Choisser v. People ex rel. Rude

29 N.E. 546, 140 Ill. 21

• Court: Illinois Supreme Court
• Decided: January 18, 1892
• Status: Published

Opinion

Mr. Justice Bailey

delivered the opinion of the Court:

There is no evidence in the record before us that the bonds issued by the county of Saline to the Cairo and Vincennes Bailroad Company, or any of them, have been negotiated by said railroad company, or that there are any assignees of said bonds who occupy the position or are entitled to the rights of bona fide holders thereof for value. The evidence shows that bonds to the amount of $95,000 were, on the 8th day of October, 1872, issued and delivered by said county to said railroad company, but nothing whatever is shown as to what the railroad company has done with them. The only presumption arising from these facts is, that said bonds are still in the hands of the railroad company, and no question therefore is presented as to how far the alleged invalidity of said bonds would be affected by those conclusive presumptions which the law raises for the protection of bona fide holders of commercial paper.

Nor is there any allegation or proof of any facts arising since the execution of said bonds, such as have sometimes been held to work an estoppel upon a municipal corporation to question the validity of its bonds, though originally invalid. Nothing is before us except the mere question of the legality of these bonds as between the county and the railroad company, the original parties thereto.

The Cairo and Vincennes Railroad Company was ineorpo.'rated by a special act of the General Assembly, approved •March 6, 1867, with authority to locate and construct a rail.•‘road from the city of Cairo, in Alexander county, by way of Mound City in Pulaski county, to some point on the line between the States of Illinois and Indiana, at or near Vincennes. The only power conferred by said act upon municipal corporations to aid in the construction of said railroad is found in tenth section 'of said act, which is as follows :

“§ 10. The several towns, cities or counties, through or mear which said railroad shall pass, may subscribe for and 'take stock in this company, and may issue bonds in payment dfor such stock, of $500 each, bearing interest at the rate of eight per cent per annum, or less, payable half-yearly, In the ' city of New York, on the first days of January and July of each year, and bonds to run not longer than twenty-five years. And a tax of not more than one dollar on each hundred dollars’ worth of taxable property, may be levied and collected in such town, city or county, per annum, to pay the installments on such stock, or to pay the interest and principal of bonds issued in payment of such stock : Provided, that no such subscription shall be made, no such bonds shall be issued, and no such tax shall be levied, unless a majority of the legal voters of said town, city or county, shall vote for the same, at an election to be held under order of the corporate authorities in cases of towns and cities, and of the County Court, in cases of counties: Provided, further, that a majority of legal voters at any such election, shall be held as a majority of the legal voters of any such town, city or county; and the questions, of', making a subscription, issuing bonds, and levying taxes, may be submitted as one question, or as separate questions, at such election; and either or all of said questions may be submitted! to an election at any time, in the discretion of the authorities authorized to call such election.” Vol. 2, Private Laws of 1867, p. 558.

It will be observed that while by this section, power is given to counties, towns and cities to subscribe for shares in the capital stock of said railroad company, and pay therefor either in municipal bonds or in money raised by taxation, no power whatever is given to make donations, to the railroad company of either money or bonds to 'aid in the construction of its railroad. The rule is well settled that these is no inherent power in municipal corporations to aid in the construction of railroads, either by becoming subscribers to the capital stock of the railroad company, or by making donations to such company of money or bonds, but such power can be given only by express legislative provision. Board of Supervisors v. Farwell, 25 Ill. 181; Clarke v. Hancock County, 27 id. 305; Marshall County v. Cook, 38 id. 44; Wiley v. Silliman, 62 id. 170; Harding v. R., R. I. & St. L. R. R. Co. 65 id. 90; McWhorter v. The People, id. 290; Town of Big Grove v. Wells, id. 263; Lippincott v. Town of Pana, 92 id. 24; Pitzman v. Village of Freehurg, id. 111; Gaddis v. Richland County, id. 119; The People v. Jackson County, id. 441; Hewitt v. Normal School District, 94 id. 528; Schaeffer v. Bonham, 95 id. 368.

