DILLON, Circuit Judge.
The following facts are recited in the bonds (the coupons on which are in suit), and alleged in the petition:
1. That the bonds were “issued pursuant to articles of consolidation in payment of stock due the Lexington, Lake & Gulf Railroad Company, consolidated October 4, 1870.”
2. That they were issued by the county “for and in behalf of Mount Pleasant township,” under the act of March 23, 186S, known as the “Township Railroad Ald Law.” Laws 1868, p. 93; 1 Wag. St. p. 313.
3. That the proposition submitted on the 3d day of May, 1S70, to the voters of the township, and by the requisite majority then assented to, was whether they would authorize the county court to “subscribe $90,000 to the capital stock of the Lexington, Chillicothe & Gulf Railroad Company.”
4. That afterwards, July 18, 1870, another corporation was newly formed under the laws of the state, namely, the Pleasant Hill Division of the Lexington, Chillicothe & Gulf Railroad Company, and that afterwards, October 4, 1S70, under the act of March 24, 1870, these two companies (as recited in the bond) were “consolidated as required by law, under the name of the Lexington, Lake & Gulf Railroad,” (the payee of said bond) — “which last named company,” the bond continues, “as provided by law, and under the terms of said consolidation thereof, possesses all the powers, rights and privileges, and owns and controls all the assets, subscriptions, bonds, moneys and properties whatever of the two said several companies forming said consolidation, or either of them.”
5.That afterwards, January 18, 1871, the county court, claiming to be authorized thereto by the above mentioned vote of May 3, 1870, in Mount Pleasant township, and reciting this vote in the bonds, as its source of power, made the subscription, not to the company to which it had been voted, but to a new company, into which that company had, after the vote, but previous to the subscription, been merged or consolidated under the laws of the state.
Upon these facts, all of which appear on the face of the petition, and, substantially, all of them, on the face of the bonds in suit, the question is, whether the bonds are valid and binding obligations in the hands of a bona fide holder? This case contains an element not in the Cass county township bond cases decided at this term on demurrer, growing out of the fact that here the subscription was made after the vote was taken, to a new or consolidated company. Jordan v. Cass Co. [Case No. 7,517].
The case also differs, as I think, from other cases in this court, and from cases decided by the supreme court of the United Slates, in the circumstance that all of the facts relied on as showing the want of power to issue the bonds, are recited in the bonds themselves; and clearly, as it seems to me, it must be true that the holder of these bonds is chargeable with actual notice of the facts therein stated concerning them; and if such facts show that in point of law the county court had no power to make the bonds, the holder is conclusively presumed to have knowledge of such want of authority. If the facts stated in the bonds, and averred in the petition, show that there was no power to issue the bonds, and if the plaintiff is affected with notice of these facts, and of their legal consequences, we have no question here as to the rights of an innocent holder for value; for the case is the same as if the action were by the railroad company to which the subscription was made and the bonds delivered.
The case differs also from those in which the subscription was made by the county court without a vote of the people, under authority to do so, contained in special charters granted prior to the adoption of the constitution, as in Nicolay v. St Clair Co. [Case No. 10,257], decided at this term.
The provisions of the constitution, and the general law of the state in pursuance of it, apply to this subscription; so that, as between the county or the people of the township, on the one hand, and the railroad company, or any holder of the bonds with actual [679]*679notice, on. the other, an assent of two-thirds of the qualified voters of the township to the making of the subscription is an indispensable pi-erequisite to its lawfulness,' and to the validitjr of the bonds issued in payment therefor.
The constitution of Missouri, of 1865, contains the following: “The general assembly shall not authorize any county, city or town to become a stock-holder in or loan, its credit to any company, association or corporation, unless two-thirds of the qualified voters of such county, city or town, at a regular or special election to be held therein, shall consent thereto.” Article 13, § 14.
And this requirement of a two-thirds vote as a condition of the right of any county, city or town, to take stock in or loan credit to any railroad company, is also made in the enactments of the legislature passed in pursuance of the above mentioned provision of the constitution. Wag. St p. 305, §§ 17, 18, And such a precedent vote is also required in the township railroad aid act of March 23, 1S6S, under which the vote was taken and the bonds now before the court were issued. Jordan v. Cass Co. [supra], at this term.
