City of San Antonio v. Gould

34 Tex. 49

• Court: Texas Supreme Court
• Decided: July 1, 1871
• Status: Published

Opinion

Walker, J.

R. S. Gould brought his suit against the city of San Antonio to the October term, 1870, on sixteen interest coupons, alleging that they were issued by said city in payment of stock in the San Antonio and Mexican Gulf Railroad, and which he avers to be his property, acquired in due course of trade, [or a valuable consideration, and prior to their maturity.

It appears that the bonds and coupons were made and delivered to the railroad company on the first day of March, 1852, as is claimed, in pursuance of an act of the Legislature, approved September 5, 1850. A copy of one of the bonds is attached to the record and the coupons were set out in the petition, a copy of one of which reads as as follows :

“ City of San Antonio, Bonds.—Due from the city of San Antonio to bearer, seventeen dollars and fifty cents, due first September, 1868, upon bond No.-, for $500.

“ C. F. King, Mayor.’.’

On the trial of the cause in the district court, the appellee recovered a judgment for the sum ef $377 74, that being the aggregate amount of the coupons sued on, with interest from their maturity.

From this judgment an appeal is brought to this court.

On the trial of the cause thirteen bills of exception were taken.

We shall only notice such of the exceptions tó the rulings of the district court, as we deem necessary to the decision of the case.

The constitutionality of the act of September 5, 1850, is called in question by the. pleadings. In the case of San Antonio v. Enoch Jones, 28 Texas, 19, it was urged that the legislative power was exceeded in the twelfth section of the act, and that so much of the act incorporating the San Antonio and Mexican Gulf Railroad Company as conferred upon the city of San Antonio the power to subscribe to the capítol stock of said company, to issue bonds and levy taxes, was unconstitutional and void.

This question was, as we think, properly settled upon authority against the appellant.

The question herein raised as to the constitutionality of the act under the twenty-fourth section of the seventh article of the Constitution of 1845, was not raised in the case; but i.t was in thesubsequent case of the city of San Antonio v. William G. Lane, and was decided by this court, upholding the constitutionality of the law.

In neither of these cases was the plea of non est factum urged by defendant below; nor was the question of holding in good faith for a valuable consideration seriously made; and to these three questions we shall direct our inquiry.

The act of September 5, 1850, is entitled “ An act to incorporate the San Antonio Railroad Company.” The act consists of eighteen sections; they set out in detail the objects and purposes of the corporation, and define the powers and privileges ordinarily granted to companies of the kind ; and these powers are very complete, full, and sufficient to have enabled the company to build and operate the proposed railroad without any reference whatever to the matters and things contained in the twelfth section of the act.

Inasmuch as the main question to be decided in this case arises under section twelve, we give it as follows :

'‘ That the mayor and aldermen of the city of San Antonio be, and they are hereby authorized to subscribe to the capital stock of said company for said city, to an amount .not to exceed fifty thousand dollars, as also such incorporated towns through which said railway may pass, inclusive of the town (if any) that may be its terminus on the gulf; and to issue bonds bearing interest, or otherwise to pledge' the faith of said city or towns to pay for the same; and the chief justice and county commissioners of the several counties through which the railway may pass shall be, and they are hereby authorized to subscribe to the capital stock of said company for their respective counties to pay the same; provided, that the chief justice and county commissioners of said counties shall not make such subscription unless two-thirds of the qualified electors of said county or counties, at an election to be held for that purpose, shall vote in favor of such subscription being made; and the chief justice of any such counties may order such election to be held, and shall give notice of the time and object of such election, by causing notice thereof to be posted up in each precinct of the county, at least thirty days before the holding of such election; said election to be conducted in the manner regulating county elections, so far as the same may be applicable; provided, also, that said mayor and aldermen of the city of San Antonio, and the towns upon the line and at the terminus of said railway on the gulf, shall not make such subscriptions unless two-thirds of the electors of said city or towns qualified to vote for, town or city officers, at an election to be held for that purpose, shall vote in favor of such subscription being made; and the mayor of said city or towns may order such an election to be held, and shall give notice by publication in the newspaper published in the city or town fer at least twenty days previous to such election being held; and said elections shall be conducted in the same manner regulating the respective city or town elections, so far as the same may be applicable; provided, further, that where any such subscriptions shall be made and bonds thereof be issued by the mayor and aldermen of any of said towns or city, or by the chief justice and county commissioners of any of said counties, it shall be their duty, respectively, to provide for the punctual payment of the interest that may from time to time become due upon the same, and for the payment of the principal thereof by levying and collecting a tax on the real and personal property in the city, town or county for which said subscription' shall be made, and bonds issued, which tax shall not be less than ten cents nor more than fifty cents on each and every one hundred dollars taxable property in said city, town or county, and shall be assessed and collected and paid into the treasury of said city, town or counties by which it is levied, in the same manner the city or county tax in such city or towns or counties is assessed and collected, which tax shall be continued from year to year until the whole amount of the principal and interest due on said bonds shall have been fully paid and discharged; and when collected, after deducting therefrom the expenses of assessing and collecting, shall first be applied to the payment of the interest due on such bonds, and the remainder shall be applied to the payment of the principal on such bonds.”

