Morton v. City of Nevada

• Decision Date: 03 March 1890
• Citation: 41 F. 582
• Parties: MORTON v. CITY OF NEVADA.
• Court: U.S. District Court — Western District of Missouri

41 F. 582

MORTON v. CITY OF NEVADA.

United States Circuit Court, W.D. Missouri, Western Division.

March 3, 1890

J. B Henderson and J. M. Lewis, for plaintiff.

Burton & Wight, for defendant.

PHILIPS J.

This is an action for money had and received, and grows out of the following state of facts, substantially, presented on an agreed statement: The defendant is an incorporated town under the General Statutes of the state. In 1870 the Tebo &amp Neosho Railroad Company was constructing a railroad in the direction of the defendant town. To secure the location of a depot within one-half mile of the public square, the board of trustees agreed with said company to donate 10 acres of ground for such depot purposes. To this end said trustees passed a resolution to procure and donate to the company the right of way through said town, and to pay a sum not exceeding $5,000 for the actual cost to the company of establishing such depot; also, to donate for depot and other purposes 10 acres of ground. Thereafter, on June 4, 1870 under an act of the general assembly of the state entitled 'An act to authorize cities and towns to purchase land, and to donate, lease, or sell the same to railroad companies, ' approved March 18, 1870, the said board of trustees ordered an election of the qualified voters of the town to be held October 25, 1870, to vote for the issue of $10,000 in bonds of said town, with which to purchase the ground for said railroad company. At such election a majority of those voting at said election voted for the issue of such bonds. On November 1, 1870, the chairman and the clerk of said board of trustees executed in due form 20 bonds of $500 each, payable at the national bank in the city of New York, ten years after date, payable to the Tebo & Neosho Railroad Company or bearer, with interest at the rate of 10 per cent. per annum, payable semi-annually at said bank, with the usual interest coupons attached thereto. That said bonds, through defendant's financial agent, were placed upon the market, and were bought by the plaintiff, who paid therefore $8,171. With this money the defendant bought 10 acres of ground, paying therefor the sum of $6,785.50, taking the deed for said land to the incorporated town of Nevada. The balance of said money was used by said board of trustees for various purposes incident to the government of said town. The Tebo & Neosho Railroad Company thereafter, having sold and conveyed to, and merged its line of railroad and property, franchises, etc., into, the Missouri, Kansas & Texas Railroad Company, the defendant duly conveyed said 10 acres of ground to the last-named company. On the 23d of August, 1877, the plaintiff instituted suit against defendant in the United States circuit court for the western district of Missouri, at Jefferson City, to recover upon the past-due coupons attached to said bonds. On the 20th day of November, 1877, the defendant answered to said action, in which it pleaded that it was not liable in said action, for the reason that the act of March 18, 1870, under which the bonds and coupons in question were voted, was unconstitutional. To this answer the plaintiff filed a demurrer on the 22d day of November, 1877, which demurrer was submitted to the court. At that time there was pending in the supreme court of the United States, on appeal from said circuit court, the case of Jarrolt v. Moberly, in which the same question, to-wit, the constitutionality of the act of March 18, 1870, was involved, which case is reported in 103 U.S. 586. The attorneys in said case of Morton against The Town of Nevada then agreed that no further action was to be taken therein, but the case would stand upon the pleadings therein until the supreme court passed upon said Jarrolt Case, after which either party might proceed in said cause as might be deemed best by said party, and the cause was continued. On the 25th day of November, 1881, after the supreme court had decided in said Jarrolt Case that the said act of March 18, 1870, was unconstitutional, said cause of Morton v. Town of Nevada was taken up, and the demurrer therein overruled, and judgment entered for defendant. The interest on said bonds was paid by the town of Nevada for the years 1871 and 1872, after which the town refused to pay plaintiff any further, interest, for the reason that said bonds and coupons were unconstitutional, and issued without authority. October 29, 1885, the plaintiff instituted this action, setting up substantially the history of facts aforesaid, and asking judgment against the defendant for the amount of money so paid by plaintiff for said bonds, with interest thereon.

