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struction of a valid statute by the court six years after the bonds in question came into the hands of complainants, innocent purchasers for value. In the case of Wilkes Co. v. Coler, 180 U. S. 506, 21 Sup. Ct. 458, 45 L. Ed. 642, it was decided that the decisions of the highest court of a state upon the question whether a particular act was passed in such manner as to become, under the state constitution, a law, should be accepted and followed by the federal courts. This decision was rendered in a case certified to the supreme court from this court,Wilkes Co. v. Coler; one of the cases in which Judge MORRIS has filed the opinions suggested in the outset of this argument, and of a similar nature to this.

The question, then, is, in the case under consideration, whether the bonds are valid and legal bonds. It was contended in the argument that this court is bound by the decisions of the state court in the case of Commissioners v. Snuggs, 121 N. C. 394, 28 S. E. 539, 39 L. R. A. 439. I think not, and, however much we may regret it,—and we do regret it, it is still our duty to decide this case in accordance with the principles, as we understand them, laid down by the supreme court of the United States and by this court. In Burgess v. Seligman (the leading case upon this subject), the supreme court of the United States (Justice Bradley delivering the opinion of the court) says:

"Where contracts and transactions have been entered into, and rights hare accrued thereon, under a particular state of the decisions, or where there has been no decision of the state tribunals, the federal courts properly caim the right to adopt their own interpretation of the law applicable to the case. although a different interpretation may be adopted by the state courts after such rights were accrued.”

Says Justice Bradley further:

“Federal courts exercise their own judgment always in reference to the doctrines of commercial law."

The rights of these parties here are to be determined according to the doctrines of commercial law; it being well settled that the bonds in question are commercial securities,-negotiable instruments.

Pine Grove Tp. v. Talcott, 19 Wall. 666, 667, 22 L. Ed. 227, was an action in the United States circuit court upon coupons cut from bonds issued by that township in aid of a railroad under an act of the general assembly of Michigan. The plaintiff in error insisted that several decisions of the supreme court of the state holding that the construction of railroads was not a public corporate purpose, such as townships were authorized by the constitution of Michigan to aid, and that such statute and the bonds issued in pursuance of it were void, were controlling. The supreme court of the United States, in declining to be bound by those decisions, said:

"It is insisted that the invalidity of the statute has been determined lis the two judgments of the supreme court of Michigan, and that we are bound to follow those adjudications. We have examined those cases with

With all respect for the eminent tribunal by which the judgments were pronounced, we must be permitted to say that they are not satisfactory to our minds. We think the dissenting opinion in the one first decided is unanswered. Similar laws have been passed in twenty-one states. In illl of them but two it is believed their validity has been sustained by the highest local courts. It is not easy to resist the force of such a current of reason and authority. The question before us belongs to the domain of general jurisprudence. In this class of cases this court is not bound by the judgment of the courts of the states where the cases arise. It must lear and determine for itself. Here commercial securities are involved. When the bonds were issued there had been no authoritative intimation from any quarter that such statutes were invalid. The legislature affirmed their validity in every act by an implication equivalent in effect to an express declariltion. And during the period covered by their enactment neither of the other departments of the government of the state lifted its voice against them. The acquiescence was universal. The general understanding of the leg:11 profession throughout the country is believed to have been that they were valid. The national constitution forbids the states to pass laws impairing the obligation of contracts. In cases properly brouglit before us, that end can be accomplished unwarrantably no more by judicial decisions than by legislation. Were we to yield in cases like this to the authority of the decisions of the courts of the respective states, we should abdicate the performance of one of the most important duties with which this tribunal is charged, and disappoint the wise and salutary policy of the framers of the constitution in providing for the creation of an independent federal judiciary'. The exercise of our appellate jurisdiction would be but a solemn mockery."

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Justice Harlan, in Wilkes Co. v. Coler, 180 U. S. 506, 21 Sup. Ct. 458, 45 L. Ed. 642, before referred to, shows that it is only in cases where the state court has held an enactment is not passed in accordance with the requirements of the constitution that its decision is controlling.

Here is a construction of a valid statute, recited in the bond, which this court is asked to follow. We are not bound by it, and, while we regret it in this case, we cannot follow it. Says Justice Harlan, in Wilkes Co. v. Coler (page 519, 180 U. S., and page 463, 21 Sup. Ct., and 45 L. Ed. 642):

"Observe that the issue is not as to the construction, meaning, or scope of a statute, but whether that which purports to be a legislative enactment ever became a law for any purpose."

This paragraph from the opinion of Justice Harlan draws the distinction clearly and expressly between “the issue as to the construction, meaning, and scope of a statute," and the issue as to "whether that which purports to be a legislative enactment ever became a law for any purpose.” The court holds that the decisions of the highest court of the state upon the question as to whether "an enactment in the form of a statute was ever passed, so as to become, under the state constitution, a law,” or not, are not to be disregarded. The question here is not whether the sections of the Code relied on were ever passed as required by the constitution, so as to become valid laws (statutes of the state), but whether the circuit court of the United States is bound by the “construction, meaning, and scope of a statute" passed as required by the constitution, placed upon such statute by the highest court of a state after the issue of the bonds, which holds invalid and void bonds (negotiable instruments, commercial securities) issued by Stanly county "in good faith, put upon the market in due course of trade, purchased in open market for value”; the purchaser being unaware of any defect of authority or other irregularity on the part of the county, and there being nothing to excite suspicion of any defect or irregularity.

