Meyer v. the City of Muscatine

• Citation: 68 U.S. 384,17 L.Ed. 564,1 Wall. 384
• Parties: MEYER v. THE CITY OF MUSCATINE
• Decision Date: 01 December 1863
• Court: United States Supreme Court

68 U.S. 384

17 L.Ed. 564

1 Wall. 384

MEYER v. THE CITY OF MUSCATINE.

December Term, 1863

ERROR to the District Court of the United States, for the District of Iowa, the case being thus:

The city of Muscatine was incorporated, A.D. 1851, by the legislature of Iowa, and by its charter made 'a body corporate, and invested with all powers and attributes of a municipal corporation.' 'The legislative authority of the city,' says this charter by its 19th section, 'is vested in a city council;' which council, the charter goes on to declare, 'is invested with the following powers,' the powers being set forth essentially as follows:

'1. To secure the inhabitants against fire, and violations of the law and the public peace; to suppress riots, drunkenness, gambling, and disorderly conduct; and generally to provide for the safety, good order, and prosperity of the city, and the health, morals, and conveniences of the inhabitants.

'2. To impose penalties for the violation of its ordinances.

'3. To establish and organize fire companies, and to provide them with fire apparatus.

'4. To regulat the keeping and sale of gunpowder within the city, and to provide that no building of wood shall be erected within designated parts.

'5. To have the control of the landing on the Mississippi River, and build wharves, and regulate the landing, wharfage, dockage, &c.

'6. To provide for the license, regulation, or prohibition of exhibitions, & c.; billiard tables, ball and ten-pin alleys, and places where any games of skill or chance are played.

'7. To make ordinances in relation to the cleanliness and health of the city.

'8. To regulate cartage and drayage within the city, and make prohibition of animals running at large within the city.

'9. To provide for the establishment and support of schools in the city, and for the government of the same.

'10. To audit all claims against the city; to provide for the keeping of the public money of the city, and the manner of drawing the same from the treasurer.

'11. To establish the grade of the streets, alleys, and wharves.

'12. To prescribe the manner of calling the meetings of the citizens, except for the election of officers.

'13. To appoint street commissioners and officers.

'14. To cause the streets and alleys of the city to be paved.

'15. To borrow money for ANY object in its discretion, if at a regularly notified meeting, under a notice stating distinctly the nature and object of the loan, and the amount thereof, as nearly as practicable, the citizens determine in favor of the loan by a majority of two-thirds of the votes given at the election.

'16. To fill vacancies occurring in any of the city offices by appointment of record, to hold, in the case of election officers, until the next regular election and the qualification of the successor.'

In addition to the power thus given by the charter to borrow money, the legislature of Iowa had, on the 25th of January, 1855, passed certain acts; [the same acts referred to ante, p. 220, Gelpcke v. The City of Dubuque, No. 81.] One is entitled 'An act regulating the interest on city and county bonds.'¹ The first section enacted, 'that railroad companies might issue their bonds at such a rate of interest and sell them at such discount as might be necessary, and that they should

remain legal and binding.' The second section, 'that whenever any company shall have received or may hereafter receive the bonds of any city or county, upon subscription of stock by such city or county, such bonds may have interest at any rate not exceeding ten per cent., and may be sold by the company at such discount as may be deemed expedient.'

With this charter and these enactments in force, it was proposed by certain persons that the city of Muscatine, Iowa, should borrow money and subscribe to the stock of the Mississippi and Missouri Railroad; an ordinance was accordingly passed, July 23d, 1855, to take the vote of the citizens, in order to see whether two-thirds of them, as required by the article 15, ante, p. 386, were in favor of borrowing the money. The ordinance enacted essentially as follows:

The election shall be upon the following propositions:

1st. To rescind a vote given, &c., authorizing the council to borrow $45,000, to be subscribed on stock of the Iowa Western Railroad, and also to rescind a vote given authorizing the council to borrow $50,000, to the subscribed on stock of the Muscatine, Iowa City, &c., Railroad.

2d. To borrow for a term of years, not exceeding twenty, on the bonds of the city, at a rate of interest not higher than ten per cent. per annum, $130,000, to be subscribed on stock in the name of the city to the capital stock of the Mississippi ad Missouri Railroad Company.

3d. The vote shall be given by ballot, written or printed, with the words 'For the rescission and loan,' and 'Against the rescission and loan,' and if the requisite number of votes are for the rescission and loan, the council shall cause the bonds to be issued.

