618
REPORTER.
rate creditor levied UpOIl and sold an, UlldiVidl'lli one-half of the partnerghip property without bringing an action to determine such partner's interest, held, that a creditor of the firm who sul:isequently levied upon the property may maintain an action in equity to determine the conflicting claims of the credEors.(n) An individual credito'f who has attached partnership assets is not a necessary pa:::ty to a suit in which a liquidator is subsequentlyappointed.(o) A judgment, although signed by two partners, will be considered an individual indebtedness unless shown to be for a partnership debt.(p) Real estate of the firm may be treated as personalty in so far as may be necessary to secure the payment of the firm debts.(q) Ifpnrchased with partnership funds, though the title be taken in the indivIdual name of one or both parties, it is first subject to the partnershIp debts.(l·) The holder by conveyanceor bequest of one partner's share of the lands of the firm must pursue his remedy for their possession by suit in equity.(s) The possessor of the legal title in such case bolds it in trust for, the purposes of the partnership.(t) A judgment against a partner individually is a lien on the real estate held by the firm, subject, however. to the payment of the firm debts and the equities of the other partners.{n) Where partr.ership is still in existence, one partner cannot mortgage the stock under his control to secure his individual debt.('ll)-ED.
a
mG.
(n) Aultman T. Fuller, 53 Iowa, 60. (0) New Orleans v. GautllereullX, 32 La. Ann.
(I') McKenna's,Estate, 11 Phila. 84. (q) In re Coddlng& Russell, 9 Fed. Rep. 849.
(.) Young v. Dun'n, 10 Fed. Rep. 711. (I) Shanks v. Klein, 11 Fed. Rep. 767. (u) Johnson v. Rogers. 16 N. II. R.I. ;\oIoline Wagon Co. v. Rammell, 12 Fed. Rep.6G8.
(to) Shanks v. Klein, 11 Fed. Rep. 761.
THOMAS
v.
TOWN OF LANSING.
(Uircuit Court, N. D. New York. 1.
8eptembl'" 6, 1852.
TOWN BONDS IN· Am OF RATL'1oADS-POWER TO ISSUE.
Where an act of the legislature provided that any town, village, or city in any county through or near which a certain railroad or its branches rna)' be located, except such counties, towns, and cities as are excepted from the provisions of the general bonding law, may aid or facilitate the construction of the said 'railroad, held, in an action on con.pons from bonds issued by a town in aid of an extension of such railroad, that the location of th!l route of the whole exteusion must be made by the board of directors of the road, and the two termini fixed and ascertained pursuant to law, before a town was empow· -ered to issue bonds in aid of its construeti9n. 2. SAME-DE8IGNATIONOF ROUTE. Where the determination of theqtiestion of location of the route and of the extension had been confiderl. to the board of directors of the railroad extension by the .authorizing the construction of theroa4, it was not the province of 'the. town commissioners to determine it ; and, although the county judge could designate the commissioners who should issue the bonds, yet he could not (lesignatethe municipality, nurcould he designate the commissioners until after the board of directors had ,designated the municipality
'THOMAS1!; TOWN OF 'LAl{SING.
619
3,
SAM"E-BoNA FIDE PURCHASER
NOT
Pno)'ltC'l'ED.
Waere a town had no power to issue bonds in aid of a railroad extension, there can be no protection of the holder of Buch bonds as an innocent pur(l.nd no rat:fication of a power that never existed can aid him, although the bonds are regular on their face and recite that they are issned .. under th') provisions" of an act of the leglslaturc; and specify thc act, and althouc:h he took them otherwise bona fide.
