paid part of the bonds issued. The town of Westport and the district of which it constitutes a part have accomplished the object of constructing a horse railroad, and are enjoying its benefits. They have recognized the bonds and given them value by paying part of them, and the interest on the whole for a number of years. To turn around now, after all this, and say no power to issue the bonds existed, savors of injustice not to be tolerated or upheld by the court, unless bound to do so under the strict letter of the law. Any doubt as to the proper construction of the act must be solved in favor ofgood faith. If the question was on the issuing of an injunction, or other propel' remedy, to prevent the issuing of the bonds for a want of power, any doubt as, to a proper construction of the act would be solved against the exercise of the doubtful power. Under the views entertained by the court the bonds are valid, and the judgment will be for plaintiff.
JOSEPH BOARD OF PUBLIO SOHOOLS.
OSBORNE 11. SAllIE.
(Otrouit (Jourt, W
n. Mis8ourt, E. D.
PUELIC SCHOOL BOARD-AUTHORITY OF-NoT TO ISSUE BONDS.
The boundary to the discretion of the board of public schools of St. Joseph as to the bUilding of school-houses is fixed by the charter of the corporation, and their authority is limited and defined in the fourteenth section of the act of incorporation, which does not authorize the hoard to create a debt for that purpose and issue bonds for the payment thereof.
The facts appear in the opinion. Woodson d; Crosby, for plaintiff. Flanagan, for defendant. KREKEL, D. J. These are instituted on detached coupons of the same issue of bonqs emitted by the St. Joseph Board of Public Schools. The question to be determined is, had the board authority to issue them? The bonds declared on are in the following form:
"No. - - . UNITED STATES OF AMERICA. $1,000· .. State of Missouri, City of St. Joseph. "The St. Joseph Board of Public Schools of the city of St. Joseph, in the county of Buchanan, in the state of Missouri; being legally organized and
ERWIN V. ST. JOSEPH BOARD OF PUBLIO SCHOOLS.
assembled, du hereby acknowledge themselves indebted to - ' - - - . or on1er, in the sum of $1,000, which said sum they bind themselves, and their sors in office, to pay the said - - - - , or order, on or before the first day of city of New York, and April, 1888, at the National Bank of Commerce, in interest thereon from ,April 1, 1868, at the rate of 10 per centum per annum, payable half yearl)' on the first days of April and October, on presentation of the proper coupons hereto annexed; reserving to themselves and their ,successors in OffiC6 the right of paying this bond, with the interest thereon, at any time after the expiration of 10 years from the datlil hereof. This bond is secured by the real and personal estate owned and held by the said board of public schools in the city of St. Joseph in their corporate capacity,in con' formity with the Revised Statutes of Missouri for the year 1865. ,. Tn testimony whereof, the said 'bOard'of public schoois l1a,ie caused their corporate seal to be hereto affixed, and their president and secretary oLthe said board to"sign theirnames to the same, and also the treasurer to cO!.lllter. sign the same, this first day of April, A. D. 1868. [Signed] "SA:lfUEL HAYS, President. "EDWARD' B. NEELEY, SeOretary [Seal.] "JOHNCALHOUN,Treasurer." i!
The petition is in the usual form, and alleges that the bonds were' issued, "with others, in accordance with and by virtue of the authority vested in the defendant by its charter of incorporation; and the acts of the general assembly of the state of Missouri amendatory thereto, for the purpose of raising money tobuil<i school-houses, and 20 instalments of interest have been paid thereon." It is not. pretended that there is direct authority in any of the laws nnder which these bonds were issued, to which reference will hereafter be made, to issue the same; but it is claimed that, from the nature of the grant of power in the charter, implied power authorizing the issue can be deduced; that on account of the object and purposes of the corporation a liberal construction, in harmony with the tendencies of legislation in Missouri regarding schools, should be indulged in; that if any doubt regarding the proper construction of the law exists, the construction given to it by those whose duty it was to carry out the law should prevail; that the acquiescence of the people of St. Joseph for more than 10 years, indicated by the payment of the interest on the bonds, and the furtherance of honesty, should incline the court to uphold the bonds. We proceed to examine the laws under which the bonds were The St. Joseph Board of Public Schools was incorporated by an act of the legislature of Missouri, approved January 4, 1860, and from this act, its amendments and laws incorporated into it, we proceed to
quote such portions as are relied on by the plaintiff, and citing other parts having a bearing on the case. We are directed, 1n the first place, by plaintiff's counsel to that portion of the first section of the charter which provides that the board may "do all other acts as natural persons." The first section, which this quotation is taken, defines the boundaries of the corporation, gives it its corporate name, confers perpetual succession, authorizes it to sue for and be sued, and proceeds, "may purchase, receive, and hold property, real and personal, may lease, sell, or dispose of the same, and do all other acts as natural persons." V,ery many acts must of necessity be done in connection with the execution of the powers here granted; and the natural construction of the language, "and do all other acts as natural persons," must be construed to mean the doing of the acts embraced within the powers grantM, but not specified. Corporations obtain powers' by grant exclusively, and from their thus limited character can claim such implied powers only as are necessary to carry out the obvious object and intention of the charter. Especially is this true in cases where the act of incorporation, when properly construed, provides for the very contingencies which are claimed to have existed, creating a necessity for the exercise of implied powers. Dpon another branch of the case something more will be said on this point. The next point to which our attention is called by plaintiff's attorneys is the concluding portion of section 5, which reads as follows: "And generally to do all lawful acts which may be proper and convenient to carry into effect the objects of said corporation." The fifth section, from which this'quotation is extracted, grants the powers which the corporation is to exercise, namely: Provide for the election of its members, compel attendance at meetings, expel members, make rules for the proceedings of the board, control the schools and property of the corporation, to loan its moneys and their proceeds, and provides.:
"The board shall' also have power to make rules, regulations, and 'ordinances necessary for the management tmd control of the property belonging to the corporation, and for the government, discipline, and other management of the schools under their charge, so that the same. shall not be inconsistent with the laws of the land, and generally tQ all lawful allts which may be proper and convenient to carry into the objects of sa.id qorporatiqn."