It will readily be seen that this section of the act is intended to enable the city of San Antonio, and other towns and counties, to become subscribers to the capital stock of the proposed San Antonio Railroad Company, directing the manner in which the stock shall be subscribed and paid. How, if it can be made to appear that all those matters and things, provided for in the twelfth section, were necessary incidents to the building of a railroad from San Antonio to the Mexican Gulf; that they were part and parcel of the necessary provisions for building said road, then the argument in support of the opinion in San Antonio v. Lane becomes plausible; but we cannot adopt this theory of the law. A railroad might have been built in accordance with the provisions of the act without calling into use any of the measures proposed in the twelfth section. The plain and literal meaning of seventeen sections of the act make it an act of incorporation, the purpose of which is to build a railroad from San Antonio to the Gulf of Mexico, with 'the ordinary powers, rights and privileges incident to such a franchise.

The twelfth section of the act would properly, in itself, be styled “ an act to provide the means for building such railroad but it is complicated and intricate, and would not ordinarily be found engrafted on a railroad charter, and especially not, unless some apt and appropriate allusion were made to it in the title of the act.

We therefore regard it as repugnant in a strong sense to the twenty-fourth section of the seventh article of the Constitution of 1845.

The Supreme Court of the State of Ohio, adjudicating under a similar constitutional inhibition, say: “ The provision in the Constitution, article 11, section ten, that no bill shall contain more than one subject, which shall be clearly expressed in its title, was incorporated into the Constitution for the purpose of making it a permanent rule of the houses, and to operate only upon bills in their progress through the General Assembly. It is directory only, and the supervision of its. observance must be left to the General Assembly.” (Pim v. Nicholson, 6 O. S., 176.) But our Supreme Court has held directly the opposite doctrine. (See Cannon, et al., against Hemphill, et al., 7 Texas, 184.)

The case of Tadlock v. Eccles, 20 Texas, 782, decided by the same learned court, is in no way inconsistent or repugnant to the former case. In that instance the law in question was entitled “ An act to consolidate the Texas Monumental Committee and the Texas Military Institute with Rutersville College,” and it was held that it embraced but one object within the meaning of the Constitution, namely: the consolidation of three different institutions into one. But the .act of September 5, 1850, contains two objects at least: the one to incorporate a railroad company, the other to raise means under various appliances to build a railroad.

The case of Chiles v. Drake, (2 Metcalf’s Kentucky R., 146,) and quoted by the learned judge who delivered the opinion in San Antonio v. Lane, is a case precisely analogous to that of Tadlock v. Eccles, and neither of them deny the authority of Cannon v. Hemphill, but clearly admit that in a proper case the constitutional inhibition would be mandatory.

‘ We now pass "to a consideration of the plea of non est factum. On the argument of this case there appeared to be some doubt as to the city of San Antonio having a common seal at the time she is supposed to have uttered the coupons sued on. The city was incorporated by an act of the Republic passed January 14, 1842. By this act she is created a body corporate and politic; no mention is made specifically of a common seal. But she was reincorporated by an act of the Legislature passed January 24, 1852; and in this act the power is “expressly given in the first section “to make and alter the common seal.”

But the common law was in force in this State at the passage of the act of December • 5, 1850, and Mr. Kidd, in his work on corporations, enumerates among the powers and capacities which tacitly and without any express provision are considered inseperable from every corporation: first, perpetual succession; second, to sue and be sued, implead and be impleaded, grant and receive by its corporate name, and do all other acts as natural persons may; third, to purchase lands and hold them for the benefit of themselves and their successors; fourth, to have a common seal; and fifth, to make by-laws.