Motion for a New Trial. James R. Cox and Sprague, Miibuht ct Sprague, for plaintiff. H. L. C01nsto:k and H'W'lbut tf Underwood, for defendant. BLATCHFORD, Justice. This is a. moti0n for a new trial. The case was tried by the court without a jury, and, on the findings of fact, a judgment was ordered for the defendant. 11 FED. REP. 829. The question on which the case turns is as to the power of the toWl'l to issue the bonds. The power, if it eli1sted, arises out of the provisions of 'section 1 of the act of the legislature of the state of New York passed April 5, 1871, (Laws New York, 1871,vol. 1, c. 298, p. 586,) which "The New York & Oswego Midland Railroad Comenacts as pany are hereby authorized and empowered to extend and construct their railroadfr.om the city of Auburn, or from any point on said road easterly or southerly from said city, upon such route arid locafon, 'and through such counties, as the board of directors of said company and favorable for the construction of saiel shall deem most railroad, to any point on Lake :Erie or the Niagara river." Then fol'low provisions for constructing other branches. Tben follows this: "And any town, village, or city in any county through or near which said railroad or its branches may be located, except such coun· ties, towns, and cities as are excepted from the provisions of the general bonding law, may aid or facilitate the constrnction of the said New York & Oswego Midland Railroad, and its branches and extensions, by the issue and sele of its bonds in the manner provided for" in the act of April 5,1866, (Laws of New York, 1866, vol. 1, c. 398, p. 874,) and the acts "amendatory of and supplementary thereto." .. The manner so provided for is the appointment, by the county judge Of the county in which the town, is situated, of not more than three commissioners to carry into effect the purposes of the act. 'Ihe commissioners are to execute the bonds under their bands and sElals,and to issue them. When issued lawfully, they becdIIlethe obligations of the town, and bonds issued by the town. The bonds in the present elise' state on their face that they are obligations of the town, and that they are "isslled under the provisions" of the said act of and "the se"eral acts amendatory
620
.I'EDERAL DEPORTE1\.
.
thereof and supplementary thereto," especially the said act of 1871. They are dated December 1, 1871, and purport to be attested by the hands and seals of three persons as "duly-appointed commissioners of said town of Lansing;" and the bonds state that the commissioners have caused each of the annexed coupons to be signed by one of their number. This suit is on coupons amounting to $3,220, cut from bonds, the principal of which amounts to $7,500. The commissioners were appointed October 21, 1871, by the county judge of Tompkins county, and took the oath of office on the first of November, 1871. On the sixteenth of November, 1871, the board of directors of the railroad company passed the following resolutions: "Whereas, the New York and Oswego Midland Railroad Company had for its original object the construction of a railway from the city of New York to the city of Oswego; and whereas, since the organization of said railway company it has become desirable to extend their said railroad to Lake Erie, or the Niagara river; and whereas, the legislature of the state of New York did, by chapter 298 of the Laws of 1871, authorize and empower the said Sew York and Oswego Midland Railroad Company to build and extend their said railroad from the city of Auburn. or from any point easterly or southerly of said city. to any point on Lake Erie or the Niagara river; and whereas, the said railroad company and its board of directors have decided to begin such extension and construction of said railroad wl'sterly at and from the village of Cortland, ill the countyof Cortland, and westerly to Lake Erie or the Niagara river; therefore, be it "Resolved, that the board of directors of said railroad company hereby determine that the construction and extension of the said railrOad westerly commence at and from the Village of Cortland, in the said county of Cortland, and thence to I.ake Erie or the Niagara river."
On the. same day the board of directors of said company passed the following resolution: "Resolved, .that the said New York and 0!lwego Midland Railroad Qompany, for the purpose of obtaining monllY andU=laterials necessary to extend their said railroad from the village of Cortland to Lake Erie or the Niagara river, hereby authorizes and directs its president and treasurer to borrow money to an amount nOt exceeding $25,000 pet'Iriue in length of the track of the said railroad, so' ae aforesaid to be extended and constructed, and. to secure the repayment thereof. to issue its first-mortgage bonds,to be made payable in gold coin of the pnited States, and to be of Buch ,denomination, and after such mall'ner and form, and to such trustees, as the said president may determine ·upon, and deem best for the interest of the said company."
It is not shown that the board of di,rectors of the company ever passed any resol,lltions except the foregoing, or took: action as el:cept what is contained in the foregoing resolutions, in
THOMAS V. TOWN OF LANSING.
