City of Aurora v. West

22 Ind. 88

• Court: Indiana Supreme Court
• Decided: May 15, 1864
• Status: Published

Opinion

Perkins, J.

This suit was brought in the Court below by ' West and Torrence, to recover the amount due on the coupons falling due in 1858, ’59, ’6.0, ’61, attached to fifty bonds of 1,000 dollars each, issued by the city of Aurora in payment of the stock of the Ohio and Mississippi Railroad Company, which the mayor of the city had subscribed. The bonds bear date the first day of January, 1852, hut they were not actually issued till about the first of June, 1858, some eighteen months after they hear date.

■ The following is a copy of one of the bonds and one of the coupons:

No. 1. UNITED STATES OP AMERICA. No. 1.

STATE OE INDIANA, $1,000. CITY OE AURORA, $1,000.

Ohio and Mississippi Railroad Company.

The city of Aurora acknowledges itself indebted to the Ohio and Mississippi Railroad Company, or bearer, in the sum of 1,000 dollars, negotiable and payable at the North River Bank, in the city of New York, twenty-five years from date hereof, upon the presentation and delivery of this certificate, bearing an interest of six per cent, per annum, payable annually on the first day of January, at said bank, in the city of Neiv York, upon presentation and delivery of the proper coupon hereto attached, signed by the clerk of said city; and at all times the holder shall have a lieu on the stock of said city in said company, for which this is received in payment, and may exchange the same for a like amount of said stock at any time before the first declaration of cash dividends, and be substituted as stockholder in place of said city, upon surrender of this bond. This bond is issued in part payment of a subscription of 50,000 dollars by the said city of Aurora to the capital stock of the Ohio and Mississippi Railroad Company, by order of the common council of the city of Aurora, on the 28th of September, 1850, in pursuance of the eighteenth section of an act granting to the citizens of the town of Aurora, in the county of Dearborn, a city charter, passed by the General Assembly of the State of Indiana, and approved February 14th, 1848.

Witness the seal of said city of Aurora, and the signature [seal.] of the mayor and clerk of said city, this first day of

■ January, 1852. Solomon P. Tumey,

Mayor of the City of Aurora, Indiana.

Will. W. Conway, Clerk of the City of Aurora, Indiana.

The following is a copy of one of the coupons:

hTo. 1. OHIO AND MISSISSIPPI RAILROAD SUBSCRIPTION. $50,000.

City of Aurora, Indiana, will pay the bearer 60 dollars, at the North River Bank, in the City of New York, on the first day of January, 1858, being annual interest on bond ISTo. 1. $60.00. Will. W. Conway, Clerk.

These bonds purport to be issued under the eighteenth section of the city charter of the City of Aurora.

That section is in these words :

“The said City Council, whenever a majority of the qualified voters of said city require it, shall have power, and they are hereby authorized to take stock in any chartered company for making roads to said city, or for watering or lighting said city; Provided, that n© such stock shall be subscribed on the part of the city until a majority of the .qualified voters thereof have signified their assent thereto by expressing upon their ticket at any annual election, that they are in favor of the subscription for such stock by the city council; and to raise funds for the payment of such stock the said city council shall have power and authority to make and sell their bonds under the seal of said corporation, payable in such time as they may deem proper and expedient, and bearing interest at the rate of six per cent, per annum, payable annually, and therein pledge to the holder of such bonds that the stock so taken, with all the dividends thereon accruing, shall be held and firmly bound, for the payment of said bonds and accruing interest on the same, and that the interest coupons attached to said bonds shall be received at all times when due, for the payment of all taxes due to said city; the amount of stock subscribed in any one chartered company not to exceed 50,000 dollars.”

The city officers having subscribed for 50,000 dollars of the capital stock of the company in September, 1850, they did, in June, 1853, issue these bonds. They were not sold in the market, or in any way to raise money for the payment of the stock, but they were, on or about the 3d day of June, delivered by the city officers to the Ohio and, Mississippi Railroad Company, in payment of the subscription. The stock was not issued to the city until long afterwards. It was, when issued, in such form that it was afterwards returned to the Ohio and Mississippi Railroad Company, and cancelled, and no stock has since been issued to the city.

Among the grounds of defence relied on by the city of Aurora was this: “that the Ohio and Mississippi Railroad Company was not a chartered company for making a road, or roads, to said city of Aurora, or for doing any other act or thing touching said city, or for the promotion of the local interest thereof; and the said defendants and the city of Aurora, aforesaid, specially aver that on the-day of September, 1850, when the said subscription was made by the said city council of the city of Aurora for 50,000 dollars of the capital -stock of said Ohio and Mississippi Railroad Company, the road of said company, that is to say the Ohio and Mississippi Railroad, was not located to or -through said city, and the said Ohio and Mississippi Railroad Company was not on the - day of September, 1850, the day upon which said subscription was made, constructing, nor had said company at any time before that day been engaged in the construction of a railroad, or any other road to, or through, or from the said city of Aurora, nor was the said company required by their act of incorporation to construct a road to, through, or from said city; ” all of which was well known to Charles W. West, one of the plaintiffs, who was then, had been before, and continued afterwards to be a member of the board of directors of said Ohio and Mississippi Railroad Company.

