German Savings Bank v. County of Franklin

• Citation: 128 U.S. 526,9 S.Ct. 159,32 L.Ed. 519
• Parties: GERMAN SAVINGS BANK v. COUNTY OF FRANKLIN
• Decision Date: 10 December 1888
• Court: United States Supreme Court

128 U.S. 526

9 S.Ct. 159

32 L.Ed. 519

GERMAN SAVINGS BANK v. COUNTY OF FRANKLIN.

December 10, 1888.

E. E. Cook, for appellant.

Thos. J. Layman, for appellee.

BLATCHFORD, J.

This is a suit in equity, commenced on the 4th of August, 1880, by a bill in equity filed in the Franklin county circuit court, of the state of Illinois, by the county of Franklin, as plaintiff, against the Belleville & Eldorado Railroad Company, the county clerk of Franklin county, the sheriff and collector of that county, the auditor of public accounts of the state of Illinois, the treasurer of that state, four individuals alleged to be holders of bonds issued by the county, and the unknown holders of others of such bonds.

The bill was founded upon the alleged invalidity of the bonds. It sought an injunction to restrain the auditor of the state and the clerk of the county from taking measures to collect taxes to pay the interest on the bonds, and to restrain the railroad company and the holders of the bonds from bringing suit against the county on any of the coupons, and to restrain the state treasurer from paying the coupons, and to restrain the sheriff and collector of the county from collecting any more taxes to pay the interest on the bonds, and from paying to the state treasurer any money already collected to pay interest on them; and prayed for a decree declaring an election held in the county on the 11th of September, 1869, on the question of a subscription by the county to the capital stock of the railroad company, to have been void, and a subscription made by the county court of the county on the 6th of November, 1869, to the capital stock of the company, and all amendments, modifications, and alterations of such subscription, to have been void, and a so-called subscription of $150,000 to the capital stock of the railroad company, made on the 13th of December, 1876, and an attempt made on the 12th of November, 1877, to amend such subscription, and to contract for the building of the railroad, to have been void, and the bonds and coupons to be void, and for a decree requiring the holders of them to surrender them for destruction, and for a perpetual injunction to the above effect, and for general relief.

On the 27th of October, 1880, on due proof of personal service of process on the railroad company, the county clerk of the county, the sheriff and collector of the county, the auditor of public accounts of the state, and the state treasurer, and on proof of due publication as to the defendants named in the bill as holders of the bonds, and as to the unknown holders of them, and there having been no appearance for any defendant, the cause was heard on the bill taken as confessed, and a decree made adjudging the invalidity of the bonds, and granting the relief asked for in the bill.

On the 27th of October, 1881, the German Savings Bank, of Davenport, Iowa, as the owner of nine of the bonds of the county, of $1,000 each, (and of eighteen others of the bonds, of $1,000 each, not involved in the present appeal,) was, on a motion made to the state court, permitted to defend the suit and to answer the bill. It filed its answer in that court, setting up that it had purchased the bonds in good faith, for a valuable consideration, and without notice of any defense or objection to the validity of any of them, before they were due, and before any default had been made in the payment of any interest on any of them, and before the suit was brought; and that the bonds were valid. At the same time it filed a petition and a bond for the removal of the cause into the circuit court of the United States for the Southern district of Illinois. A copy of the record from the state court was filed in the circuit court on the 21st of December, 1881, and the cause afterwards proceeded therein. A replication was filed to the answer of the savings bank, various holders of the bonds were made defendants and answered, and some of them filed cross-bills, proofs were taken, and it was stipulated between the parties that each defendant was, at the commencement of the suit, a bona fide holder of the bonds specified in the respective answers, and that they purchased the same for value, without any notice of defense.

The nine bonds held by the savings bank, involved in the present appeal, are all alike, except as to the number, and each one has upon it a certificate of the auditor of public accounts of the state of Illinois, the bond and the certificate being in the form following:

'UNITED STATES OF AMERICA, STATE OF ILLINOIS:

'No. 15. Franklin county, eight per $1,000 cent. railroad bond.