621
respect to said extension, until after the bonds involved in thie suit were issued. On the first of January, 1871, the executive committee of the company had purchased a railroad road-bed called the Murdock line, 16 miles long, with its franchises and right of way, which had been graded in 1852, and part of which was ready for ties and ballasting, the grading, however, being grassed over and the culverts decayed. It !'an from a place called Osmun's, in the town of Lansing, northward, to the north line of that town, which is the north line of Tompkins county and the south line of Cayuga county, and then on through the towns of Genoa and Venice, in Cayuga county, into the town of Scipio, in that county. During the fall and summer of 1871 the company made surveys for a line of railroad, to run from Freeville, in the town of Dryden, Tompkins county, (the town next north sing,) northward to Osmun's, a distance of 10 miles. Thegrading and making of the railroad from Freeville, north, through the town of Lansing, was begun in December, 1871. On December'13, 1871, a map called "Map No.1," certified by the directors of the company, was filed in the office of the clerk of Tompkins county, containing this inscription: "Map and profile of a part of. the Auburn branch of the New York and Oswego Midland Railroad, as located in and through a part of the county of Tompkins, New York." This map covered the 10 miles from Freeville to Osmun's. On second of December, 1871, there was filed in the same office a; map similarly certified and inscribed, called "Map No.2," and covering the Murdock line from Osmun's to the north liiJ.eofthetown of. Lansing. On the twenty-third of December, 1871, there office of the clerk of Cayuga county a map similarly certified, called "Map 1," containing this inseription: "Map and profile of a part of the Auburn branch of the New York and Oswego Midland Railroad, all located" in and ·through a part of the county of Cayuga;, New' York," and covering tile Murdock line from the north line ()f tlie town ,of Lansing, through the towns of. Genoa and Venice,:t<Jthe'southHne 61 Scipio. On'the January, 1872, $15,000 '\VeM issued, arid in Augnst, 1872, $60,000 were issued. 'No mOl.'ewe"reevet issued. WheI1 thebondsIDvolved iD:this suit were issutl'd' doeS' t!lidt appear. In exchange··for'said:'bonds thecoinniiS8i6ners certificate for·750 shares 6f the' capital atockofthe railroad 'cdhiplihY'} of $100 each, in: the name :and On behalf efthe 'ttnvn the. thirtieth of May, 1872, there wa.s filed dffieeof'tIHl"elerk
622
of Cayuga county a map called "Map No.2," certified by the said directors, containing the same inscription as the said. "Map 1," and covering the Murdock line from the south line of Scipio to the Merrifield road, in Scipio, which was the north end of the MurdJck line. The Utica, Ithaca and Elmira Railroad Company owned a railroad which was running from the village of Cortland to the village of Freeville, west from Cortland, a distance of about 10 miles. Under a contract or arrangement between that company and the Midland Company, the latter began, in the fall of 1872, to run its own cars from Cortland to Freeville, and then on its own road' from Freeville to 8cipio, 26 miles, the latter road having been completed. The terminus in Scipio was 11 milel:l from Auburn, in a farming community. and was nevar connected. with any other road until 1881, when it, finished to Aubur,n by another company. On the twenty-ninth of January, 1873, the following proceedings took place at a meeting of the hoard of directors of the Midland Company: "The president presented the contract mada by the· executive committee with Charle& P. Wood, of Auburn, dated January 1, 1871, for the road-bed and franchises known as the Murdock line. On being read and discussed J. W. Merchant offered the following: 'Resolved, that the contract made by D. C. Littlejohn, J. W. Merchant, John R, Clark, Cheney Ames, and William Foster, as the executive committee, and Charles P. Wood, of Auburn, for the purchase of the franchises, right of way, and road-bed known as the Murdock line, be and the same is hereby approved, ratified, and confirQ1ed. Resolved, that the action of the president in locating and constructing the western extension of this company's road over and uponthe said Murdock line be and the same hereby is appl'OYI'.d.' Unani-, mously adopted."
The persons named were all or a majority of the executive committee. On the twenty-ninth of August, 1873, there was filed in the, office .of the clerk of Cayuga county a map called "Map 3," certified by the said directors, containing tbis inscription: "Map and profile of a part of the western extension of the New York and Oswego Mid· land Railroad, as located in and through a part of the county of Cay·uga,"and covering It line from the said Merrifield road to Mud Lock" a.pointin Cayuga c9unty 10 miles northwest of Auburn, on the eastern line of Seneca county, the county west of Cayuga county, alld about 50 miles from Freeville. The company continued its ef-, forts the fall.of 1872 to extend its railroad westward, until, embarrassed by the financial tr:QlJbles of 1873,it failed and discontinued operations, and its property passed into the hands of a receiver,.
