DENISON
v.
MAYOR, ETC., OF CITY OF COLUMBUS.
court -will sanction them upon proper investigation. Cowdrey v.Railroad Co., 1 Woods, 336, Fed. Cas. No. 3,293. The present instance is a case of this character; and, as the expenditure would have been allowed if authoritv had been asked, it is now confirmed; but the charge will be upon "the entire road of the Port Royal & Western Carolina Railway, and must be subordinate to the lien of the first mortgage on the Augnsta & Knoxville Railroad, the trustees of this mortgage having no part or lot in the receiver'ship. Interest on Bonds of Augusta & Knoxville Railroad Company. This is a question of much difficulty. If the receivers, by virtue of this payment, can require its return in the shape of receivers' certificates, they would then be placed in a position superior to any bond or coupon holder of the company. The payment of the interest under these circumstances would work no advantage whatever to the first-mortgage bondholders, and there would be no equity for its reimbursement. On the other hand, the payment and of these coupons prevented the foreclosure of the thereby prevented the disintegration of the system,-the object for which the receivership was created. When the roads now forming the Port Royal & Western Carolina Rail way Company were consolidated, however, the consolidation held the part of their road formerly the Augusta & Knoxville Railroad subordinate to this first mortgage, and under the act of the legislature it assumed a liability for this debt. Gen. St. S. C. § 1428; Pub. Laws S. C. § 1539. The claim under consideration is admitted, ranking next after the snm necessary to satisfy the outstanding bonds and coupons secured by the first mortgage on the Augusta & Knoxville Railroad. 'l'he prayer for receivers' certificates is refused. In the order for sale of the property, let provision be made for the sums allowed in accordance with this opinion.
DENISON et aL v. MAYOR, ETC., OF CITY OF COLUMBUS.
(Circuit Court, N. D. :Mississippi, E. D. No. 205.
September 6, 1894,)
L
MUNICIPAL BONDS-DONATION TO RAILROAD COMPANY -VALIDITY CATION.
RATIFI
Act Feb. 1, 1872 (Acts :Mlss_ 1872, p. 297), gave the city ot Columbus power to subscribe in aid of the Coo F. & D. R. Co., and to issue its bonds therefor. No provision was made fOl' an exchange of bonds for stock, ood stock Is not mentioned in the act. Acts 1\'1iss. 1882, p. 886 (ratifying the consolidation of such railroad company and others into the G. P. R. Co.), § 2. provides that the "donation of $100,000 in Its bonds" by the town ot Columbus to the C., Ii'. &, D. R. Co., but which have not yet been pald over. "be lwd are hereby declared to be payable to the" G. P. R. Co. In 1884 the city charter of Columbus was amended so as to authorize It to levy Illid collect a special tax to pay the Interest on such bonds, and provide a sinldng ftmd to pay the principal. The bonds were voted as a donation by the constitutional majority of two-tblrds of the qualified voters, and Interest was paid on the bonds for 11 yeu1's, Bela that, If a donation was
776.
i'EOERAL 'REPORTER)
vol. 62.
not originally but only a sUbscription to the capital stock of the C., F. & D. R. Co., Buch qOI1ation has been ratified by the legiBlature, the city authorities, and the people. S;·SA.Mlt7"""CRANGE OF ROAD .AFTER ISSUANQE QF
", \Acta Ala. 1868, p. 462 (a general act for the creation of raUroads), § 21,
autho;11ized railroads to consolidate on certain conditions. Section 23 transferredall the property lljIld elloses in action of each constituent company to the ,consolidated company. Acts M;iss. 1871, pp. 187, 188, granted the C., F. &D. R. Co. "all the privileges, rights and immunitieB" conferred by the Alabama act. ActS Miss. 1882, p. 836, authorized the bonds which were payable to the C., F. & D. R. Co. to be delivered to the consolidated company under the same limitations and restrictions under which they Would have become payable to snch payee., Acts Miss. 1872, p. 298, required city authorities toissue'the bonds only "when the terms of subscription are compIled With." Helw, that BUell city, in an action by an innocent holdell" of.sucbbonds on overdue interest coupons, could not set up as a defense that consolidated company, was authorized to build a different road from tile one originally chartered, and to leave such, city off its line entirely.
