City of San Antonio v. Gould

• Decision Date: 01 January 1870
• Citation: 34 Tex. 49
• Parties: THE CITY OF SAN ANTONIO v. R. S. GOULD.
• Court: Texas Supreme Court

34 Tex. 49

THE CITY OF SAN ANTONIO

v.R. S. GOULD.

Supreme Court of Texas.

1870.

1. The case of the city of San Antonio v. Jones, 28 Tex. 19, approved in so far as it decides that it was competent for the legislature of this state, while the constitution of 1845 was in force, to authorize a municipal corporation to subscribe to the capital stock of a railroad company, and to issue bonds and levy taxes for the liquidation of its subscription, if two-thirds of the electors of the corporation should vote in favor of the subscription, at an election to be held for the purpose.

2. The constitution of 1845, article 7, section 24, provided that every law enacted by the legislature should embrace but one object, which object should be expressed in its title. Held, that this provision was not merely directory to the legislature, but was mandatory, and it is to be enforced by the courts. The ruling in Cannon v. Hemphill, 7 Tex. 184, to the same effect, approved.

3. In 1850, the legislature passed an act entitled “An act to incorporate the San Antonio Railroad Company;” of which act all of the provisions, except those contained in one section, conferred the ordinary and appropriate powers, rights, and privileges, incident and adequate to such a franchise. But by the twelfth section of the act it was enacted that the city of San Antonio and other incorporated towns on the line of the road, and also the several counties through which it should pass, might subscribe to the capital stock of the railroad company, and issue bonds or otherwise pledge their faith to pay for the same, provided that two-thirds of their respective electors should vote in favor of the subscription, at elections to be held for the purpose. Held, that these provisions are extraordinary and not such as are necessary to or usually engrafted upon a railroad charter, and the section itself, if regarded as a separate enactment, would properly be entitled “An act to provide the means for building the railroad;” and it was therefore repugnant to section 24 of article 7, of the constitution of 1845, then in force and above cited.

4. With respect to the modes in which corporations aggregate may execute contracts, a broad distinction is taken and maintained by the authorities between trading and municipal corporations. The former are permitted to incur many liabilities without using their common seal, which the latter are not otherwise permitted to incur; and notwithstanding that the rule of the common law on this subject has received many modifications in this country, yet no case has been found in which a municipal corporation has been permitted, otherwise than by its common seal, to issue its negotiable bonds for the liquidation of its subscription to the stock of a company.

5. The facts and circumstances of the present case are reviewed by this court, with reference to the inquiry whether the plaintiff can be considered a bona fide holder of the municipal bonds sued on, so as to exonerate him from equities or frauds between the original parties; and it is strongly intimated that he cannot be so regarded, although no actual knowledge or notice was brought home to him by direct evidence.

APPEAL from Bexar. Tried below before the Hon. George H. Noonan.

This case was decided in the court below at the October term, 1870. For all professional purposes the opinion of this court states the material facts. Should fuller information of the enterprise which engendered the litigation be desired, it can be had in the report of a similar case to be found in 28 Tex. 19.

Davis & Murphy, for the appellant.

1. In this case certain coupons were sued on, which, it is alleged, should be paid by the city of San Antonio. Suits concerning this same class of coupons and the bonds to which they were attached have already been before this court in two instances--San Antonio v. Enoch Jones, 28 Tex. 19, and San Antonio v. Wm. G. Lane, in the supreme court, Austin term, 1869.

In the case in 28 Tex. it will be noticed that a large part of the foundation of the defense of the city was conceded and admitted away by the counsel in that case acting for the city. In the report, page twenty-eight, appears the following: “On the trial it was admitted that an election was held in accordance with the terms of the twelfth section of the charter, on the last Monday of December, 1850, and that at San Antonio two-thirds of the qualified voters of that city voted in favor of taking $50,000 of the capital stock of said road; that thereupon the bonds to that amount, and the coupons in controversy, were signed and delivered to said company by C. F. King, the mayor of the city.” None of these circumstances are admitted in the suit at present under consideration; on the contrary, the pleadings especially deny them, and evidence was offered to sustain such denial. In other respects, too, the case in 28 Tex. was presented in a very different shape. New and additional good grounds of defense are raised in the present suit, and evidence given (or offered to be given) in support of the same. This court, however, in that suit, let drop expressions which showed that its decision might have been very different had the case borne the appearance of that now before the court. 28 Tex. 32 et seq.