THOMAS V. TOWN,'OF LANSING.
623
fr6m which condition it has never recovered; It never located or' built any line of road of its own between Cortland and Freeville. The $75,000 of bonds were delivered by the commissioners to Charles' P. Wood, the assistant treasurer of the company. The plaintiff, became a bona fide purchaser of the $7,500 of bonds, and of the, coupons thereon which are in suit. The commissioners paid the' interest which became due on all of the bonds on September 1, 1872',: being the first installment, and nearly all which became due on them; on March 1,1873, and September 1, 1873, having received the money to do so from the collector and supervisor of the town of Lansing, collected in the usual manner, as provided by said acts, but since that time they have not paid any more, nor have any funds been provided for that purpose. They have retained the certificate of stock. On the foregoing facts it was held'(1) That the statutes prior to the act of 1871 conferred no power to issue the bonds, because the counties through which the branch road to Auburn was to run, as prOVided by acts passed in 1867 and 1869, were named in the statute, and Tompkins was nO.t one of them. and such branch road was not. to pass through or near the town of Lansing; (2) that, under the act of 1871; nO power was conferred on any town to issue bonds in aid of the N:idland Company until the whole of the western extension provided for in that act should be located by some definite action by the company, and, irrespective of the said maps and profiles, there remained about 140 miles more to be located between Mud Lock and Buffalo or the Niagara river, which, so far as appeareJ,. was never located at ,all ;, (3) that payment of the interest, and receivAng and retaining the ce;tificate of stock, might be a ratification of steps in to which merely irregularity was claimed, but could not avail to prevent the town from setting up a total want of power to issue the bonds.
Taking all the provisions of the act of 1871 together, it seems to be very plain, that the legislature, instead of designating any C01lllty ot town from which the western extension was to start, or any counties or towns through which its route should lie, or any county or town which should be its western terminus, left all those matte'rs open ta be determined by the board of directors of the company, and required, the board to determine all those matters, and to determine them by certain prescribed principles. It required the board, if it, should construct the extension, to ·first. determine what route it shou.ld' deem: most feasible and favorable for the construction of the whole:'exten-' sion, the starting point, the route, and the western terminus being' a:lleft to depend on what was m08t feasible and favorable. A choice was given to start from Auburn, or from any point on the' existing: road easterly or southerly from Auburn, and to end!at,a,nypoint'on
624
FEDERALBEPORTE&
Lake Erie or the Niagara river. This gave an option over a wide extent of country from north to south. Even !l.dopting the village of Cortland as the eastern starting point did the same. If the branch should be located through Tompkins county without reference to any route beyond Tompkins county in either direction, it might well be that thereafter, with a view to the rest of the route, a route through Tompkins county would not be at all a feasible or favorable route, in the judgment of the board, for reaching Lake Erie or the Niagara river, and that a location abandoning Tompkins county and abandoning even a starting at the village of Cortland would have to be resorted to, involving a starting point, a route, and a western terminus in respect to which it could not fairly be said that Tompkins was a county near the road. and which would be such that the requisite number of tax-payers would never consent to bond the town to aid in constructing the branch. The-resolution of November 16, 1871, merely bed the eastern point. The board of directors were to determine not only that matter, but also the most feasible and favorable route for reaching such western terminus as they should select as most feasible and favorable. The resolution was incomplete. It was a snare and a delusion. The expression "may be located," in the clause in the statute giving power to tow;ns to aid the construction of the extension, has reference to the word "location" iz!. the first clause of the same section. It means "may have been located in a location of the route of thewhole extension." There was nothing in any of the maps filed in either Tompkins county or Cayuga county before the bonds were issued, which indicated that the board of directors intended the road between Freeville and the Merrifield road in Scipio to be a part of the west,ern extension. It was called, in all of those maps, "the Auburn branch," and was so called by the directors, by their certificate on each map. It was not the Auburn branch or the branch to Auburn authorized by the acts of 1867 and 1869 to be made through the counties of Chenango, Madison, Cortland, and Cayuga. It was, in fact, a branch without authority of law. The idea of regarding the Murdock line as a part of the western extension does not, so far as appears from anything shown, seem to have been entertained by the board of directors until January 29, 1873, when the resolution of that date was passed. The map filed in Cayuga county August 29,1873, called the continuation from the Merrifield road to Mud Lock a part of the western extension. But there is nothing of record showing that the 10 miles from Freeville to the Murdock line was ever called by the board of directors a part of the western extension. The case