This was an action on overdue coupons on bonds issued by the city of Columbus, Miss.) to the Columbus, Fayette & Decatur Rail· roadOom,pany, but delivered to the Georgia Pacific Railway Company, and afterwards transferred to plaintiffs. Defendant demurs to the declaration, and plaintiffs demur to defendant's special pleas. Defendant's ,demurrer overruled. Plaintiffs' demurrer sustained. Oritz & Beckett, for plaintiffs. Arnold, Etans & BaldWin, for defendants. NfLES,District Judge. This is a suit on overdue coupons for interest on Muds issued by the defendant to the Oolumbus, Fayette & Decatur Railroad Oompany, and delivered to the Georgia Pacific Railway Company, into which the first·named company and several others were consolidated. The main points relied on as defenses are that the bonds were voted as a donation, when the act under which they were voted only authorized a subscription to the capital stock, and that the consolidated company was authorized to build a different railroad from that originally chartered. The act approved Feb. 1, 1872 (see Acts Mis,S. 1872, p. 297), gave the city authorities power to subscribe to aid in the construction of the Columbus, Fayette & Decatur Railroad Oompany, and to issue its bonds to the amount of said subscription. No provision is anywhere made for an exchange of bonds for stock, and stock is no· where mentioned in the act. The act ratifying the consolidation (Acts Miss. 1882, p. 836, § 2) provides that "the donation of $100,000 in its bonds heretofore agreed to be made by the town of Oolumbus, to the Columbus, Fayette and Decatur Railroad Oompany, but which have not yet been paid over, be and are hereby declared to be to the said Georgia Pacific Railway This is a legislative construction, at least, that a donation was author· ized, which in such cases is entitled to greaj: respect, and will frequently amount to a legislative ratification. Pompton v. Oooper Union, 101 U. S. 196. In 1884: an act was passed amending the charter of the city of Oolumbus, in which it was authorized to levy an<'l collect a special tax to pay the interest on these bonds, and to
DENISON V. MAYOR, ETC., OF CITY OF COLUMBUS.
777
provide a sinking fund for the ultimate redemption of the principal. The declaration shows that the interest has been paid for 11 years, since 1882. Here is a ratification by the legislature, in authorizing the bonds to be issued as a donation, and taxation to pay them; a ratification by the city authorities, in issuing them as a donation, and levying the taxes; and a ratification by the people, in the continued payment of the taxes. It is difficult to conceive a stronger case of ratification, if that were necessary. The bonds were voted as a donation by the constitutional majority of two-thirds of the qualified voters, as recited in the face of the bonds themselves; and, this only barrier against legislative power being removed, the legislature clearly had the right to ratify. Supervisors v. Brogden, 112 U. S. 261, 5 Sup. Ct 125; Katzenberger v. Aberdeen, 121 U. S. 178. 7 Sup. Ct. 947. It is next objected that by the consolidation a different road was authorized to be built, and that the consolidated company had authority to leave Columbus off its line entirely, and to build by way of Aberdeen. It is not alleged that the consolidated company was deprived of the right to build the road for which the bonds were voted, or that it actually did build by way of A1;>erdeen. The rule is that, if bonds are voted to a railroad company which at that time is authorized to consolidate with other railroads, then the bonds may properly be delivered to the consolidated company. This prin· ciple is announced, and the authorities reviewed, in Livingston Co. v. First Nat. Bank, 128 U. S. 102, 9 Sup. Ct. 18. There was a general act for the creation of railroads passed by the legislature of Alabama on December 29, 1868 (see Acts Ala. 1868, p. 462). By the twenty-first section of this act, railroad companies were authorized to consolidate on certain conditions. By the twenty-third section, all the property and choses in action of each constituent company were transferred to the consolidated company. By the Mississippi act this Columbus, Fayette & Decatur Railroad was granted "all the privileges, rights and immunities" conferred by the Alabama act. See Acts Miss. 1871, pp. 187,188. Hence, the companies were authorized to consolidate, and the bonds, or right to the bonds, which is a chose in action, was transferred to'the consolidated company, unless this right was cut off by the allegation that the consolidated company had an option to build a different road, by ,way of Aberdeen. The answer to this is that the city authorities were only required to issue the bonds "when the terms of subscription are complied with." See Acts Miss. 1872, p. 298. ,On their faces, the bonds are payable to the Columbus, Fayette & Decatur Railroad Company. They were authorized to be delivered to the Georgia Pacific Railway Company, the consolidated company, under the same limitations and restrictions that they were or would have become payable to the Columbus, Fayette & Decatur Railroad Company. See Acts Miss. 1882, p. 836. The city authorities of ColumbUS, Miss., were the tribunal to determine when these conditions were complied with, and issue and deliver the bonds. They did issue and deliver the bonds, with proper recitals; and they are now estopped, as against innocent purChasers, from alleging that they
178
FEDE:QAL REPO:QTE:Q,:voL
62.
