Mobile Sav. Bank v. Board of Sup'rs

• Decision Date: 01 January 1885
• Citation: 24 F. 110
• Parties: MOBILE SAVINGS BANK v. BOARD OF SUP'RS OKTIBBEHA CO.
• Court: U.S. District Court — Northern District of Mississippi

24 F. 110

MOBILE SAVINGS BANK v. BOARD OF SUP'RS OKTIBBEHA CO.

United States District Court, N.D. Mississippi, Eastern Division.

April Term, 1885

E. L Russell, B. B. Boone, and A. J. Russell, for plaintiff.

Butler & Carroll and Muldrow, Nash & Alexander, for defendant.

HILL J.

The questions now presented arise upon plaintiff's demurrer to defendant's amended special pleas.

The first of said pleas in substance alleges that the alleged election authorizing subscription for capital stock in the Mobile & Ohio Railroad Company, and the issuance of bonds in payment thereof, and the act of the legislature authorizing the same, required that when an election should have been held, and a majority of two-thirds of the voters should have legally assented thereto, that the president of the board of supervisors should subscribe for $125,000 of the capital stock, and a certificate of the same should be given to the county.

The plea avers that no subscription of capital stock was made and a certificate thereof delivered, as required by said act of the legislature, and that when the plaintiff received said bonds with coupons attached, it well knew that the same had not been done, and that said county of Oktibbeha had never by voting in the stockholders' meetings, and by levying a tax to pay said bonds and coupons, or otherwise, ratified the issuance of the same; all of which was at the time the plaintiff received said bonds and coupons sued upon well known to plaintiff.

The consideration for the bonds and coupons, as recited upon the fact of the bonds, was the payment for capital stock in the Mobile & Ohio Railroad Company, and this subscription of stock should have preceded the issuance of the bonds and coupons. A suit by the railroad company upon the bonds, while in their possession, would have been defeated without the issuance of the capital stock, the issuance of which was a duty imposed upon the company. The law imposed upon the president of the board of supervisors the duty of subscribing for the capital stock, when duly authorized by the voters of the county, and vested him with no discretion to subscribe or not to subscribe for the same, and a tender of the certificate of capital stock to the president of the board would have entitled the railroad company to demand the execution and delivery of the bonds.

The plea avers that the plaintiff had knowledge that the law under which the bonds are claimed to have been issued, required as a condition precedent the issuance of the stock. It is certainly true that the plaintiff is charged with a knowledge of the law of the land, under which the bonds were issued, but where the authority to make the subscription and issue the bonds is given by statute, and the bonds are issued and put in circulation, and come into the hands of a bona fide purchaser without notice that all the steps have not been taken as required, such holder will not be affected by any failure in making the subscription, or in the delivery of the certificate of subscription; the bonds reciting, as those sued upon in this cause do, that the bonds are issued in pursuance to the constitution and laws of the state. The declaration avers that the plaintiff is a bona fide holder, for value, of the bonds and coupons sued upon, which negatives knowledge of any imperfection in the bonds sued upon. To make this plea good, it must aver knowledge by the plaintiff, at the time the bonds were received, that the subscription for capital stock and a certificate therefor had not been made, and for want of this averment the demurrer to this plea must be sustained. Hotchkiss v. National Banks, 21 Wall. 354.

The second plea makes the same averment as the first, with the addition that plaintiff, when the bonds were received had knowledge that the subscription for capital stock, and issuance of a certificate for the same, had not been made; which constitutes this plea a valid defense to the action, and therefore the demurrer thereto will be overruled.

The third plea in substance avers that the statute of the state, under which the bonds and coupons are claimed to have been authorized, provided that the bonds should bear 7 per cent. interest, payable annually, whereas the bonds sued upon bear 7 per cent. interest, payable semi-annually, which it is averred renders them null and void upon their face. The supreme court of the United States has repeatedly held that when the rate of interest does not exceed that provided by the statute authorizing the issuance of the bonds, though the time of payment may vary from that provided in the statute, yet the bonds will be held valid. See Commissioners v. Clark, 94 U.S. 278; Myers v. City of Muscatine, 1 Wall. 384. Therefore this plea does not present a sufficient defense to the action, and the demurrer thereto must be sustained.

The fourth plea avers that the original order, contract, and agreement between the Mobile & Ohio Railroad Company and the county of Oktibbeha, was that the said bonds and coupons should not...