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as one of the forms of his invention. In both forms the parts are numbered alike, and the claims refer to the numbers of the figures of their references in the specification without distinction. Under these circumstances we must hold that the difference is not material, and that either form answers the requirements of the invention. Busell Trimmer Company v. Stevens, 137 U. S. 423, 435; Wells v. Curtis, 31 U. S. App. 123, 156. It is proper to add that the difference was not adverted to on the hearing, but in the brief of counsel for the appellant some parts of the discussion seem to refer to the capacity of the combination for such adaptations as are mentioned in the references of the specification to the first two figures in the drawings, and for that reason we have given the matter due consideration.

We conclude that the decree of the court below dismissing the bill should be

Affirmed; and it is so ordered.

MERCER COUNTY, KENTUCKY, v. PROVIDENT LIFE AND TRUST COMPANY OF PHILADELPHIA.

ERROR TO THE CIRCUIT COURT OF THE UNITED STATES FOR THE DISTRICT OF KENTUCKY.

No. 326. Argued October 30, 1895. — Decided March 3, 1896.

Delivery is as essential to the existence of a bond, note or other negotiable instrument as it is to a deed.

Municipal corporations have no power to issue bonds in aid of a railroad except by legislative permission, and the legislature in granting permission may impose such conditions and restrictions as it may choose, to guard the public from the negligence or crimes of their officials, and to secure exact compliance with the terms upon which the power of taxation may be exercised. Such permission does not carry with it authority to execute negotiable bonds except subject to the conditions and restrictions of the enabling act, which must be strictly pursued, and a purchaser or holder of such bonds is chargeable with notice of the requirements of the law under which they purport to be issued. Where recitals are relied upon to cut off the defense that municipal bonds

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were in fact issued without authority of law, or in violation of law, they should be fairly and reasonably construed, and be such as to indicate clearly and without ambiguity that the conditions and requisites of the law had been complied with.

Where bonds are issued by a municipal corporation under a special and limited authority imposing restrictions and conditions, but authorizing officials of such municipality to execute and issue such bonds when the conditions precedent imposed have been complied with, and it can fairly and reasonably be gathered from the act that the officials so authorized to execute the bonds were also empowered to ascertain and determine that the requisite facts and circumstances did exist, or all conditions precedent had been complied with, and this determination or decision has been embodied in the recitals of the bonds, a purchaser without other notice and for value has the right to rely upon the truth of the representations appearing on the bonds, and need make no further inquiry; but if such bonds are issued without recitals, but in violation of law or authority, no reason exists why they should not be open to defense when action is brought, even by one who bought without actual knowledge that they had been issued without performance of precedent conditions. In the latter case the purchaser buys at his peril, and cannot rely upon his mere ignorance nor upon the mere fact that the bonds had been issued and were found in circulation.

A person dealing with an agent assumes all the risk of a lack of authority in the agent to do what he does; and negotiable paper and securities are no more protected against this inquiry than any other.

A ratification can have no greater effect than a previous authority. Debts which neither a municipal corporation nor its officers had any power to authorize or create cannot therefore be ratified or rendered valid by either of them, by the payment of interest or otherwise. Under the provisions of the Kentucky act of May 15, 1886, Private Acts of 1885-86, p. 702, c. 1159, the county of Mercer was authorized to subscribe to the capital stock of the Louisville Southern Railroad Company and to pay for the same in its negotiable coupon bonds. To secure the county against failure to complete the road all power to issue bonds was made dependent on the actual construction of the road "through" the county. To secure the railroad in obtaining the bonds when actually earned it was provided that, when a favorable vote of the people had been cast and a subscription made, the bonds should be prepared and formally executed and deposited with a trustee, who should hold them in escrow and deliver them only when the railroad company had actually performed all precedent conditions. The act further provided in plain terms that the bonds should not be valid obligations until the completion of the road, and further, that the trustee should give a bond for the due discharge of his trust. Under this act the county issued bonds, in form negotiable securities, each of which recited that it was "issued pursuant to the authority conferred upon the said county" by the said enabling act of May 15, 1886, which was the only recital in the bonds