'Know all men by these presents, that the county of Franklin, in the state of Illinois, acknowledges itself to be indebted to the Belleville and Eldorado Railroad Company, or bearer, in the sum of one thousand dollars, which sum the said county, for value received, promises to pay said company, or bearer, in the city and state of New York, twenty years after date, (payable at any time after five years, and before this bond becomes due, at the option of said county of Franklin,) with interest thereon from and after the fifteenth day of November, A. D. 1877, at the rate of eight per cent. per annum, payable semi-annually on the first days of January and July of each year, on the presentation and surrender, at the place in the said city of New York where the treasurer of the state of Illinois pays the interest and debt of said state, of the coupons hereto attached, as they severally become due.

'This bond is one of a series of fifty of like tenor, for the sum of one thousand dollars each, numbered from one to fifty, inclusive, issued under the provisions of an act of the general assembly of the state of Illinois, entitled 'An act to authorize cities and counties to subscribe stock to railroads,' approved November 6th, A. D. 1849, and authorized by a majority of the qualified voters of said county of Franklin at an election held in said county on the 11th day of September, A. D. 1869, in accordance with the provisions of said act.

'In testimony whereof, the said county of Franklin has executed this bonds, by the chairman of the board of supervisors, under the order of the board of supervisors of said county, signing his name hereto, and by the clerk of said board, under the order thereof, attesting the same, and affixing hereto the seal of said county. This done at the office of the clerk of said board, this 13th day of November, A. D. 1877.

'JOHN J. ST. CLAIR,

'Chairman of the Board of Supervisors of Franklin Co., Illinois.

[Seal.]

'EVAN FITZGERRELL,

'Clerk of Board of Supervisors of Franklin Co., Illinois.'

'AUDITOR'S OFFICE, ILLINOIS,

'SPRINGFIELD, October 24th, 1879.

'I, Thomas B. Needles, auditor of public accounts of the state of Illinois, do hereby certify that the within bond has been registered in this office this day pursuant to the provisions of an act entitled 'An act to fund and provide for paying the railroad debts of counties, townships, cities, and towns,' in force April 16th, 1869.

'In testimony whereof, I hereunto subscribe my name, and affix the seal of my office, at Springfield, the day and year first above written.

[Seal.]

[Signed] 'T. B. NEEDLES,

'Auditor Public Accounts.'

The nine bonds involved in this appeal were purchased by the savings bank, at Davenport, Iowa,—four of them for 99 per cent. and accrued interest, on the 13th of April, 1880; and five of them at the same price, on the 15th of May, 1880. None of them, and none of the coupons on them at the time of purchase, were overdue; and the first installment of interest which fell due on them after they were purchases by the Savings Bank was duly paid by the county. A copy taken from the records in the office of the clerk of the county, of all the proceedings of the county court and of the board of supervisors of the county relative to the election and to the subscription by the county to the stock of the railroad company, was put in evidence. On final hearing, the circuit court made a decree on July 3, 1883, adjudging that the nine bonds in question were issued without authority of law, and were void, and awarding a perpetual injunction in regard to them, as prayed in the bill. From that decree the savings bank has appealed.

The record shows the following facts:

On the 24th of July, 1869, the county court of Franklin county, purporting to do so under the authority of an act of the general assembly of Illinois, entitled 'An act to incorporate the Belleville & Eldorado Railroad Company,' approved February 22, 1861, and an act of the general assembly, approved November 6, 1849, authorizing counties to take stock in railroad companies, made an order submitting to the voters of the county, to be voted upon on the 11th of September, 1869, a proposition to subscribe $200,000 to the capital stock of that company, payable in county bonds at par, due in 20 years from date, with interest, payable semi-annually, at the rate of 8 per cent. per annum, and to be of denominations of not less than $1,000 each; the bonds to be issued upon certain specified conditions, and not until they were complied with, one of the conditions being 'that said railroad shall be commenced in the county of Franklin within nine months from the date of said election, and completed through the county by the 1st day of June, 1872.'

On the 6th of November, 1869, the county court made an order reciting that the election had been held on the 11th of September, 1869, in pursuance of the order of July 24, 1869; that at such election the qualified voters of the county did by a majority of their votes (taking as a standard the number of votes cast for county officers at the last general election previous to such vote had upon the question of subscription) authorize the county court of the county to subscribe the sum of $200,000 to the capital stock of the railroad company; and declaring that, by authority of such...