In the leading case of Louisville, N. A. & C. R. Co. v. Louisville Trust Co., 174 U. S. 573, 574, 19 Sup. Ct. 825, 43 L. Ed. 1081, Justice Gray says:

"In Merchants' Bank v. State Bank, 10 Wall. 604, 19 L. Ed. 1008, this court stated, as an axiomatic principle in the law of corporations, this proposition: 'Where a party deals with a corporation in good faith, the transaction is not ultra vires, and he is unaware of any defect of authority or any other irregularity on the part of those acting for the corporation, and there is nothing to excite suspicion of such defect or irregularity, the corporation is bound by the contract, although such defect or irregularity in fact exists. If the contract can be valid under any circumstances, an innocent party in such a case has a right to presume their existence, and the corporation is estopped to deny them, 10 Wall. 644, 615; Board v. Sutliff, 38 C. C. A. 167, 97 Ted. 270. The proposition was supported by citations of many English and American cases, and among them Bank v. Turquand (1856) 6 El. & Bl. 327; and the justices of this court, while differing among themselves in the application of the principle to municipal bonds, have always treated Bank v. Turquand as well decided upon its facts. Knox Co. v. Aspinwall, 21 How. 539, 545, 16 L. Ed. 208; Moran v. Miami Co., 2 Black, 722, 724, 17 L. Ed. 312; Gelpeke v. City of Dubuque, 1 Wall. 175, 203, 17 L. Ed. 520; St. Joseph Tp. v. Rogers, 16 Wall. 644, 666, 21 L. Ed. 328; Humboldt Tp. v. Long, 92 U. S. 612, 650, 23 L. Ed. 752. And see Zabriskie v. Railroad Co., 23 How. 381, 16 L. Ed. 188, above cited.”

The cases cited by Justice Gray in the above paragraph are decided upon municipal bonds, and show that the principle he states applies to contracts municipal as well as to other corporations; and the late Justice Miller, in his dissenting opinion in the case of Humboldt Tp. v. Long, 92 U. S. 650, 651, 23 L. Ed. 752, says:

“The case of Knox Co. v. Aspinwall, 21 How. 539, 16 L. Ed. 208, the original case, on which the rule and principles are based, is itself based upon Bank v. Turquand.”

In 1890, 1891, etc., Stanly county, for the purpose already shown, put the bonds in question upon the market for sale. They were in due form, and contained the usual recitals. These bonds were purchased in due course of trade by the complainants, unaware of any defect of authority or other irregularity in their issue. There was nothing to excite suspicion of any defect or irregularity in their issue. The railroad was constructed; the county had its stock in the same, and had for years paid the interest on the bonds. The county was, each and every year, collecting from the railroad company taxes levied upon the property of the same. Under conditions like these, I consider it the duty of this court, as said by Justice Gray in the case above cited, to uphold the bonds,—to declare them valid, -if, under any circumstances, the court can do so.

I have shown that this court is not bound by the construction put upon these valid statutes by the supreme court of North Carolina in the Snuggs Case, years after the issue and sale of the bonds. It becomes necessary, then, to inquire as to what construction the court will put upon the statutes. In construing these sections of the Code, we must do it in the light of the rule laid down by Justice Gray in the Louisville, N. A. & C. R. Co. Case. This is an easy thing to do, when we consider the decision of Belo v. Commissioners, 76 N. C. 489. Indeed, it seems to us that if the principles laid down in that case had been called to the attention of the court in the case of Com

missioners v. Snuggs, 121 N. C. 394, 28 S. E. 539, 39 L. R. A. 439, the decision would have been different. As I have already said, no bondholder was a party to that suit. It seems to have been argued, however, but there is no reference to the Belo Case in the opinion, and, from that, I take it, there was none in the argument. In addition to the leading opinion of the court, written by Justice Montgomery, there were two concurring opinions, and in none of them is there any mention of the Belo Case. This, to us, is remarkable, when we consider the fact that it is the leading case in North Carolina upon the subject of municipal bonds; and the more remarkable when we consider the principles there laid down, decisive of the case here in favor of the bonds and their validity. What are these principles? The supreme court, in 1877, in Belo v. Commissioners, 76 N. C. 489,—the leading case upon the subject of municipal bonds, and the effect of recitals in the bonds,-lays down the law as follows:

