US SUPREME COURT DECISIONS

COUNTY OF CLAY V. SOCIETY FOR SAVINGS, 104 U. S. 579 (1881)

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U.S. Supreme Court

County of Clay v. Society for Savings, 104 U.S. 579 (1881)

County of Clay v. Society for Savings

104 U.S. 579

Syllabus

1. The legislation of the State of Illinois reviewed whereunder the County of Clay issued two series of bonds, one dated Nov. 1, 1869, in payment of its subscription to the stock of the Illinois Southeastern Railway Company, and another dated Jan. 4, 1871, whereby its donation voted before the year 1870 to that company was paid.

2. The bonds are valid, as they were issued in strict conformity to the conditions and requirements prescribed by statute, and pursuant to a popular vote cast at an election lawfully held before the year 1870. The Constitution of Illinois, which took effect during that year, does not attempt to impair the obligation of any prior contract in regard to them, nor prohibit the issue of such as were necessary to give effect to a donation so voted.

3. Where a bona fide holder for value of a county bond sues thereon, its recitals, showing that it was issued in accordance with the statute, are conclusive and binding, and the fact that for many years its validity has been recognized by paying the interest thereon as it became due cures mere irregularities in issuing it. The county cannot, by setting them up, escape liability.

On Nov. 6, 1849, the Legislature of Illinois passed an "Act authorizing counties and cities in the State of Illinois to subscribe to the capital stock or make loans to railway companies," which contained the following provisions:

"SEC. 1. Whenever the citizens of any city or county in this state are desirous that said city or county should subscribe for stock in any railroad company, already organized or incorporated, or hereafter to be organized or incorporated, under any law of this state, such city or county may, and are hereby authorized to, purchase or subscribe for shares of the capital stock in any such company, in any sum not exceeding $100,000, for each of such cities or counties, and the stock so subscribed for or purchases shall be

Page 104 U. S. 580

under the control of the county court of the county, or common council of the city, making such subscription or purchase, in all respects as stock owned by individuals."

"SEC. 2. For the payment of said stock the judges of the county court of the county, or the common council of the city, making such subscription or purchase, are hereby authorized to borrow money at a rate not exceeding ten percent per annum, and to pledge the faith of the county or city for the annual payment of the interest and the ultimate redemption of the principal, or, if the said judges or common council should deem it more advisable, they are hereby authorized to pay for such subscription or purchase in bonds of the city or county, making such subscription to be drawn for that purpose in sums not less than $50, bearing interest not exceeding ten percentum per annum: provided that no bond shall be paid out at a rate less than par value."

"SEC. 3. The railroad companies already organized or incorporated, or hereafter to be organized or incorporated, under the laws of this state, are hereby authorized to receive the bonds of any county or city becoming subscribers to the capital stock of such company at par and in lieu of cash."

"SEC. 4. No subscription shall made, or purchase or bond issued, by any county or city, under the provisions of this act, whereby any debt shall be created by said judges of the county court of any county or by the common council of any city, to pay any such subscription, unless a majority of the qualified voters of such county or city (taking as a standard the number of votes thrown at the last general election previous to the vote had upon the question of subscription under this act) shall vote for the same; and the judges of the county court of any county, or the common council of any city, desiring to take stock as aforesaid, shall give at least thirty days' notice, in the same manner as notices are given for election of state and county officers in said counties, requiring said electors of said counties or cities to vote upon the day named in such notices, at their usual place of voting, for or against the subscription for such capital stock which they may propose to make,"

&c. See Gross's Statutes of Illinois (3d ed.), pages 552, 553.

Afterwards, on Feb. 26, 1867, the legislature passed an act to incorporate the Illinois Southeastern Railway Company, the seventh section of which was as follows:

"The county court or board of supervisors (where such county has adopted township organization) of any county into or through

Page 104 U. S. 581

which this road or its branches may pass is hereby authorized and fully empowered to donate to said company, as a bonus or inducement towards the building of said railroad or its branches, any sum not exceeding one hundred thousand dollars, and may order the clerk of the county court or board of supervisors of such county to issue bonds of the county to the amount donated, and such clerk of the county court or board of supervisors, as the case may be, of such county shall countersign and deliver such bonds so issued to the president or directors of said company, which said bonds may bear any rate of interest not to exceed ten percent per annum, payable at the maturity of the bonds, as hereinafter expressed, and yearly thereafter, provided that no donation by the county court or board of supervisors of any such county shall be of a greater sum than fifty thousand dollars until the question of such larger donation shall have been submitted to the legal voters of such county, at an election to be called, conducted, returns made, canvassed, and published in the usual manner of calling, conducting, making returns, canvassing, and publishing special county elections,"

&c.

