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§ 1535b. A constitutional prohibition, contained also in a legislative enactment, forbidding municipal officers to loan municipal credit, or donate or subscribe stock to railroad or other corporations without previous assent of two-thirds of the qualified voters, is merely prohibitory, and confers no authority when such assent is given.2

§ 1536. It has been held that, if a majority of the electors of a municipal corporation vote in favor of a proposition for the corporation to subscribe to the capital stock of a railroad company, under a law directing such subscription to be made if such majority's vote is obtained, the municipal authorities, on proceedings to compel them to make such subscription, have a right to allege and show that the election was not fairly conducted, but was influenced by bribery and corruption, practiced and perpetrated by the railroad company and its employees. It has been been held by the United States Supreme Court that under an Illinois statute authorizing a township subscription to a railroad company not exceeding $250,000, provided the people so voted, the power of the township was not exhausted by a subscription of a portion of the sum limited, and that a consolidation of the railroad company with another, and assumption of a different name prior to the subscription, did not vitiate it."

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§ 1536a. Right of taxpayers to injunction. The taxpayers of the municipality may also enjoin the proceedings of the corporate authorities to carry out the subscription on the ground of fraud, bribery, nonfulfilment of pre-existing conditions, or other sufficient cause; but they must do so, if at all, in apt time, and before the rights of bona fide third parties have accrued.

2. Jarrolt v. Moberly, 103 U. S. (13 Otto) 581.

3. People v. Supervisors, 27 Cal. 655.

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4. Empire v. Darlington, 101 U. S. (11 Otto) 87. See People v. Waynesville, 88 Ill. 469.

5. Empire v. Darlington, 101 U. S. (11 Otto) 87. See ante, § 1523a.

6. Butler v. Dunham, 27 Ill. 477, 478; Prettyman v. Supervisors, 19 Ill. 406; Steines v. Franklin County, 48 Mo. 176. See § 1522a.

SECTION III.

POWER OF A MUNICIPAL OFFICER OR AGENT TO BIND THE MUNICIPALITY; VIEWS OF THE UNITED STATES SUPREME COURT.

§ 1537. The Supreme Court of the United States has enunciated the following doctrines on this subject as applicable to corporations, private and public, which we shall divide into two series. The first series are as follows:

First: Where a party deals with a corporation in good faith, the transaction is not ultra vires, and he is unaware of any defect of authority, or other irregularity on the part of those acting for the corporation, and there is nothing to excite suspicion of such defect or irregularity, the corporation is bound by the contract, although such defect or irregularity in fact exists."

Second: When a corporation has power, under any circumstances, to issue negotiable securities, the bona fide holder has a right to presume they were issued under the circumstances which give the requisite authority, and they are no more liable to be impeached for any infirmity in the hands of such a holder than any other commercial paper.8

7. Merchants' Bank v. State Bank, 10 Wall. 644; Myers v. The City of Jeffersonville, 145 Ind. 431. In the last case Mr. Justice Hackney, speaking for the court, and referring to the elaborate review of the cases in the opinion, said: "The result of the authorities is, we think, that where municipal bonds have passed into the hands of bona fide holders, that, is: holders for value without notice of mere irregularities in the exercise of existing power to execute the bonds, they hold them as other commercial paper, subject to no defense by reason of such irregularities. But where there is an absence of power to execute the bonds, they are void, and subject to defense in the hands of whomsoever they may come." Hoag v. Town of Greenwich, 133 N. Y. 152. Held, in this case, in an able opinion of Finch, J., that where commissioners appointed under an act, issued bonds of the town payable in twenty years instead of for thirty as required by the act, that the bonds were void as such; but that, as the commissioners had authority to borrow the money which the bonds were merely to secure, they by so doing bound the town to repay it, and it appearing that the parties, both borrower and tender, acted in good faith and with the intention to comply with the statute, that a promise on the part of the town to repay the loan at the time and in the manner prescribed by the statute, would be implied, and an action thereon against the town was maintainable. Town of Brewton v. Spire, 106 Ala. 229, 17 So. 606.

8. Gelpcke v. City of Dubuque, 1 Wall. 203; Moran v. Miami County, 2 Black, 725; Supervisors v. Schenck, 5 Wall. 784; The Mayor v. Lord, 9 Wall. 414; City of Lexington v. Butler, 14 Wall. 296. See also San Antonio v. Lane,

Third: That, where negotiable bonds or securities on their face import by recitals a compliance with the law under which they were issued, the purchaser is not bound to look further for evidence of compliance with the conditions annexed to the grant of power to issue them."

Fourth: That, if it appears to have been the sole province of the officers who execute and issue the bonds or securities to decide whether or not there has been antecedent compliance with the regulation, condition, or qualification prescribed to their authority, their determination that there has been such compliance and

32 Tex. 414; County of Henry v. Nicolay, 95 U. S. (5 Otto) 626; Auerbach v. Le Sueur Mill Co., 28 Minn. 291; City of Cadillac v. Savings Bank, 7 C. C. A. 574, 58 Fed. 935; Louisville, etc., Ry. Co. v. Louisville Trust Co., 174 U. S. 552, 19 Sup. Ct. Rep. 817.

