Town of Lexington v. Union National Bank

• Decision Date: 29 March 1897
• Citation: 75 Miss. 1,22 So. 291
• Court: Mississippi Supreme Court
• Parties: TOWN OF LEXINGTON v. UNION NATIONAL BANK

22 So. 291

75 Miss. 1

TOWN OF LEXINGTON v. UNION NATIONAL BANK

Supreme Court of Mississippi

March 29, 1897

March 1897

FROM the circuit court of Holmes county HON. W. F. STEVENS, Judge.

The facts are sufficiently stated in the opinion of the court.

Affirmed.

Noel &amp Pepper, Hooker & Wilson, and Tackett & Smith, for appellant.

If in the pursuit of the history of these bonds it should be ascertained that such bonds were not authorized by or Were not in conformity with the statute under which they purport to have been issued, they are illegal in the hands of every person, whether a bona fide holder or not. The investor would be supposed to know that without legislative authority municipal corporations cannot invest its obligations with the character and incidents of commercial paper. Jones on R. R Securities, § 222, 226, 283. The statute did not, in words or effect, give the officers any such power, and it was ultra vires to execute an obligation not authorized in terms by the legislature. The municipal authorities could do but one thing, and that was to execute the bonds in the mode and manner directed by the statute. They were purposely and intentionally cut off from making negotiable bonds. Observe the language: "And he [the mayor] shall execute to said company, in the name of such town, bonds, and said bonds shall be delivered to the president or treasurer." The words, ex vi termini, exclude power to issue a negotiable bond. He can only deliver to the president bonds executed to the company. The word "execute" is used in its ordinary sense, as if I "execute" a note or deed to A B, the note is payable, or the deed is, to A B.

The investor, examining the law, would have observed that not only was there lack of authority to issue negotiable bonds, but that so to do was actually prohibited. Expressio unius exclusio alterius. He would see from the act of 1884, first, that the act was a permissive one to extend the bonds issued. He would see that the legislative intent was to deal with the town--the people of the town. The permission was given to the people as a corporation, and not to the officers, to renew. A majority of the people might have been, and possibly were, opposed to the extension, especially upon the terms imposed by the act. The legislature certainly did not intend to force the people, or to permit them to be forced, to an extension of this debt, upon the onerous conditions imposed by officers, without their consent, and yet this is exactly what was done. Our contention is that the language of the statute, especially taken in connection with the previous legislation on the subject, and the origin of the bonds, gives no power to the officers to renew the bonds, but leaves the question with the people. New bonds could not be lawfully issued without consent, expressed in an election held for that purpose.

If, in searching the history of the legislative record of these bonds, the imaginary investor should disagree with us in our judgment as to the intent and scope of the first section of the act of 1884, as well as in other matters hereinbefore alluded to, his next inquiry must necessarily be: Have the corporate authorities of the town of Lexington complied with the law authorizing them to renew the bonds? Are they, in form and kind, such as were authorized to be issued? If they differed materially from the obligations the legislature authorized, their issuance was ultra vires, and the bonds void. What variations were permitted? What was the form and kind of bonds permitted to be issued? What incidents pertain to these new bonds that did not pertain to the old? The bonds authorized to be issued were to be of like tenor of the outstanding bonds, except; as to the date of bonds, date of maturity of bonds and coupons. The statute does not provide that the bonds shall be of the same "import" or "purport" or "effect" or similar words, but of like "tenor." The word "tenor" has a technical meaning, an "exact copy." 25 Am. & Eng. Enc. L., 946. The renewal bonds are each for one thousand dollars; the old bonds were each for fifty dollars. Certainly they are not of the same "tenor" in this respect. The old bonds recite "that this bond is one of a series of bonds issued in payment of a donation of twenty-five thousand dollars." The new bonds recite "issued in part payment of a donation, " etc. What possible right did the municipal authorities have to make such a change in the bond? The recitals are certainly not of the same "tenor, " effect, or purport.

Other objections to the validity of the bonds, which we think fatal to plaintiff's right of recovery, are the fact that the bonds were not dated May 1, 1894, as provided in the statute, and the coupons of the original bonds were signed by the mayor, while those to the substituted bonds had the signature of the clerk lithographed.

If a statute makes signature of a particular officer essential, they are not the bonds of the corporation without such signature. 15 Am. & Eng. Enc. L., 1227.