THOMAS V. TOWN OF LANSING
625
is one of the absence of legislative authority, because there was no designation of Tompkins county, either directly by name in the statute, or by any delegated authority, as a county the towns in which could issue bonds in aid of the western extension. Everyone tak. ing the bonds was notified by the face of them of the act of 1871. Even a bonn fide purchaser of them was referred to the source of authority. It was not found directly in the statute, and he was remitted by that to the action of the "board of directors" as to the counties through which the route and location of the road were to be fixed. The foregoing views, as to the proper construction of the act of 1871, are those which were held by the court of appeals of New York in People v. Morgan, 55 N. Y. 587. The case stands as if there were no act, or as if the act provided that it should not take effect until the happening of an event which had not yet happened. But the question arises whether, in. view of the recitals in the bonds, which recitals were maide by the commissioners as officers of the town, and of the fact that plaintiff is a bona fide holder of. the bonds and coupons, and of the payment of the interest, and of the retention of the stock certificate, or of all or any of these circumstances, the town is estopped from asserting that the board of directors .of the company never took the action made necessary by the act to fix the route and location of the branch. It is contended for the plaintiff that the ascertainment of the facts conferring power on the town to issue the bonds was confided by law to the commissioners who issued them; that the bonds are regular on their face, and recite that they are issued "under the provisions" of the act of 1871; ·that that is a declaration by the commissioners, in the bonds, that the route and location of the road were fixed by the board of directors in such manner that the town had the right, under some circumstances, to issue the bonds; and that, therefore, they are valid in the hands of a bona fide holder of them. It is also urged, that whenever the company has constructed any railroad which might be a part of a road provided for by the act of 1871, the presumption, in a collateral suit like the present, is, that it has been lawfully built, and that all the proper steps legally necessary for its construction have been taken; that the word "location," in the act, is a synonym for the word "place;" that, when a road has been built or acquired upon any route or location, the presumption is that such route or location has been deemed most feasible and favorable for its construction; that it is sufficient if the court finds the company constructing, occupying, v.14,no.l0-40
626
. FJilDERAL REPORTER.
or operating snch portion of a road a8 is through or near the town of Lansing; that the purchaser of the bonds is only required to ascertain that a branch or extension of the road is in fact situated or placed through or near the town which issues the bonds; that it is enough if the road is found constructed throngh or near the town of Lansing, between a point east or south of Auburn and a point on Lake Erie or the Niagara river, on any possible route between those points; that it was for· the town of Lansing to decide whether the road in question was located through it, or sufficiently near to it to justify the issue of the bonds; that it made that decision affirmatively, and announced it by declaring on the face of the bonds that they were issued "under the provisions" of the acts referred to in the bonds; and that the town is, therefore, estopped, a8 against a bonafide purchaser of the bonds, from asserting that there WiltS not & sufficient "location," under the statute. The case is sought to be brought. within those numerous cases in the Supreme Court of the United States, where, the legal power being . sufficiently comprehensive, the bona fide holder has a right to presume, from the recitals in the bonds, and the fact of their issue by the officers charged with the duty of issuing them, that all precedent requirements prescribed by have been observed. But, in those cases, the municipality was designated by name in the statute, or all the towns in certain designated counties were authorized to issue bonds, or the authority was given to all the towns on or near a route which had been. designated by some record, or there was something equivalent to such a designation of the municipality. In the present case, however, on all the facts existing when these bonds were issued, the power to issue bonds in aid of this road, under the act, of 1871, might as well have been exercised by any town, village, or city in the ;;tate west of Auburn, or west of any point on the road of the company easterly or southerly from Auburn, as by the town of Lansing. Cer, tainly, the legislature did not, in the act of 1871, use language indicating such an intention. It clearly, by the language it used, intended to have the two termini, and the route and location of the road, determined by the· board of directors with a view to what was most feasible and favorable for. its construction, before the taxpayers of the town could be called upon to act on the question of consent to bonding the town. 'rhe determination of this question being confided to the directors, it was not the province of the commissioners or of anyone else to determine it. The question in issue in this suit is not as to the regularity of the exercise of
THOMAS ,V. TOWN .OF .LANSING.
