US SUPREME COURT DECISIONS

1. A town in New York was authorized, upon certain conditions, to subscribe for railway stock, and sell its bonds at not less than their par value to raise funds wherewith to pay therefor. The subscription was made, but the commissioners issued to the company, in exchange for its stock, bonds in which that fact is recited. Such an exchange was not authorized by the statute, and, under the decisions of the courts of that state, a holder of the bonds, who had notice that they had been so exchanged, could not enforce the payment of them. After the passage of the Act of April 28, 1871, infra, p. 103 U. S. 809, A, purchased them for value and brought suit upon certain coupons detached therefrom. Held that the legislature had the constitutional power to pass the act and that the bonds were thereby validated.

2. The court declines to follow Morton v. Town of Thompson, 71 N.Y. 613, in which the same point is involved.

3. County of Warren v. Marcy, 97 U. S. 96, affirmed.

This action was commenced on the first day of May, 1876, by Perrine against the Town of Thompson, a municipal corporation in Sullivan County, New York, for the amount of coupons attached to certain bonds, signed by G. M. Benedict, N. S. Hamilton, and W. H. Cady, county commissioners, and issued by them in the name of the town under date of May 1, 1869. They were purchased by him of Gulick & Van Kleeck, July 20, 1875, he paying cash therefor. Each bond is payable to bearer on the 1st of March, 1899. It recites that it

"is a valid security, being issued by virtue of an act entitled 'An Act to authorize certain towns in the Counties of Sullivan and Orange to issue bonds and take stock in any company now organized or that may hereafter be organized within three years after the passage of this act for the purpose of building

Page 103 U. S. 807

a railroad from the Village of Monticello in the County of Sullivan through the Towns of Thompson and Forestburgh in said county, and the Town of Deerpark in the County of Orange, to Port Jervis, Orange County,' passed May 4, 1868, and of the act amendatory thereof, passed April 1, 1869."

And that the promise to pay that sum is

"by virtue and in pursuance of the acts above entitled and referred to, and for value received in the stock of the Monticello and Port Jervis Railway Company."

Those acts authorized the commissioners who might be appointed in the mode therein prescribed on behalf of any town along the route of the proposed road from Monticello to Port Jervis, to borrow, on its credit, such sums of money, not exceeding thirty-three percent of the valuation of the town, to be ascertained by its assessment rolls for 1867, for a term not exceeding thirty years, at not exceeding seven percent interest per annum, and "to execute bonds therefor under their hands and seals" -- such debt not, however, to be contracted and such bonds not to be issued, until there was obtained the written consent of the majority of the taxpayers appearing upon the last assessment roll as shall represent a majority of the taxable property, not including lands owned by nonresidents, nor until a certain amount of the capital stock of the company had been subscribed in good faith and paid by individuals or corporations. The statute required the fact that the persons so consenting represented the proper number of taxpayers should be supported by the affidavit of one of the town assessors or the town clerk -- the consent and the affidavit to be filed in the offices of the county and town clerks respectively, a certified copy whereof "shall be evidence of the facts therein contained and certified in any court of this [that] state, and before any judge or justice thereof."

The third section of the original act provided that the commissioners thereby authorized

"may, in their discretion, dispose of such bonds or any part thereof to such persons or corporations and upon such terms as they shall deem most advantageous for their said town, but not for less than par, and the money that shall be received by any loan or sale of such bonds shall be invested in the stock of such company, now organized

Page 103 U. S. 808

or that may hereafter be organized, within two years after the passage of this act for the purpose of building or aiding in the building of a railroad"

from Monticello to Port Jervis.

The entire issue of bonds under the acts referred to was $148,000, of which $15,000 were delivered to the company on the 4th of May, 1869, and $133,000 on the 12th of May, 1869.