Much of what has.a1readybeen said regarding.the cOll.stru.ation of such language as is here employed applies to the provision cited; but
it., is insisted that the words "to do all lawful acts. which may ,be proper and convenient to carry into effect the objects of the corporation," when viewed in connection with the in .the first section, "to do all other acts as natural persons," has peculiar signifi. cance, and may well be construed to authorize the creation of a debt for school purpOSes, and the issuing of bonds therefor. On the words "proper and convenient" great stress is laid in the argument. What do these words, when read in their connection, mean? The answer i!3<. they suggest the exercise of caution in the doing of the manifold acts which a board of directors is called upon to perform in the man· agement of its schools. The building of school·houses, under the view taken by. plaintiff's counsel, is claimed to have been not only proper and conYenil3nt, but necessary to carry into effect the objects of the corporation. There must necessarily be some limitationsome boundary as to what may be proper and convenient. Has the charter left the fixing of this boundary to the discretion of the board, . or defined it? We think it has clearly and indisputably defined and fourteenth section of the act of incorporation, which limited it in is,as,follows:
"TheJloard shall cause an estimate of the am ount of money necessary to be the purpose of building and repairing school-houses and,furnishing the same, together with the amount necessary to meet the other expenses of the corporation, to be made out and certified under the seal of the board annually; and a copy of such·· estimate duly authenticated shall be filed with the clerk of the county court of Buchanan county on or before the first Monday in each year, and the county court shall cause the same so certified to be levied upon all taxable property, real and personal, in said district,and tbe·amount so levied shall be collected in the manuer prescribed by law for the collection of state and county taxes: provided, the taxes mentioned in this section shall not exceed one-fifth of 1 per cent. (amended by the act of 1869, and made one-half of 1 per cent.)"
It is scatcely possible to draw a clearer provision of law defining the lirriits within which any discretion regarding the building of school-houses and other ewenditures for school purposes in St. seph should be exercised by the board. But'it is argued that. the tax limitations were such as not to produce a sufficient amount of revenue to build, and pay .for the number of school·houses necessary, proper, andcoDvenient. How, can this be said, in the face of the fact that the people·of St. Joseph :had ina measure,· by and through their charter, detenniried this very ? If we'were to the view taken by the board, where, iUi;lay'be, asked, are there limits to the implied powerliJ ,St. Joseph school hoard? The boaI'd
may issue one hundred thousand or a million of dollars of bonds. We would be bound to hold the issue of the one amount as well as the other to be valid; and would further be bound to Cj1use the taxes to be collected to pay the interest and principal, when due, for whatever amount the board saw fit to issue the bonds. There is a vast difference between building or purchasing school-houses and the appointed revenues of the district, and the making use of the credit of the city by issuing bonds and using them for that purpose; the one leading to prudence and caution in expenditure, the other tending towards extravagance, and going beyond the real wants of the city. There is scarcely any use in providing limitations to the exercise of powers in laws or charter, if they can be evaded under the guise of implied powers. I fully concur in the reasoning on this subject in the case of Gauss v. ClarksviUe, 19 Alb. Law J. 253. It will not do to substitute discretion, however soundly exercised and however laudable the object, for law; and especially not in construing charters of corporations. But the charter under consideration has in its twenty-third section this provision: The legislature, after reserving the power to change, alter, and repeal the charter, goes onto provide "that no law hereafter passed shall be construed as changing,' altering, or repealing the whole or any part of this act, unless this act be expressly m.entioned in such Laws ,authorizing the creation of debts and the issuing of bonds therefor for the purpose of building school-houses, passed afte1,'. the charter and amendment thereof in 1866, and after the issuing Of the bonds in: oontroversy, can have no bearing on this case. We have examined with care the amendments of the original charter in 1866, and the town and village schoollawof 1855, ma'de a part of the original charter. .. In the amendment of 1866 no trace of authority authorizing the creation of a debt for the purpose of buildingschoQI-4onses, By the, ninth much less' the issuing of bonds the tw'enty-second section of the town. and village school of 1855, granting powers to school boal:ds, the is given " ,
., To determine the number of common schools to be !kept: to designate and lease or llurchase sites for school-houses: (10) To build, bire, purc!J.ase school-houses, and keep in repair and furnish the sllJ1lewith fuel> furniture', and necessary appendages.. (11) To appropriate and- apply. such ;part of the town or village school moneys as may be necessary to the purchaSE! or lease Qf sites for school-houses to tbebui:lding, hirillg,keeping in repair, and jng school-houS6swith fuel, furniture, and appen'dages." . ;" ). 1,.
