Keane v. Fort Scott

14 F. Cas. 161, 1 Cent. Law J. 140

• Court: U.S. Circuit Court for the District of Kansas
• Decided: November 15, 1873
• Status: Published

Opinion

DILLON, Circuit Judge.

Upon the agreed statement of facts the court holds: (1) That the plaintiff is presumed to be a holder fox-value, and without notice of the coupons in suit, and is entitled to recover unless there is some defence available to the city as against such a holder. (2) The only defence open to the city against such a holder of its bonds, is want of power to issue them; mere irregularities in the exercise of the power-will not avail.

The defence that the bonds are void because the stock was never subscribed, if true as matter of fact, is not available to the defendant. The bond recites that "it is issued under the laws of Kansas, and in pursuance of an" ordinance of the city of Fort Scott, ap-pi-oved July 22, 1870 — $75.000 subscription to the' Missouri, Kansas and Texas Railway Company.” This recital estops the city to make this defence, and hence it is not a good defence against a holder of the bonds for value before due and without notice. The same obsei-vations hold in i-eference to the provisions of the ordinance, that the stock issued for the bonds should be transferred for a nominal consideration by the city, and the failure of the company in respect to the ei-ection of machine shops. It is contended that the submission to the voters -was not according to the statute authorizing “the city council of any city of the state to subsci-ibe for the stock of any railway company of the state upon such conditions as it may prescribe, provided there is a majority vote in favor of the subscription.” Gen. Laws 186S, c. 23, § 51. The objection is that the oi-dinance submitted a proposition to vote $75.000 to the stock of this railway company, and $25.000 for -another purpose, and that a joint subscription is unauthorized. But the vote was taken in this mannex-. and carried by 523 votes against 3 votes, and the bonds have been issued. Now a defect or irregularity in the manner of making the submission will not invalidate the bonds in the hands of innocent holders for value; and under the decision of the supreme court of the United States it is doubtful, if there had never been an election, but the bonds were nevertheless issued and in the hands of innocent holders for value, whether the defence of want of election would avail the municipality which issued them. But here this point does not arise; for there was an election and the proposition carried, and the ordinance authorizing the issue of the bonds so recites. The objection to the submission would probably have been well taken in a suit to prevent the issue of the bonds, but it comes too late now.

Another defence is that the bonds are void because the railroad company to which they were issued had no authority or power in law to build the road into or through the city •of Fort Scott. But upon the agreed statement of facts this does not appear, and from the agreed statement taken in connection with the recitals in the act of March 2, 1871, relating to the Missouri, Kansas and Texas Railway Company, it would seem that the company had such power; and it appears from the ordinance of December 5, 1S70, that the company did build the road and in all respects comply with the terms and conditions on which it was to become entitled to the §75,000 subscription. The decisions of the supreme court of the United States upon the subject of municipal Tailway-aid bonds cover the case, and under ■those decisions the defences of the city here relied on are not good. Judgment for the plaintiff.