Prior to the delivery of the bonds to the railroad company, it had made a construction contract with Crowley and Colts by which the latter were to be paid partly in bonds of towns along the line of the road. In September, 1869, Gulick & Van Kleeck purchased for cash eight of the bonds from the National Bank of Port Jervis at ninety cents on the dollar. In November of the same year, the Atlantic Savings Bank of the City of New York (subsequently known as the Bond Street Savings Bank) purchased $50,000 of the bonds at eighty-two and one-half cents on the dollar and accrued interest for cash, and from that institution Gulick & Van Kleeck purchased eighteen of the bonds, Feb. 19, 1875, at seventy-five cents on the dollar. The town, by means of taxation in conformity with the provisions of the original and amendatory acts, met the installments of interest due March 1, 1870, and Sept. 1, 1870. The road was completed in January, 1871, and has been in operation ever since.

Such was the condition of the enterprise and such were the relations which the town held to the holders of its bonds when, on the 28th of April, 1871, the Legislature of New York passed an act entitled

"An Act to legalize and confirm the acts of the Commissioners of the Towns of Thompson and Forestburgh in the County of Sullivan and of Deerpark in the County of Orange in issuing and disposing of the bonds of their respective towns to build a railroad from the Village of Monticello, in the County of Sullivan, to the Village of Port Jervis in the County of Orange under chapter five hundred and fifty-three of the laws of eighteen hundred and sixty-eight, and to legalize and confirm all bonds heretofore issued by such commissioners under said chapter of laws, now held by or owned by bona fide purchasers."

As the facts were undisputed, the court directed a verdict for Perrine and the town sued out this writ. chanrobles.com-redchanrobles.com-red

Page 103 U. S. 809

Since the present case largely depends upon the construction and effect of the Act of April 28, 1871, it is here given in full:

"SEC. 1. The acts of Nathan S. Hamilton, Giles M. Benedict, and William H. Cady, Commissioners on the part of the Town of Thompson, and Silas T. L. Norris, Edwin Hartwell, and James Ketcham, Commissioners of the Town of Forestburgh, in the County of Sullivan, and of Orville J. Brown, Samuel O. Dimmick, and Augustus B. Goodale, Commissioners of the Town of Deerpark, in the County of Orange, appointed in pursuance of an act entitled"

"An Act to authorize certain towns in the Counties of Sullivan and Orange to issue bonds and take stock in any company now organized or that may hereafter be organized, within three years after the passage of this act for the purpose of building a railroad from the Village of Monticello in the County of Sullivan through the Towns of Thompson and Forestburgh in said County of Sullivan and the Town of Deerpark in the County of Orange to Part Jervis,"

"passed May fourth, eighteen hundred and sixty-eight, in issuing bonds upon the faith and credit of their respective towns, and in exchanging them for the stock of the company, organized for the purpose of constructing the railroad, contemplated by said act, are hereby ratified and confirmed."

"SEC. 2. No bond or bonds issued or purporting to have been issued under the said act and now held, owned, or possessed by any person or persons, guardian, trustee, or corporation in good faith or for a valuable consideration shall be void or voidable by reason of any defect or omission in the consents in writing, of the taxpayers of the said Towns of Thompson, Forestburgh, and Deerpark upon which such bonds were or purport to have been issued in or by reason of said consents not stating the name of the railroad company in which the taxpayers so signing such consents desired the bonds or the money arising from the sale thereof to be invested. But that the said bonds shall be as valid and effectual for every purpose as if such defect or omission had not occurred, provided that such or any exchange of bonds by said commissioners for the stock of said company was made at the par value of the said bonds, and provided further that the respective issues of the said bonds by their commissioners do not exceed the amount authorized by said act."

"SEC. 3. No action or proceeding at law, commenced or pending at the time of the passage of this act shall abate or be discontinued

Page 103 U. S. 810

or be in any was affected by reason thereof, but the same may be prosecuted or defended and judgment entered therein, and all proceedings taken to enforce the same in the same manner as now provided by law and with the like effect as if this act had not been passed."

"SEC. 4. This act shall take effect immediately."