: The authority, when conferred, must be strictly pursued. Hardin v. R., R. I. & St. L. R. R. Co. supra. The power to aid in the building of a railroad by subscribing for a portion of the capital stock of such company, is essentially different in its nature from the power to aid in such enterprise by making a donation to such company, and the former power neither includes nor implies the latter. Macoupin County v. The People, 58 Ill. 191.

In this case the undisputed evidence is, that on the 5th day of October, 1867, the proposition to subscribe for $100,000 of the capital stock of said railroad company was submitted to the legal voters of Saline county, at a special election called therefor by the County Court of said county, and that the majority of the votes cast at said election were in favor of that proposition; that on the 28th day of November following, said County Court, claiming to act upon the authority given it by said election and its result, entered into a contract with said railroad company, by which it was agreed that said County Court, acting on behalf of said county, should issue $100,000 of the bonds of the county in payment for that amount of the capital stock of said company, but that at the same time and as a part of the same transaction, said stock should be sold back and returned to said railroad company for the nominal sum of $5000, payable by the re delivery to the county of that amount of said county bonds. By this maneuver the proposition submitted to the vote of the people of the county, viz, to subscribe for and receive $100,000 of the capital stock of said railroad company as the consideration for $100,000 of county bonds, became virtually changed into a proposition to donate $95,000 of the bonds of the county to the railroad company without consideration. That such was the understanding of the parties themselves is manifest from the fact that, when the bonds came to be finally issued, the record of their issue made by the County Court, recited that it had been agreed that the $100,000 of capital stock of the railroad company should be sold back to the company for $5000 in county bonds, “thereby making a payment of $95,000 of Saline county bonds to said company as a donation, ” and from the further fact that, at the final consummation of the transaction, it does not appear to have been deemed necessary by the parties to go through with the form of issuing the $100,000 shares of stock to the county, and buying them back by handing back to the county $5000 of county bonds. These trifling formalities seem to have been omitted, the entire transaction having been limited to the delivery by the county authorities to the railroad company of $95,000 of county bonds.

■ That in its consummation if not in its inception the transaction was a donation pure and simple is too plain to admit, of serious controversy. In the beginning and until the election was had, the guise of a subscription was resorted to so as to bring the municipal aid sought to be obtained apparently at least within the power conferred upon the county by the tenth section of the railroad company’s charter. But when viewed in the light'Of the interpretation put upon the transaction by the subsequent acts of the parties, it appears too transparent to mislead. The bonds being essentially a donation, it was not within the power of the County Court to issue them, and They must therefore be held to be ultra vires and void.

But it is urged that the invalidity of said donation was cured •by the third section of the act to amend the charter of said railroad company, approved February 9, 1869. That section .is as follows:

“§ 3. That all contracts made by towns, cities and counties, into, through or near which the Cairo and Vincennes Railroad shall run, whereby, as an inducement to the construction of said railroad, such towns, cities and counties agreed, upon the •completion of certain portions of said railroad, to sell to the •said company, at a nominal price, the stock of said company ■for which such towns, cities or counties, by a vote of their •electors, had theretofore subscribed, and agreed to issue bonds in payment thereof, thereby, in effect, agreeing to make a donation to said company of certain amounts of bonds of such towns, cities or counties, as an inducement to the construction ■of said railroad, are hereby declared to be valid and binding upon such towns, cities and counties, and shall be carried into effect in good faith, by the same; and all orders for and notices of elections, and elections and returns of such elections, in respect to such subscriptions of stock to said company, in any such towns, cities and counties, are hereby declared to be valid and binding upon such towns, cities and counties.” Vol. 3, Private Laws, 1869, p. 259.

Here is a clear attempt by the General Assembly to impose upon Saline county an obligation which it had never assumed, •and for which no valid contract was in existence. The only proposition which had been submitted to the vote of the people-of the county, and the only proposition which, under existing laws, the County Court had power to submit to them, was that of making a subscription to the capital stock of the railroad company, the stock to be received as the consideration, and,, presumably, the equivalent, for the county bonds to be issued, in pursuance of the subscription. The proposition to donate $95,000 in county bonds to said railroad company was never-submitted to the people of said county, was never voted upon by them, and could not, under then existing laws, have been submitted to such vote. The subsequent contract entered into by the County Court to sell back the stock subscribed for a nominal consideration, so as to effectually transmute the proposition to subscribe $100,000 to the capital stock of said company, to which the people of the county had given their assent, into a proposition to donate to the railroad company $95,000 of county bonds, to which the people of the county had not and could not have given their assent, was clearly void, so as to confer no rights and impose no obligations. The question then is, whether, even independently of the provisions of the Constitution of 1870, the General Assembly had the power, to validate a contract which was utterly void, and thus impose upon the county an indebtedness to which it had never assented, and to which, prior to said amendatory statute, it had no power to assent.