On Feb. 24, 1869, an act was passed to amend the act to incorporate the Illinois Southeastern Railway Company, sec. 10 of which provided:

"That any village, city, county, or township organized under the township organization law or any other law of this state along or near the route of said railway or its branches, or that are in anywise interested therein, may, in their corporate capacity, subscribe to the stock of said company or make donations to said company to aid in constructing and equipping said railway, provided that no such subscriptions or donations shall be made until the same shall be voted for, as hereinafter provided."

The section then proceeded to declare that upon the application of twenty legal voters of any such city, village, county, or township, the clerk thereof should call an election to be held by the legal voters to determine

"whether such village, city, county, or township shall subscribe to the capital stock of said company or make a donation thereto to aid in building or equipping said railway, and whether to be subscribed or donated, and the rate of interest and the time of payment of the bonds to be issued in payment thereof."

Section 12 of the act declared as follows: chanrobles.com-redchanrobles.com-red

Page 104 U. S. 582

"That when payment of subscription to the capital stock of said company or payments for donations to said company have been or shall be made by villages, cities, counties, or townships in bonds of such villages, cities, counties, or townships under any act authorizing such subscription or donation to be made, all such bonds issued or negotiated by the proper authorities of such villages, cities, counties, or townships and appearing regular on the face thereof shall, in the hands of said company or any other bona fide holder thereof, be deemed and taken in all courts and elsewhere as prima facie evidence of the regularity of everything required by the several acts in relation to the issuing of said bonds or by any other act to be done preliminary to the issuing and negotiation of said bonds."

On April 16, 1869, the legislature passed an act for the registration of municipal bonds in the office of the auditor of state, sec. 7 of which required that before any county bond could be registered, the presiding judge of the county court should certify under oath to the auditor that all the preliminary conditions to their issue required by law had been complied with. See Underwood's Statutes of Illinois, p. 994.

The Constitution of Illinois, which went into effect Aug. 8, 1870, declares (second additional section):

"No county, city, town, township, or other municipality shall ever become subscriber to the capital stock of any railroad or private corporation, or make donation to, or loan its credit in aid of, such corporation, provided, however, that the adoption of this article shall not be construed as affecting the right of any such municipality to make such subscriptions when the same have been authorized under existing laws by a vote of the people of such municipalities prior to such adoption."

This suit was brought by The Society for Savings against the County of Clay upon certain bonds dated Nov. 1, 1869, with the coupons attached, of a series issued by it to pay for stock in the Illinois Southeastern Railway Company, subscribed by the county board of supervisors, and upon certain bonds dated Jan. 4, 1871, with coupons attached, of another series issued by it to pay for a donation made to the company by that board, both series being issued, as was claimed, by authority of the foregoing legislation. chanrobles.com-redchanrobles.com-red

Page 104 U. S. 583

Although the instruments sued on are under seal, the suit is called in the record an action of assumpsit, and the defendant pleaded nonassumpsit.

Upon the trial, a jury being waived, the court made an elaborate and comprehensive finding of the facts in which is set out in full a copy of one of the bonds belonging to each class sued on and of one of the coupons attached to each respectively.

The subscription bonds, as appears by the finding of the court, contain this recital:

"This bond being issued under and pursuant to orders of the Board of Supervisors of Clay County, Illinois, for subscription to the capital stock of the Illinois Southeastern Railway Company, as authorized by virtue of the laws of the State of Illinois. And the faith of the County of Clay is hereby irrevocably pledged for the payment of said principal and interest as aforesaid."