In the case mentioned as decided at Austin term, 1869, the political events of the time were not favorable to a calm and unprejudiced judgment. The judgment was rendered in the fall of 1869, at a time of much excitement caused by the political contest then pending. Several of the judges were personally interested in the election then about to take place. One of them was a candidate in opposition to one of the counsel of the city, and another, at least (the judge who rendered the decision), was a decided partisan of his learned brother. These circumstances it is necessary to recollect in order that the said decision may receive no more consideration than it is fairly entitled to, but they are referred to only because we believe that our duty to our client, and a correct understanding of her case, requires it. The decision was, perhaps, no more than another illustration of the weakness of human nature.

But aside from the peculiar circumstances under which the said decision was made, in that case as in the case in 28 Tex., the issues presented below and apparent here upon the record, differed materially from those presented in the present case. A comparison of the respective records will make this apparent. The case is, therefore, in no respect, a precedent for the decision of this one. We will, however, comment briefly on the position assumed, in one important respect, by the judge in that case. He says: “It is assumed as well settled, that the legislature may authorize municipal corporations to subscribe for stock in railroad companies and to provide for the payment of such subscriptions in such manner as may be acceptable to the corporation, provided it be not repugnant to the constitution.” Let us take it for granted (for argument sake) that this is a correct statement of the law, and the facts as presented in the record now before this court show that the bonds and coupons were null and void because issued to a company which had ceased at the time to exist. On this point, it will appear that the testimony of all the witnesses introduced by the defense, who speak to this matter, is emphatic that the terms of the railroad charter (San Antonio and Mexican Gulf) had not been complied with, and said charter, by its own limit, had expired and become a nullity when the bonds and coupons were issued. Yet, say the holders of these bonds and coupons, “granted that the facts are as you say, still the bonds and coupons are good, because the legislature subsequently revived and continued the railroad charter.” In plain English they assume that the legislature, by action had long subsequently, can make good these bonds issued without authority, and to a corporation that had, when issue was made, ceased to exist, and which bonds are further accompanied by every indicia of fraud! This proposition carries with itself its condemnation.

We will now pass to the consideration of the features presented by the case now before the court, and the law applicable to those features. Appellants plead “ non est factum,” and under this plea the want of the common seal of the city corporation to the bonds and coupons was a good objection to their admissibility. Angell & Ames, Corporations, §§ 217, 223. When these bonds were issued the common law rule in reference to seals was in full force, and the law of February 2, 1858 (Pas. 852), especially excepts corporations from the effect of its provisions, abolishing the use of seals in many cases. The corporation of San Antonio could only act in such a matter as this by their common seal, which the act of incorporation of that city provided for, and it is well settled that the people of a city are not bound by the acts of their agents outside of the defined limits of their authority. Clark v. Corporation of Washington, 12 Wheat. 40. And where a corporation relies upon a grant of power from the legislature for authority to do an act, it is as much restricted in respect to the mode of exercise of this authority, as it is restricted in respect to the thing allowed to be done. Farmers' Loan and Trust Co. v. Carroll, 5 Barb. 613; Clarke v. City of Rochester, 13 How. 204; Brown v. City of Utica, 3 Barb. 104. In the language used in Beatty v. Lessee of Knowles, 4 Pet. 152, by the supreme court of the United States: “The exercise of the corporative franchise being restrictive of individual rights, cannot be extended beyond the letter and spirit of the act of incorporation.” Also see Jackson v. Ostrander, 1 Cow. 686;Utica Insurance Co. v. Scott, 19 Johns. 1.

2. The appellant objected to the introduction and reading of section twelve of the act incorporating the San Antonio and Mexican Gulf...