Winona St Co v. Town of Plainview Same v. Town of Elgin

• Citation: 12 S.Ct. 530,143 U.S. 371,36 L.Ed. 191
• Parties: WINONA & ST. P. R. CO. v. TOWN OF PLAINVIEW. SAME v. TOWN OF ELGIN
• Decision Date: 29 February 1892
• Court: United States Supreme Court

143 U.S. 371

12 S.Ct. 530

36 L.Ed. 191

WINONA & ST. P. R. CO. v. TOWN OF PLAINVIEW.

SAME

v. TOWN OF ELGIN.

February 29, 1892.

By an act of the legislature of the state of Minnesota approved March 5, 1877, (Gen. Laws 1877, c. 106,) it was enacted by sections 4, 5, 6, and 7 thereof, as is printed in the margin.¹

Purporting to proceed under sections 4 and 7 of that act, the Plainview Railroad Company, a Minnesota corporation, on the 31st of January, 1878, delivered to the town-clerk of the town of Plainview a proposition in writing, signed by the president and secretary of the company, containing the statements and specifications required by section 4 of the act, and stating that the amount of the bonds of the town desired by the company was $50,000, The town-clerk indorsed on the proposition the date of filing, and transcribed the proposition in his records on March 30, 1878. On the 31st of January, 1878, the company posted in three public places in the town a notice that, after February 6, 1878, a petition to the supervisors of the town, appended to a copy of said proposition, would be presented to the resident tax-payers of the town, asking the supervisors to agree to the proposition. The notice and the proposition were published in a newspaper printed and published in the town.

On the 30th of March, 1878, within three months after the filing of the proposition with the town-clerk, the company delivered to him four petitions, in the form required by section 7 of the act, addressed to the town board of supervisors, stating that the petitioners, being residents of the town and assessed for taxes upon real or personal estate therein, as shown by its last assessment roll, asked the supervisors, as the proper authorities of the town, to agree to the proposition of the company to which the petition was appended. The petitions bore the signatures of a majority of the persons residing in the town who were assessed for taxes on real or personal estate therein, as shown by its then latest assessment roll, and the signatures tures were verlfied by the affidavits of the persons witnessing such signatures; but the petitions were not signed by a majority of the electors or legal voters of the town. Those petitions were the only ones ever made asking the authorities of the town to agree to the proposition of the company, and they and section 7 of the act constituted the only authority had or claimed for the issue of the bonds hereinafter mentioned. No election was held in the town to authorize its supervisors to agree to the proposition or to the issue of any such bonds.

On the 30th of March, 1878, the board of supervisors of the town adopted and placed on file in the office of the town-clerk resolutions which recited the proposition of the company, the posting of the notices, and the presenting of the petitions, with signatures and affidavits, from which it appeared that a majority of the resident tax-payers of the town, assessed for taxes upon real or personal estate therein, as shown by its last assessment roll, had signed the petitions, and that the construction of the railroad by the company, as set forth in its proposition, would promote the general prosperity and welfare of the tax-payers of the town. The resolutions were that the proposition of the company was accepted, so far as related to the issue of bonds; that bonds of the town to the amount of $50,000, with interest coupons attached and payable as requested in the proposition, be issued to the company as soon as it should have its railroad completed, with the cars running thereon; and that the issue of stock to the town by the company, in consideration of the bonds, was waived.

The company constructed its railroad, had the cars running thereon, and performed what was stated in the proposition, except that it never issued to the town any stock of the company.