Accordingly, the question was submitted to the voters of Mount Pleasant township, on the 3d day of May, 1870, whether they would subscribe 890,000 to the Lexington, Chilli-cothe & Gulf Railroad Company; and the requisite two-thirds of those voting at the election voted therefor. But before any subscription was made, or bonds issued, or steps taken to carry out this vote, the company in whose favor the aid was voted consolidated with a distinct corporation not in existence when the election was held, and the two tas recited in the bond) were merged “into one company, under the name of the Lexington, Lake & Gulf Railroad Company;” to which, in January following, the subscription, under the vote of the previous May, was made, and the bonds in suit issued.
The consolidation was made under the act of March 24, 1870, which authorizes a majority in interest of “any two or more railroad companies in the state * * * to consolidate in the whole or in the main, and form one company, owning and controlling such continuous line of road, with all the powers, rights, privileges and immunities, and subject to all the liabilities and obligations to the state, or otherwise, which belonged to or rested upon either of the companies making such consolidation.” Wag. St p. 314, § 56. So that, upon the facé of the act, it appears that upon the consolidation being effected in pursuance of its provisions, the old corporations are merged in the new, which, however, succeeds to all the rights, powers, privileges and immunities, and is subject to all the liabilities and obligations. of both the companies making the consolidation. And such would appear to be the effect of the consolidation, were there no statute provisions upon the subject Clear-water v. Meredith, 1 Wall. [68 U. S.) 40; McMahan v. Morrison, 16 Ind. 172; Tomlinson v. Branch, 15 Wall. [82 U. S.) 465.
Under the legislation of the state, when two companies consolidate and form one, the stock is changed, and the former companies become extinct, and the line of the road is changed as may be provided in the articles of consolidation. In the case before the court, the nature of the changes in the line of the road of the consolidated company is set forth in the petition.
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DILLON, Circuit Judge.
The following facts are recited in the bonds (the coupons on which are in suit), and alleged in the petition:
1. That the bonds were “issued pursuant to articles of consolidation in payment of stock due the Lexington, Lake & Gulf Railroad Company, consolidated October 4, 1870.”
2. That they were issued by the county “for and in behalf of Mount Pleasant township,” under the act of March 23, 186S, known as the “Township Railroad Ald Law.” Laws 1868, p. 93; 1 Wag. St. p. 313.
3. That the proposition submitted on the 3d day of May, 1S70, to the voters of the township, and by the requisite majority then assented to, was whether they would authorize the county court to “subscribe $90,000 to the capital stock of the Lexington, Chillicothe & Gulf Railroad Company.”
4. That afterwards, July 18, 1870, another corporation was newly formed under the laws of the state, namely, the Pleasant Hill Division of the Lexington, Chillicothe & Gulf Railroad Company, and that afterwards, October 4, 1S70, under the act of March 24, 1870, these two companies (as recited in the bond) were “consolidated as required by law, under the name of the Lexington, Lake & Gulf Railroad,” (the payee of said bond) — “which last named company,” the bond continues, “as provided by law, and under the terms of said consolidation thereof, possesses all the powers, rights and privileges, and owns and controls all the assets, subscriptions, bonds, moneys and properties whatever of the two said several companies forming said consolidation, or either of them.”
5.That afterwards, January 18, 1871, the county court, claiming to be authorized thereto by the above mentioned vote of May 3, 1870, in Mount Pleasant township, and reciting this vote in the bonds, as its source of power, made the subscription, not to the company to which it had been voted, but to a new company, into which that company had, after the vote, but previous to the subscription, been merged or consolidated under the laws of the state.
Upon these facts, all of which appear on the face of the petition, and, substantially, all of them, on the face of the bonds in suit, the question is, whether the bonds are valid and binding obligations in the hands of a bona fide holder? This case contains an element not in the Cass county township bond cases decided at this term on demurrer, growing out of the fact that here the subscription was made after the vote was taken, to a new or consolidated company. Jordan v. Cass Co. [Case No. 7,517].
The case also differs, as I think, from other cases in this court, and from cases decided by the supreme court of the United Slates, in the circumstance that all of the facts relied on as showing the want of power to issue the bonds, are recited in the bonds themselves; and clearly, as it seems to me, it must be true that the holder of these bonds is chargeable with actual notice of the facts therein stated concerning them; and if such facts show that in point of law the county court had no power to make the bonds, the holder is conclusively presumed to have knowledge of such want of authority. If the facts stated in the bonds, and averred in the petition, show that there was no power to issue the bonds, and if the plaintiff is affected with notice of these facts, and of their legal consequences, we have no question here as to the rights of an innocent holder for value; for the case is the same as if the action were by the railroad company to which the subscription was made and the bonds delivered.
