Hannibal & St. Joseph R.R. Co. v. Marion Cnty.

• Decision Date: 31 October 1865
• Parties: THE HANNIBAL AND ST. JOSEPH RAILROAD COMPANY, Plaintiff in Error v. MARION COUNTY, Defendant in Error.
• Court: Missouri Supreme Court

36 Mo. 294

THE HANNIBAL AND ST. JOSEPH RAILROAD COMPANY, Plaintiff in Error

v.MARION COUNTY, Defendant in Error.

Supreme Court of Missouri.

October Term, 1865.

Error to Marion Circuit Court.

Jos. L. Hart, for plaintiff in error.

I. The county had no power, in the absence of an express legislative enactment, to subscribe for stock in the railroad company and issue its notes or bonds therefor.

A county is a territorial division, such as a senatorial district for the election of a State senator--a congressional district--a judicial circuit. It is not a corporation or artificial person, hence has not the general powers of a corporation. (15 Johns. 382; N. York Fire Ins. Co. v. Ely, 2 Cow. 699; Ang. & Ames, § 2, p. 256.)

The 4th sec. of plaintiff's charter exhausts its force in re-enacting such clauses of the charter of the Louisiana and Columbia Railroad Company (and such only) as imposed restrictions on that company, or granted to that company rights, privileges or immunities. The 16th sec. of the charter of the Louisiana and Columbia Railroad Company, relied on, does not come within the scope of the 4th sec. of plaintiff's charter.

The first legislative enactment authorizing Marion county to subscribe for stock was the act approved Feb. 23, 1853; the 1st. sec. of that act confers power on the county to subscribe for stock in plaintiff's company. The subscription having been made some months previous, is void for want of power. (3 Wend. 485; 2 Cow. 709.) The subscription is void because not made by the proper agent. The County Court is the agent, and only agent, authorized by law to bind the corporation by making a subscription. (Act of Feb. 23, 1853, § 1; Ang. & Ames on Corp. § 1, p. 256; Bealy v. Marine Ins. Co. 2 Johns. 114; 26 Wend. 496; Ang. & A. § 277 & 279; 12 Mass. 248; 8 Serg. & R. 521.)

There is no authority of law for issuing the $1,000 stock note No. 28. The county was authorized to issue its bonds by the act of Feb. 23, 1853; but it was not authorized to issue a parol contract, a stock note like this, and it is therefore void and the county is not bound. (3 Wend. 485; Ang. & A. § 231, 252 a. & 291; Head v. Providence Ins. Co. 2 Cranch, 168; N. Y. Fire Ins. Co. v. Ely, 5 Cow. 568; Dawes v. N. Y. Ins. Co., 7 Cow. 465; 8 Gill & J. 318; 3 Wend. 485; Ang. & A. § 231, 252 a. & 291; 11 Humph., Tenn. 20.)

The corporation (i. e. the defendant) may avail itself of the want of authority to make the contract, although it may have received the consideration. (Albert & wife v. Savings Bk. of Baltimore, 1 Md. Ch. Dec. 413; 8 Gill & Johns. 318; Ang. & A. § 256.) The doctrine of estoppel does not apply. (Pa. & Md. Steam Nav. Co. v. Dandridge, 8 Gill & J. 319; Ang. & A. § 256.) The plaintiff was bound to take notice of the limitations on defendant's power to contract; he cannot plead ignorance of the law. (Ang. & A. § 265; Root v. Goddard, 3 McLean. 103.)

II. The act, so far as it seeks to make a previous void act binding, is retrospective, conflicts with the 17th sec. of the 13th art. of the State Constitution and is therefore void.

The doctrine in the case of the Commis'rs of Knox Co., Ind., v. Aspinwall et al. does not conflict with the authorities cited to show this stock note void. (21 How. 54.)

In the case at bar the question is not a question of good faith, but a naked question of power, bearing on a law that all persons are bound to know at their peril.

In Flagg et al. v. City of Palmyra, held that the law authorized the corporation to issue the kind of instruments it did issue for the purpose for which they were issued; that bona fide holders in such a case will not be held to inquire into all the formal pre-requisites to the issuance of the bonds, but will be held to a knowledge of the law. Under the principle thus laid down, had the instrument been a parol contract, and not a bond, the decision would have been for the city.

