Deland v. Platte County

54 F. 823, 1890 U.S. App. LEXIS 1945

• Court: U.S. Circuit Court for the District of Western Missouri
• Decided: November 5, 1890
• Status: Published

Opinion

PHILIPS, District Judge,

(after stating the facts.) The bonds in question are predicated of section 7 of an act of the general assembly of the state of Missouri,' approved 4th January, 1860, incorporating the Platte City & Des Moines Railroad Company, which section is as follows:

“Upon tlie presentation of a petition of the president and directors of said company to the county court of any county through which' said road may be located, praying that a vote may be taken in any strip of country through which it may pass, not to exceed ten miles on either side of said road, that the inhabitants thereof are desirous of taking stock in said road, and of voting upon themselves a tax for the payment of the same, it shall be the duty of said county court to order an election therein, and shall prescribe the time, place, and manner of holding said election; and if a majority of the taxable inhabitants shall determine in favor of the tax, it shall be the duty of said court to levy and collect from them a special tax, which shall be kept separate from other funds, and appropriated to no other purposes, and as fast as collected shall cause the same to be paid to the treasurer of said company.”

It is the settled law of this jurisdiction that the holder of municipal bonds is chargeable with notice of the provisions of the law authorizing their issue. If there was no law authorizing the issue of the bonds, the bonds are void; and a purchaser of such instruments is bound to see to it that there is some law consistent with the recitations of the bond pursuant to which it was issued. The bond in question recites that it was issued “in pursuance of an election by the taxable inhabitants of Camden Point, on the 17th day of August, 1869, and for the payment of which and the interest thereon the county court of said county shall from time to time levy and causé to be collected, in the same manner as county tax, a special tax, which shall be levied on the real estate lying within the district so voting at such election.” This recital, of course, referred the purchaser to the records and law authorizing the issue of this paper; and the plaintiff has pleaded the acts of the legislature and the action of the county court aforesaid as the basis of his right of action.

It has been expressly decided in Ogden v. County of Daviess, 102 U. S. 634, that said section 7 of the charter of the railroad did not authorize the county court of Platte county to issue bdnds for' the payment of any subscription voted by the inhabitants of-the “strip” of country. The court say:

“The inhabitants were not even organized by themselves, much less made a body politic, for any purpose. They could vote the tax, if called upon to do so by the county court; but that was all. The effect of their vote was nothing more than to authorize the county court to levy, collect, and pay over to the treasurer of the company the special tax they had determined upon. The requirement of the law that the money, when collected, should be paid over to the treasurer of the company, is entirely inconsistent with any idea that the obligations to be met in this way were to be in the form of negotiable paper afloat on the market as commercial securities. Under the provisions of section 6 of the charter, counties, towns, and cities were expressly authorized to issue bonds in payment of their subscriptions. The omission of any such power in section 7 is conclusive evidence that nothing of the kind was intended in case of ‘strip’ subscriptions. In this particular, the ease is even stronger than that of Wells v. Supervisors, Id. 625.”

Clearly, therefore, unless these bonds can be referred to some other law for their vindication, this action must fail. Counsel for complainant rely upon two acts of the legislature, — one adopted March 23, 18(58, entitled “An act to facilitate the construction of railroads in the state of Missouri.” This act authorized the county court to make subscription to the capital stock of railroads, and issue bonds therefor on behalf of any municipal township of a county, when petitioned therefor, and after an election to he held in the said township, at which two thirds of the qualified voters should vote for such subscriptions. It was also expressly held in Ogden v. County of Daviess, supra, that this act related entirely to municipal townships, as such, and was no authority for issuing bonds on a subscription voted by a mere strip of country, or for any less subdivision of a county than the municipal townships as they existed under the political subdivisions in onr state government. But plaintiff contends that by an amendatory act of the statute last aforesaid, approved March 24, 1870, the issue of the bonds was authorized. This amendment is as follows:

“In all cases where, by the provisions of the charter of any railroad company organized tinder the laws of this state, the taxable inhabitants of a portion of a municipal township of any county in this state have voted, or may hereafter vote, to take stock in such railroad company, they are hereby declared entitled to and shall have all the privileges, rights, and benefits In said act conferred upon counties or townships, and the county court of .such county shall exercise ihe same powers and perform the same duties in issuing bonds, levying, collecting, and paying over the taxes, which it is required to do in the case of a county or township under the provisions of said act: provided, however, that no part of said township, outside the limits of ihe district voting, shall be taxed to pay any of the bonds or coupons so issued by the county court. This act shall take effect from its passage.”