,8.e.ted iwrongfully. Bloqk, v. Commissioner's, 99 U. S. 686; Comv. ,January,Oli:' U. S. 202; ,Oommissioners Y·. Olark, rd. 218;i,B:l'ooklyn v. Insurance Co., 99 U. S. 362; Moran v. Commissioners,S Black, 722. For these reasons, I think the demurrer to the declaration should be overruled, and the demurrers to the special pleas (from the third to the fifteenth, inclusive) should be sustained, and judgments can be entered accordingly.
NATIONAL LIFE INS. CO. OF MONTPELIER v. BOARD OF EDUCA· , TIQNOF CITY OF (Circuit Court of Appeals, Eighth Circuit. No. 402.
July 16, 1894.)
1.
RECITAUI IN 'MUNICIPAL BONDS-EsTOPPEL,
Where a. municipal}:lody has laWful authority,toissue bonds or negotiable dependent only ulJQn. the adoptj.o.ll of certain preliminary proc,*dIngs" and tbe adoptJ,on of those .preliBlinRl'Y is certified on the face of the bonds by the body towhich thelaw intrusts the power. and upOn whIch It impOses the duty, to ascertain, determine, and certify this faot before or at tlle:time of the Issuing of the bonds, such a certificate will gs,top the municipaU1Jy, as a,gainst' a )Jona fide purchaser of the bonds; from its falsity:in order to der.eiLt them. COKS1'I'I'UTIONAI. REQUIREMENT.
S. ESTOPPEL+-RECITAT, OF PERFORMANCE
a.
, Such an estoppel IIUlY: al'ise, in a proper case, upon a recital that an act required by a constitution has been performed, as well as upon a recital oflJhe pettormanCe of· an act requiredby'smtute. Recitals in mUlIlicipalbonds may constitute an estoppel iil favor of a bona MEl purchaser, even where body that issued the bonds had no power ,tp issl,le them,and could not, by any act of its OWjl0r .of its constitUent body, make 'It laWful issueo! the bonds, if the fact of this want of power d<leB not appear from the bonds the purchaser buys, the constitution and statutes under which they are issued, nor the public records referred to' Ulerein.
ESTOPP:IJ:L-C.J.RECITAI.S.
"
in municipai bonds, by ,the representative body that issues them, to the etrect tha,t a,11 the requirements of the laws with reference to their issue have been compIled with, wlllriot estop the municipality from proving, as against a bona fide purchaser, that the representative body had no 'P9wer to Issue tliem where rio act of the representative or constituent body could make the issue a,t the time it was made, and this fact appears from the constitution and statute Under which the bonds are issued, the public records referred to therein, a,nd the bOnds the purchaser buys. , MUNICIPAL CORPORATTONS:""BoNDS-EsTOPPEL BY RECITALS.
G.
A board ofeduca,tion, authorized to issue bonds, tssued them without complyiog,)Vtth a, constitutional reql$'ement (Const. S. D., art. 13, § 5) that, a,torbefore the time of incurring such indebtedness, provision shouId be made 'fot the collectl<ln of an annUM tax w pay interest a,nd principal, aithough the board had full power to make such provision, but the bonds recited "that: all conditions and things requireQ. w be done precedent to a,ndin the Il:lBWng of said bonds havEll.duly hapP ned, and been performed In regull# lU:,d due form as requireuby law.': Held, that the 'noncompliance withsu,ch requirement was notavailable to the board as a defense against bollA fide purchasers of tho bonds. ' ,
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