Huidekoper v. Dallas County

12 F. Cas. 845, 3 Dill. 171

• Court: U.S. Circuit Court for the District of Western Missouri
• Decided: July 1, 1875
• Status: Published

Opinion

KREKEL, District Judge.

There is no inherent power in the county courts of Missouri to make railroad subscriptions, and hence the power must either be grantéd in the charter of the company to which subscription is made, or must be found in the general law upon the subject. In- the case before the court, power to subscribe is found in the 14th section of the act incorporating the Laclede and Fort Scott Railroad. Company, approved Feb. 11th, 1860, in the following words: “It shall be lawful for the county court of any county in the state to subscribe to the stock: of said company; and for the stock subscribed in behalf of the county may issue the bonds of the county to raise the funds to pay for the same, and to take proper steps to protect the interest of the' county.” [Laws Mo. 1859-60, p. 438.] Here then we have the power of the county court to subscribe without submission, and in the exercise of that power the county court of Dallas county on the 5th day of August, 1869, made and entered the following order upon its record: “It is ordered by the court that one hundred and fifty thousand dollars be, and the same is hereby, subscribed to the capital stock of the-Laclede and Fort Scott Railroad Company for-and on behalf and for the use and-benefit of said county of Dallas.” After providing the .size of the bonds, the rate of interest, how and where to be paid, the order referred to exacts conditions as to the issue and delivery of the bonds as the work progresses, which conditions were afterward modified so that the bonds might be issued at once. There are no allegations of fraud in the issuing of these bonds, nor has there been any attempt made to show • such fraud, but- the objection is -that the subscription was- not. submitted to a vote- of the people. Provisions of law as to subscriptions of this kind are found-.upon the statute books-of Missouri as early as 1837, and continued to-be-granted in a large majority of charters which were passed by the legislatures from time to time. The 30th section of the general railroad law of 1855 [Rev. St. 1855, p. 427], gives power to subscribe to railroads in the following words: “It shall be lawful .for. the county court of any county and the city council of any city, to subscribe to the capital stock of any railroad company duly organized under this or any other act in this state, and the county court or city council subscribing or proposing "to subscribe to such capital stock, may, for information, cause an election to be held to ascertain the sense of the tax-payers -of such county or such city, as to such subscription, and as to whether the same shall be paid by issue of county or city bonds, as the case may be, or by taxation.” The act of January 14th, I860 [Laws Mo. 1859-60, p. 88], changed the word “may” in the act quoted, to “shall.” The act of March 23, 1861 [Laws Mo. 1860-61, p. 60], made it the duty of the county court or city council of any city, whenever satisfied that the people wanted to subscribe stock to any railroad company, to order an election, and if a majority of the resident qualified voters voted therefor, to subscribe such stock.

The second section of the last quoted .act-, provides that no subscription should be made.' unless the same had been voted for by a-majority of the resident voters. Thus stood' the law when the convention which framed the. present' constitution of the state met. The increasing interest in railroad improvements and the evasions of existing laws caused the enactment of a constitutional provision in the following words: “The general assembly shall not authorize any county, city or town to become a stockholder in or to 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 assent thereto.” This provision would, no doubt, have prevented many unwise subscriptions for railroads, but for the existence of a very large number of charters, at the time, and the opinion of the supreme court of Missouri, construing the constitutional provision as not applying to them. Many of these-charters were by special-enactment exempted from the provision of the general railroad law requiring submission, being, at the same time, authorized to build branches. The question-as to the rights of the corporation under these charters came before the supreme court of Missouri at the October term, 1867, in the Maeon County Court Case, 41 Mo. 453,..and it was there held that.it did not apply to them, and subscriptions could still .be made to corporations having special charters, as stated, without submission.

To this doctrine the supreme, court of Missouri has steadily adhered up to this time. Clark County Case, 54 Mo. 5S. The construction of a special constitutional or statutory provision, given by the highest judicial tribunal of a state, is binding upon the federal judiciary, and has been applied in many sim-. ilar cases determined at this term. It must-be held, then, that the subscription made by the county court of Dallas county, under the authority of the provisions of the charter of the Laclede and Fort Scott Railroad to its stock, was valid and binding. The irregularities set up in the answer can not avail the defendant, a holder for value. The only one relied on is the order of the county court of August 2, 1870. It will be observed that the bonds and coupons bear date prior to this last mentioned order. Supposing, however, that the bonds were actually issued, as' alleged in the answer, after August 2, 1870, could that avail the defendant? The court thinks not. In the first place the repealing order referred to is utterly ignored in the after proceedings of the county court, and treated as a nullity. But not only that, the county court proceeds to pay the interest from time to time, and may be said to have thus waived the irregularity, if such. Even if a fraud had been committed in the issuing of the bonds under those circumstances, an innocent holder is not affected thereby. The bonds must be held valid, and judgment, will l>e rendered for the plaintiff in the amount of the coupons sued on. Judgment accordingly.

[NOTE. The defendant appealed, but the supreme court, in an opinion delivered by Hr. Chief Justice Waite, affirmed the judgment below. (154 U. S. G54, 14 Sup. Ct. 119!)), following County of Macon v. Shores. 97 U. S. 272, and Smith v. Clark Co., 54 Mo. 59.]