CHAPTER VI. EXECUTION, DELIVERY, FORM, AND CONTENTS OF MUNICIPAL BONDS; REGISTRATION, ETC. A. Municipal bonds must be executed by the officers designated, in the manner, with the formalities, and within the limitations prescribed by law. B. Authorized delivery of municipal bonds necessary to their validity. Enabling statutes generally contain explicit directions as to what officers shall execute the bonds of a municipality, and when such directions are given it is necessary to the validity of such securities that they be executed by the officers designated. In some enabling acts no directions are contained as to any particular form of words, or statements, or recitals, which such instruments shall contain, or as to other formalities of execution; but in a large number of cases such statutes contain directions that certain statements or recitals shall be embodied in the bonds and contain specific directions concerning the form and manner of execution. When no such provisions are contained in the act, the bonds may be in any usual form importing the character of negotiable instruments; but when the act directs that the bonds shall be executed in a particular form or shall contain certain recitals, it is generally necessary to their validity as negotiable instruments that such requirements be substantially complied with. In all cases, unless the enabling act prescribes a form to be used, the bonds should contain some statement or recital indicating the purpose for which, or the authority under which, they are issued; as otherwise there would generally be no presumption in favor of their validity, and, in an action on them, for collection, the authority for their issuance, and, in some instances, the consideration on which they had been issued, would have to be pleaded and proven in order to show prima facie a right to recover; but in most cases, when the bonds, being properly executed, show by appropriate statements or recitals that they have been issued in pursuance of an existing legal authority, either by indicating the purpose for which, or the law under which, they were issued, a valid consideration for their issuance will be presumed, until such presumption shall be overcome by proof to the contrary, especially in favor of a bona fide holder for value. Any requirements of law in regard to signing, sealing, attesting, registering, or other matters pertaining to the form or manner of execution of such bonds should be carefully observed, as a failure to substantially comply with such statutory directions will generally affect the negotiable quality of the securities and will often render them absolutely invalid. Unless the statute prescribes the form of such bonds and the recitals which they shall contain, and by what officers they shall be executed, such matters should all be provided for by express direction of the board or officers who are authorized to direct their issuance, and such directions should be carefully embodied in the ordinance, resolution, or order providing for their issuance. It must not be assumed that, when the statute prescribes that the bonds shall contain certain statements and recitals, other and additional statements or recitals, inserted in the bonds in the nature of assurances or certificates of legality, will be disregarded by the courts. On this particular point, as to the effect of recitals in municipal bonds, see chapter VII. It is necessary to the validity of municipal bonds that they shall be delivered by, or by the direction of, the board, officers, or persons authorized to make or direct such delivery on behalf of the body issuing them. Such authorized delivery is necessary to their complete execution as obligations of the municipality; and an unauthorized delivery will neither convey title to the securities nor give them vitality as obligations in favor of the original taker or subsequent purchasers or holders. The rules of law relating to the delivery of municipal securities are not different from those relating to the delivery of other negotiable securities by the makers thereof, except as to the authority of the agents or officers by which such deliveries may be made. An unauthorized delivery of municipal securities may, in some cases, be ratified by the action or acquiescence of those who might have originally made or directed a delivery. The subject of ratification is treated of in chapter VIII of this work. A. Municipal Bonds Must be Executed by the Officers Designated, in the Manner, with the Formalities, and within the Limitations Prescribed by Law. Execution of bonds by agents designated by legislature; power of legislature to bind municipality in this way. 317. (N. Y. 1873.) Bonds with interest coupons attached, both signed by commissioners designated by the enabling statute to so execute them, purported to be obligations of the town of Queensbury. It was urged that the town was not liable on the coupons. Held, that the town was liable. "It is vain to say that the statute imposed no duty upon the town or its officers. No one can doubt that it is competent for the legislature to determine by what agents a municipal corporation shall exert its powers. The statute in question did designate the agents, and their acts, within the authority conferred, are binding upon their principal, upon the town of which they had been constituted the agent." Town of Queensbury v. Culver, 19 Wall. 83, 22 L. Ed. 100. Contents of bonds affecting negotiability. 