Commissioners of Douglas County v. Bolles

• Decision Date: 01 October 1876
• Parties: COMMISSIONERS OF DOUGLAS COUNTY v. BOLLES
• Court: U.S. Supreme Court

94 U.S. 104

24 L.Ed. 46

COMMISSIONERS OF DOUGLAS COUNTY v. BOLLES.

October Term, 1876

ERROR to the Circuit Court of the United States for the District of Kansas.

This was an action by Matthew Bolles and M. Shepard Bolles against the board of county commissioners of the county of Douglas, Kansas, upon sundry coupons attached to certain bonds issued by the county. The facts are stated in the opinion of the court.

The following questions of law arose, upon which the judges of the court below were divided in opinion:——

1. Whether, as respects the bonds dated July 1, 1869, and the coupons in suit originally attached to said bonds, there was authority and power in the board of county commissioners of the county to issue said bonds under the act of Feb. 10, 1865, recited in the bonds and other acts of the legislature of the State of Kansas, including the act of Feb. 25, 1868.

2. Whether the bonds mentioned in the preceding question are void in the hands of a holder for value without actual notice, because the vote on the question of subscribing stock and issuing bonds was had Sept. 12, 1865, before the organization of the company known as the St. Louis, Lawrence, and Denver Railroad Company was made in 1868, to which company the stock was subscribed in 1868, and the bonds were issued and delivered in 1871.

3. Said bonds having been issued upon the facts as found, was the issue of them illegal and invalid in such a sense as to devolve upon the plaintiffs the burden of showing that they, or those whom they represented, were holders of them for value?

4. Whether, as respects the bonds dated July 1, 1872, and the coupons in suit originally attached to said bonds, there was power and authority in the board of county commissioners of the county to issue the same.

5. Whether, upon the facts found, said bonds and coupons last named are void in the hands of a holder for value without actual notice of the orders for and facts connected with the election therefor, and with the organization of the said railroad company.

6. Said bonds having been issued under the facts as found, was the issue of them illegal and invalid in such a sense as to devolve upon the plaintiffs the burden of showing that they, or those whom they represented, were purchasers or holders of them for value?

7. Whether the facts found constitute or show a defence to the bonds of July 1, 1869, or the said bonds of July 1, 1872, the said bonds or coupons attached thereto in suit being in the hands of the plaintiffs, without affirmative proof that they were holders thereof for value without notice of said facts.

There was a judgment for the plaintiffs below; whereupon the defendants brought the case here.

Submitted on printed arguments by Mr. William M. Nevison for the plaintiffs in error, and by Mr. John S. Abbott, contra.

MR. JUSTICE STRONG delivered the opinion of the court.

Whether the St. Louis, Lawrence, and Denver Railroad Company was lawfully a corporation, capable of contracting with the defendants below, is a question that cannot be raised in this case. The findings of the Circuit Court establish that a majority of the persons named as corporators in the certificate filed in the office of the secretary of state on the eleventh day of May, 1868, published a notice that books would be opened on a designated day for subscriptions to the stock of the company. The books were accordingly opened, subscriptions to the capital stock were made, a meeting of the stockholders ensued, and directors were chosen, together with a president, vice-president, secretary, treasurer, and an executive committee. This was on the 28th of July, 1868; and from that time corporate meetings have been regularly held, and the company has built and operated a railroad from Lawrence to the Missouri State line, and has exercised the usual functions of a railroad corporation. It has been a corporation de facto, at least, if not de jure, from the date of its organization. Its corporate existence, therefore, and its ability to contract cannot be called in question in a suit brought upon evidences of debt given to it.

It was after the organization of the company that the defendants subscribed, on behalf of Douglas County, for $125,000 of its capital stock, stipulating that the subscription should be paid with the county bonds, payable to bearer in thirty years, and that the stock and bonds should be issued and delivered when the railroad should be completed and in full operation from Lawrence to the eastern boundary of Douglas County. The road was thus completed and put in operation; the county received the $125,000 of stock; and the bonds were sold by the railroad company to the contractor for building the road, and, after its completion, delivered to him by direction of the defendants.

The bonds were executed by the board of county commissioners of the county of Douglas, who by law are constituted the financial agents of the county. They were made payable to bearer, and each contains the following recital: 'This bond is executed and issued by virtue of and in accordance with the act of the legislature of the State of Kansas, entitled 'An Act to authorize counties and cities to issue bonds to railroad companies,' approved April 10, 1865, and the other laws of said State, and in pursuance of and in accordance with the vote of a majority of the qualified electors of said county of Douglas, at a special election, regularly called and held on Sept. 12, 1865.'

This recital, it will be perceived, asserts legislative authority for the issue of the bonds, found in the statute of April 10, 1865, and other laws of the State. Referring to the act of 1865, it is there enacted that the 'board of county commissioners of any county to, into, through, from, or near which, whether in this or any other State, any railroad is or may be located, may subscribe to the capital stock of any such railroad corporation, in the name and for the benefit of the county, not exceeding in amount the sum of $300,000 in any one corporation, and may issue the bonds of said county in such amounts as they may deem best, in payment...