It was at one time a matter of grave controversy among courts of the highest respectability, whether furnishing aid to the building of railroads was so far a corporate purpose that a municipal corporation could, even in pursuance of express legislative authority, lawfully issue its bonds or incur indebtedness in furtherance of such purpose. And while there is; now a substantial agreement among the courts of the country* that aid to railroad building is so far a corporate purpose* -that municipal corporations may, when there is no adverse-■constitutional limitation, after being expressly authorized by the Legislature so to do, in the exercise of its own discretion* subscribe for stock in a contemplated railroad, or make &■ donation to aid in constructing it, it has never been held, we think, to be within the power of the Legislature, to compel a. municipal corporation, without its own consent legally expressed, to enter into or assume obligations of this character.

In the present case, the amendatory act of 1869, if effectual at all, can be held to operate only by way of validating a contract for a donation, which, by reason of want of power, as well as the absence of either an intention or opportunity on the part of the legal voters of the county to give their assent to it, was ultra vires and void. Declaring such void contract to be valid and binding, and providing that it should be carried into effect in good faith, as said amendatory act undertook to do, was an attempt to impose upon the county an obligation in aid of a railroad, without its own consent expressed in any legal form.

In Marshall v. Silliman, 61 Ill. 218, which was a bill to' restrain a railroad company from negotiating certain township bonds issued to it in payment of a subscription by the township to its capital stock, and to enjoin the collection of a tax levied for the payment of the interest thereon, and where it appeared that the township had voted in favor of a subscription of $15,000 in excess of the sum which by the charter of the company, as. it then stood, a township was authorized to subscribe, and that the Legislature subsequently amended said charter increasing the amount which a township might subscribe, so as to make it cover said $15,000, and also passed a special act confirming and legalizing the $15,000 subscription, and declaring it to be binding upon the township, this court, in stating the question presented, said: “This law, if valid, had the effect of creating a debt of $15,000 against the township. It declares that the subscription is binding, and may be collected from the township in the same manner as if it had been legally made. But before the passage of this act, it was not binding, and could not be collected. If -it is now binding, it became so for the first time at the passage of this law, and is so solely by force of the law. The question then, whether the subscription is binding, does not depend merely' upon whether the legislature can pass a retrospective law, but ■upon whether it can create a debt against a town, and require the town to assess a tax for its payment. ”■ After discussing this question somewhat at length, the court, in conclusion, said:

“Our conclusion is, that-the so-called curative act was a violation of the Constitution. Its object was to compel this town to issue its bonds for railroad stock independently of its •own wishes, and this was beyond the limits of its legislative power. It sought to accomplish this by declaring that a void proceeding was a valid one; that a vote confessedly illegal' was in fact legal. But this vote was an accomplished fact. Whether it was within the corporate powers of the town and binding upon' its people was a question which no subsequent legislation could affect; and when the Legislature undertook to say that this vote created a valid obligation against the town, when it did not, it was attempting, by its own act, to ■create a corporate debt.” See also Wiley v. Silliman, 62 Ill. 170; Barnes v. Town of Lacon, 84 id. 461; C. & St. L. R. R. Co. v. City of Sparta, 77 id. 505.

But the case of the bonds under consideration here presents •still further difficulties when considered in the light of the following provision of the Constitution of 1870 :

“No county, city, town, township or other municipality, ■shall ever become subscriber to the capital stock of any railroad or private corporation, or make donation to or loan its ■credit in aid of such corporation: Provided, however, that the adoption of this article shall not be construed as affecting the right of any such municipality to make such subscriptions where the same have been authorized, under existing laws, by a vote of the people of such municipalities, prior to such adoption.”

