Kelley v. Town of Milan

• Citation: 32 L.Ed. 77,8 S.Ct. 1101,127 U.S. 139
• Parties: KELLEY et al. v. TOWN OF MILAN. 1
• Decision Date: 23 April 1888
• Court: United States Supreme Court

8 S.Ct. 1101

127 U.S. 139

32 L.Ed. 77

KELLEY et al. v. TOWN OF MILAN.¹

April 23, 1888.

This is an action at law, brought in the circuit court of the United States of the Western district of Tennessee, by Albert Kelley and Lawrence D. Alexander, copartners under the firm name of Kelley & Alexander, citizens of New York, against the mayor and aldermen of Milan, a municipal corporation organized under the laws of Tennessee, to recover the sum of $5,040, being the amount of 144 coupons, for $35 each, cut from 12 bonds purporting to have been issued by the defendant, bearing date July 1, 1873, each for the payment of the sum of $1,000, payable to _____, or bearer, on the 1st of July, 1893, 24 of which coupons matured on the 1st of July, 1876, 24 on the 1st of Jyly, 1877, 24 on the 1st of July, 1878 24 on the 1st of July, 1879, 24 on the 1st of July, 1880, and 24 on the 1st of July, 1881. Interest was claimed on each coupon from its maturity. Each of the bonds was in the following form, all being alike except as to the numbers:

'No. 1.

State of Tennessee, Town of Milan.

$1,000.

'Be it known that the town of Milan, by its mayor and aldermen, in consideration of the location of the Mississippi Central Railroad by said town, the citizens thereof, in pursuance of the laws of Tennessee authorizing the same, having agreed to issue bonds, payable on twenty years' time, to the amount of twelve thousand dollars, with annual interest at seven per cent., with coupons attached, in bonds of one thousand dollars each. And whereas, the people of Milan voted the same by a majority and in the form required by law, the vote being in pursuance of due notice, and in all respects according to the laws of Tennessee, said bonds to be payable to the Mississippi Central Railroad, under lease and control of the Southern Railroad Association, now, be it known that the town of Milan, by its mayor and aldermen, in pursuance of the authority given by the people thereof, and in obedience to the duty required of them, issues and delivers this bond, being one of twelve; and said town of Milan hereby acknowledges itself to owe and be indebted to _____, or bearer, in the sum of one thousand dollars, which sum said town of Milan binds itself to apy, in lawful money of the United States, to the Mississippi Central Railroad Company, or to the order of the Souh ern Railroad Association, or bearer, in the city of New York, on or before the 1st day of July, in the year of our Lord 1893, with interest at the rate of seven per cent. per annum, payable annually on the 1st day of July of each year, on presentation of the proper coupons hereto annexed. And the town of Milan, by its mayor and aldermen, hereby pledges the legal responsibility and the faith of said town for the payment of said coupons and bond according to the terms and effect hereof.

'In testimony whereof, the mayor and aldermen of the town of Milan have caused the signature of the mayor to be hereto set, and the seal of the corporation to be affixed, this 1st day of July, 1873, A. D.

[L. S.]

A. JORDAN, Mayor of the Town of Milan.'

The declaration alleged that the 12 bonds constituted the entire number of the issue by the defendant, and that the plaintiffs owned the bonds and coupons by the purchase of them in good faith. The defendant, for plea, averred that it did not make the bonds or the coupons, nor was any person authorized to make the same for it, and that the coupons were not its act and deed. The plaintiffs, for replication to the plea, averred that theretofore, in the chancery court for the county of Gibson, in Tennessee, the defendant instituted suit against the payee of the bonds, and certain other persons, holders thereof, by filing its bill in said chancery court against the Mississippi Central Pailroad Company, H. S. McComb, and others, alleging that the bonds were invalid, and praying to have the same so adjudged, and to be surrendered to the defendant and canceled; that thereafter, in January, 1875, in said chancery court, a final decree was rendered adjudging that the bonds and coupons were valid obligations against the town of Milan; and that, therefore, the matter was res adjudicata. The defendant put in a rejoinder to the replication, averring that the decree referred to was produced by combination and fraud between the vice-president of the New Orleans, St. Louis & Chicago Railroad Company, and the agents and attorneys of the defendant, by which a decision of the court in the cause, upon the matters involved, was prevented, and the decree was consented to for the purpose of giving it effect as res adjudicata upon points in litigation not honestly contested; that the decree was not the judgment of the court on the issues involved, but was founded upon the unauthorized consent of certain agents and attorneys of the defendant, who had no power to give such consent or to bind the defendant in the premises; that the court had no power to bind the defendant by the decree; that the decree was not rendered in favor of a party to the record, but in the interest of a stranger thereto; and that the plaintiffs were not bona fide holders, without notice, of the bonds or the coupons. The plaintiffs demurred to the rejoinder, alleging various causes of demurrer. The demurrer was overruled, and the plaintiffs then took issue upon the rejoinder. The case was then tried by the court on due waiver in writing of a jury. At the trial, the coupons sued on, and the bonds from which they were detached, were offered in evidence by the plaintiffs; the genuineness of the signatures being admitted. Each coupon was in the following form:

