Nicolay v. St. Clair County

DILLON, Circuit Judge. The bonds here in controversy were issued by the county court of St. Clair county, and recite an indebtedness on the part of the county “to the Tebo and Neosho Railroad Company, to the use and in the name of the Clinton and Memphis Branch of the Tebo and Neosho Railroad Company, in the sum of,” etc., “which sum the said county hereby promises to pay to the Tebo and Neosho Railroad Company, or bearer, to aid in building said branch railroad.” The bonds also contain this recital: “This bond is issued under and in pursuance of an order of the county court of the county of St. Clair, in pursuance of and by authority of an act of the general assembly of the state of Missouri, entitled ‘An act to incorporate the Tebo and Neosho Railroad Company,’ approved January 1G, I860, and of an act entitled ‘an act to aid in the building of branch railroads in the state of Missouri,’ approved March 21, 1868.” The charter of the Tebo and Neosho Railroad Company thus referred to in the bonds, approved January 16, 1S60 (Laws 1859-60, p. 402, § 6), prescribes the termini and general course of the main line of the road which it authorized this company to build, and gives to the company express authority to “extend branch railroads into and through any counties the directors may deem advisable,” without any limitation whatever. This charter (section 8) adopts and reenacts inter alia, section 14 of the charter of “the Osage and Southern Kansas Railroad Company,” approved November 21, 1857 (Laws 1857, p. 59), and declares that section, with others “to be applicable to the company hereby incorporated, and all the powers therein contained are extended to the Telo and Neosho Railroad Company.” The 14th section of the charter of the Osage and Southern Kansas Railroad Company, thus adopted, reads as follows: “Sec. 14. It shall be lawful for the county court of any county in which any part of the route of said railroad or branches may be, or any county adjacent thereto, to subscribe to the stock of the company, and, for the stock subscribed in behalf of the county, may issue the bonds of the county to raise the funds to pay the same, and to take proper steps to protect the interest and credit of the county court.” In 1S65 the present constitution of the staie of Missouri was adopted, containing the following: “The general assembly shall not authorize any county, city, or town to become a stockholder in, or loan its credit to, any company, association, or eorpora-tlon, unless two-thirds of the qualified voters of such county, city, or town, at a regular or special election to be held therein, shall assent thereto.” Article 9, § 14. At the time the constitution was framed there was a large number of charters in force specially incorporating railroad companies, and authorizing, as in the case of the Tebo and Neosho Company, the county courts of counties along their lines, or branches, or adjacent thereto, to subscribe for the stock of railroad companies, without any limitation as to amount, and without requiring a previous election or the assent of the tax-payers or people of the county. That such extraordinary powers, conferred, without limit or check, upon the small number of persons who compose the county court, would open the door to abuses, to frauds upon the officers and frauds by them, and to extravagant and unwise indebtedness, ought to have been foreseen by the legislature, although in 1860, and prior to that time, the evils which come from unlimited grants of power of this kind were not so well known as at present. After the adoption of the constitution of 1865, the question as to the effect of the 14th section of the 11th article thereof, above quoted, upon these special charters, came before the supreme court of the state for its judgment. That court held that powers conferred in these special charters upon the county courts to subscribe without a vote of the people, were not repealed or touched by the prohibition of the constitution, its view being that the constitution did not affect existing charters, but only limited the power of the legislature in the future. This point was first decided in the Macon County Case, — State v. Macon Co. Ct. (1867) 41 Mo. 453, — and this is the settled law of the state. Chillicothe & B. R. Co. v. City of Brunswick (1869) 44 Mo. 553; Kansas City. St. J. & C. B. R. Co. v. Alderman (1871) 47 Mo. 349; State v. Sullivan Co. Ct., 51 Mo. 522; Smith v. Clark Co. (decided by the supreme court of Missouri, Nov. 3, 1873) 54 Mo. 58. In this last case the legislation and judicial decisions of the siaie on the subject of municipal aid to railways is reviewed by the able judge who delivered the opinion of the court, in which, speaking of this subject, he says: “So that the provisions of the Revised Code of 1855, and the amendatory acts of 1860 and 1S61, and the constitutional prohibition, and the legislative adoption of that prohibition immediately after its passage, have been held by repeated adjudications, and without any conflicting opinions of the court or any individual judge thereof, so far as the reports show, not to effect the repeal of the privilege contained in special charters." Not only so. but the ease of State v. Sullivan Co. Ct.. above c-ited, also decides tlia-under suc-h a charter as the Tebo and Ne230 osho Railroad Company, the county court of a county along a branch railroad may subscribe for the stock of the company and issue bonds therefor. The subscription in tiiis case, which was sustained by the supreme court of the state, was one by the county of Sullivan “to the St. Joseph and Iowa Railroad Company, in the name and for the use of the central branch of the St. Joseph and Iowa Railroad Company” — the same precisely as the one recited in the bonds in question issued by the county of St. Clair. The decisions of the supreme court of the state, therefore, settle the point that, under the charter of the Tebo and Neosho Railroad Company, the county court of St. Clair county had the power to make, without any vote of the people of the county, precisely the kind of a subscription which the bonds in suit recite they did make, and to issue the bonds of the county therefor. The county court having the power to subscribe and to issue the bonds, and a valid subscription being recited in the bonds, the plaintiff can recover thereon if he purchased them bona fide for value, and without actual notice of any irregularities in the exercise of the power by the county court. The securities are authorized and made to be sold in distant places, and the supreme court of the United States has repeatedly decided that a purchaser of such bonds, while he is bound to ascertain whether the legislature has conferred the power to issue them, is not bound, to ascertain whether the local officers intrusted with the execution or carrying out of the authority have properly pursued the directions or requirements of the law authorizing their issue. The cases in the supreme court are collected and stated in Dill. Mun. Corp. § 415 et seq. See, also, Kenicott v. Wayne Co., 16 Wall. [83 U. S.] 452, and Huidekoper v. Buchanan Co. [Case No. 6,847], decided here at this term. A bona fide purchaser of one of ihese bonds is not bound to look into the records of the county court which made the subscription, and is not chargeable with constructive notice of their contents; and hence the fact' that the order shows that the subscription by the county court of St. Clair-county was not to the capital stock of the Tebo and Neosho Railroad Company, but to the stock of the “Clinton and Memphis Branch of the Tebo and Neosho Railroad Company,” is no defense, provided the plaintiff is a holder of the bonds for value, without actual notice of this fact. These views dispose of the only defense which counsel have urged in their briefs, unless actual notice to the plaintiff of the facts set forth in the orders of the county court is intended by the pleader. If he intends to rely upon constructive notice only, the plea should be modified accordingly; and in that event the demurrer to the answer will be sustained. If he means actual notice, then the demurrer should be overruled; or at least we should consider further, whether, under the charter, or under the act of March 21, 1868 (relating to branch railroads), recited in the bond, or both, there was any power to subscribe by the county to the stock, not of the company, including the branches, but to the stock of the branch alone. The answer was amended so as to allege actual notice, and afterwards, upon a trial, the plaintiff Had judgment, and the defendant sued out a writ of error. As to bonds issued under the branch railroad act of March 21,..1868, see Washburn v. Cass County [Case No. 17,213].