The case differs also from those in which the subscription was made by the county court without a vote of the people, under authority to do so, contained in special charters granted prior to the adoption of the constitution, as in Nicolay v. St Clair Co. [Case No. 10,257], decided at this term.
The provisions of the constitution, and the general law of the state in pursuance of it, apply to this subscription; so that, as between the county or the people of the township, on the one hand, and the railroad company, or any holder of the bonds with actual [679]*679notice, on. the other, an assent of two-thirds of the qualified voters of the township to the making of the subscription is an indispensable pi-erequisite to its lawfulness,' and to the validitjr of the bonds issued in payment therefor.
The constitution of Missouri, of 1865, contains the following: “The general assembly shall not authorize any county, city or town to become a stock-holder in or loan, its credit to any company, association or corporation, unless two-thirds of the qualified voters of such county, city or town, at a regular or special election to be held therein, shall consent thereto.” Article 13, § 14.
And this requirement of a two-thirds vote as a condition of the right of any county, city or town, to take stock in or loan credit to any railroad company, is also made in the enactments of the legislature passed in pursuance of the above mentioned provision of the constitution. Wag. St p. 305, §§ 17, 18, And such a precedent vote is also required in the township railroad aid act of March 23, 1S6S, under which the vote was taken and the bonds now before the court were issued. Jordan v. Cass Co. [supra], at this term.
Accordingly, the question was submitted to the voters of Mount Pleasant township, on the 3d day of May, 1870, whether they would subscribe 890,000 to the Lexington, Chilli-cothe & Gulf Railroad Company; and the requisite two-thirds of those voting at the election voted therefor. But before any subscription was made, or bonds issued, or steps taken to carry out this vote, the company in whose favor the aid was voted consolidated with a distinct corporation not in existence when the election was held, and the two tas recited in the bond) were merged “into one company, under the name of the Lexington, Lake & Gulf Railroad Company;” to which, in January following, the subscription, under the vote of the previous May, was made, and the bonds in suit issued.
The consolidation was made under the act of March 24, 1870, which authorizes a majority in interest of “any two or more railroad companies in the state * * * to consolidate in the whole or in the main, and form one company, owning and controlling such continuous line of road, with all the powers, rights, privileges and immunities, and subject to all the liabilities and obligations to the state, or otherwise, which belonged to or rested upon either of the companies making such consolidation.” Wag. St p. 314, § 56. So that, upon the facé of the act, it appears that upon the consolidation being effected in pursuance of its provisions, the old corporations are merged in the new, which, however, succeeds to all the rights, powers, privileges and immunities, and is subject to all the liabilities and obligations. of both the companies making the consolidation. And such would appear to be the effect of the consolidation, were there no statute provisions upon the subject Clear-water v. Meredith, 1 Wall. [68 U. S.) 40; McMahan v. Morrison, 16 Ind. 172; Tomlinson v. Branch, 15 Wall. [82 U. S.) 465.
Under the legislation of the state, when two companies consolidate and form one, the stock is changed, and the former companies become extinct, and the line of the road is changed as may be provided in the articles of consolidation. In the case before the court, the nature of the changes in the line of the road of the consolidated company is set forth in the petition. And it seems to me to be perfectly clear, upon well-settled principles of law, that a subscriber to the stock of company A, after it has consolidated with company B, and formed company C, can not be compelled by the latter company to pay the subscription; and the plain reason is that such was not his contract Such a change is structural and organic, and is not binding upon a non-assenting subscriber or stockholder, unless the right to make it is given by statute, or was reserved at the time the corporation was created, or the contract of subscription made.
In support of these views, the case of Clearwater v. Meredith, supra, decided by the supreme court of the United States, is a direct authority; and if it can not be reconciled with the majority opinion in the Pacific R. Co. v. Hughes, 22 Mo. 291, it would not be difficult, perhaps, to show that the views of the supreme court of the United States, aside from their authoritative force in this court, are most consonant with principle, and with adjudications elsewhere. It follows that if the subscription which Mount Pleasant township authorized by its vote had actually been made, it could not have been enforced by the new company; if made by the county court to the new company, it would be without authority, and bonds issued therefor would be both unauthorized and without consideration, and could not, therefore, be enforced by the new company, or by any holder with notice of the facts, unless by virtue of the act of March 24, 1870.
