Town of Plainview v. Winona & St. P. R. Co.
| Decision Date | 28 April 1887 |
| Citation | 32 N.W. 745,36 Minn. 505 |
| Parties | TOWN OF PLAINVIEW v WINONA & ST. P. R. CO. |
| Court | Minnesota Supreme Court |
OPINION TEXT STARTS HERE
(Syllabus by the Court.)
An agreement entered into between a railway company and the authorities of a town, upon petition of a majority of the tax-payers, in pursuance of the provisions of section 7, c. 106, Laws 1877, for the issuance of the bonds of such town, is invalid, and imposes no legal obligation upon the town, by reason of the unconstitutionality of the statute; and the latter, in its corporate capacity, is not estopped to resist the enforcement of bonds so issued by the completion of a line of railroad under the agreement by such company; following Harrington v. Plainview, 27 Minn. 224,6 N. W. Rep. 777.
Where a railroad company procured negotiable bonds to be so issued by the officers of a town, under the section of the statute referred to, which were in form the obligations of the town, and recited on their face that they were issued under such an agreement, and which were accepted by such company, and negotiated and transferred by it for the full face value thereof, and were subsequently negotiated and sold to the citizens of another state, who, in an action in the circuit court of the United States, brought against the town to recover overdue interest, and tried upon the merits, recovered final judgment therefor, which fixed the liability of the town for the whole amount of such bonds to the holders thereof, held, that the acts of the company in procuring and negotiating the bonds were without authority of law and wrongful, and that, by reason thereof, a cause of action arose in favor of the town, and against the company, for the recovery of the amount of such bonds, with interest.
Under Sp. Laws 1881, c. 414, upon the purchase by the Winona & St. Peter Railroad Company of the property and franchises of the Plainview Railroad Company, it succeeded to the liabilities of the latter company, including the claim involved in this suit.
Appeal from district court, Wabasha county.
C. K. Davis, Kellogg & Eaton, and C. W. Bunn, for Town of Plainview, respondent.
Wilson & Bowers, for Winona & St. P. R. Co., appellant.
The town of Plainview seeks to recover the value of certain bonds, issued by its officers in its behalf, and alleged to have been procured by the Plainview Railway Company without authority of law, and thereafter negotiated, and which the town have, in consequence, paid, or are obliged to pay, to the present owners. The case presents some novel features, and involves questions of considerable doubt and difficulty, in the solution of which the court can find but little aid from precedents.
The question of the validity of those bonds was considered and determined, in the case of Harrington v. Town of Plainview, 27 Minn. 228,6 N. W. Rep. 777, adversely to the railroad company, and that decision must be accepted without further discussion as the law governing this case. The bonds were not issued upon the vote of the electors of the town, in pursuance of Laws 1877, c. 106, § 5, but in pursuance of section 7 of that act, upon a petition of a majority of the tax-payers. The proceedings to procure such bonds were initiated, and prosecuted by the railway company under the act, by filing with the town clerk its proposition in writing for the issuance to it of the bonds of the town, as provided by section 4, and thereafter in securing and filing the petition of the tax-payers as directed by section 7.
We have no hesitation in saying that the evidence in the case is sufficient to uphold the finding of the trial court, that the bonds in controversy were issued to the Plainview Railroad Company, and were by its agents transferred to the Chicago & Northwestern Railroad Company at their par value, and in consideration of the amount due the latter company, which had been previously advanced by the Chicago Company in aid of the construction of the Plainview Company's road.
Before the issuance of the bonds, the action above referred to was commenced, to enjoin the same, and while the case was pending in this court, the bonds were issued and transferred. The evidence, however, does not warrant the conclusion that there was any actual fraud in the procurement or transfer of the bonds. Both railway companies were cognizant of the pendency of the action, and of the grounds of the alleged invalidity of the bonds; but the legal questions involved were still open and in dispute, and they were advised and believed them to be legal and valid.
It is affirmed by the trial court, upon sufficient evidence, that, except as appears upon the face of the bonds, Marshall & Ilsey, and others to whom they were subsequently transferred, had no notice of the suit, and were bona fide purchasers and holders for value. The Chicago & Northwestern Railroad Company was a foreign corporation, and the subsequent purchaser of the bonds were and are citizens of other states. The bonds all recite on their face that they were issued in pursuance of the authority given for that purpose by the laws of the state of Minnesota, and in compliance with a resolution of the board of supervisors of the town, and also “in pursuance of a mutual agreement, which agreement was made in accordance with the laws of Minnesota, and through and by a proposition made by said railroad company, and duly accepted by said town, upon petition therefor signed by a majority of the resident tax-payers, said agreement having been fully performed by said railroad company on its part.”
This court held in the Harrington Case that an agreement, consummated by proceedings under the provisions of the statute referred to, between the railway company and a majority of the tax-payers, could not, under the constitution, be considered as the lawful agreement of the town, nor be, if any, binding obligation as such, and that bonds issued in pursuance thereof would be void, except in the hands of bona fide purchasers.
1. These bonds were invalid in the hands of the Plainview Company, and could not have been enforced by it. It was not material that the company had executed the so-called agreement on its part by building the road. It proceeded on its own motion and at its own peril. There was no agreement made with the town; for it was necessary to secure the consent of the voters, who are the contracting party in its behalf, and the supervisors are simply agents of the town to carry out an agreement duly authorized. Rochester v. Alfred Bank, 13 Wis. 432;Lawson v. Schellen, 33 Wis. 294. The town, in its corporate capacity, has received nothing and withholds nothing. It has been guilty of no laches, has waived nothing, and there is no estoppel. It represents the public, and is itself entitled to be protected against the unauthorized acts of its own officers, when it can be done without injury to third parties. Thomas v. Richmond, 12 Wall. 356;Town of South Ottawa v. Perkins, 94 U. S. 261.
2. In our opinion, the recitals in the bonds were sufficient to put the purchasers, Marshall & Ilsey or others, upon inquiry as respects the authority under which such bonds were entitled to be issued, and the manner in which they were in fact issued. As we construe the bonds, therefore, all purchasers are chargeable with notice of the invalidity thereof by the recitals.
3. Marshall & Ilsey, however, brought suit upon the coupons of these bonds as they matured, and recovered thereon in the circuit court of the United States for the district of Minnesota, in a sum less than $5,000, and the bonds have been duly adjudged and determined in a trial upon the merits in that court to be valid in their hands.
For the purposes of this case we are unable to see that it is material for us to inquire into the particular grounds of the decision of that court, as the result of the judgment is, in any event, to make the bonds valid, negotiable securities held by Marshall & Ilsey as bona fide purchasers. In other words, it is sufficient to say, that court differs with this court upon the question of the validity of the bonds, and accordingly adjudges the holders entitled to recover thereon, and notwithstanding the recitals therein. The result would be the same if that court had differed with this court on questions of fact resting...
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