Three hundred and twenty-six votes were given for the rescission and loan, and five against it.

The city accordingly issued its bonds, the form of them, somewhat special, being thus:

Bond of the City of Muscatine,

UNITED STATES OF AMERICA.

$1000.

No. 51.

Be it known that the city of Muscatine owes to Adam Ogilvie, or bearer, the sum of one thousand dollars for money borrowed the receipt whereof is hereby acknowledged, and which sum the said city of Muscatine hereby promises to pay, at the office of E. W. Clark, Dodge & Co., in the city of New York, on the first day of January, eighteen hundred and seventy-six (January 1st, 1876), with interest on said sum of one thousand dollars at the annual rate of ten per cent., payable semi-annually, on the 1st day of January and 1st day of July in each year; and the faith of the city of Muscatine is hereby pledged for the semi-annual payments of interest and the ultimate redemption of the principal.

Upon the surrender of this bond to A. C. Flagg, treasurer in trust, at any time previous to said 1st January, 1876, the holder hereof will be entitled to ten shares of the capital stock of the Mississippi and Missouri Railroad Company, in satisfaction thereof.

Whereof J. H. Wallace, Mayor of the city of Muscatine, does hereby cerify that by a vote of the legal electors of the said city of Muscatine, at an election held 13th August, 1855, in accordance with an ordinance of the Common Council sanctioning the same, that the said city was authorized to borrow the sum of one hundred and thirty thousand dollars, and to issue its bonds therefor, bearing interest an ten per cent. per annum, and that the above is one of the bonds given for said loan.

In testimony whereof, I have hereunto set my hand and affixed the seal of said city this thirty-first day of December, A.D. 1858.

J. H. WALLACE, Mayor.

[SEAL.]

Attested by

D. S. JOHNSON, Recorder.

The coupons were in this form:

The city of Muscatine will pay the bearer, on the 1st day of January, 1860, twenty-five dollars, at the office of E. W. Clark, Dodge & Co., in the city of New York, interest due on their bond No. 51.

J. H. WALLACE, Mayor.

A number of the bonds thus issued having got into the hands of the plaintiffs, and the interest being unpaid, they brought suit to recover it. The city set up various defences, as follows:-

1. That there was no authority in the charter of the city of Muscatine under which money may be borrowed to aid in the construction of railroads.

2. Because the interest was made payable in New York city, instead of at the treasury of the city of Muscatine.

3. Because, in the stipulation to pay the interest semi-annually at the rate of ten per cent., the authority conferred by the vote which limited the rate of interest to 'not higher than ten per cent. per annum,' was transcended and a usurious rate agreed to be paid.

4. Because the stock of the Mississippi and Missouri Railroad Company, for which said bonds and coupons were issued, was, without authority from the city, placed in the hands of a trustee and entirely beyond its control.

5. Because, under the authority to borrow a sum of money, no money was ever borrowed by the city, but instead, these bonds were delivered to the officers of the Mississippi and Missouri Railroad Company, and by their agents and brokers sold to the plaintiffs at a price greatly below their par value.

[An amended answer to the claim averred, 'that the said bonds were by the officers of said railroad company, and their agents and brokers, sold to the plaintiffs at a price greatly below their par value; that at the time said bonds and coupons were received by said plaintiffs, they had full knowledge of the fact that said bonds had been issued for the purpose of aiding in the construction of said Mississippi and Missouri Railroad.']

6. Because the ordinance on which the vote for a loan was taken was void, because it submitted three distinct propositions in one, and in such a manner as to cut off an effective opposition from all voters who were against the whole of the propositions.

7. Because, finally, the legislature had no constitutional power to authorize the issue of such bonds, and that hence they are void.

To these defences there was a demurrer, which demurrer the court overruled, giving judgment in favor of the city. On appeal, the questions here were the same as they were below; that is to say, whether the defences set up by the city were sufficient defences to the claim for payment of the coupons in the hands of bon a fide holders for value.

The case was submitted on briefs of Mr. Cook for the bondholders, and of Mr. Richman and Butler for the city of Muscatine; the arguments on both sides being much the same as those in one or the other of the three cases of Gelpcke v. The City of Dubuque, ante, p. 175, or in Mercer County v. Hacket, ante, p. 83. As every reader of this volume, and every inquirer into...