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concerning the authority for their issuance. The bonds were deposited in the hands of a trustee, who before the road had been completed through the county delivered them to the railroad company and received from it a certificate of certain shares of its capital stock. The road as constructed ran from a boundary line of the county through the county nearly twenty miles to a town where a junction was made with another railroad about two miles from the nearest point on another boundary of the county. For a time after their issuance the county levied an annual tax to meet the interest on the bonds and paid interest thereon, but afterward defaulted. This action was brought against the county by a trust company on past-due coupons of certain of the said bonds which it had bought. Held, (1) That the provisions in the enabling act of May 15, 1886, that the bonds should not be valid obligations of the county, and that the trustee should not deliver them, until the railroad should have been constructed "through" the county, were imperative, and limited the power of the county and of the trustee to the issuance of bonds only when the requisite facts existed; (2) that the legislature had undoubted authority to impose the condition that the bonds should not be valid obligations until the railroad should have been constructed "through" the county; (3) that the construction of the railroad to a point within two miles of the statutory requirement was not a substantial compliance with the condition; (4) that the trustee, in delivering the bonds before the condition had been complied with, did so in violation of his duty and acted without authority of law; (5) that the recital in the bonds concerning the authority for their issuance must be referred to the acts which, under the enabling act of May 15, 1886, were to precede the execution and deposit of the bonds in escrow, and did not operate as a recital of facts which could not have existed when the bonds were made; (6) that there was no estoppel by recital, because there was no statement in the bonds implying that the railroad had been completed "through" the county, as required by the provisions of the enabling act of May 15, 1886, and because the trust company, in buying the bonds, was bound to look to the enabling act, which operated as notice to it that the bonds were not binding and valid obligations when placed in escrow, and would not become valid and legal securities until the railroad should have been completed "through" the county; (7) that it could not be successfully contended that the absence of recitals in the bonds was immaterial, because the circumstances attending the execution of the bonds were such that there could be no recitals on the face of the bonds importing the performance of conditions which were to be complied with after their formal execution and deposit in escrow, and that the decision of the trustee before delivering them to the railroad company that all precedent conditions had been complied with precluded the county from contradicting that decision after the bonds had passed into the hands of an innocent purchaser, because to support this position it was necessary to construe the enabling act of May 15, 1886, as not only empowering the trustee to ascertain and determine

Statement of the Case.

&

whether all conditions subsequent to such deposit had been performed, but that such determination should estop the county as against an innocent purchaser of the bonds, although no such determination appeared on the bonds, either through a recital or an indorsement,-a construction of the act for which no express authority existed ; (8) that the fact that the enabling act of May 15, 1886, authorized the making of "negotiable bonds" furnished no basis for the contention that authority in the trustee to decide whether all conditions subsequent to the deposit of the bonds had been performed was to be implied, and that his decision should be conclusive, but that the mere fact that the bonds had been issued and were in form negotiable securities, if entitled to any significance whatever, only raised a presumption that they had been delivered to the railroad company by the trustee in compliance with the terms of the law, but that such a presumption would not be conclusive, and that the county would not be estopped, even as against one who bought in actual ignorance of the facts; (9) that the authority of the trustee to deliver the bonds depended on the same principles that determine such authority in other contracts, and was not aided by the doctrine that, when once lawfully made, negotiable paper has a more liberal protection than other contracts in the hands of an innocent holder, and that the fact that the bonds were negotiable bonds did not relieve the trust company from the duty of looking to the authority of the trustee to deliver them; (10) that the fact that the trustee was required to give a bond for the due discharge of his trust did not imply that the county was to look to this bond in case of an unauthorized delivery; (11) that the county could not be held responsible upon the principle that, whenever one of two innocent persons must suffer by the acts of a third, he who has enabled such third person to occasion the loss must sustain it, because the trust company could not be regarded as an innocent purchaser, as it was constructively chargeable with all that inquiry would have disclosed, and because the bonds, as bonds of a municipal corporation, were invalid for want of power to issue them until the actual completion of the railroad in aid of which they were authorized; and (12) that as no power to issue the bonds existed when they were issued they were not rendered valid by the payment of interest for a time after their issuance.

Before TAFT and LURTON, Circuit Judges, and SEVERENS,

District Judge.

The county of Mercer in the State of Kentucky subscribed for stock in the Louisville Southern Railroad Company to the extent of $125,000, and issued in payment therefor one hundred and twenty-five bonds, each for $1,000, dated January 10, 1887, payable in thirty years, with interest payable semi

Statement of the Case.

annually at five per cent, for which coupons were attached. These bonds, with past-due coupons attached, were received by the railroad company in August, 1888, and one hundred of them subsequently came to the hands of the Provident Life and Trust Company of Philadelphia.

This suit was brought upon four hundred coupons past due and unpaid. The county denied liability upon the bonds and presented a number of defenses, which so far as now insisted upon will be hereafter stated. A jury was waived and the decision of the law and facts submitted to Hon. John W. Barr, District Judge, holding the Circuit Court, who made a special finding of facts upon which he gave judgment against the county and for the plaintiff below. The bonds were in the usual form of negotiable county bonds. The only recital concerning the authority for their issuance is in these words: "This bond is one of a series of one hundred and twenty-five bonds of even date herewith, all of the same denomination and tenor, and numbered consecutively from one to one hundred and twenty-five, the same having been issued pursuant to the authority conferred upon the said county by an act of the legislature of Kentucky, entitled 'An act to authorize the county of Mercer to subscribe aid to the Louisville Southern Railroad Company,' approved May 15, 1886, and pursuant to an order entered by the county judge of said county in conformity with said act, subscribing in behalf of said county for the capital stock of the said Louisville Southern Railroad Company in the sum of one hundred and twenty-five thousand dollars ($125,000), which order was entered of record in said court on January tenth, A.D. eighteen hundred and eightyseven (1887)."

The act granting power to subscribe for stock of the Louisville Southern Railroad Company, which is referred to in the recital above set out, was passed on May 15, 1886. The first section of that statute authorized Mercer County to subscribe to the capital stock of the Louisville Southern Railroad Company, “as hereinafter provided," and that it might pay for the same in the "negotiable coupon bonds of said county." The second section provided the method of applying for a sub