Oswego Township v. Anderson

The opinion of the court was delivered by Johnston, J.: Three classes of bonds which have been issued by Oswego township, Labette county, are involved in this action. The first is what is known as the Missouri, Kansas & Texas railroad bonds, issued July 1,1870, in pursuance of an election held May 17, 1870; the second were bridge bonds, originally issued October 15, 1872, in pursuance of a vote taken July 30, 1872; and the third were the Memphis, Carthage & Northwestern railroad bonds, issued September 2, 1872, upon a vote taken December 20, 1871. The vote last mentioned authorized the issuance of $80,000 of bonds to the State Line, Oswego & Southern Kansas Railroad Company, which company transferred its rights, subscriptions and franchises to the Memphis, Carthage & Northwestern Railroad Company, after which and upon the date mentioned $30,000 of the amount voted was delivered to the latter company. The validity of these various classes of bonds was contested in the federal court, and judgments sustaining their validity and in favor of the holders of each class were rendered. When the indebtedness arising from the issuance of these bonds amounted to about $350,000, the township compromised and reduced the debt to $148,000, and issued funding bonds to that amount to satisfy and cancel the original debt. The township of Oswego originally included the territory which now [225] constitutes the city of Oswego, and in March, 1871, steps were taken to organize and incorporate the village of Oswego as a city of the second class in pursuance of the provisions of chapter 59 of the Laws of 1871. It is contended by the plaintiffs below, who were tax-payers within the city of Oswego, that since that time Oswego has been at least a de fado city of the second class, and that the territory now composing the city was not a part of the township at the time the bonds were issued, and therefore not liable for the indebtedness represented by them, nor liable for any funding bonds based thereon. Some taxes were levied upon the property within the village, and collected from the tax-payers therein after the attempt to organize Oswego as a city of the second class in 1871; but both the township and the city resisted the payment of these bonds for several years, and until a compromise and settlement was effected in 1885. The tax-payers within the city now resist the payment of the taxes levied to meet the funding bonds issued to compromise and cancel the bonds above mentioned, but the court below sustained the tax levy to meet the first two classes of bonds — that is, the M. K. & T. Rly. bonds, and the bridge bonds; and it enjoined the collection of the third class, namely, the M. C. &N. ~W. bonds; and of this latter ruling the township complains. [226] , , l. Railroad bonds, nevedfrom tax to pay. [225] The recent case of Brown v. Milliken, 42 Kas. 769, is an apt, and to a great extent a controlling, authority in the present case. The attempted organization of the city of Oswego in 1871, like that of Chetopa, was wholly void, and did not operate to create a municipality and to take it out of the township of Oswego. Chapter 59 of the Laws of 1871, under which both Oswego and Chetopa undertook to incorporate, was a direct violation of that provision of the constitution which prohibits the legislature from conferring corporate powers by a special act. (City of Council Grove, 20 Kas. 619; Brown v. Milliken, supra.) It furnished no authority for a separation of the city as a municipality from the township, nor will it, or the action of the people thereunder, relieve the tax-payers and property within the city from a bonded debt [226] which its people voluntarily incurred as a township debt after the passage of the act. It is true, that a corporation organized under an invalid law is sometimes held to be a corporation de facto, in order that justice may be done to innocent parties; but to sustain the claim of the defendant in error, that a defacto organization and separation from the township had been perfected, would work a legal injustice. While steps were taken under the void act to incorporate, and in some respects the people of the city acted as if their purpose was to carry on a separate municipality, yet the steps and acts taken and performed did not create such a de facto ... . . municipality as will separate it from the township and relieve the people therein from the debt which they were largely instrumental in voting upon the township as it then existed. A defacto organization such as would separate the city from the township, was not only not recognized by the people of the township outside of the city, but was not recognized and acquiesced in by the people within the city during the years when the bonds in question were voted and issued. It is true, that au election for the purpose of choosing some city officers was held in April, 1871, and that since that time the city has claimed the right to elect, and has elected some of the officers, and “ has exercised many of the privileges and performed many of the duties provided or imposed by law upon cities of the second class.” They did many things, however, during the same time which were inconsistent with the organization and maintenance of a separate municipality. The people within the city during all the years from 1871 to 1873, inclusive, acted and voted with the city in choosing township officers, voting township bonds, and upon all other questions submitted at township elections. The voting-place and precinct for said township at these elections was within the corporate limits of the town of Oswego, and the inhabitants of the town signed the petitions for the bond elections, and were largely instrumental in calling the elections and carrying them in favor of the propositions submitted. The people within the town had no city assessor during the [227] years 1871 and 1872, but joined with the people of the entire township in selecting a township trustee, who assessed the property of the township and town; and, more than that, the trustee and assessor thus chosen resided within the limits of the town. The township treasurer and clerk chosen at the election in 1871 were residents of the town, and continued as such during their entire terms of office; and the trustee, treasurer and clerk who were chosen in 1872 were residents and citizens of the town at the time of the election, and continued as such during their entire terms of office. It further appears that persons resident within the town were candidates against persons residing outside of the limits of the town, and defeated the outside candidates at the township elections. In all these things the people of the town acted as though they were inhabitants of the township, and their conduct was consistent with the theory that the site of the town in which they resided was within the territorial limits of the