It will bo observed that this provision relates to the instance of a vote already had, as well as to one'that might thereafter be taken; and it is the retroactive feature of this provision that plaintiff invokes and relies upon. For it must be kej)t in mind that the subscription voted by the taxpayers of the strip was at an election held in 1809, and prior to the adoption of this amendatory statute of March 24, 1870. The contention of plaintiff is that said election was held in “a, portion of a municipal township,” and it is sought in argument to construe the decision in Ogden v. County of Daviess so as to give authority for this post mortem legislation. The chief justice, arguendo, does say:

“It must lie presumed that the amendment applied only to parts of townships, separately, and not to the aggregation of townships or parts of townships, which must necessarily be included in a strip of country twenty miles wide, or less, along a railroad as it runs through a country. The bonds which this statute authorizes wore to be issued on behalf of a portion of a township, not on behalf of a ‘strip of country.' ”

It is to bo observed, however, that, while the court is reciting what the statutory amendment authorized, it does not say that, this statute would authorize the issue of bonds after an election held under the charter of the railroad in question. For the learned chief justice instantly proceeds to state:

“Under the charier the taxable inhabitants of the strip were to take the stock, and they were to be taxed. We cannot, without a perversion of language, apply the act of 1870 to this provision of this statute.”

Counsel for plaintiff asserts the proposition that this amendatory act of 1870 should he applied in this case as if it were a part of the. act of 1868, and in existence at the lime of the election held in. the strip in 1869; and contends that the legislature could ratify and affirm the exercise of any power by a municipal corporation which it could originally confer; and we are referred to the following authorities in support thereof: Anderson v. Township of Santa Anna, 116 U. S. 356, 6 Sup. Ct. Rep. 413; Bolles v. Brimfield, 120 U. S. 759, 7 Sup. Ct. Rep. 736; Jonesboro City v. Cairo, etc., R. Co., 110 U. S. 192, 4 Sup. Ct. Rep. 67. These are cases arising on legislative acts in the state of Illinois, in which the principle is announced that, “unless there be a constitutional inhibition, a legislature has power, when, it interferes with no vested right, to enact retrospective statutes to validate invalid contracts, or to ratify and confirm any act it might have lawfully authorized in the first instance.” That such statutes enacted subsequent to the occurrence of the act sought to be cured may obtain in some states whose constitutions do not interdict retrospective legislation, may be conceded to the plaintiff. But the constitution of the state of Missouri, (section 28, art. 1, of the declaration of rights,) in force at the time of the issue of these bonds, declares that, “no ex post facto law, nor law impairing the obligation of contracts, or retrospective in its operation, can be passed.” The constitution of the state of Illinois contains no such provision as the latter part of the foregoing clause. Under the constitution of Missouri, no law retrospective in its operation can be passed.

What is a retrospective law? “This word,” says Bouvier, “is usually applied to those acts of the legislature which are made to operate upon some subject, contract, or crime which existed before the passage of the act; and they -are, therefore, called 'retrospective laws.’ ” “A statute which takes away or impairs any vested right acquired under existing laws, or creates a new obligation, or imposes a new duty, or attaches a new disability, in respect to transactions of considerations already past, is to be deemed retrospective or retroactive.” Sedg. St. Const. Law, (2d Ed.) 160. This provision of the Missouri constitution has been construed and applied by the state supreme court, and is entitled to respect, and should be followed where a right, in pari materia, again comes under review. In Fowler v. City of St. Joseph, 37 Mo. 228, certain work was done for the city under an ordinance which provided for the collection of the bills by suit at law. After this work was done, the city, by a subsequent amendatory ordinance, provided that the cost of such improvement should be enforced by a special tax, levy, and sale. Under this amendatory ordinance the city proceeded by levy and seizure of property to collect the claim. The court held that when the contract was made and the work done the law in force did not make the amount apportioned to each property owner a lien on the property, but only created a personal liability, enforceable at law; it was therefore not competent by subsequent ordinance to create such lien, and provide for a different mode of collecting it, because it was retroactive in its operation. In Insurance Co. v. Flynn, 38 Mo. 483, the legislature undertook by an amendment to the charter of the company to make the certificates signed by the president and secretary, attested by the corporate seal, that the party therein named is indebted to the company in the sum named, conclusive evidence, of the fact, and made it retroactive as to the causes of action originating anterior thereto. The court, after quoting the text above cited from Sedgwick, said:

“The right oí the legislature to change the remedy and prescribe rules oí evidence, if its enactment does not create a new obligation, or attach a new disability retrospectively, is conceded: but it is not within the constitutional competency of the legislature to annul by statute any legal ground on which a previous action is founded, or to create a new bar by which such action may be defeated. No new ground for the support oi an existing action ought to be created by legislative enactment, nor any legal bar which goes to deprive a party of his defense.”