The proviso in this section seems to apply only to “subscriptions,” but if it be admitted that this word as here used, is sufficiently broad to include “donations” as well, it is clear that there are excepted from the constitutional prohibition only such donations as had been authorized by a vote of the people of the municipality prior to the adoption of the Constitution. All others are absolutely prohibited. As said in Middleport v. Ætna Life Ins. Co. 82 Ill. 562, and repeated in substance in People v. Jackson County, 92 id. 441: “The obligations assumed under existing laws can not, since the adoption of the Constitution, be enlarged or materially changed, either by the action of the people of the township, or its corporate authorities. All power is taken away, and the utmost that can be done is, to make and complete the subscription or donation previously voted under then existing laws, upon the same terms and conditions as voted. Subscriptions or donations upon other terms would obviously require new consent on the part of the people of the municipality, which can not be done for want of power.”

The bonds in question were not issued until considerably more than one year after the Constitution was adopted, and as the proposition to make a donation to said railroad company was never submitted to a vote of the people of Saline county, it is impossible to see how such donation can be held to be within the terms of the proviso or exception in said section of the Constitution. At the time the bonds were issued, nothing remained to be done but to carry out the terms of the subscription precisely as it was submitted to the vote of the people at said election. This, however, was not done nor attempted to be done, but instead of it, an entirely different transaction, viz., a donation out and out of $95,000 of the bonds of the county was substituted, thus bringing the case clearly within the constitutional prohibition.

The validity of said bonds is also assailed upon the further ground, that it does not appear that any notice was given of the election held upon the proposition to subscribe $100,000 to the capital stock of said railroad company. Said election was a special one, called by the County Court, to enable the-people of the county to vote' for or against said proposition,, and there is no direct evidence in the record that any notice* of said election was given.

The tenth section of • the charter of said railroad" company" provided for the submission of the question of subscription to-the legal voters of the county at an election to be called by" the proper county authorities, but it made no provision as to-how the election should be conducted, or as to what notice of it should be given. Under these circumstances we think there* can be no doubt that the Legislature intended that the general law in relation to elections should apply, and that the notice prescribed by that law in cases of special elections should be given. In order to a valid election, the giving of such notice was necessary, and if- none was given, the election was invalid.

Whatever may be the rule in case of bonds issued prior to the adoption of the Constitution, the rule seems to be well settled, that, where bonds have been issued since its adoption, all presumptions are against them, so as to throw upon those asserting their validity, the burden of proving the legality of the election authorizing their issue. Town of Prairie v. Lloyd, 97 Ill. 179; People v. Jackson County, 92 id. 441; Middleport v. Ætna Ins. Co. 82 id. 562; Williams v. The People, 132 id. 574.

Not only is there no direct evidence that notice of said election was given, but the county clerk, who is the official custodian of the records of the County Court, testifies that he has carefully examined the records of his office pertaining to the issue of said bonds, and is unable to find any paper or record showing or indicating that any notice of said election was ever given, and that there is no such paper or record in his office. The absence from the files and records of the county of all evidence tending to show that notice of the election was given., is a strong circumstance bearing upon that question. It may also be observed that the record before us discloses no finding or recital in any order of the County Court that notice of said election had been given, or even, in general terms, that the election was held in pursuance of law. The only item of evidence upon which reliance is placed as tending to show notice, is a recital in the form of bond copied into the order of October 8, 1872, and which by that order was authorized to be issued, to the effect that the bond, and the others of the same series, “were authorized by a majority of the legal votes cast at an election held in said county, in pursuance of law, on the 5th day of October, 1867.”

There is no finding by the court of the truth of this recital, so that even if the court, after the adoption of the present Constitution, was competent to make a finding which should be binding upon the county, it is not shown that it made any such finding.

As the burden of proof upon the issue -of notice was upon the party asserting the validity of the bonds in question, we are of the opinion that, upon the evidence in this record, that issue should have been found in favor of the appellant. It follows from this, as well as from the reason first above given, that the judgment of the County Court of Saline county giving judgment against the appellant’s land for the tax levied to pay the interest on said bonds, must be reversed. The cause will be remanded to that court for further proceedings.

Judgment reversed.