Board of Com'rs of Stanly County v. Coler

• Citation: 113 F. 705
• Decision Date: 04 February 1902
• Docket Number: 290.
• Parties: BOARD OF COM'RS OF STANLY COUNTY et al. v. COLER et al.
• Court: U.S. Court of Appeals — Fourth Circuit

113 F. 705

BOARD OF COM'RS OF STANLY COUNTY et al. v. COLER et al.

No. 290.

United States Court of Appeals, Fourth Circuit.

February 4, 1902

A. C Avery and James E. Shepherd (Avery & Avery, Schenck &amp Schenck, and Shepherd & Busbee, on the briefs), for appellants.

Charles Price (John F. Dillon and Harry Hubbard, on the briefs), for appellees.

Before GOFF, Circuit Judge, and MORRIS and BOYD, District Judges.

MORRIS District Judge.

The opinion expressing the conclusions of this court on the first hearing of the case was filed August 1, 1899. 37 C.C.A. 484 97 F. 284. Upon the appellee's petition for a rehearing the whole case has been fully reargued in connection with the appeal in Wilkes Co. v. Coler, decided at this term, 113 F. 725, and in connection with the answers of the supreme court of the United States to the questions certified in that case. 180 U.S. 506, 21 Sup.Ct. 458, 45 L.Ed. 642.

The bonds in question are as follows:

'County of Stanly Six Per Cent. Bond.

'Stanly county, state of North Carolina, is indebted to the bearer in the sum of five hundred dollars payable, * * * ' etc. 'This bond is one of a series of eighty of the denomination of one thousand dollars each, and forty of the denomination of five hundred, making a total of one hundred thousand dollars, issued by authority of an act of the general assembly of North Carolina ratified the third day of March, A.D. 1887, entitled 'An act to amend the charter of the Yadkin Railroad Company,' and of sections 1996, 1997, 1998, and 1999 of the Code of North Carolina, and authorized by a majority of the qualified voters of Stanly county at the election regularly held for that purpose on the 15th day of August, A.D. 1889, duly ordered by the commissioners of Stanly county. This series of bonds is issued to pay the subscription of one hundred dollars made by Stanly county to the capital stock of the said railroad, known as the Yadkin Railroad Company, * * * ' etc. 'In testimony whereof, the chairman of the board of county commissioners of Stanly county hath hereunto subscribed his name for and on behalf of said board, and the clerk of the superior court of Stanly county hath countersigned the same and affixed thereto the seal of said superior court this day of July, A.D. 1890.'

The recitals of present interest are (1) that the bonds are issued by authority of the act of March 3, 1887; and (2) of sections 1996, 1997, 1998, and 1999 of the Code; and (3) are authorized by a majority of the votes of the county.

The act of March 3, 1887, the supreme court, of North Carolina has decided, never because of law of North Carolina, so far as it undertook to give authority to issue the county bonds, for the reason that it was not passed with the special formality required by section 14 of article 2 of the North Carolina constitution of 1868, which declares that no law shall pass, authorizing a county to raise money on its credit, or impose a tax, unless the bill be read three several times in each house of the general assembly, and pass three several readings on different days, and the yeas and nays on the second and third reading of the bill are entered on the journals. The recital of the invalid enactment of March 3, 1887, however, does not invalidate the bonds, if there was in force at the time the bonds were issued over valid legislation which gave power to Stanly county to issue them; and it is urged upon us by counsel for the bondholders that the recited sections of the Code, reasonably construed, and applied as understood at the time the bonds were issued, gave sufficient power and authority. County Com'rs v. Beal, 113 U.S. 227, 5 Sup.Ct. 433, 28 L.Ed. 966; Commissioners v. January, 94 U.S. 202, 24 L.Ed. 110; City of Evansville v. Dennett, 161 U.S. 434, 443, 444, 16 Sup.Ct. 613, 40 L.Ed. 760; Knox Co. v. Ninth Nat. Bank, 147 U.S. 91, 13 Sup.Ct. 267, 37 L.Ed. 93; Wilkes Co. v. Coler, 180 U.S. 506-524, 21 Sup.Ct. 458, 45 L.Ed. 642. These sections of the Code were originally enacted as chapter 171 of the laws of North Carolina of 1868-69, and were reenacted as sections 1996, 1997, 1998, 1999, and 2000 of the Code of 1883, with all the formality required by section 14 of article 2 of the constitution with regard to a law allowing counties to pledge their credit and impose a tax for that purpose. Commissioners v. Snuggs, 121 N.C. 394-401, 28 S.E. 539, 39 L.R.A. 439.

