 92 U. S. 636, 638, 484, 642 (Bk. 23, L. ed. 634, 748, 579 and 752); Orleans v. Pratt, 99 U.S. 676 (Bk. 25, L. ed. 404); Dixon Co. v. Field, 111 U. S. 94 (Bk. 28, L. ed. 360); Buchanan v. Litch field, 102 Ú. S. 292 (Bk. 26, L. ed. 138); Hayes v. Holly Springs, ante, 81. To the extent the county court paid out of the taxes, any interest on, or principal of, the overissue, it was without authority and in violation of the law, and did not amount to a ratification. See Marsh v. Fulton Co. 10 Wall. 684 (Bk. 19, L. ed. 1040); Hayes v. Holly Springs, supra; McCracken v. San Francisco, 16 Cal. 624. Messrs. J. Hubley Ashton, P. B. Muir and James Speed, for defendant in error: The bonds in question are all payable to bearer, and were all signed by the county judge and countersigned by the clerk. The signatures are admitted to be genuine; and the bonds were all sold for value by the county judge within three months after their date. Being in possession of defendant in error, the presumption of law is that he acquired them "bona fide, for full value, in the usual course of business, before maturity, and without notice of any circumstances impeaching their validity, and that he is the owner thereof." 1 Dan. Neg. Inst. § 812 and cases there cited. Such instruments are commercial paper, and governed by the rules of the law merchant concerning such paper; and as respects a holder for value, before due, without notice of facts constituting a defense thereto, the only defense which is available is that there was no power in the defendant corporation to issue the bonds or instruments in question. Dill. Law of Mun. Bonds, § 7; St. Joseph's Township v. Rogers, 16 Wall. 644 (88 U. 8. bk. 21, L. ed. 828). Irregularities in the exercise of the power, as against a holder for value, without notice of such irregularities, constitute no defense. Dill. Law of Mun. Bonds, & 7; Knox Co. v. Aspinwall, 21 How. 589 (62 U. S. bk. 16, L. ed. 208); Marsh v. Fulton Co. 10 Wall. 676 (77 U. S. bk. 19, L. ed. 1040), and many later cases in this court. It may well be contended that the express power to create this debt carried with it the implied power to issue bonds to an amount sufficient, at their market value, to pay the debt. The Supreme Court of Ohio so held in the case of Bank of Chillicothe v. Chillicothe, 7 Ohio, pt. 2, 81. The doctrine in Iowa and Wisconsin is the same. Hull County of Marshall, 12 Iowa, 142; Mills v. Gleason, 11 Wis. 470; State v. Madison, 7 Wis. 688. Such seems to have been the ruling of this court in Lynde v. Winnebago Co. 16 Wall. 12 (83 U. S. bk. 21, L. ed. 272). As there was authority for the issue of the subscription bonds which is indorsed on the bonds by reference to the law from which it is derived, the purchaser before maturity was not bound to look further. County of Moultrie v. Fairfield, 105 U. 8. 874 (Bk. 26, L. ed. 945); Knox v. Aspinwall, 21 How. 589 (62 U. S. bk. 16, L. ed. 208); Town of Coloma v. Eaves, Humboldt Township v. Long and Marcy v. Township of Oswego, 92 U. S. 484, 642, 637 (Bk. 23, L. ed. 579, 752 and 748). There was no want of power to issue more bonds of any class than the order prescribed for that class; and at most the issuing of such bonds was a mere irregularity which cannot | avail the County as a defense to the bonds in the hands of a bona fide purchaser for value. The irregularity, if it was one, was committed by the agents of the County; and the County is precluded from taking advantage of it, upon the plainest principles of justice. This would be true if there had been no representation or warranty or certificate, on the part of the county court, upon the bonds, that everything necessary by law had been done, and every fact necessary by law to have existed did exist, to make the bonds lawful and binding. But there is such a certificate on the back of each bond, which declared to the purchaser that "This bond is issued as authorized by an Act of the Kentucky Legislature, approved February 27, 1867, entitled, 'An Act to Charter the Owensboro and Russellville Railroad Company,' and by an ordinance of the County Court of Daviess in pursuance thereof." This certificate was a part of the bond, as prepared, executed and issued under the order of the county court, by authority of the statute. See Marshall Co. Supervisors v. Schenck, 5 Wall. 772 (72 U. S. bk. 18, L. ed. 556); Pendleton Co. v. Amy, 13 Wall. 297 (80 U. S. bk. 20, L. ed. 597); County of Clay v. Society for Savings, 104 U. S. 591 (Bk. 26, L. ed. 856); Anderson Co. Commissioners v. Beal, 113 U. S. 240 (Bk. 28, L. ed. 966); Moran v. Miami Co. 2 Black, 722 (67 U. S. bk. 17, L. ed. 342); Zabriskie v. Cleveland, C. & C. R. R. Co. 23 How. 381 (64 U. S. bk. 16, L. ed. 488); Grand Chute v. Winegar, 