U.S. Supreme Court
County of Cass v. Gillett, 100 U.S. 585 (1879)
County of Cass v. Gillett
100 U.S. 585
1. The Court adheres to its rulings in County of Henry v. Nicolay, 95 U. S. 619, that the provisions of sec. 14, art. 11, of the constitution adopted by Missouri in 1885, which require the assent of two-thirds of the qualified voters of a county to a subscription on its behalf for stock in a corporation, do not apply to cases where such subscription is made for stock in a railroad company pursuant to the power conferred by its charter granted prior to the adoption of that constitution, notwithstanding the contemplated road is a branch road, the construction of which, although authorized by such charter, is undertaken as an independent enterprise under the Act of March 21, 1888, entitled "An Act to aid in the building of branch railroads in the State of Missouri."
2. Where the company authorized a committee to take charge of the construction of such road, and solicit subscriptions in the name of the company to the use of such branch, and it subsequently assigned a portion of its franchises to another company, held that the branch being thus organized and invested with the powers and privileges conferred by the charter of the company to enable it to prosecute the work, a subscription by a county through which such road passed is not rendered invalid by the fact that when made, such partial assignment by the company of its franchises had taken place.
3. Where the county court made an order to subscribe to the capital stock of the company for the use of one of its branches, and issued county bonds which were accepted by the construction committee, in payment, held that
an actual manual subscription on the books of the company was not necessary to entitle the county to the stock or to bind it as a subscriber thereto.
4. A bona fide purchaser of negotiable securities before their maturity is not affected with constructive notice of a suit respecting them. County of Warren v. Marcy, 97 U. S. 107, cited on this point and approved.
This action was brought against the County of Cass, Missouri, on certain interest coupons or warrants detached from bonds purporting to be issued by the county court of that county. The following is a copy of one of the bonds and of a coupon thereto annexed:
"UNITED STATES OF AMERICA"
"$1,000] [County Bond No. 66"
"COUNTY OF CASS, STATE OF MISSOURI"
"Interest ten percent per annum, payable on the first days of"
"August and February, in New York"
"Know all men by these presents, that the County of Cass, in the State of Missouri, acknowledges itself indebted and firmly
bound to the Tebo and Neosho Railroad Company, to the use and benefit and in the name of the Clinton and Kansas City Branch of the Tebo and Neosho Railroad, in the sum of $1,000, which sum the said county, for value received, hereby promises to pay to the Tebo and Neosho Railroad Company, or bearer, to aid in building the said branch railroad, at the National Park Bank in the City of New York, in the State of New York, on the first day of February, A.D. 1891, redeemable, however, at the option of the county court of said county at any time after the lapse of five years after the date hereof, together with interest thereon from the first day of February, 1871, until paid, at the rate of ten percentum per annum, which interest shall be payable semiannually, on the first days of August and February of each year, on presentation and delivery at said bank of the coupons of interest hereto severally attached. This bond is issued under and in pursuance of an order of the County Court of the County of Cass, in the State of Missouri, and in pursuance of and by authority of an Act of the General Assembly of the State of Missouri, entitled 'An Act to incorporate the Tebo and Neosho Railroad Company,' approved Jan. 16, 1860, and of an Act of the General Assembly of the State of Missouri, entitled 'An Act to aid in the building of branch railroads in the State of Missouri,' approved March 21, A.D. 1868. In testimony whereof, the said County of Cass has executed this bond, by the Presiding Justice of the County Court of Cass County, under the order of said court, signing his name hereto, and by the clerk of said court, under the order thereof, attesting the same and affixing the seal of said court, at the Town of Harrisonville, County of Cass, aforesaid, this first day of February, A.D. 1871."
"JEHIEL C. STEVENSON"
"Presiding Justice of the County Court of Cass County, Missouri"
"[SEAL OF CASS COUNTY COURT]"
"C. H. DORE"
"Clerk of the County Court of Cass County, Missouri"
"$50] Harrisonville, Cass County, Missouri, Feb. 1, 1871 [$50"
"The County of Cass acknowledges itself to owe and promises to pay to the bearer fifty dollars, on the first day of August, 1873, at the National Park Bank, in the city and State of New York, being semiannual interest on bond No. 66."
"C. H. DORE"
"Clerk of Cass County Court, Missouri"
The Tebo and Neosho Railroad Company mentioned in the bond was incorporated Jan. 16, 1860, by an act of the General chanrobles.com-redchanrobles.com-red
Assembly of Missouri (Acts of Mo., 1860, p. 402), the eighth section of which reads as follows:
"The 8th, 9th, 10th, 11th, 12th, 13th, 14th, 15th, 16th, 17th, 18th, 19th, 20th, 21st, and 22d sections of an act entitled 'An Act to incorporate the Osage Valley and Southern Kansas Railroad Company, approved Nov. 21, 1857,' are hereby reenacted and declared to be applicable to the company hereby incorporated, and all powers therein contained are extended to the Missouri, Tebo, and Neosho Railroad Company."