The following are sections 1996 and 1997:

Section 1996 of the Code of North Carolina: 'The boards 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.'

Section 1997 of the Code of North Carolina: 'The board of commissioners of any county proposing to take stock in any railroad company shall meet and agree upon the amount to be subscribed, and, if a majority of the board shall vote for the proposition, this shall be entered upon the record, which shall show the amount proposed to be subscribed, to what company, and whether in bonds, money or other property, and thereupon the board shall order an election, to be held on a notice of not less than thirty days, for the purpose of voting for or against the proposition to subscribe the amount of stock agreed on by the board of county commissioners. And, if a majority of the qualified voters of the county shall vote in favor of the proposition, the board of county commissioners, through their chairman, shall have power to subscribe the amount of stock proposed by them and submitted to the people, subject to all the rules, regulations and restrictions of other stockholders in such company or companies. Provided, that the counties, in the manner aforesaid, shall subscribe from time to time such amounts, either in bonds or money, as they may think proper.'

The bonds were duly authorized by a majority of the qualified voters of Stanly county, and were dated July . . ., 1890, and were issued from time to time as the railroad was built, and were placed on the market and sold; and for four years a tax was levied and collected by the county, and the interest coupons paid. When the tax for the fifth year had been collected, the superior court of Stanly county, in 1897, at the instance of the commissioners of the county and certain taxpayers, held the bonds to be invalid, and enjoined the treasurer of the county from paying the interest; and on appeal the supreme court of North Carolina affirmed the ruling. Commissioners v. Snuggs (1897) 121 N.C. 394, 28 S.E. 539, 39 L.R.A. 439. The supreme court of North Carolina (Chief Justice Faircloth dissenting) held that Stanly county had no power or authority, under the above-recited sections of the Code, even with an affirmative vote of the qualified voters of the county, to issue bonds, and levy a tax for their payment, in aid of a railroad not begun before the adoption of the state constitution of 1868.

When this case was first heard in this court the argument of the counsel for the bondholders was largely devoted to the effort to show that the decision of the supreme court of North Carolina against the validity of the act of March 3, 1887, amending the charter of the Yadkin Railroad Company, and authorizing Stanly county to subscribe for its stock and issue these bonds, and declaring that act invalid because not passed as required by the state constitution, was a ruling which this court ought not to follow. That question has been settled in favor of the county by the supreme court of the United States. Wilkes Co. v. Coler, far this court was bound to follow the rulings of the supreme court of North Carolina in its construction of the sections of the Code recited in the bonds, was not fully discussed, and this is the question we are urged to re-examine upon this rehearing.

The articles of the Code, first enacted in 1868-69 (chapter 171), and re-enacted as part of the Code in 1883, before the Stanly county bonds were authorized or issued, does, in the broadest terms, by section 1996, declare that 'the boards of commissioners of the several counties shall have power to subscribe stock to any railroad company when necessary to aid in the completion of any railroad in which the citizens of the county may have an interest. ' The supreme court of North Carolina declared in Commissioners v. Snuggs (1897) that this language was to be held that the railroad must be an unfinished one, which had begun before the subscription was made, and that it must also be a railroad in which the county had a direct pecuniary interest. The question now to be re-examined is whether that construction is one to which, as a proposition of law, we can assent; and, if not, are we bound to follow the decision of the supreme court of North Carolina?

The case of Commissioners v. Snuggs was not a case to which any bondholder was a party. The county commissioners and certain taxpayers of the county were the plaintiffs, and the defendant was the county treasurer, who was the appointee of the county commissioners, had no personal interest to resist the plaintiffs, and represented no bondholder. The bonds had been sold as negotiable securities, and had been over four years on the market, and had been purchased by widely scattered investors. The railroad into Stanly county had been built and was in operation, and for over four years the authorities of the county had recognized the bonds as valid obligations of the county, and had paid the interest. The case was, in effect, a direct attack upon the property of bona fide holders of the bonds, in which they had no hearing. It seems, therefore, to be a case in which it is our duty to examine the question independently, with, however, an...