The donation series of bonds the court found to contain the following recital:

"This bond is one of a series of bonds issued by Clay County to aid in the construction of the Illinois Southeastern Railway Company in pursuance of the authority conferred by an Act of the General Assembly of the State of Illinois entitled 'An Act to incorporate the Illinois Southeastern Railway Company,' approved February 25, 1867, and an act amendatory thereof approved February 24, 1869, and of an election of the legal voters of Clay County, Illinois, held on April 22, 1868, under the provisions of said act."

"This bond is not to become a binding obligation of the said County of Clay until the following conditions shall have been complied with, to-wit: this bond to become due and payable on the express conditions that said company shall have completed the whole length of its line from Shawneetown, on the Ohio River, to the Chicago Branch of the Illinois Central Railroad, and shall have the cars running thereon."

Upon the back of each one of the donation series of bonds was printed the following certificate:

"STATE OF ILLINOIS, CLAY COUNTY, ss:"

"I, Jno. L. Moore, Clerk of the County Court of Clay County in the State of Illinois, do hereby certify that the county court of said county have entered an order on the records of said county

Page 104 U. S. 584

court directing me to endorse upon this bond the following words, to-wit: 'All the conditions upon which this bond was to become a binding obligation of the County of Clay have been complied with.'"

"In testimony whereof, I hereto affix my hand and the seal of said court at Louisville this fourth day of January, A. D. 1871."

"[SEAL] JNO. L. MOORE, Clerk"

Upon all the bonds of both series was printed the certificate of the auditor of public accounts as follows:

"STATE OF ILLINOIS, AUDITOR'S OFFICE"

"Jan. 9, 1871, Springfield"

"I, Charles E. Lippincott, Auditor of Public Accounts of the State of Illinois, do hereby certify that the within bond has been registered in this office this day pursuant to the provisions of an act entitled "An Act to amend an act entitled An Act to incorporate the Illinois Southeastern Railway Company,' approved February fund and provide for paying the railroad debts of counties, townships, cities, and towns," in force April 16, 1869."

"In testimony whereof I have hereunto subscribed my name and affixed the seal of my office the day and year aforesaid."

"[SEAL] C. E. LIPPINCOTT, Auditor P.A."

The court further found that on March 2, 1868, the board of supervisors made an order calling an election to be held by the qualified voters of the county upon two propositions: first, that the county should subscribe $100,000 to the capital stock of the Illinois Southeastern Railway Company and issue in payment thereof bonds for an equal amount, and second that the county should donate $50,000 to the railway company and issue bonds of the county to pay said donation; that the election was held in accordance with the order of the board of supervisors, and resulted in a majority of votes' being cast in the county in favor of both of the propositions; that at a special meeting of the board of supervisors held on the first Monday of November, 1868, the president of the board was instructed, by resolutions duly passed by the board, to make such donation and to subscribe said amount upon the books of said railway company, the subscription and donation to be made strictly and only in accordance with the terms of the chanrobles.com-redchanrobles.com-red

Page 104 U. S. 585

proposition aforesaid, submitted and voted upon on April 22, 1868.

The court also found that the company had located its road and graded, bridged, and tied ten miles thereof before the first day of November, 1869, and that on that day, the president of the board of supervisors made the subscription upon the books of the railway company under and in pursuance of the submission, vote, and resolution aforesaid, the subscription being made upon the terms and conditions aforesaid.

The court further found that the $100,000 of bonds so voted as subscription as aforesaid were delivered to the company on Nov. 1, 1869, and subsequently thereto, the company having fully complied with the terms and conditions of the vote before receiving the bonds.

The court further found that on Jan. 1, 1871,

"the fifty thousand dollars so donated as aforesaid, under and in pursuance of the vote aforesaid, in the bonds of said county were delivered and donated to said railway company, said railway company having complied with the conditions of said vote,"

&c.

The court also found that both series of bonds had been registered in the office of the auditor of public accounts, and that taxes had been certified by him and the interest paid on the bonds up to the commencement of this suit.

The findings of the court further state that the plaintiff purchased all the bonds sued on for full value before maturity, and was an innocent holder thereof without notice of any irregularity in the issue, except such constructive notice as the law charges it with.

The court found the issue for the plaintiff and rendered judgment. The county sued out this writ.



























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