To hold that a corporation, created for a specific purpose with limited powers, is estopped from inquiring into the extent of its powers, and from defending on the ground that its agents exceeded their authority, would place the corporation at the mercy of its agent; and to hold that agents of a corporation may bind it by their act, in the absence of any power conferred by law, simply by repeated illegal acts by way of ratifying the original act, would be to enable the corporation, by the act of its agents, to get rid of all restrictions on its powers by acts of usurpation of power in the beginning and subsequent acts of ratification. Such a principle is repugnant to the whole theory of the law in regard to corporations created for a special purpose, and would prove dangerous in practice.

Carr, for defendant in error.

Defendant in error contends that the public faith underlies this whole case, and that in times like these, when nine-tenths of the commerce and trade of the whole nation is carried on through and by the medium of city, county, State and national securities or obligations, with nothing but plighted public faith to redeem them, that it should be the policy of the courts of the country to so construe those securities and obligations, as to give them the highest standard of commercial paper at home and abroad.

I. Marion county had the power, through its County Court, to subscribe for one thousand shares of capital stock, and to issue her notes for such subscription. (See §§ 16 & 17 of charter of Louisiana and Columbia R. R. Co., approved January 27, 1837; p. 13, § 4, act February 16, 1837.) Even if there should be doubt as to the power or right of Marion county, by its County Court, to subscribe for the stock of the railroad company prior to February 23, 1853, that power is fully given by the Legislature of the State and subsequent approval of the original subscription by the County Court. (See § 6 of “An act to amend an act to incorporate the Hannibal and St. Joseph Railroad Co., Feb. 23, 1853, p. 16.)

The character of the obligation issued by the county in payment of its subscription for the railroad stock, was in conformity to the statutes above cited, both in form and legal effect. The fact that the notes, when issued, were called bonds, cannot change their legal effect, nor can such designation alter the law under which said notes were issued. The acts of estoppel cannot be disregarded by the courts, and public policy and faith and honest dealing require that the county should be concluded thereby. (21 How. 539.)

The county, after having issued these securities accompanied by orders of the County Court inviting public confidence, is as much estopped from setting up informality as a defense to the same extent that an individual would be. (23 How. 381; S. C. 24 How. 365, 450.) The County Court was authorized to issue these notes in payment of its subscription, and the notes, reciting the facts, show them to have been regularly issued; the county is thereby estopped to deny their regularity, or to assert that they were not made in conformity to the statute. (2 Black. U. S., S. C. 722; 1 Black. 386; 33 Mo. 440; 1 Wal. S. C. 175.) The ratification by the Legislature, and approval by the County Court, made the subscription and notes binding. (8 Gray, 575; 15 Conn. 475; 5 Wheat. 326.)

WAGNER, Judge, delivered the opinion of the court.

This is a suit brought by the Hannibal and St. Joseph Railroad Company against Marion County, on a warrant for sixty dollars, being the amount of one year's interest which had accrued on a note given by said county to said company in payment of subscription on stock.

By section four of said company's charter, which was approved February 16, 1847, it is enacted; “The said company shall have power to view, lay out, and construct a railroad from St. Joseph in Buchanan county, to Palmyra in Marion county, and thence to Hannibal in said county of Marion, and shall in all things be subjected to the same restrictions and entitled to all the privileges, rights and immunities, which were granted to the Louisiana and Columbia Railroad Company by an act entitled “An act to incorporate the Louisiana and Columbia Railroad Company,” passed at the session of the General Assembly in 1836 and 1837, and approved January 27, 1837, so far as the same are applicable to the company hereby created, as fully and completely as if the same were herein re-enacted.” By the charter of the Louisiana and Columbia Railroad Company above referred to, it is provided:

Ҥ 16. It shall be lawful for the county courts of the respective counties on said road to subscribe for such portions of the stock of said company as they may deem proper, and upon such terms as they may agree with the company. When any county shall have subscribed for any portion of the stock, the justices of the county court may issue the notes of the county for such subscription, which shall be signed by all the justices, and attested by the clerk, and shall be payable in such times and places as may be agreed upon; provided, said note shall not in any event bear a greater rate of interest than seven per cent. per annum; all proceedings in relation thereto shall be entered on the records of the court.

§ 17. When any stock shall have been subscribed for by the county, the justices shall have a right to vote on behalf of the county at any election, and they may at any time require of the directors information concerning the affairs of the company.”

On the 4th day of February, 1852, whilst the county court of Marion county was in session, the directors of the said railroad company, by their agent, moved the court to subscribe one thousand shares, of one hundred dollars each, of stock to said company; which proposition was assented to by said court by an order entered of record, and certain persons designated by the court to draw up the form for the notes or bonds to be issued by the county in payment of the shares of stock. And at a subsequent term of the said county court, the following proceedings were had, as...