15 Wall. 355, 378 (82 U. S. bk. 21, L. ed. 170, 174); Knox Co. v. Aspinwall, 21 How. 539 (62 U. S. bk. 16, L. ed. 208); Mercer Co. v. Hackett and Myer v. City of Muscatine, 1 Wall. 88, 884 (68 U. Š. bk. 17, L. ed. 548, 564). Mr. Justice Gray, after stating the case as above reported, delivered the opinion of the court: The county court had no power to subscribe for stock in the railroad corporation, or to issue bonds therefor, except as authorized by statute. The statute authorized the county court to subscribe for such an amount of stock only, as should be fixed and proposed by the commissioners named in the statute, and be approved by the vote of a majority of the voters of the County; and the authority of the county court, either to levy taxes, or to issue bonds, was limited to the amount so proposed and voted. That amount was $250,000. The county court therefore had no authority to issue bonds for a greater amount, and any bonds issued in excess of that amount were unlawful and void. By the statute the bonds were to be in such sums and payable at such times as the county [664] court should determine. The county court ordered that the bonds should be executed and made payable, $50,000 in five years; $50,000 in ten years; $75,000 in fifteen years; and $75,000 in twenty years; and that the bonds should be signed by the judge and the clerk of the county court, and have the seal of the County impressed on each. Notwithstanding this, bonds so signed and sealed were issued of each class to a larger amount, amounting in all to $320,450, showing, after deducting bonds returned and canceled, an excess of $67,350. To the ex tent of this excess, the bonds were invalid, and the county is liable upon bonds to the amount of $250,000 only. It does not deny its liability to that amount. Then comes the question, Which of the bonds are valid and which invalid? We can have no doubt that the test is: Which were first delivcred-if that can be ascertained, and without regard to the classification of bonds according to times of payment in the order of the county court; for, as the county court was authorized to determine at what time the bonds should be payable, anyone, taking a bond signed by the presiding judge and the clerk and bearing the seal of the County, had the right to presume that it was valid, provided the county court had not already issued bonds to the amount limited by the statute and by the vote. The certificate of the judge of the county court upon the back of each bond, that it was issued as authorized by the statute and by an order of the county court in pursuance thereof, cannot estop the County to deny that the particular bond is void because the county court, at the time of issuing it, had exhausted the power conferred by the Act of the Legislature and the vote of the people. The certificate is not a recital in the bond. It is not the act of the county court, is not under its seal, nor signed by its clerk; but is simply the certificate of the person holding the office of judge of that court. Neither the statute, nor the vote of the people, nor the order of the county court, empowered him to make such a certificate, or to determine the question whether the county court had ex1080 ceeded the power conferred upon it. An of ficer's certificate of a fact which he has no authority to determine is of no legal effect. Dizon Co. v. Field, 111 U. S. 83 [Bk. 28, L. ed. 360]. Nor can the payment of interest on all the bonds have the effect of ratifying bonds issued beyond the lawful limit; for a ratification can have no greater force than a previous authority, and the county cannot ratify what it could not have authorized. Marsh v. Fulton Co. 10 Wall. 676 [77 U. S. bk. 19, L. ed. 1040]. The necessary consequence is that the court below erred in instructing the jury that the plaintiff was entitled to recover on all the bonds and coupons sued on, if he purchased them before their maturity and for value, and without notice that more than $250,000 of bonds had been issued by the defendant. Merchants Bank v. Bergen Co. 115 U. S. 384 [Bk. 29, L. ed. 430]. The judgment must therefore be reversed, and the case remanded, with directions to set aside the verdict and order a new trial. What part of his bonds and coupons the plaintiff may enforce against the County may depend upon further evidence of the exact dates of the delivery and the purchase of the several bonds, that may be introduced upon another trial of this case, or perhaps in some other suit to which all the bondholders may be made parties, and therefore no opinion is expressed upon that question. Judgment reversed. True copy. Test: James H. McKenney, Clerk, Sup, Court, U.S. 117 U.S. [665] END OF VOL. 117, AND OF Book 29. |