'Town of Milan.

'$35. Warrant for thirty-five dollars, being for six months' interest, payable on the 1st day of July, 1880, in the city of New York, on bond No. ___.

'A. JORDAN, Mayor of the Town of Milan, Tenn.'

The defendant objected to the admissibility of the coupons and bonds, on the ground that they were signed, sealed, and delivered by the constituted authorities of Milan, without any legislative power having been given to them, or to the defendant or its agents, to sign, seal, deliver, or issue the coupons or the bonds. The court, being of opinion that such objection was well taken, sustained it, and excluded the coupons and the bonds, and the plaintiffs excepted.

Te re was a stipulation of facts made by the parties, which is set forth in the bill of exceptions, stipulating (1) that the bonds in question were issued by the defendant in payment of a stock subscription made by it to the Mississippi Central Railroad Company, the subscription being for the sum of $12,000; (2) that, at the time of making the subscription, the railroad company was about to extend its line from Jackson, Tenn., to Cairo, Ill., and the subscription was to aid in making such extension, and to secure its location through* the defendant's town; (3) that such extension was completed in 1873, the same running through the town limits of the defendant, as it stipulated for, and the extension had been operated ever since that time. The following facts also appeared by the stipulation: On the 10th of July, 1874, A. Jordan and six other persons, residents and tax-payers of the town, instituted proceedings in the chancery court at Humboldt, in Gibson county, Tenn., against the Mississippi Central Railroad Company and others, for the purpose of avoiding the liability of the town upon the bonds; the complainants constituting the board of mayor and aldermen of the town. The bill alleged, that, in the record of proceedings of the board, of the date of May 11, 1872, there was the following entry: 'The board was convened by order of the mayor. Present: A. Jordan, mayor; W. M. McCall, M. B. Harris, J. H. Dickinson, J. M. Douglas, W. E. Reeves, W. H. Algea, aldermen. On motion, it was ordered that 12 bonds of $1,000 each, with coupons attached, payable 20 years after issuance, bearing interest at 7 per cent. per annum, be issued by the corporation of the town of Milan, Tenn., to the Mississippi Central Railroad Company, upon the following conditions, namely: That the Mississippi Central Railroad be extended from Jackson, Tenn., to the town of Milan, and intersect or cross the Memphis and Louisville Railroad at the point agreed upon by Col. Read, chief engineer of the Mississippi Central Railroad, and the committee on behalf of the corporate authorities of the town of Milan, near S. P. Clark's residence, the interest on said bonds to be paid annually; and that the town marshal open and hold an election on the 12th day of June, 1872, within the corporate limits of said town, for a ratification or rejection of said proposition.' That in such record were entered the following proceedings as having taken place at a meeting of said board on the 17th of June, 1872: 'The board met pursuant to adjournment. Present: A. Jordan, mayor; W. M. McCall, M. B. Harris, J. M. Douglas, W. H. Algea, and W. E. Reeves, aldermen. The minutes of the former meeting were then read and adopted The election was held on the 12th day of June, 1872, for the ratification or re jection of the action of the board of mayor and aldermen of the town of Milan in regard to the issuance of the $12,000 in bonds to the Mississippi Central Railroad Company upon certain conditions. The returns of said election show a vote of 117 for subscription, and 2 no subscription.' 'W. M. McCall and W. H. Algea were appointed a committee to correspond with Judge Milton Brown, of Jackson, Tenn., in regard to the proposition of Milan corporation in regard to issuing the $12,000 in bonds to the Mississippi Central Railroad Company.' That the foregoing entries constitute all the proceedings in regard to the subscription of the $12,000 in bonds, and in regard to the election held for ratifying or rejecting the action of the board in directing the issue of the bonds. That there was nothing to show the manner in which the election was held, or...