9. Mercer County v. Hacket, 1 Wall. 93; Commissioners of Knox County v. Aspinwall, 21 How. 545; St. Joseph Township v. Rogers, 16 Wall. 659; Pendleton County v. Amy, 13 Wall. 305; Bissell v. Jeffersonville, 24 How. 287; Moran v. Miami County, 2 Black, 722; Grand Chute v. Winegar, 15 Wall. 372; Larned v. Burlington, 4 Wall. 276, 277; Lynde v. County, 16 Wall. &; Kennicott v. Supervisors, 16 Wall. 464; County of Warren v. Marcy, 97 U. S. (7 Otto) 96; Menasha v. Hazard, 102 U. S. (12 Otto) 81; San Antonio v. Meharty, 96 U. S. (6 Otto) 313; Township of Rock Creek v. Strong, 96 U. S. (6 Otto) 227; Commissioners v. Bolles, 94 U. S. 202; Commissioners v. January, 94 U. S. (4 Otto) 202; Pompton v. Cooper Union, 101 U. S. (11 Otto) 204; Clay County v. Society for Savings, Morrison's Transcript, vol. III, No. 3, p. 654; Sherman County v. Simons, 109 U. S. 735; Livingston County v. First Nat. Bank, 129 U. S. 102. But it has been held that such recitals will not relieve a purchaser where the law, compliance with which is recited, is unconstitutional, or otherwise invalid. Lake County v. Graham, 130 U. S. 674. A certificate of a judge of the County Court indorsed on the back of each bond, alleging compliance with the enabling statute, has been held not a recital of the bond itself, the judge being unauthorized to make such certificate. Daviess County v. Dickinson, 117 U. S. 664; Coler & Co. v. Dwight School Township, 3 N. Dak. 249, 55 N. W. 587; Flagg v. School District, 4 N. Dak. 30, 58 N. W. 499; Mayor of City of Columbus v. Dennison, 16 C. C. A. 125, 69 Fed. 58; West Plains, etc., Co. v. Sage, 16 C. C. A. 553, 69 Fed. 943; Risley v. Village of Howell, 12 C. C. A. 218, 64 Fed. 453; Wesson v. Town of Mt. Vernon, 39 C. C. A. 301, 98 Fed. 804; Rondot v. Rogers, 39 C. C. A. 462, 99 Fed. 202; Pickens Township v. Post, 41 C. C. A. 1, 99 Fed. 659; Hughes County v. Livingstone, 43 C. C. A. 541, 104 Fed. 306; Rollins v. Board of Commissioners, 26 C. C. A. 91, 80 Fed. 692; City of South St. Paul v. Lamprecht Bros., 31 C. C. A. 585, 88 Fed. 449. Where the bonds recite a wrong act as authority for their being issued, the holders are not precluded from showing that independent of such act there was power to issue the bonds. Wilkes County v. Coler, 180 U. S. 506, 21 Sup. Ct. Rep. 458.

declaration to that effect is sufficient, and cannot be impugned as against a bona fide holder.10

10. Town of Coloma v. Eaves, 92 U. S. (2 Otto) 491; Town of Venice v. Murdock, 92 U. S. (2 Otto) 496; Town of Genoa v. Woodruff, 92 U. S. (2 Otto) 502; County of Moultrie v. Savings Bank, 92 U. S. (2 Otto) 631; Marcy v. Township of Oswego, 92 U. S. (2 Otto) 637; Walnut v. Wade, 103 U. S. (13 Otto) 683; Commissioners v. Bolles, 94 U. S. (4 Otto) 104; Buchanan v. Litchfield, 102 U. S. (12 Otto) 291; Bonham v. Needles, 103 U. S. (13 Otto) 648; Orleans v. Pratt, 99 U. S. (9 Otto) 676; Lincoln v. Iron Co., 103 U. S. (13 Otto) 413; Moultrie County v. Fairfield, Morrison's Transcript, vol. IV, No. 1, p. 152; Commissioners v. January, 94 U. S. (4 Otto) 202; St. Joseph Township v. Rogers, 16 Wall. 659, Clifford, J.; Kennicott v. Supervisors, 16 Wall. 464, Hunt, J. In Lynde v. County, 16 Wall. 13, Swayne, J., said: "It is a settled rule of law that, where a particular functionary is clothed with the duty of deciding such a question, his decision, in the absence of fraud or collusion, is final." See also Bank of Rome v. Village of Rome, 19 N. Y. 20; Commissioners of Knox County v. Nichols, 14 Ohio St. 271. In Town of Coloma v. Eaves, 92 U. S. (2 Otto) 491, Strong, J., quoting Dillon on Municipal Corporations, § 419, said: "After a review of the decisions of this court, the author remarks: If upon a true construction of the legislative enactment conferring the authority (viz., to issue municipal bonds upon certain conditions), the corporation, or certain officers, or a given body or tribunal, are invested with power to decide whether the condition precedent has been complied with, then it may well be that their determination of a matter in pais, which they are authorized to decide, will, in favor of a bondholder for value, bind the corporation.' This is a very cautious statement of the doctrine. It may be restated in a slightly different form. When legislative authority has been given to a municipality, or to its officers, to subscribe for the stock of a railroad company, and to issue municipal bonds in payment, but only on some precedent condition, such as a popular vote favoring the subscription, and where it may be gathered from the legislative enactment that the officers of the municipality were invested with power to decide whether the condition precedent has been complied with, their recital that it has been, made in the bonds issued by them, and held by a bona fide purchaser, is conclusive of the fact, and binding upon the municipality, for the recital is itself a decision of the fact by the appointed tribunal." But if the bonds are issued without authority of law, holder for value would not be protected. Smith v. Town of Greenwich, 80 Hun, 118, 30 N. Y. Supp. 56. See authorities cited in notes to § 1540; Provident Trust Co. v. Mercer County, 170 U. S. 601, 18 Sup. Ct. Rep. 788; Evansville v. Dennett, 161 U. S. 442, 16 Sup. Ct. Rep. 613, 20 C. C. A. 142, 73 Fed. 966; Cairo v. Zane, 149 U. S. 122, 13 Sup. Ct. Rep. 803; Anderson County Commissioners v. Beal, 113 U. S. 227, 5 Sup. Ct. Rep. 433; Graves v. Saline County, 161 U. S. 369, 16 Sup. Ct. Rep. 526; Andes v. Ely, 158 U. S. 312, 15 Sup. Ct. Rep. 954; Citizens' Sav. Assn. v. Perry County, 156 U. S. 692, 15 Sup. Ct. Rep. 547; Oregon v. Jennings, 119 U. S. 74, 7 Sup. Ct. Rep. 124; Insurance Co. v. Bruce, 105 U. S. 328; County of Jasper v. Ballou, 103 U. S. 745; Board of Commissioners v. Etna Life Ins.

