excess of the limit prescribed by the constitution, and that the act allowing the commissioners to exceed the limit was unconstitutional, because in disregard of article 5, § I. The tax in that case was levied without being submitted to a vote of the people of the county, and was therefore inhibited by section 7, article 7, of the constitution. The further objection also prevailed that the tax about to be levied exceeded the limit restriction of section 6 of article 5, viz:

"The taxes levied by commissioners of the several counties shall be levied in like manner with the state taxes, and shall never exceed the double of the state tax, except for a special purpose and with the special approval of the general assembly."

There is no allegation or evidence in this case that the payment of interest on these bonds requires a tax exceeding that limit, or that the tax collected and in the hands of the county treasurer, levied for the purpose of paying the coupons due at the institution of this suit, had exceeded that limit.

The case of Galloway v. Jenkins (1869) 63 N. C. 147, cited by counsel for the county, deals exclusively with the constitutional provision restricting the state from aiding railroads without a vote of the people, and has no relevancy to cases of county subscriptions. We find nothing in the decisions of the supreme court of North Carolina prior to the issue of these Stanly county bonds that pointed to any defect of power to issue them under the Code sections recited in the bonds. On the contrary, the opinion of that court in Belo v. Commissioners (1877) 76 N. C. 494, 495, is to the effect that as to bona fide holders the records of the proceedings of the commissioners affirming the existence of particular facts are conclusive, as well as the recitals in the bonds that they have been issued in pursuance of the law which authorized their issue.

The majority of the judges constituting the court on this rehearing are of opinion that the decree of the circuit court should be affirmed.

BOYD, District Judge. I concur with Judge MORRIS in his opinion filed in this case, and will give my reasons therefor:

The county of Stanly issued its bonds, in the sum of $100,000, in the years 1890, 1891, etc., for the purpose of paying its subscription to the stock of the Yadkin Railroad, running from Salisbury to a point in Stanly (Norwood), a distance of 44 miles. It is alleged in the bill that this road runs through the best and most fertile portion of Stanly county for a distance of 30 miles. It is also alleged that the county of Stanly "has received benefits from the same, in the greatly increased value of the lands of the county, in the increased and improved transportation within the limits of the same, and, further, by reason of the taxes paid into the treasury of the county by the company in each and every year." It is also alleged "that in return for, and in consideration of, said subscription, the Yadkin Railroad Company issued to said county of Stanly stock in and to the said amount of one hundred thousand dollars, which stock the county holds now, and has held since the date of the issue of the same, to wit, the year 1891." It appears, also, that the interest on the bonds so issued

by the county of Stanly was paid regularly to complainants and others. holding the bonds until 1897,-some time before the commencement of this suit. It is alleged in the bill that complainants "bought, for valuable consideration, a large sum (the market price), a great number" of these bonds (48), of the denomination of $1,000 each; "that the purchase of the bonds was for value, in good faith, and without any notice, expressed or implied, that there was any suggestion of their being void, invalid, or fraudulent, or otherwise than perfectly legal in their issue and sale." It appears that the payment of the interest on these bonds was stopped by reason of a judgment of the superior court of Stanly county, affirmed by the supreme court of North Carolina, in 1897, in the case of Commissioners v. Snuggs, 121 N. C. 394, 401, 28 S. E. 539, 39 L. R. A. 439. In that action the bonds in question were adjudged void. It is to be noted, in the first place, that there was no bondholder party to the suit of Commissioners v. Snuggs; it being an action brought against the defendant, Snuggs, to restrain him from paying the interest on the bonds to the holders of the same; the interest, in the amount of $6,000, being in his hands, as treasurer, having been paid to him by the sheriff of the county for that purpose, and only that. It was held by him-set apart from all other funds-solely for the purpose of the payment of the interest due July 1, 1897.

The contention upon the part of the defendants, as appears from the complaint filed in May, 1897, in the superior court of Stanly, in the action against Snuggs, in which they were plaintiffs, was that the bonds sued on here were void because the acts of 1870 and 1887 were not passed in accordance with the requirements of section 14, art. 2, "of the constitution of North Carolina, in that neither of the said acts passed its several readings in the house of representatives, on three different days," and that the yeas and nays, if taken at all, were not entered upon the journal, as required, etc. In this contention the plaintiffs in this action in the state court were sustained. In the supreme court, however, it was insisted that, in addition to the power conferred by the statutes to issue the bonds, it was also conferred by sections 1996, 1997, 1998, and 1999 of the Code of North Carolina, recited in the body of the bond. The court, as appears from the opinion of Justice Montgomery, failed to uphold this contention, also, upon the sole ground, however, that the road was not shown to be an "unfinished road," and that the "citizens of the county had an interest in the same."

Section 1996 of the Code of North Carolina is as follows:

"The board of commissioners of the several counties shall have power to subscribe stock to any railroad company, or companies, when necessary to aid in the completion of any railroad in which the citizens of the county may have an interest."

In the case of Commissioners v. Snuggs the sections of the Code: were upheld by the court as valid statutes, and in this case were for the first time construed by the supreme court of North Carolina. They were passed regularly, and in accordance with the requirements of the constitution of the state. The court put its decision upon the ground that the sections of the Code did not apply. It was a con

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 have accrued thereon, under a particular state of the decisions, or where there has been no decision of the state tribunals, the federal courts properly claim 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 by the two judgments of the supreme court of Michigan, and that we are bound to follow those adjudications. We have examined those cases with care. 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 all 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 hear 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 declaration. 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 legal 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 brought 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.”

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 noth ing 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, 645; Board v. Sutliff, 38 C. C. A. 167, 97 Fed. 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. 342; Gelpcke 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. 642, 650, 23 L. Ed. 752. And see Zabriskie v. Railroad Co., 23 How. 381, 16 L. Ed. 488, 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