On the trial the Court charged the jury, among other things, as follows:

“If you believe from the evidence that the plaintiffs' purchased the bonds from the railroad company in good faith, and paid a valuable consideration,- and -without any knowledge on their part of the city of Aurora having any objections to the payment of said bonds, or having objections to the manner in which the city of Aurora made said bonds, you should find for the plaintiff.”

This was excepted to.

It appeared in evidence that the plaintiff, West, was a director and active member of the corporation, as alleged in the paragraph of the answer above quoted.

There was judgment below against the city. In examining the case we may first properly ascertain the character of these corporation bonds.

They are, in legal effect, the promissory notes of the city. It is true, they are under seal, and would not, by strict common law rules, come within the definition of promissory notes; but they are now treated as such. If they had been issued, payable generally, they might not have been governed by the law-merchant in this State. Only-bills of exchange, and such notes as are payable at a bank in this State are, by the law of this State, governed by the lex mercatoria. 1 Blackf. 81; 13 Ind. 521.

But the bonds or notes in question are payable in New York; they are, therefore, as against the maker of them, New York contracts; they are governed by the law of New York.

This principal of law was settled in England, by the case of Robinson v. Bland, in 1760, 1 Wm. Black. Rep. 234, 256; S. C. 2 Burr. 1077. In that case Sir John Bland drew a bill at Paris upon himself, payable in England, for money lost at play in Paris. It was, in legal effect, his promissory note, executed in Paris but payable in England. Suit was instituted on the bill in England. The question was whether the law of France or England was to determine the character of the paper. The case was twice argued. On the first argument, Dennison, J., said: “ This case and the law upon it are quite new to me. I can form no opinion upon it.”

On the second argument, Lord Mansfield said: “ The general rule established ex comitate et jure gentium is, that the place where the contract is made, and not where the action is brought, is to be considered in expounding and enforcing the contract. But this rule admits of an exception, where the parties (at the time of making the contract) had a view to a different kingdom. IJuberus says, Proel. 1, tit. 3, p. 34, contracts are to be considered according to the place wherein they are to be executed. As, therefore, the bill in the present case is made payable in England, it is entirely an English transaction, and to be governed by the local law. Dennison «7,, said: “ It is a plain case and must be ruled by the laws of England.” Wilmot, J., said: “ The place whore the money is to be paid must guide the law. It is determined as to usurious contracts in Ireland. Pr. Chanc. 128. Clearly, therefore, the law of England must be the rule, as the money was made payable here.” To the same effect in Indiana. The State Bank v. Bowers, 8 Blackf. 72; Hunt v. Standart, 15 Ind. 33: Rose et al. v. The Park Bank, 20 Ind. 94: Butler v. Myer, 17 Ind. 77.

By the law of New York, bonds like those in suit are governed by the law-merchant. This is shown by the statute of New York set out in the record, and the decisions of her courts. Gould v. The Town of Sterling, 10 Am. L. Reg., and note 2; S. C., 23 N. Y. Court of App. 439, 464; Bank of Rome v. The Village of Rome, 19 N. Y. Court of App. 20. See 19 Ind. R. p. 93.

Being mercantile paper, the next question is to what defences is it subject? As a general proposition, it may be laid down that mercantile paper, made void ab initio, by statute, is void in the hands of a bona fide holder. Story on Bills, § 189. So, such paper, as a general proposition, we take it, can not be enforced, even by a bona fide holder, against infants, lunatics, married women, and alien enemies, they not having capacity to bind themselves by such contracts. Story on Bills, § 81 et seq. So, it has been held, that where a corporation issued commercial paper, not apparently within the scope of its powers, such paper was void in the hands of a bona fide holder, if there could be such. Smead v. The Indianapolis, &c. Co., 11 Ind. 104; Starin v. Town of Genoa, 23 N, Y. Rep. 450; Gould v. The Town of Sterling, id. 459. See, also, 14 Cal. Rep. 367; 16 id. 626; 18 id. 613; 20 id. 103. See Moran v. Commissioners of Miami Co., 2 Black, (U. S.) Rep. 722. But we need not now express an opinion on this point, for the plaintiffs in the case at bar were not, as will appear further on, bona fide holders of the bonds in suit; so that if these bonds were irregularly issued, the plaintiffs were chargeable with notice thereof. Aurora was and is a municipal corporation, and therefore, on general principles of law, could not, without special authority, subscribe stock and issue bonds in payment of it, in a railroad corporation. Grant on Corp. pp. 60, 276, (side pages.) But such authority is proper to be conferred upon a city where it is expedient. And where such special authority is given, by statute, in any case, it must be executed as prescribed in the grant, if executed at all. The terms and conditions of the grant can not legally be departed- from or exceeded. In the case of the city of Aurora a special authority was given to her, by the section of the charter above quoted, to take stock in a railroad, running to the city, upon a vote of a majority of her qualified voters. The power of the city, then, to take railroad stock, &c., was granted subject to two conditions precedent, viz: the existence of a road running to the city, and a vote, expressed, &c., of a majority of her qualified voters. The bonds in suit bore a reference upon their faces to the authority under which they were issued, and thus put all persons on inqury as to the extent of the powers of the agent issuing them.