The case of City of St. Louis v. Clements, 52 Mo. 133, is still more pertinent. The city charter authorized the construction of sewers,» the dimensions of which were to be prescribed by ordinance of the council. The ordinance passed left the determination of this matter to the city engineer. This was held to be an unauthorized delegation of legislative discretion, and, therefore, no liability under the contract was created against the city. Subsequently the state legislature passed an act authorizing the city to reassess the sum unpaid to the adjacent real estate benefited by the improvement. This act was held to be unconstitutional, for the reason that it was retroactive in its operation. The court, after quoting from Sedgwick that it is competent for the legislature in given cases to enact laws having a retroactive effect, unless it cranes within the purview of some express prohibition contained in the state constitution, say:

‘‘Here is a positive prohibition against the passage of any law which is retrospective in its operation. There is nothing loft for construction: we are only left to ascertain, what is defined to be a retrospectivo law, and if the law pudor consideration comes within the definition, the constitution pronounces the judgment..”

After stating the definition given above by -Sedgwick, and showing that no legal liability was created against the oily, unless by virtue of the after legislative enactment, the court further say;

“How. then, can we say that this act does not create, a how right in fa- -or of the contractor, and incur a new liability on the part oí the defendant? * ⅞ ⅞ To my mind ibis law comes exactly within the definition to be given to a retrospective law.”

Tv. o of these decisions were made prior to the issue of the bonds in question, and the other almost contemporaneously with the issuance. So that the construction placed on this clause of the state constitution was established before the bonds went into market If the act of March 24,1870, at least, in so far as it undertook to authorize ¡he county court to issue bonds upon a vote “of a portion of a municipal township,” theretofore taken, is not retrospective legislation, it would be difficult to conceive of an act falling within the inhibition of tbe constitution. At the time the vote was taken by the [inhabitants of the strip of country, there was no law, say the supreme court in Ogden v. County of Daviess, supra, authorizing the county court of Platte county to issue such, bonds predicated of such election. When this subsequent legislation, therefore, is resorted to as authority for their validity, it can only be made to apply by giving to it a retroactive effect, and the constitution says this cannot be done.

Section 7 of the charter of the railroad company, under which the election was held in 1869, did not contemplate the issue of bonds in payment of the debt thus voted. What the taxpayers voted for was that the county court might ‘levy and collect from them a special tax” to raise the requisite fund to liquidate the debt. They never did vote for the issue of bonds. There was no law in being at the time of the election authorizing or empowering the issue of bonds for such purpose.

As said by Judge Dillon in Gause v. City of Clarksville, 5 Dill. 172:

“There is an obvious and essential difference in incurring a debt, to be paid in the usual manner out of the revenue of the corporation derived from taxation, and the raising of money in advance by a pledge of credit, and tho issue of coupon bonds payable at a long, distant day, for sale in the market of the country. The bonds may be issued, and sold for sixty-seven per cent, of their par value, and the corporation is bound.”

The issue of the bonds in question materially altered the condition and right of the taxpayers from what they were at the time of making the contract for which they voted. The bonds issued bear 10 per cent, interest, payable semiannually at the city of blew York, and are not payable until 1890, nearly 20 years after their issue. By this act of the county court the bonds were not redeemable, however much the taxpayers may have desired to take them up, for 20 years. They must during all these years pay interest thereon semiannually at the rate of 10 per cent. If this did not make a new contract, create a new liability for the debtors, after their vote, and in despite of what they voted for, common sense is at fault. The taxpayers of the so-called “strip” can well say to the demand of these bondholders: “In hoc foedere non veni.”