To these Chancellor Kent has added a sixth: the power of amotion or removal of members. (See Angel & Ames on Corporations, § 110.) We also- make the following quotation from the same learned authority:

“The general rule in England seems, however, still to be, that a corporation aggregate cannot expressly bind itself except by deed, unless the act establishing it authorizes it to contract in another mode, or obviously contemplates that it shall so do, as make promissory notes, in order to attain the object or do the business for which it was created. Where ‘ a company, like the bank of England, or the. East India Company, are incorporated for the purpose of trade, it seems,’ says Mr. J us tice Best, to result from the very object of their being so incorporated, that they should have power to accept bills, or issue promissory notes; since without such power, it would be impossible for either of these companies to go on.’ We find, indeed, in Edie v. The East India Company, and from the Bank of England v. Moffat, that actions on simple contracts have been maintained against these institutions, without the objection we are considering. If the contract, however, be executed, the general rule above stated does not seem to be applied; and hence assumpsit for use and occupation may be maintained by a corporation aggregate against a tenant who has occupied under them and paid rent. In Beverly v. Lincoln, it was held that a corporation aggregate might be sued in assumpsit on a contract by parol, express or implied, for goods sold and delivered; and in Church v. The Imperial Gas Company, that it made no difference as to the right of a corporation to sue on a contract made by them without seal, whether the contract be executed or executory. At all events, a suit brought by a corporation upon an executory contract is held, in England, to amount to an admission of record by them that such contract was duly entered into by them, so as to estop them from setting up, in a cross action, the objection that it was not sealed with their common seal. (See Fishmonger’s Company v. Robertson, 5 Mann. & Grang., 192.) The English law on this subject is evidently in a state of slow transition. (See De Grave v. Monmouth, 4 Carr. & Payne, 111.) A distinction, however, is taken in this respect between a municipal corporation and the corporations of late established by charter or act of parliament, for the purpose of carrying on trading speculations; and where the nature of these latter has been such as to render the drawing of bills or the making of any other particular set of contracts necessary for the purpose of the corporation, the English courts have held that they would imply in those who are, according to the provisions of the charter or act of parliament, carrying on the corporation concerns, an authority to do those acts without which the corporation could not subsist. At the same time, they hold that a municipal corporation cannot enter into an important contract to pay a sum of money out of the corporate funds, even to make improvements in the borough, except under the common seal.” (See Mayor of Charlton v. Ludlow, 6 Mees. & Welsb., Ex. R., 815; S. C., 9 Carr. & Payne, 242; and see Arnold v. Mayor of Poole, 4 Mann. & Grang, 860; Hall v. Mayor & C., of Swansea, 5 Adolph. & Ellis, N. S., 526; Reg. v. Mayor Stamford, 6 Adolph & Ellis, N. S., 433; Paine v. Strand Union, 8 Adolph. & Ellis, N. S., 340; Reg. v. Council of Warwick, Id., 926.)

We are fully aware that this rule has been modified in Pennsylvania, in Kentucky, and perhaps in most of the States; but we are unable to find an instance where a municipal corporation has been permitted to do an act such as that alleged to have been done by the city of San Antonio, otherwise than by its common seal.

A broad, distinction is kept up through the authorities between trading and municipal corporations; the former are permitted to do many things in the way of simple contracts, without the common seal of the corporation, which municipal corporations are not allowed to do.

Upon a careful examination of the facts in this case, we think it very doubtful if the appellee can be considered a bona fide holder of the coupons sued on, for a valuable consideration and without notice of outstanding equities. At the' time the bonds were uttered it is very doubtful whether, in law, there was any such corporation in existence as the San Antonio and Mexican Gulf Railroad Company.

The bonds were uttered in the year 1852, and did not pass out of the hands of the railroad company until 1857, during which time it was attempted to revive and resuscitate the railroad company by an act of the Legislature, but the city of San Antonio neither lost or gained anything by this act, for it is not shown that she ever asked for it or acquiesced in it.

The corporation appears to have been rotten from the beginning. The subscribers would not pay their stock, the public had no faith in it. The city of San Antonio, by her common council, enacted a protest against the payment of principal and interest; the newspapers of the city published it. Two witnesses, Judge Devine and Nathaniel Lewis, who went to the city of New York for the purpose of disposing of these bonds, testify that the insolvency of thé railroad company was as notorious in the city of New York as it was in the city of San Antonio; that the bonds of the railroad • company could not be sold at any price • that the bonds of the city would not have brought more than twenty-five or thirty cents on the dollar, and that not in money, but in carts, picks and barrows.

This was in 1853, and the witnesses testify that the affairs of the company grew worse from that time on.

It is a matter which the facts, as proven, bring into great doubt whether any man in his senses would have purchased railroad or city bonds which must necessarily derive their existence from some law, and which depended for their value upon the solvency or insolvency of the corporation by which they are uttered, without examining into the condition of such corporations, and knowing all about the nature of such securities. Railroad and city securities do not ordinarily pass from hand to hand like commercial paper; they are usually thrown upon the market and sold like other stocks, and are subject, like all other securities, to the vicissitudes of the market, which are well understood by those who deal in them.

We think the eleventh bill of exceptions well taken.

For the reasons given the judgment of the district court is reversed and the cause dismissed.

Reversed and dismissed.