The charter of said Osage Valley, &c., Railroad Company is set forth in the acts of that State for 1857, p. 50, and its fourteenth section provides that
"It shall be lawful for the county court of any county in which any part of the route of said railroad or its branches may be, or any county adjacent thereto, to subscribe to the stock of the company; and, for the stock subscribed in behalf of the county, may issue the bonds of the county to raise the funds to pay the same."
The act of incorporation authorizes the company to construct a road between certain points, and "to extend branch railroads into and through any counties that the directors may deem advisable."
The fourteenth section of the eleventh article of the Constitution of Missouri, adopted in 1865, declares that
"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."
The Act of March 21, 1868, recited in said bonds in connection with the Act of Jan. 16, 1860, as the authority for issuing them, is set forth in the case of County of Henry v. Nicolay, 95 U. S. 619.
Proceeding under its charter and the provisions of the branch railroad act, the directory of the Tebo and Neosho Railroad Company adopted, on the 6th of June, 1870, a resolution establishing a branch, to be known as the "Clinton and Kansas City Branch," designating its point of intersection with the main line and its general course. A copy of it was filed with the secretary of state. At the same time, a committee was chanrobles.com-redchanrobles.com-red
appointed to take charge of the construction of the branch and authorized to solicit subscriptions in the name of the company to the use of the branch.
On the 11th of October, 1870, the Tebo and Neosho Railroad Company entered into a contract with the Missouri, Kansas, and Texas Railway Company, organized and doing business under the laws of the State of Kansas, by the terms of which the former company sells and conveys to the latter
"all its privileges, rights, powers, franchises, real estate, and other property, the whole or a part of which is in this state, excepting only such as belong to the extension of the Tebo and Neosho line, north from Sedalia via Boonville,"
"and doth consent to a merger of the same with the franchises, property, and rights of said party of the second part, and the said Missouri, Kansas, and Texas Railway Company, party of the second part, shall have, exercise, and enjoy all the rights, powers, privileges, and immunities of the original charter of the Tebo and Neosho Railroad Company, and of the several amendments thereto, in the same manner and to the same extent as has heretofore been exercised and enjoyed by the said party of the first part, or by the several shareholders in said company, whose stock shall be exchanged as herein provided, either or both; and the said party of the second part does hereby accept the terms and conditions of the within instrument."
The contract was filed and recorded in the office of the Secretary of State on the 4th of January, 1871.
On the 28th of February, 1871, upon the application of the committee appointed by the resolution of June 6, 1870, the County Court of Cass County, by an order of record, subscribed for
"three thousand shares of the capital stock of the Tebo and Neosho Railroad Company (now in part the Missouri, Kansas, and Texas Railway Company), in the name of and for the use and benefit of the Clinton and Kansas City Branch of the Tebo and Neosho Railroad, and to aid in the construction thereof, each share being of the denomination of $100, and amounting in the aggregate to the sum of $300,000,"
The remaining facts are set forth in the opinion of the Court. chanrobles.com-redchanrobles.com-red
The case was tried by the court, which made a special finding of the facts. A judgment was rendered for the plaintiff below, and the county then sued out this writ.
The following are the errors assigned:
1. The charter of the Tebo and Neosho Railroad Company did not authorize the County Court of Cass County to issue the bonds in question in the absence of the assent of two-thirds of the qualified voters of said county, and the court below erred in holding that such power existed.
2. The Act of the Missouri legislature of Jan. 14, 1860, required as a condition precedent to the subscribing of stock to a railroad company, and the issue of bonds to pay therefor, that an election should be held in the county to test the sense of the tax-payers of the county, on the question of making the subscription and issuing the bonds, and the court erred in holding otherwise.
3. Said company, at the time of the subscription by Cass County to the stock of the branch road, had sold all its interest in and control over the alleged branch road, and had no authority to receive subscriptions of stock for such branch road, or to contract for the issue of bonds on account of such subscription, nor could the branch road receive such subscriptions or make such contract; and the court erred in holding otherwise.
4. The county court had no authority to issue the bonds in question, because, by the judgment of a court of competent jurisdiction, they have been restrained from issuing said bonds; and the court below erred in holding otherwise.
5. It does not appear from the finding of the facts by the court that the County Court of Cass County made any valid contract with said company, or any other person or company, for the issue of stock to said county, nor that there was, in fact, any valid subscription by said county court to the stock of any company; and the court therefore erred in rendering judgment for the plaintiff below, on the special finding of facts. chanrobles.com-redchanrobles.com-red
The case was argued by Mr. James O. Broadhead for the plaintiff in error, and by Mr. Thomas K. Skinker for the defendant in error.