Cole v. City of La Grange

• Decision Date: 05 January 1885
• Citation: 5 S.Ct. 416,113 U.S. 1,28 L.Ed. 896
• Parties: COLE v. CITY OF LA GRANGE. 1
• Court: U.S. Supreme Court

113 U.S. 1

5 S.Ct. 416

28 L.Ed. 896

COLE v. CITY OF LA GRANGE.¹

January 5, 1885.

This was an action to recover the amount of coupons for interest from January 1, 1873, to January 1, 1880, attached to 25 bonds, all exactly alike, except in their serial numbers, and one of which was as follows:

'UNITED STATES OF AMERICA, STATE OF MISSOURI, CITY OF LA GRANGE.

'No. 23.

$1,000.

'Know all men by these presents, that the city of La Grange doth, for a good, sufficient, and valuable consideration, promise to pay to the La Grange Iron and Steel Company, or bearer, the sum of one thousand dollars, in current funds, thirty years after the date hereof, at the Third National Bank, city of New York, together with interest thereon at the rate of eight per cent. per annum, payable annually in current funds, on the first day of each January and July ensuing the date hereof, on presentation and surrender of the annexed interest coupons at said Third National Bank.

'This bond is issued under an ordinance of the city council of the said city of La Grange, passed and approved September 22, 1871, under and in pursuance of an act of the legislature of the state of Missouri, entitled 'An act to amend an act entitled an act to incorporate the city of La Grange,' approved March 9, 1871, which became a law and went into force and effect from and after its said approval.

'This bond to be negotiable and transferable by delivery thereof.

'In testimony whereof, the city council of the city of LaGrange hath hereunto caused to be affixed the corporate seal of said city, and these presents to be signed by the mayor, and countersigned by the clerk, of the city council of said city, this fourteenth day of December, 1871.

[Seal.]

'J. A. HAY, Mayor.

'R. McChesney, Clerk.'

The petition alleged that the city of La Grange, on December 14, 1871, executed the 25 bonds, and delivered them to the La Grange Iron & Steel Company, under and by virtue of the authority contained in section 1 of article 6 of the city charter, as amended by an act of the legislature of Missouri, approved March 9, 1871, (which section, as thus amended, was set forth in the petition, and is copied in the margin,¹) and under and by virtue of an ordinance of the city dated September 22, 1871, by which an election was authorized to be held in the city on October 4, 1871, to test the sense of the people of the city upon the question of issuing the bonds; that, in compliance with the ordinance and with the city charter, an election was held at which the proposition was adopted by a two-thirds vote of the qualified voters; and that on September 1, 1872, the plaintiff bought the 25 bonds, for value, relying upon the recitals on their face, without knowledge of any irregularity or defect in their issue,—of all which the defendant had notice, by means whereof the defendant became liable and promised to pay to the plaintiff the sums specified in the coupons, according to their tenor and effect.

The answer denied all the allegations of the petition; and for further answer averred that the act of the legislature mentioned in the petition, approved March 9, 1871, attempted to give, and by terms did give, to the city authority to make gifts and donations to private manufacturing associations and corporations; that the city council, purporting to act under such authority, by an ordinance adopted September 22, 1871, (which was referred to in the answer and is copied in the margin,¹) did submit to a vote of the citizens a proposition to give or donate to the La Grange Iron & Steel Company, a private manufacturing company, formed and established for the purpose of carrying on and operating a rolling-mill, the sum of $200,000; that, in accordance with that ordinance, the bonds of the city were issued, with interest coupons attached, a part of which were those sued on; and that the bonds and coupons were issued to said manufacturing company, which was a strictly private enterprise, formed and prosecuted for the purpose of private gain, and which had nothing whatever of a public character, and it was incompetent for the legislature to grant authority to cities or towns to make donations and issue bonds to mere private companies or associations having no public functions to perform, and the act of the legislature and the ordinance of the city were void; wherefore the bonds and coupons were issued without any legal authority, and were wholly void.

To this answer the plaintiff filed a general demurrer, which was overruled by the court, and, the plaintiff electing to stand by his demurrer, judgment was entered for the defendant. 19 Fed. Rep. 871. The plaintiff sued out this writ of error.

Geo. A. Sanders for plaintiff in error.

[Argument of Counsel from pages 4-6 intentionally omitted] David Wagner, for defendant in error.

GRAY, J.

The general grant of legislative power in the constitution of a state does not enable the legislature, in the exercise either of the right of eminent domain or of the right of taxation, to take private property, without the owner's consent, for any but a public object. Nor can the legislature authorize counties, cities, or towns to contract, for private objects, debts which must be paid by taxes. It cannot, therefore, authorize them to issue bonds to assist merchants or manufacturers, whether natural persons or corporations, in their private business. These limits of the legislative power are now too firmly established by judicial decisions to require extended argument upon the subject.

In Loan Association v. Topeka, 20 Wall. 655, bonds of a city, issued, as appeared on their face, pursuant to an act of the legislature of Kansas, to a manufacturing corporation, to aid it in establishing shops in the city for the manufacture of iron bridges, were held by this court to be void, even in the hands of a purchaser in good faith and for value. A like decision was made in Parkersburg v. Brown, 106 U. S. 487; S. C. 1 SUP. CT. REP. 442. The decisions in the courts of the states are to the same effect. Allen v. Jay, 60 Me. 124; Lowell v. Boston, 111 Mass. 454; Weismer v. Douglas, 64 N. Y. 91; In re Eureka Co. 96 N. Y. 42; Bissell v. Kankakee, 64 Ill. 249; English v. People, 96 Ill 566; Central Branch U. Pac. R. Co. v. Smith, 23 Kan. 745. We have been referred to no opposing decision. The cases of Hackett v. Ottawa, 99 U.S. 86, and Ottawa v. National Bank, 105 U. S. 342, were decided, as the chief justice pointed out in Ottawa v. Carey, 108 U. S. 110, 118, S. C. 2 SUP. CT. REP. 361, upon the ground that the bonds in suit appeared on their face to have been issued for municipal purposes, and were therefore valid in the hands of bona fide holders. In Livingston v. Darlington, 101 U. S. 407, the town subscription was towards the establishment of a state reform school, which was undoubtedly a public purpose, and the question in controversy was whether it was a corporate purpose within the meaning of the constitution of Illinois. In Burlington v. Beasley, 94 U. S. 310, the grist-mill, held to be a work of internal improvement, to aid in constructing which a town might issue bonds under the statutes of Kansas, was a public mill which ground for toll for all customers. See Osborne v. Adams Co. 106 U. S. 181; S. C. 1 SUP. CT. REP. 168; and 109 U. S. 1; S. C. 3 SUP. CT. REP. 150; Blair v. Cuming Co. 111 U. S. 363; S. C. 4 SUP. CT. REP. 449. Subscriptions and bonds of towns and cities, under legislative authority, to aid in establishing railroads, have been sustained on the same ground on which the delegation to railroad corporations of the sovereign right of eminent domain has been justified,—the accommodation of public travel. Regers v. Burlington, 3 Wall. 654; Queensbury v. Culver, 19 Wall. 83; Loan Association v. Topeka, 20 Wall. 661, 662; Taylor v. Tpsilanti, 105 U. S. 60. Statutes authorizing towns and cities to pay bounties to soldiers have been upheld, because the raising of soldiers...