But the case in hand is one where no subscription was ever made to the company to which it was voted; and it might be conceded that if it had been actually made, the right to it would pass by operation of the statute to the new company, without the concession involving the consequence of a liability upon a subscription made for the first time after the new corporation was formed.
The opposite view would nullify the constitutional provision, • by defeating the purpose it was designed to accomplish. The theory of the constitution and the acts of the legislature passed in pursuance of it, is, that no stock in a railroad company shall be taken by the public corporations or municipalities of the state, unless two-thirds of the voters sustain it; and it is necessarily implied that the company whose stock is to be taken and paid for in bonds must be specified and known. Is it possible that when [680]*680the people vote that they will take stock In a particular company, which is named, this will authorize the county court to make the subscription to another corporation? The frauds which such a doctrine would produce, and the injustice which would result from it, may be readily foreseen, and need not be portrayed. By such a construction the constitutional provision, which was conceived in the highest wisdom, and was intended to remedy for the future a mischief then already begining to be felt, would be deprived of effective operation, and rendered of little or no value. The principle, where the law requires a precedent vote, and the vote is in favor of the municipal or public corporation subscribing to the stock of a particular company, that a subscription to the vote of another and distinct corporation is unauthorized and not binding, was decided by the supreme court of the United States in the case of Marsh v. Fulton Co., 10 Wall. [77 U. S.] 676, and that, too, in a case where the face of the bonds did not so fully as in the case at bar display the history of their issue, and of the subscription in which they originated.
NOTE 1. The foregoing decision was made before the judgment of the supreme court in Nugent v. Supervisors of Putnam Co., 19 Wall. [86 U. S.] 241. That case differs from the one above reported, in this: There the- subscription to one of the constituent companies was before the consolidation, here it was afterwards. In this case there was nothing but a bare vote before the consolidation and that, without more, creates no contract between the municipality and the railroad company. This is clear in principle and is settled law. Aspinwall v. County of Jo Daviess, 22 How. [63 U. S.] 364; Dill. Mun. Corp. § 42. Under the constitutional provision requiring a vote of the people before any municipality shall ‘‘become a stockholder in or loan its credit to any company,” I still think that the subscription, or agreement to subscribe, must be to the company in whose favor the vote was taken, and that this vote cannot be carried over to the consolidated company and the subscription made to it. Whether this view is reconcilable with the opinion of the supreme court in the Nugent Case, remains yet to be decided. I think the cases can be and ought to be distinguished, and after reading the foregoing opinion in the light of the opinion of the Nugent Case, I am still satisfied with it. and that any other doctrine practically nullifies the constitutional provision, which originated in necessity and was intended to protect the people from the abuse of the power to aid railroads by loaning them their credit or purchasing their stock. See Thomas v. Scotland Co. [Case No. 13,909].
[NOTE 2. From this judgment sustaining the demurrer the plaintiff appealed to the supreme court (92 U. S. 569), where, in an opinion by Mr. Justice Bradley, the judgment of the circuit court was affirmed. The “Township Aid Act” of 1868 was held to be repugnant to the fourteenth section of article 11 of the constitution of Missouri adopted in 1865, the specifications mentioned therein being held to embrace every political organization which could be supposed capable of making a subscription.
[The objection to the validity of the subscription on the ground that the vote was for one company and the county court substituted another was also sustained. “The law authorizing the consolidation of railroad companies does not change the law of attorney and constituent.” “It does not continue in existence powers to subscribe for stock, given by one person to another, which, by the general law, are extinguished by such a change.”]
In my judgment, under the principles established by the cases of Clearwater v. Meredith, and Marsh v. Fulton Co., above mentioned, the county court of Bates county had no power to make the subscription recited in the bonds here in question, or to issue the bonds; and I consider this view to be consistent with the many cases in which that court has decided, in substance, that nothing but a want of power to issue such securities can avail against a holder for value, without actual notice of the equities set up by the way of defense.
I might dwell upon the fact that the statute in relation to the consolidation was, as in the case of Clearwater v. Meredith, permissive and not mandatory upon the companies; and point out the hardship of holding the township or its people bound by a subscription to a consolidated company, when they had never authorized such a subscription, nor ever had an opportunity to vote against or oppose the consolidation; but it is scarcely necessary to do so.
As the facts which in law show the bonds to have been issued without authority appear on their face, and are alleged in the petition, it is my judgment that the plaintiff can not recover thereon; and accordingly, the demurrer to the petition will be sustained. Judgment accordingly.