Where the mode of the exercise of a power is prescribed, it is the measure of power, and must be followed. 15 Am. & Eng. Enc. L., 1042; Zattman v. San Francisco, 20 Cal. 96.

Miller, Smith & Hirsh, for appellee.

The courts, for twenty-five years or more, all over this country, have been filled with cases involving issuance of bonds by cities, towns and counties in aid of railroads, and every question conceivable has been raised by these cases and adjudicated. Among the questions so adjudicated is the question that a municipality, through its officers, may so act as to ratify the issuance of bonds, which were, in their inception, irregularly issued. Jones on Railroad Securities, sec. 282, lays this down as the law upon this point: "A municipality or corporation may, by the payment of interest, or by holding stock received for the bonds, or by other acts, become bound to pay bonds issued in its name, although the execution of them was irregular or without authority. Ratification may also be inferred from long delay in taking advantage of the irregular or unauthorized issue of municipal bonds, though such ratification is doubtless more cautiously inferred in cases of municipal corporations than private corporations, because experience shows that public officers do not guard the interest confided in them with the same vigilance and fidelity that characterizes the officers of private corporations." L., L. & C. Railroad Co. v. Douglas, 18 Kan. 169; Pendleton Co. v. Amy, 13 Wall., 297; County of Ray v. Vansycle, 96 U.S. 675, s.c. 99 U.S. 684; Campbell v. Kenosha, 5 Wall., 194; Mercer Co. v. Hackett, 1 Wall., 83; Merchants' Bank v. State Bank, 10 Wall., 645; Aurora v. West, 17 Wall., 105; Smith v. Sac Co., 17 Wall., 150; Lexington v. Butler, 14 Wall., 296; Davenport v. United States, 9 U.S. 414; San Antonio v. McHaffey, 96 U.S. 314; Randolph Co. v. Post, 93 U.S. 514; Venice v. Murdock, 92 U.S. 500; Colama v. Eaves, 92 U.S. 491; Lyons v. Munson, 99 U.S. 686; Orleans v. Platte, 99 U.S. 682; Pumpton v. Cooper Union, 101 U.S. 204; Brooklyn v. Ins. Co., 99 U.S. 363.

The original bonds in this case were surrendered and destroyed by the defendant or appellant, and these new ones were delivered by the appellant to appellee in exchange for the old ones, and eleven years' interest has been paid thereon.

The seventh paragraph of appellants' answer attempts to raise the question that the issuance of the twenty thousand dollars' worth of bonds in lieu of the original ones, taken up under the act of 1884, was never submitted to a vote. "It being once admitted that the city authorities had the power to issue these bonds, that undoubtedly carried with it the authority to renew the bonds or to take them up and supply their place with other bonds." Portsmouth Savings Bank v. City of Springfield, 4 Fed. Rep., 275; Lloyd v. City of Altoona, 19 A. 675; Little Rock v. National Bank, 98 U.S. 308; Ragan v. Waterton, 30 Wis. 259; City of Galena v. Corwith, 95 Am. Dec., 557; Merrell v. Town of Monticello, 25 F. 589; Rates v. Gregory, 22 P. 683; Blanton v. McDowell, 101 N.C. 532; 15 Am. & Eng. Enc. L., 1263.

As to the other point suggested in this paragraph of appellant's answer, that the bonds were not of like tenor, it will be noted the new bonds impose no extra or additional liability upon the town of Lexington. The effort to apply the word "tenor" as construed in indictments and other cases of like nature, to the word "tenor" in the act of 1884, will not bear scrutiny. Moreover, the town council eleven years ago issued these bonds. The people have paid interest upon them for eleven years, and, at the time when the new bonds were delivered, the town council received back the old bonds and canceled and burned them. It would certainly be an unheard of proposition that a town could exchange its old bonds for new ones, pay interest on them for eleven years, destroy the old bonds, and then come forward and defeat the new bonds because each bond of the new series was not exactly of the same amount as the old bonds. This would be a new way to pay old debts. The doctrine of estoppel, as set forth in the cases cited, is clearly applicable to this point.

The act of 1884 does not require either the bond or the coupon to be signed by the mayor or clerk, and it may be considered as a matter of common knowledge that coupons are never signed, but only lithographed signatures thereto are made. The signature to the bond itself is simply a matter of precaution for authentication, and no bond is ever issued with numbers of coupons attached, to which the signature is actually made by any officer. Lithographed copies or engraved copies of genuine signatures are all that is necessary, and that is the universal custom in issuing such...