"While the decisions are very uniform that the records of the justice's court, affirming the fact of compliance with the conditions precedent to the subscription of stock, are conclusive and estop the county from denying the validity of the bonds in the hands of a bona fide holder before maturity, they are equally uniform in giving the same effect to the recitals in the bonds themselves that they had been issued in pursuance of the law which authorized their issue. The recital is a determination of the question, and the holder has a right to rely on it. Town of Coloma v. Ea ves, 92 U. S. 481, 23 L. Ed. 579; Knox Co. v. Aspinwall, 21 How. 539, 16 L. Ed. 208. Mr. Justice Gray says: 'In the leading case of Knox Co. v. Aspinwall, the decision was rested upon two grounds. One of them was that the mere issue of bonds, containing a recital that they were issued in pursuance of the legislative act, was a sufficient basis for the assumption by the purchaser that the conditions on which the county was authorized to issue them had been complied with, and it was said the purchaser was not bound to look further for evidence of such compliance, though the recital did not affirm it. The position was supported by reference to the Royal British Bank 1. Turquand, 6 El. & Bl. 327, in a case in the exchequer chamber, which fully sustains it.'”

Here the court in 1877 approved of the doctrine in the Royal British Bank Case, upon which Knox Co. v. Aspinwall was based,—the case Mr. Justice Gray bases his decision upon in the case of Louisville, N. A. & C. R. Co. v. Louisville Trust Co., 174 U. S. 573, 574, 19 Sup. Ct. 817, 43 L. Ed. 1031. The above are the words of Justice Gray,—the same used in the Belo Case by Justice Bynum; the leading case on municipal bonds in North Carolina.

To apply these rules to this case, what were the conditions on which the county of Stanly was authorized to issue the bonds? One was, "when necessary to aid in the completion of any railroad"; and another was, “of any railroad in which the citizens of the county may have an interest.' Here was a power, legislative in its character, recited in the bond, to be exercised under certain conditions. By whom? The act says, the “board of commissioners.” In June, 1889, an order was entered upon the record of the board of commissioners of Stanly county, when they came to consider the proposition to subscribe to the capital stock of the Yadkin Railroad, a part of which was as follows: “It appearing that the citizens of said county have an interest in said railroad,” etc. In this same order, reference time and again was made to the Yadkin Railroad and its construction, and to the conditions upon which it was to be constructed. Among others, it was ordered that "said railroad shall be of standard gauge.' It appeared then to the board, and they (the commissioners) acted upon it, that there was a railroad to be completed,—constructed,—and that the citizens of the county had an interest in it. These were the conditions to be complied with, and some authority had to pass upon the same. It was not for the innocent purchaser of the bond to inquire as to whether the conditions were complied with, but for the municipal authorities who put it upon the market, and the recital in the bond that it was issued in pursuance of the power conierred by the sections of the Code "was a sufficient basis for the assumption by the purchaser that the conditions on which the county was authorized to issue it had been complied with.” Belo's Case, supra. The proceedings had before the board of commissioners of Stanly county, printed in the record, show that the corporate authorities acted with the sections of the Code recited in the face of the bond before them, and that they passed upon all questions left for their determination, as said by Justice Brewer in his opinion in the Mercer Co. Case, 170 U. S. 601, 18 Sup. Ct. 791, 42 L. Ed. 1156. It shows these corporate authorities were acting in good faith, and wanted to perform their duty, according to law. On page 660, 30 C. C. A., and page 307, 87 Fed., in the case of Township Ninety-Six v. Folsom, the circuit court of appeals, speaking through Judge Jackson, says:

"It will be observed from the inspection of these bonds that their recitals show upon the face of the bond a compliance with the law under which they were issued. The purchaser had a right to assume that all the conditions of the law were complied with, authorizing the issue of the bonds. The question whether they were issued in compliance with the law was a question that properly belonged to the authorities who were authorized by the acts of the legislature to issue the bonds."

Purchasing these bonds with the recitals they contained, was it required of the purchasers to find out whether the citizens of the county of Stanly had an interest in the railroad? Was it required of them to find out whether the railroad was completed or uncompleted? These are matters for the corporate authorities, and for nem alone. Savs Justice Brewer in Provident Life & Trust Co. v. Mercer Co., 170 S. 601, 18 Sup. Ct. 791, 42 L. Ed. 1156:

"By a long series of decisions, such recitals are held conclusive, in favor of a bona fide holder of bonds, that precedent conditions preseribed by statute, and subject to the determination of those county officers, have been fully complied with.”

In the case of Provident Life & Trust Co. v. Mercer Co., 170 U. S. 601, 18 Sup. Ct. 788, 42 L. Ed. 1156, it will be seen that the recitals in the bond, which are printed in the volume, are similar to those in the Stanly bonds. See, also, the recent case of Gunnison Co. v. E. H. Rollins & Sons, 173 U. S. 255, 19 Sup. Ct. 390, 43 L. Ed. 689, as to recitals in bonds; also School Dist. v. Rew, 49 C. C. A. 198, 111 Fed. 1.

We understand the rule to be that the purchaser has to look no further than to ascertain if a power has been granted to issue the bonds. If there is a power, then he can depend upon the recitals in the bonds for the proper exercise of that power.

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