Before any bonds of the town were issued to the company, one George W. Harrington, a resident citizen and tax-payer of the town, brought a suit in the district court for Wabasha county, in which county the town is situated, against the town and its officers and the railroad company, setting forth the proceedings on which the bonds were to be issued; that they were illegal; and that it was intended to issue the bonds; and praying that the town and its officers, particularly the chairman of the board of supervisors and the town-clerk, might be enjoined from issuing, and the railroad company from accepting or receiving, any such bonds. The town answered the complaint, and in January, 1879, the case was tried by the district court, which, on February 6, 1879, gave judgment for the defendants, and dismissed the suit. Harrington took an appeal to the supreme court of the state, but, before it was perfected, the bonds were issued and delivered to the company. The supreme court, on October 6, 1880, reversed the judgment below, its opinion being reported in 27 Minn. 224, 6 N. W. Rep. 777. It held that, under the constitution of Minnesota, it was not competent for the legislature to authorize any person or class of persons, other than the electors of a town or the officers chosen by such electors, to determine what action, requiring local taxation, the town would take in any particular case; that, therefore, section 7 of chapter 106 of the Laws of 1877, which assumed to empower a majority of the 'resident tax-payers,' whether they were electors or not, to bind a town to issue its bonds to aid in the construction of a railroad, was unconstitutional and void; and that, although the mode for authorizing the issue of bonds provided by section 7 was invalid, yet, as the same act provided another mode for authorizing such issue, which was valid, and as the bonds need not recite under which of the two provisions of the act they were issued, but only that they were issued under and pursuant to such act generally, and a purchaser would then have the right to presume that they were issued under its valid provisions, and there might thus be bona fide purchasers of the bonds, a suit for an injunction would lie to restrain the issuing of the bonds by the town officers under the invalid mode provided by section 7 of the act.

On the 18th March, 1879, the town board of supervisors passed a resolution that the town issue to the company its bonds in the sum of $50,000, dated on January 1, 1879, to become due on or before 20 years from that date, with interest thereon, payable annually, at 7 per cent. per annum; that the bonds be signed and issued by the chairman of the board and the town-clerk; and that the issue of stock by the company to the town in a corresponding amount was waived. The bonds were issued on the 19th of March, 1879, being 100 in number, and numbered, consecutively, from 1 to 100, each purporting to be the bond of the town of Plainview, payable to the Plainview Railroad Company or bearer, for $500, dated January 1, 1879, due on or before January 1, 1899 with interest at 7 per cent. per annum, payable annually, according to the conditions of the 20 interest coupons attached, one of them payable January 1, 1880, and one on January 1 of each year thereafter until the maturity of the bond. Each bond contained on its face the following statement: 'This bond is issued in pursuance of a mutual agreement between the said town and the said railroad company, which agreement was made in accordance with the laws of the state of Minnesota, and through and by a proposition made by said railroad company, and duly accepted by said town upon petition therefor signed by a majority of the resident tax-payers of said town, said agreement having been fully performed by the said railroad company on its part. This bond is issued in pursuance of the authority given for that purpose by the laws of the state of Minnesota, and in compliance with a resolution of the board of supervisors of said town.'

The company, on or about July 9, 1879, sold, transferred, and delivered the bonds and coupons to citizens of the state of Wisconsin, who purchased the same without notice of any facts invalidating the bonds, and paid the company $50,000 for them. The bonds and coupons were purchased and acquired by Samuel Marshall and Charles F. Ilsley, citizens of Wisconsin, who purchased them in good faith, for value, without notice of any facts invalidating them. On the 29th of January, 1881, Marshall and Ilsley commenced an action at law in the circuit court of the United States for the district of Minnesota against the town of Plainview, to recover the amount of 46 coupons for $35 each, cut from said bonds, which coupons fell due January 1, 1881. The action was defended by the town, and was tried before the circuit court without a jury, which found in favor of the plaintiffs, and entered a judgment in their favor for $1,746.98. The opinion of the circuit court of the United States is reported in 3 McCrary, 35, 8 Fed. Rep. 783. It held that the recitals in the bonds were conclusive evidence in favor of a purchaser, without further information; that the conditions precedent prescribed by the statute had been complied with; that, as the law under which the bonds were issued had been recognized as valid by the highest court of the state of Minnesota, before they were purchased by Marshall and Ilsley, no subsequent decision could affect their validity in the hands of such purchasers; and that the rule charging every one with notice of pending suits was inapplicable where negotiable securities constituted the subject-matter. The case referred to by the circuit court, as that in which the supreme court of Minnesota had recognized section 7 of chapter 106 of the Laws of 1877 as constitutional and valid, was that of State v. Town of Highland, 25 Minn. 355, (decided January 10, 1879.) The circuit court arrived at the conclusion that, as the bonds in question had been purchased by Marshall and Ilsley before the case of Harrington v. Town of Plainview...