township. It is fair to presume that these large debts would not have been incurred had it not been for the action of the inhabitants of the town. They signed the petitions calling the elections, and generally voted in favor of the bond propositions submitted at such elections. The people within the town, as well as without, proceeded upon the theory that all the electors in both places had the right to vote a township debt, and that the property of the entire township, including that of the town, would be liable for the payment of such debt. Then, again, the person who acted for the township in funding the debt in question was a resident of the town, and since the debt was funded the people of the town have contributed to some extent toward the payment of the funding bonds that were issued. Subsequently, and in June, 1880, the people of the town took steps to organize as a city of the second class under the general law, and thus to some extent they recognized the fact that no separation had occurred prior to that time. We are clearly of opinion that at the time the bonds in question were authorized and issued the town of Oswego did not constitute a de facto city of the second class, such as [228] separated it from the township, and therefore the case of Brown v. Milliken, supra, is an applicable and controlling authority. It appears from the record that the validity of the bonds originally issued by the township has been tried and determined in the federal courts, and the question suggested as to whether the Memphis, Carthage & Northwestern Railway bonds were legally issued, is not before us. The bonds passed into the hands of persons claiming to be innocent holders thereof for value, and judgments were rendered against the township for interest that accrued and matured thereon prior to the funding of the debt. There was due on these bonds at the time they were funded about $90,000, but the representatives of the township succeeded in making a compromise which reduced the debt to $30,000. Under the authority of Brown v. Milliken, supra, and the cases there cited, it must be held that the tax levied upon the property within the city of Oswego for the payment of this debt was legal, and the judgment of the district court enjoining its collection is to that extent erroneous. There are two other serious objections urged by the township against the judgment rendered against the tax, but in view of the conclusion we have reached upon the merits of the question it is unnecessary to discuss and determine them. [229] „ „ x , tory subject\'(> tax' [228] The defendants in error complain of the judgment rendered against them dissolving"the injunction as to the tax levied to pay the interest on the funding bonds issued to compromise and fund the M. K. & T. Rly. bonds and the bridge bonds. They contend that the court erred in ignoring an agreement made between the mayor and clerk on the part of the city, and the township officers in behalf of the township. The agreement was dated July 1, 1887, and by it the township agreed to compromise and settle $63,000 of the debt, which it is recited might be compromised for $47,500 in cash, or $50,000 in the bonds of the township; and the city officers agreed that in consideration of the township assuming the payment of the $47,500 either by payment of cash or the issue [229] of its bonds the city would pay $23,750 in five equal installments, which should be received in full of all obligations on the part of the city on account of the $63,000 indebtedness. In pursuance of this agreement, and on January 3, 1888, the city paid to the township the sum of $2,060, but no other or further payments have been made on account of the agreement. It does not appear that the mayor and clerk of the city were authorized by any vote of the people or the city council to enter into such a contract, neither does it appear that the township officers were authorized by a vote of the people of the township to adjust the indebtedness or to relieve any portion of the territory subject to taxation therefor from the payment of its proportionate share of such debt. The indebtedness was a lien against the property of the township and city, and no authority is given by the legislature or otherwise for these subordinate officers to change the course of taxation or to shift the burden of the debt from one portion of the municipality to another. Aside from this, the creditor who held the indebtedness was not a party to the agreement, and no arrangement between the tax-payers could affect the right of the creditor to have a levy extended upon all the property subject to taxation for the payment of his debt. We think there was no authority whatever in the officers to make the agreement, and that the court properly ignored the same in the rendition of its judgment. The further point is made against the tax levied to pay interest on funding bonds issued to compromise and cancel a judgment rendered against the township on what were known as the M. K. & T. Rly. bonds and the interest thereon. It appears that the township trustee confessed judgment on a portion of the bonds before they were due. The judgment, however, stands unreversed, and the funding bonds issued in satisfaction of the judgment and the debt were for a much less sum than the original debt. The judgment was a finality, and the creditor having accepted the funding bonds, the judgment is satisfied and canceled, and both the city and the township are released from the payment of the judgment or the original [230] indebtedness which it represented. The funding bonds issued to compromise and cancel the judgment are binding obligations against the township, and certainly it would be estopped from setting up the irregularity that a part of the debt was not due when the judgment was rendered; and that being true, every tax-payer of the township, including the defendants in error, are likewise estopped. (Brown v. Milliken, supra.) Further than that, all parties to this proceeding have agreed that these. funding bonds which were executed and delivered in satisfaction of the judgment, were “issued in all respects in compliance with the law and are valid outstanding obligations against said township.” Our opinion is that the judgment of the court below in favor of the township and dissolving the injunction is correct, and should stand. That part of the judgment, however, which perpetually enjoins the levy and collection of taxes to pay the interest upon the $30,000 bonds issued to compromise and cancel the Memphis, Carthage & Northwestern Railway bonds issued by the township, should be reversed, and the cause remanded with the direction to dissolve the temporary injunction theretofore granted against the levy and collection of all the taxes, and to render judgment in favor of the defendants below for costs. That will be the judgment of this court. All the Justices concurring.