318. (Kan. 1875.) "The first question certified from the court below is, whether the bonds to which the coupons in suit were attached are negotiable bonds, such as to entitle the plaintiff to the rights of a bona fide holder of negotiable paper taken in the ordinary course of business before maturity. They are certificates of indebtedness to the railroad company, or bearer, each for $1,000, lawful money of the United States, payable on a day certain, with interest at the rate of 7 per cent., payable annually on the first days of January in each year, at a specified banking-house, on the presentation and surrender of the respective interest-coupons thereto annexed. If this were all, there could be no doubt of their complete negotiability. But it is said the subsequent language of the certificates controls the absolute promise, and shows that payment was to be made only on a contingency. This is argued from the recital contained in the instrument, and from what follows it. We quote: This bond is issued for the purpose of subscribing to the capital stock of the Fort Scott & Allen County railroad, and for the construction of the same through the said township, in pursuance of, and in accordance with, an act of the legislature of the State of Kansas, entitled "An act to enable municipal townships to subscribe for stock in any railroad, and to provide for the payment of the same, approved February 25, 1870;" and for the payment of the said sum and accruing interest thereon, in manner aforesaid, upon the performance of the said condition, the faith of the aforesaid Humbolt township, as also its property, revenue, and resources, is pledged.' Relying upon this clause of the certificate, the township contends that the construction of the railroad through the township was a condition upon which the payment was agreed to be made. We think, however, this is not the true construction of the contract. The construction of the road, as well as the subscription for stock, were mentioned in the recital as the reasons why the township entered into the contract, not as conditions upon which its performance was made to depend. It was for the purpose of subscribing, and to aid in the construction of the road, that the bond was given. The words, upon the performance of the said condition,' cannot then refer to anything mentioned in the recital, for there is no condition there. A much more reasonable construction is that they refer to a former part of the bond, where the annual interest is stipulated to be payable at a banker's on the presentation and surrender of the respective interest coupons.' Such presentation and surrender is the only condition mentioned in the instrument. It is what is always implied in every promissory note or bill of exchange that it is to be presented and surrendered when paid. As well might it be said that a note payable on demand is payable upon a contingency, and therefore nonnegotiable, as to affirm that one payable on its presentation and surrender is, for that reason, destitute of negotiability." Humbolt Township v. Long, 92 U. S. 642, 22 L. Ed. 752. Railroad company not correctly named in the bonds. V. 319. (Kan. 1876.) Bonds are not invalid because the name of the railroad company to which they were issued was not correctly stated in the bonds. County of Leavenworth Barnes, 94 U. S: 70, 24 L. Ed. 62. 320. (Kan. 1876.) The bonds in this case recited the wrong act as the authority for their issuance. Held, that they were not thereby rendered invalid. Comrs. of Johnson County v. January, 94 U. S. 202, 24 L. Ed. 110. Form of bonds; manner of execution. 321. (Kan. 1876.) The sufficiency and legality of the form and manner of execution of municipal bonds must be tested by the law of the jurisdiction where they are issued. An enabling act provided that county bonds should not be made to run for a longer period than thirty years. Held, that bonds issued so as to become due within thirty years from the date of their actual issuance complied with the law in that regard, notwithstanding they matured thirty years and twenty-seven days from their date. Time of payment of principal and interest. "Where a municipal corporation has power to borrow money, they may make the principal and interest payable when they please." Comrs. of Marion County v. Clark, 94 U. S. 278, 24 L. Ed. 59. Interest payable semi-annually. 