Aurora, then, might take a certain amount of stock and issue bonds, &c., to- a certain amount, in and for a railroad running to that municipal corporation, after a vote, &c.

A railroad running through would be a railroad running to the city. The City of Aurora v. West et al., 9 Ind. 74; Von Hostrup et al. v. The City of Madison, Dec. Term Sup. Court U. S. 1863.

That city did, in fact, take stock in the Ohio and Mississippi Railroad Company, and issue bonds in payment of it. Some of those bonds passed into- the hands of the plaintiffs below in this suit. And the questions arise, was the Ohio and Mississippi Railroad Company a railroad running to Aurora? "Was the stock taken after a vote as prescribed by the charter? A determination of the city council that such a vote had been taken would probably be sufficient evidence of that fact, at least, to constitute a prima'facie bona fide purchaser in a given case. The Evansville, &c. Railroad Company v. The City of Evansville, 15 Ind. p. 395. In this case, however, it may be questioned whether the city council ever passed upon the point. A majority of those voting may not be a majoi'ity of the votes; but we pass this point, and proceed to the other inquiry above propounded, viz: was the Ohio, $e., Railroad, a road running to Aurora ‡ How is this inquiry to be determined? If Aurora had been made a point in the charter of the company, that fact would have been an answer to the question; but it'was not. ■ Hence, it could only have been made a road running to Aurora by subsequent action of the directors of the corporation; and, till such action had been had, no absolute subscription of stock in the corporation could have been made by the city. How, the directors of the Ohio and Mississippi Railroad Company, are constituted, by the charter, the corporation; and the fact appears that, from its origin till after the subscription by Aurora, West, one of the plaintiffs, and a partner of the other, was one of the acting directors of the Ohio, $c. Company, and thus a part of the corporation; and such a corporation must be chargeable with knowledge of its line of .road; hence, in point of law, was necessarily chargeable with notice of the time, place and manner of the location of the road. See Aspinwall et al. v. Ohio, &c. Company, 20 Ind. Rep. 492.

In view of this fact, then, that the plaintiffs must be charged with notice, on the question of location, the instruction given by the Court, above quoted, is erroneous, and may have controlled the verdict in the cause. That instruction is erroneous on two grounds:

1. It goes upon the hypothesis that the bonds may have been illegally issued, and the plaintiffs bona fide Holders of them, even though that illegality consisted in issuing the bonds for stock subscribed in a road not running to Aurora.

ITolman $ Haynes, Jer. Sullivan and T. D. Lincoln, for the appellants. A. Brower, for the appellees.

2. It goes upon the hypothesis that the bonds might have been void for illegality of issue, and that fact kiiown to the plaintiffs, and yet the plaintiffs be entitled to recover if they did not know that the people of the city were objecting on that ground.

This instruction was calculated to mislead the jury. The people would be presumed to be objecting.

A point is made as to an error of the Court in allowing an illegal question to be propounded to a witness. Whether the answer to such-question should be excepted to as well as the question, to save the error for review in the Supreme ■Court, we do not decide; but we do decide,that the Supreme Court will not reverse for the error of permitting such question to be put aud answered, where the answer is harmless; nor where, though not harmless, no motion for a new trial on account of the error, was interposed. See The City of Aurora v. Cobb et al., 21 Ind. p. 492.

In the case of Culbertson v. Stanley, 6 Blackf. 67, Sullivan, J., says: “Nor is it error that the Court erroneously overruled an objection to a leading question, unless the record show that the opposite party was injured by the answer of the witness.” See also 13 Ind. 377: “If the witness did not give the answer it was the design of the plaintiff to draw from him, the defendant has no reason to complain.”

Per Curiam.

The judgment below is reversed, with costs. Cause remanded, &e.