627
a power plainly conferred on, and capable of being exercised by, the commissioners of this town. The county judge could designa.te the commissioners, but he could not designate the municipality. He could designate the commissioners' only after the board of directors had designated the municipality. No certificate by the commissioners that the board of directors had designated the municipality could make such designation a fact., when it was not .0. fact. Every taker of the bonds had notice from them that the act required the designation by the board of directors, and, if there was no such designation in fact,' there was none as to such taker, though he took otherwise bonafide, and the absence of such desiguation was the absence of power in the town to issue the bonds under any circumstances. The present case falls within the principlesadjuged in Marsh v. Fulton Co. 10 Wall. 676, because the power of the town to contract never existed. In such a case there can be no protection of the holder as an innocent purchaser, and no ratification of a power which never ex.isted, by such alleged acts of ratification as are shown in this case. East Oakland v. Skinner, 94 U. S. 255, 258; South Ottawa v. Perkins, ld. 260, 269; McClure V. Oxford, Id. 429; Ogden v. Davies8 Co. 102 U. S. 634, 641; Bucha.nan V. Litchfield, ld. 278. The plaintiff can derive no aid from the fact that the decision of the supreme court of New York in the case which the court of appeals decided in 55 N. Y. was contrary to that of the latter court. The decision of the supreme court of New York was an appealable decision, and was appealed and reversed. All persons who relied on the decision by the supreme court of New York took the risk of a deeision the other way, on appeal; in the same suit. It results from the foregoing considerations, that the motion fora new trial must be denied, and the same decision is made in the case' of Mellen against the same defendant.
628 MERRILL
FEDERAL REPOBTER.
TOWN OF MONTICELLO.·
(Uircuit Oourt, D.Jndiana. DccemlJer, 1882.) 1. MUNICIPAL BONDS-POWER TO ISSUE.
Municipal corporations have no general power to issue commercial paper; such power must be derived from legislative authority. 2. PURCHASERS OF-MUST TAKE NOTICE.
Where bonds, on their face, recite that they are" funding bonds," and issued to fund the town's indebtedness, purchasers assume, at their peril, that the legislature h:ld authorized the issue of bonds for that purpose. 3. DEFENSES.
No such power hav:ng been granted by the legislature, purchasers, notwitll' standing the form of the bonds, hold them as non-negotiable paper, and sub. ject to all legal and equitable defenses in favor of the maker. 4. ANSWER.
An answer which avers that. the bonds were issued without legislative authority in that behalf, and that the town did not get the proceeds of the same, and did not derive any benefit therefrom, held good on demurrer. The case of Ragan v. Oity of lVatertO'lDn, 30 Wis. 259, distinguished from the case at bar.
Roach et Lamme, for plaintiff. David Turpie and W. E. Ukl, for defendant. GRESHAM, D. J. On the twentieth day of May, 1878, the town of Monticello made and issued a series of coupon bonds, each for $100, and amounting in all to $21,000, payable in gold, to bearer, at New York, in 10 years, with interest at the rate of 7 per cent. per annum, in gold, at the same place. The principal of each bond was to be· come due !'Lnd payable, at the option of the holder, o,n the non-payment of any coupon thereto attached, f01' 90 days after maturity. The words "funding bonds of the town of Monticello" conspicuouslyappear at the top of eac,b. bond,. and each recites that "this bond is one an ordinance of a series of $21,000 authorized by the passed by the board of thereof on the thirteenth aay of May, 1878, for the purpose of funding the indebtedness of said town." The coupons numbered 2, attached to each bond, were presented at the proper place, at maturity, and payment was refused. The plaintiff, as holder of the entire series, thereupon elected to declare the principal sum due, and brought this suit. The amended answer avers that on the twenty-fourth day of J anllary, 1869, a petition was presented to the board of trustees of the town, by the school trustees, for the issue of bonds to build a schoolhouse, and on the same day the town trustees passed an ordinance *Reported by Charles H. MeCarer, Asst. U. 8. Atty.