ST. JOSEPH. BOAaD 01' PUBLIO SOHOOLS.6St)
It will be observed that here, as in the charter, not only is there no authority to create a debt to build school-houses, but, dntheMntrary, the creation of a debt is implicitly denied by the provision that such part of the town and village school moneys as may be necessary for the building, hiring, keeping in repair school-houses shall· b!3 applied for that purpose. The conclusion reached against the power to issue the bonds in suit is fortified by the subsequent legisJation of Missouri, which ·expressly gives the power to issue school bonds. The power to create a debt, and the issuing of commercial securiof ties therefor, are quite different things. The ordinary corporate indebtedness, such as warrants, orders, notes. are subject This, being known, induces prudence to legal and equitable in their issue, and caution in receiv:ing them. Once allow such debts to be put in the shape ofcommerclal securities, preventing all inquiry in the hands of a bona fide holder except that of powedo issue, thecom.missiori of fraud, and you open· the· doors wide, ih:deed and point the way to its successful accomplishment. As to the argument that construction given by those who had to execute the law, and the acquiescence in such construction by paying taxes on the bonds for a long period of time, it is sufficient to say that we are pteclt'ided from making inquiry, for the supremecbut't of the acts cannot cure United States has again and again decided that the want of power, and have held the. bondholder to :strict inquiry regarding its.enstence. The conclusions reached a.rethat the St Joseph Board .of Public Schools had no power under its. cnarter,nor the law of 1855; regarding towns and villages, made part of the charter, to issue the bonds, the coupons whereof are in controversy, and that the dem'urrer to the petition must be sustained. c'. Ordeted
(Oircuit Court, 8. D. Ge<Yl'fJia, W. D.
1. BANKRUPTCy-ILLEGAL PRll:1l'ERENCE.,:
CUbbedge & Lockett were members of the firm of C., H. & Co., and also president and cashier .of a" Bank & :r'rust Co.," in which C., H. & Co. were stockholders. The firm was indebted to the B. & T. Co., and agreed verbally with C. and L., as officers thereof, to secure the indebtedness by the stock which the firm owned in the B. & T. Cd. This agreement was reported to and accepted by the directors of the B. & T. Co. Various stock certificates standing on the books of the, B. & T. Co. in the name of C., H. & Co. were, under their agreement, (probably,) deposited with and held by Lockett as cashier of the B. & T. Co.; but now.ritten transfer, or power of attorney authorizing for some time, and a ,few transfer, was executed. The firm had been days before its suspension, also within less thanfour. month;; before adjudication in bankruptcy, the firm for the first time made' formal note evidencing said indebtedness, and formally transferred said'sbares u))on the books to the B. & T. Co. Held, that in blinkruptcyof said firm is entitled to recover said stock, or the value th!;lreof, said B. & ,'I'.
2. SAME-NOTICE. Wbere two members of an insolvent firm are president and cashier ,of a bank, their knowledge of the insolvency their firm is the knowledlte of. the bank. . S.
A transfer on the books of the company, or the execution of " power of at· torney authorizing Ii transfer, is essential to pledge of corporate stock, (excep' when by statute it is otherwise provided, in LouisIana.) ,
4. SAME-REQUISITES oJi.· POSSESSION." ,-' When the pledgeors of stock retain the title and contral Oftbe stock pledged, the power pf withdrawal and \lubstU.ution.,1iO tl,1at can transfer or negotiate the same without the pledgee, while'the pledgee could not control the stock without consUlting the 'pledgeors, the mere'deposi t of the stock certificates (standing in the name 'of the pledgeorsl with,the pledgee does not create a valid pledge thereof. ,
In Equity. Submitted upon pleadings for final decree. Hill it HaJrris, for complainant. Bacon et Rutherford, contra. PARDEE, C. J. For several years prior to June 6, 1878, R. W. Cubbedge, William Hazlehurst, and J. W. Lockett, under the firm name of Cubbedge, Hazlehurst & Co., were engaged in the city of Macon in carrying on a general banking and brokerage business. On the said sixth day of June, 1878, the said firm failed in business and made a general assignment of their assets then on hand to W. W.
-Reported by W. B. Hill, Esq" of the Macon bar.