Belo v. The Comm'rs of Forsythe Cnty.

• Decision Date: 31 January 1877
• Citation: 76 N.C. 489
• Court: North Carolina Supreme Court
• Parties: EDWARD BELO v. THE COMMISSIONERS of FORSYTHE COUNTY.

76 N.C. 489

EDWARD BELO

v.THE COMMISSIONERS of FORSYTHE COUNTY.

Supreme Court of North Carolina.

January Term, 1877.

This was an ACTION for a Mandamus, to compel the defendants to provide for the payment of certain bonds alleged to have been issued pursuant to law by the County of Forsythe, tried at Spring Term, 1876, of DAVIDSON Superior Court, before Cloud, J.

The action was commenced in Forsythe and removed to Davidson.

The question presented for the decision of this Court is so elaborately discussed by Mr. Justice BYNUM in delivering the opinion, that a statement of the facts is deemed unnecessary.

Upon the issues submitted and under the instructions of His Honor in the Court below, the jury rendered a verdict for the plaintiff. Judgment. Appeal by the defendants.

Mr. J. M. McCorkle, for plaintiff .

Messrs. Dillard & Gilmer, Shipp & Bailey and Watson & Glenn, for defendants .

BYNUM, J.

The North Western North Carolina Railroad Company was incorporated by an ordinance of the Convention of 1868, and by Section 12 of the charter, the same power to subscribe to the capital stock of the company and subject to the like regulations and restrictions, is given to Counties and Towns, as was conferred by an Act incorporating the Atlantic & N. C. Railroad Company, passed by the Legislature of 1852. By section 34 of the latter Act, the Justices of the County through or near which the road was located, “a majority concurring,” are authorized to fix upon a subscription sum and submit it to the voters of the County. If the majority favored subscription, the Justices were to choose an agent to subscribe the stock voted and to prepare and issue County bonds, as the Justices should direct. The minutes of the Special Term of the County Court of Forsythe County which ordered the proposition to be submitted to the popular vote, recite that a majority of the Justices were present, concurring in the order. The vote resulted in favor of subscription and was so certified to the succeeding Court, held in June, 1868.

The minutes of that Term recite that 35 Justices were present, which number is admitted to be a majority of the whole number. At this latter Term of the Court, the Justices ordered the subscription to be made to the capital stock of the Company, and the bonds to be prepared and issued and sold by the agent then chosen. The bonds were accordingly put upon the market and among them the identical bonds now sued on were by the agent sold to one Lemly, at his Banking House in Salem, on 5th of March, 1869. These bonds recite that they were “authorized by an ordinance of 1868, by an order of the Court of Pleas and Quarter Sessions of Forsythe County at June Term, 1868, and re-enacted and ratified and confirmed by an Act of the General Assembly, ratified the 11th of August, 1868.”

At the same Term at which the subscription was made, the Justices assessed a special tax upon the County to meet the semi-annual interest on the bonds. This Special Railroad Tax was annually assessed, levied and collected and applied in the discharge of the accruing interest upon the bonds from that time until 1872. A certificate for the stock subscribed was issued by the Railroad Company to the County, which it yet holds; an agent was annually chosen to represent and did represent the County stock in all the meetings of the Company. Under the new State Constitution of 1868, a Board of County Commissioners succeeded to all the powers and duties of the Justices; and up to 1872, this Board unanimously caused the levy and collection of the Railroad Tax and its application to the discharge of the coupons due upon the bonds. But the Board elected in 1872 refused to assess any further tax and to pay any further interest upon the bonds, alleging as the reason therefor, that the subscription of stock so made by the County was illegal and void.

I. The plaintiff purchased the bonds in suit of Lemly, in May, 1873, after they fell due. The bonds were then dishonored, like other commercial paper remaining unpaid at maturity, and the plaintiff is a purchaser with notice of all defects which would invalidate them in the hands of Lemly. He acquired no better title than his transferrer. Any defence which could be asserted against the claim of Lemly can be maintained by the County against the plaintiff. 1 Daniel on Negotiable Instruments, § 782; Arrents v. Commonwealth, 18 Grat. 773; 14 Minn. 79. The question then is, were the bonds invalid in the hands of Lemly, who purchased them from the County before maturity. The defence to the action is that the election could be ordered and the subscription of stock made only by the concurrence of a majority of the Justices of the County; and that in point of fact, no such majority did concur, and therefore the subscription and the bonds issued therefor are void, even in the hands of a bona fide holder of the bonds before they fell due. This proposition cannot be maintained. Municipal bonds are negotiable instruments, and the legal rights of the holders of such paper do not so much rest upon abstract propositions, though true, as upon a system of practical rules found by experience to be essential to healthy commercial life. For the public protection and the convenience of trade, every intendment is made in favor of the validity of negotiable instruments. Where bonds have been issued and sold in the market, and have come into the hands of a bona fide holder, before maturity, as a general rule such bonds are prima facie valid and the onus is upon the party impeaching them, to show the contrary. This rule however, which subsists between individuals, is much modified in respect to corporate bonds. Such bonds can be issued only in pursuance of a special grant of power, and the party claiming the benefit of such bonds must show a power in the corporate body to issue them. But if he is a purchaser for value without notice and before maturity, he need do no more. If a municipal corporation has the power to issue bonds only on a compliance with conditions precedent, as for instance, as here, in pursuance of a popular vote and the bonds are issued, the presumption is that the conditions have been observed and they are prima facie valid, though the defendant may show the contrary unless he is estopped by his own acts from doing so. The principle, however, of equitable estoppel is a most important element in the transaction. For whether conditions precedent have been complied with is a matter of fact to be determined by some tribunal invested with the power and authority to decide it, and the decision when made should be final. It is not disputed that the power to make the subscription of stock and issue the bonds was conferred upon the County of Forsythe by the Ordinance of the Convention. It is equally clear that the tribunal which was authorized to issue the bonds only on compliance with conditions precedent, was the sole tribunal to determine the fact whether the conditions had been fulfilled. In our case the Justices of the County, a majority concurring, was the Court or tribunal designated to carry the law into effect, and was the tribunal to decide whether the conditions had been complied with, and their decision is final in a suit by a bona fide holder of the bonds against the municipality. This determination of a question of fact by the Justices is manifested in two ways; first, by the records of their Court, and second, by the recitals in the bonds issued by them. The Justices were authorized by the Act to take the sense of the people, declare the result and issue the bonds. Their declaration spread upon the Minutes of the Court and made a record, is conclusive against the County in favor of all bona fide bondholders without notice. If they purchased before maturity, they need look no further. Marcy v. Township of Oswego, 92 U. S. Rep. 637; Dunning v. Houston, 18 Am. Rep. 253 and note. If there was fraud in making the record, or irregularities in the election, which would vitiate the bonds, upon exceptions taken in apt time any tax payer of the County could intervene and enjoin their issue. But this could only have been done before the bonds were issued, negotiated and passed into circulation as commercial securities, with the insignia of validity impressed upon their face. Chester & Lenoir R. R. Co. v. Caldwell Co., 72 N. C. 486. If intentionally or by neglect the tax payers fail to protest, interfere or assert their legal rights; if they suffer the election to be held, a false result declared, the bonds to be issued and sold, and the proceeds received by their agents; if for the period of four years they annually submit to a special tax, which is applied in payment of the accruing interest on the bonds; if they still retain the Railroad stock, without an offer to surrender it and continue to have it represented in the meetings of the Company; they cannot now disaffirm the acts of...