Attention is directed by counsel for plaintiff to section 27, art. 4, of the constitution of 1865, which declares that “the general assembly shall not pass any local or special law, legalizing, except as against the state, the unauthorized or invalid acts of any officer,” and also to the enlargement of this provision in the constitution of 1875, (section 53, art. 4,) which declares that “the general assembly shall not pass any local or special law legalizing the unauthorized acts of any officer or agent of the state, or of any county or municipal authority.” It may be conceded that the above provision in the constitution of 3865 does not cover the case at bar, and that the constitu-. .tion of 1875 is prospective in this respect. But these provisions detract naught from the other positive prohibition against retrospective legislation. These additional limitations but illustrate the fact that it was the purpose of the framers of the fundamental law, by particularization, to throw every possible safeguard around the constituency against post mortem legislation; and as far as possible, by going into details, to prevent both legislative and judicial departments from construing away the plain and obvious scope of other more general declarations. It remains just as true to-day, as it ha? since the adoption, of the constitution of 1820, that no retroactive law can be passed by the legislature, which “creates a new obligation, or imposes a new duty, or attaches a new disability in respect to transactions or considerations already past.” And the provision of said section 53 in the constitution of 1875 has not added one atom of strength to the prohibition. It but emphasizes the popular view of the state policy.

The case of Lynde v. County of Winnebago, 16 Wall. 6, which it is not too much to say carried the doctrine of implied power and agency to the utmost verge, is no authority for the action of the defendant county in issuing these bonds. In that case the power to borrow money to meet the tax voted did exist, under certain conditions. And the argument of the majority opinion proceeds upon the presumption that it could not reasonably have been within the contemplation of the legislature, or the county court, tlmt, in providing for a necessary courthouse, “the erection should be delayed until a sum sufficient to pay for the structure had been realized from the tax authorized to be imposed, or that the work should proceed only pari passu with the progress of its collection from year to year.” . Whereas, as already shown, the act of the legislature of 1860 conferred no authority to borrow the money to meet the subscription under any circumstances; and it could not have been in the contemplation of the voters in 1869 that bonds should be issued without authority of law. IsTor was the county undertaking to build the road, so as to raise any implication that it must have been within the intendment of the taxpayers, or of the county court, that the money was to be borrowed to instantly prosecute the work. The railroad company was to build the road, and the taxpayers of the strip merely voted, under section 7, to take stock in said road, and voted “upon themselves a tax for the payment of the same.” To that “special tax,” levied and collected by the court, “to be paid to the treasurer of said company,” “as fast as collected,” could the company alone look for the payment of such subscription. The case of Dodge v. County of Platte, 82 N. Y. 218, bears out with additional force of reason 'and authority the foregoing opinion.

There also occurs to me a further objection of minor importance to this action. Under 'die charter of the railroad company it required “a majority of the taxable inhabitants” to vote for the subscription. The record of the county court only recites that “the taxable inhabitants aforesaid voted in favor of such subscription.” It is not recited, nor found by the court, that a majority of the taxable inhabitants voted therefor, to say nothing of the constitutional provision of the state, then in force, which required a two-thirds vote of the qualified voters to authorize a subscription made outside of the provisions of the antecedent charter of 1860. The fact found by the county court does not necessarily imply that a majority of the taxable inhabitants voting at said election so voted.

Does the recitation on the face of the bond cure this defect in the record? Tc recites that the bond was “issued in pursuance of an election by the taxable inhabitants of Camden Point.” This might conclude the county from disputing that an election was had, but the peculiarity of this recitation lies in the fact, not only that it fails to state either a majority or a two-thirds vote, hut that the election held was “by the taxable inhabitants of. Camden Point,” whereas the election petitioned for and held was for a part of the municipal township of Greene, lying between given points. Camden Point, as appears from the face of the record of the county court, was a town at which the election was held. No vote of the inhabitants of Camden Point could have authorized the subscription; and no authority has been shown by the plaintiff for the issue of these bonds, other than the election held under section 7 of the charter, which is limited to the taxable inhabitants of the strip of country through which the railroad runs. When plaintiff resorts to the record of the county court to sustain his right, he must abide by what it shows.

It is hardly necessary to discuss the proposition advanced by counsel that the action of the county court has been ratified by any act done by it since the issue of the bonds. “He who may authorize in the beginning, may ratify in the end.” Bank v. Gay, 63 Mo. 39. A ratification' can only occur when the party ratifying possesses the power to perform the act done. Marsh v. Fulton County, 10 Wall. 677.

On the facts of this case I declare the law to be that the plaintiff cannot recover. Judgment accordingly.