Fifth: That, from the mere fact that the bonds or securities are issued and subscribed to the object of their issue, the purchaser has a right to assume that the conditions precedent to the right to issue have been fulfilled," and in an action on the bonds or coupons the plaintiff need not aver the performance of such conditions. 12

Sixth: That, if the legal authority be sufficiently comprehensive, a bona fide holder for value has a right to presume that all precedent requirements have been complied with.13

Seventh: That, if there be lawful authority for the corporation to issue the bonds, the omission of formalities and ceremonies, or the existence of fraud on the part of the agents of the corporation issuing the bonds, cannot be urged against a bona fide holder seeking to enforce them.14

§ 1538. Qualifications of doctrines stated. But the effect of its decisions is to qualify these doctrines by a second series of propositions, as follows:

First: That where the power on the part of the corporation officers to make the contract for the corporation never existed, negotiable securities issued by them are invalid in the hands of

Co., 32 C. C. A. 600, 90 Fed. 237; Brown v. Ingalls Township, 30 C. C. A. 27, 86 Fed. 261; City of Huron v. Second Ward Sav. Bank, 30 C. C. A. 38, 86 Fed. 272; Wesson v. Saline County, 20 C. C. A. 227, 73 Fed. 917; Syracuse, etc., Co. v. Rollins, 44 C. C. A. 277, 104 Fed. 958; Village of Kent v. Dana, 40 C. C. A. 281, 100 Fed. 56; Board of Commissioners v. Sutliff, 38 C. C. A. 167, 97 Fed. 270; Geer v. Board of Commissioners, 38 C. C. A. 250, 97 Fed. 435; Board of Commissioners v. Etna Life Ins. Co., 32 C. C. A. 585, 90 Fed. 222; Board of Commissioners v. National Life Ins. Co., 32 C. C. A. 591, 90 Fed. 228; Gratton Township v. Chilton, 38 C. C. A. 84, 97 Fed. 145; Louisville, etc., Ry. Co. v. Louisville Trust Co., 174 U. S. 552, 19 Sup. Ct. Rep. 817.

11. Commissioners of Knox County v. Aspinwall, 21 How. 544; Meyer v. Muscatine, 1 Wall. 393; Lincoln v. Iron County, 103 U. S. (13 Otto) 412. But see Buchanan v. Litchfield, 102 U. S. 278; Citizens' Sav. Assn. v. Perry County, 156 U. S. 692, 15 Sup. Ct. Rep. 547, and § 1538.

12. Lincoln v. Iron County, 103 U. S. (13 Otto) 413.

13. Meyer v. Muscatine, 1 Wall. 393; Grand Chute v. Winegar, 15 Wall. 373; Life Ins. Co. v. Board of Education, 10 C. C. A. 637, 62 Fed. 778; Pickens Township v. Post, 41 C. C. A. 1, 99 Fed. 659.

14. Kennicott v. Supervisors, 16 Wall. 465; Town of East Lincoln v. Davenport, 94 U. S. (4 Otto) 801. The omission of seals required by statute has been held not to vitiate the bonds. Town of Solon v. Williamsburg Sav. Bank, 42 N. Y. S. C. 1.

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