66 322. (Iowa, 1863.) It is no objection to the validity of bonds that interest at 10 per cent. per annum was made payable semi-annually under a statute providing for interest at a rate "Not higher than ten per cent. per annum." This objection has no foundation. When a statute fixes the rate of interest per annum, it has always been held that parties may lawfully contract for the payment of that rate, before the principal debt becomes due, at periods shorter than a year." Interest payable in New York city. It does not affect the validity of bonds that the interest thereon was made payable in New York city, instead of at the treasury of the city issuing them. Meyer v. City of Muscatine, 1 Wall. 384, 17 L. Ed. 564. Comrs. of Marion County v. Clark, 94 U. S. 278 (284), 24 L. Ed. 59. "Time of payment of bonds." 323. (Kan. 1877.) "Are the bonds mentioned in the plaintiff's petition void, for the reason they are made payable for thirty years and thirty-five days from their date of execution therein written, but only drawing interest for the last thirty years of said time? The second section of the act authorizing their issue enacted that the bonds should be payable in not less than five nor more than thirty years from the date thereof, with interest not to exceed ten per cent. per annum, all in the discretion of the officers issuing the same. These provisions were obviously directory, and not of the essence of the power. The bonds issued were dated September 10, 1872, made payable thirty years from the 15th day of October, 1872, with interest thereon from that time at the rate of 7 per cent. When they were delivered to the railroad company does not appear, though they were not registered by the auditor of the State until October 17, 1872. They were "The defendant further offered to show that no registration of the bonds exists, or ever has been in the office of the auditor of the State, though the auditor's certificate of registration does appear upon the bonds. We cannot think this evidence, if admitted, could in any degree avail the defendant. The certificate of that officer indorsed on the bond was all that was required for the holder of them. If the State auditor failed to make in his office an entry of his action, we do not perceive how his failure in this respect can invalidate bonds upon which he has certified a registration.' Township of Rock Creek v. Strong, 96 U. S. 271, 24 L. Ed. 815. 324. (Tex. 1877.) The absence of a seal on city bonds held to be immaterial. San Antonio v. Mehaffy, 96 U. S. 312, 24 L. Ed. 816. Bonds countersigned by a person whose term of office as clerk has expired. 325. (Miss. 1878.) Bonds were issued by a town in Wisconsin bearing date of June 1, 1871. "At that time Fenelon was chairman and Verke clerk. The signatures of these officers were lithographed and printed on the coupons. Before the bonds were actually signed by Verke, he had resigned his office and moved out of town. Another clerk had been appointed and qualified in his place. Apparently to save the expense of a new lithograph and another printing of the bonds, Verke, after going out of office, affixed his signature to those which had been printed. These bonds so signed by Verke and by Fenelon who actually was chairman at the time, were taken by Fenelon and delivered to the railroad company. This having been done, Ayling, the defendant in error, purchased the bonds to which the coupons sued on were attached, and paid their full value without notice of any claim of defense to their due execution. Under these circumstances we think the town is estopped from proving that Verke in fact signed the bonds after he went out of office. If Ayling had put himself on inquiry when he made his purchase he would have found, 1, that the town had authority to vote the bonds; 2, that the necessary vote had been given; 3, that at the date of the bonds Verke was clerk and Fenelon chairman; 4, that their signatures were genuine; 5, and that the bonds had actually been delivered to the railroad company by Fenelon, who was at the time chairman." Town of Weyauwega v. Ayling, 99 U. S. 112, 25 L. Ed. 470. Statutory requirements as to form of bonds directory. 326. (Miss. 1878.) Bonds were issued by Calhoun county, Mississippi, to a railroad company, in payment for stock subscribed by the county in said company. The enabling act declared that the bonds should be made payable "To the president and directors of the G. H. & E. Railroad Company and their successors and assigns." The bonds were made payable to the G. H. & E. Railroad Company, or bearer, at the agency of said county in the city of New York, two years after date. It was urged that this deviation from the requirements of the law in the form of the bonds rendered them invalid. Held, that the statutory requirement was only directory. "The defect is one of form and not of substance. The irregularity was committed by the serestopped to take advantage of it." vants of the county, and the county is Place of payment. No place of payment of the bonds being designated by the statute, it was competent for the supervisors to make them payable in New York. Supervisors v. Galbraith, 99 U. S. 214, 25 L. Ed. 410. Municipal officers; extent of authority. 327. (Kan. 1878.) "The township trustee and the township clerk who made the subscription and issued the bonds in this case were the officially constituted authorities of the township, and when they subscribed to the stock and issued the bonds they acted in their official capacity as the legai |