Two principal questions arise on the foregoing facts: Will the action for money had and received lie against the defendant? And, if so, is the cause of action barred by the statute of limitations?

Bonds similar to these were held by the supreme court in Jarrolt v. Moberly, supra, to be void, for the reason that their issue was in contravention of section 14, arc. 11, of the state constitution of 1865, which declares that--

'The general assembly shall not authorize any county, city, or town to become a stockholder in, or to loan its credit to, any company, association, or corporation, unless two-thirds of the qualified voters of such county, city, or town, at a regular or special election to be held therein, shall assent thereto.'

This provision was prohibitory in its character. In its legal effect, it was a withdrawal from and a denial of the power to such constituent bodies to loan their credit to such corporation, unless authorized thereto by the vote of two-thirds of the qualified electors. No such vote having been taken, and no consent of the qualified voters given, the power to create this debt never came into existence. It would therefore seem to follow logically that, no matter what the form of action is, no recovery could be had against the town, as such, for the money arising from the sale of the bonds, as the town was forbidden by law from doing what it did do. We are not left in this controversy to conjecture to ascertain what was the object and scope of the provision of the constitution in question. The supreme court of the state of Missouri, speaking through NAPTON, J., in State v. University, 57 Mo. 183, say:

'What was the object of restriction on county courts, city and town municipalities? The object was, plainly, to prevent them from taxing the people without their consent. * * * It is manifestly the intention of the constitution to prevent taxation without the assent of the tax-payers, and without regard to the purposes of the proposed tax.'

So. Mr. Justice FIELD, speaking for the supreme court of the United States in Jarrolt v. Moberly, supra, says:

'The object of the inhibition in the state constitution was to prevent the creation of debts by counties, cities, and towns on behalf of any company, association, or corporation, without the assent of two-thirds of their qualified voters.'

After referring to the abuses which had hitherto grown up in the state in this respect, he further says:

'It was the purpose of the constitutional provision to check these abuses, by requiring the previous assent of two-thirds of the qualified voters of the municipal bodies before any more stock should be subscribed by them, or any further indebtedness be thus incurred.'

Further on he says:

'As remarked by counsel, it is difficult to see how the fundamental law of the state could be evaded by a change of the parties through whom the credit of the municipality is to be converted into money. In either case, the debt created is to be paid by taxation.'

What is said by Chief Justice BEASLEY in Town of Hackettstown v. Swackhamer, 37 N.J.Law, 191, is quite pertinent and reasonable:

'Nor do I think that it adds anything to the right to enforce the note in this case that the money which it represents, and which was borrowed, has been expended in behalf of the corporation for legitimate purposes. The argument on this head was that, as the money had gone for the benefit of the corporation, the law, upon general principles, would compel its repayment. If this is so, then the rejection of an implied power to borrow is of little avail. The doctrine, although repudiated in the abstract, would be ratified in the concrete. If this contention is tenable, it is impossible to close the eye to the fact that the loan, although held illegal and void in its inception, would thus, by a subsequent act, be rendered valid and enforceable. To style it, as was done in the argument, 'money had and received,' would not change the real nature of the transaction. To permit a recovery of it in this secondary form would be, virtually and in truth, to effectuate a loan, and all the evils attendant on the power to borrow money in an unrestricted form would supervene. And it is to be noted that it is altogether a fallacy to argue that the law will raise an implied promise to repay the money after it has been used. The impediment to such a theory is that the corporation has not the competency to make the promise thus sought to be implied. An express promise to the effect contended for would be illegal; and therefore, clearly, the law will not create one by implication. It is not the case of a principal using money borrowed by his agent without authority, but it is the case of a principal who is incapacitated by law from borrowing, and who therefore cannot legalize the act, either directly or by circuity. Perhaps a parallel instance would be presented in case of a loan to a married woman at common law; the money being used by her. Her promise to repay the loan would be void, and from the fact of her having made use of the money no implied promise in law could

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