Town of Cherry Creek v. Becker

aside and declare cancelled certain bonds of the town, issued in aid of a railroad. The Buffalo & Jamestown Railroad Company was duly incorporated prior to April 1, 1872, to construct a railroad from the city of Buffalo to a point on the line that divides the states of New York and Pennsylvania and about twelve miles west of Jamestown. As the route of the road was to pass through the town of Cherry Creek, proceedings were instituted by certain of its citizens and tax-payers to authorize the issue of its bonds to aid in construction, under the provisions of law then existing, empowering towns to issue their bonds in aid of railroads. Laws of 1869, chap. 907, as amended by Laws 1871, chap. 925. On the 15th of June, 1872, a petition in the form prescribed by the first section of the act signed by taxpayers of the town and purporting on its face, and held by the trial court, to be a majority of such taxpayers, was presented to the county judge of the county, praying that the town create and issue its bonds to the amount of $25,000 and invest the same, or the proceeds thereof, in the stock of said railroad, upon such terms and conditions as should be agreed between the company and the commissioners in behalf of the town. It was provided in the petition that such bonds issue, on the condition that the road be constructed through the town, as follows: $5,000 when the railroad was located through the town ; $10,000 when the road was graded through the town, and the remaining $10,000 when the road was completed. This petition was dated April 8, 1872. Another petition was also presented to the county judge the same day, bearing date April 26, 1872, purporting to be signed and from the finding below was actually signed, by a majority of the taxpayers as required by the statute, praying that the town create and issue additional bonds, in the amount of $19,000 in aid of said railroad.

The county judge directed the publication of notice to whom it might concern, as required bjr the statute, and that cause be shown before him at a time and place specified, why the prayer of the petitions should not be granted. On the 11th day of July, 1872, the day named in the notice, the county judge proceeded to take proof as to the facts stated in each of the petitions, and on the' same day rendered judgment thereon which recites the presentation of the petitions, the substance of their contents, the order directing the publication of notice and proof of the publication thereof, the appearance of the petitioners, the hearing and proofs before him, from which it appeared that each of the petitions contained the names of a majority of the taxable property of the town, as shown by the last preceding tax list and assessment roll of the town. The judgment then concluded as follows: “ Now, therefore, I do adjudge and determine that the said petitioners in each of said petitions do represent a majority of the taxpayers of said town of Cherry Creek, as shown by the last preceding tax list and assessment roll of said town, and that the petitioners, in each of said petitions, do represent a majority of the taxable property upon said last preceding tax list and assessment roll of said town.” Commissioners were named and the judgment roll filed in the county clerk’s office, July 15, 1872. On August 9, 1872,

the railroad and the commissioners agreed in writing that when the road was located and constructed through the town, ready for the rolling stock, the town would subscribe to the capital stock and the road issue its stock to the town in the sum of $44,000 and the town would issue and deliver to the railroad its bonds for a like amount, bearing date as of the time of the subscription, at seven per cent interest, payable semi-annually. Upon the faith of this agreement and the proceedings for bonding, the line of the railroad was located through the town in October, 1872.

On the 26th of August, 1874j the commissioners, in behalf of the town, subscribed for the stock and executed and delivered the bonds, amounting to $44,000, to a third party in escrow, to be delivered to the railroad, upon completion of the road through the town, according to the terms of the petition, and the railroad, on the same day, issued and delivered $44,000 of its stock to the same person and in like way to be delivered to to the town in return for the bonds. The railroad commenced the construction of the road through the town about August, 1874, and completed it on or about April 1, 1875, on which date the stock was delivered to the commissioners by the party in whose hands it had been placed, and the bonds to the railroad company, which sold or disposed of the same. The commissioners reported these transactions to the taxpayers and the town regularly paid the interest on the bonds as it came due until July 1, 1881, when the first default in the payment of interest was made. The railroad was being operated through the town at the commencement of the action and had been assessed in the town each year up to the trial in the sum of $60,000 or upward. In August, 1875, the defendant Becker became the owner of $5,000 of the bonds without notice of any defense to them and for value, and the other bonds were owned by parties who were not served in the suit. The trial court held as matter of law, upon the facts, that the bonds were valid; that the defendant Becker was a bona fide holder, and dismissed the complaint on the merits. Much of the argument in support of this appeal is directed to the proceedings before the county judge and to proving that the adjudication made by him and above set forth, that the requisite number of taxpayers, representing the requisite amount of taxable property, had executed the consents, was and is irregular or erroneous. In the view that we are constrained to take of the case it is unnecessary to examine the various questions bearing on that point raised and discussed by the learned counsel for the plaintiff. All of these questions could have been properly raised in a direct proceeding to review the determination of the county judge'by certiorari, but they cannot be considered upon this appeal. If the county judge had jurisdiction to make the determination, then, so long as it has not been reversed for error or set aside for irregularity, the judgment rendered by him is conclusive in this case. We cannot see that his jurisdiction was at all impaired because the judgment rendered was based upon two separate and distinct petitions, instead of one, so long as the aggregate amount of bonds to be cleated was not to exceed the statutory limit of twenty per cent

of the total assessed valuation of the taxable property of the town, as shown by the last preceding assessment roll.

The county judge had before him both petitions, containing the statements and allegations prescribed by the statute, duly verified, and proof that the process or notice required under the statute to give jurisdiction had been properly served or published, and he then, at the time and place named in the notice, proceeded to take proofs touching the truth of the matters alleged in the petitions, and adjudged that the papers before him contained the consent of a sufficient number of the taxpayers and representing the requisite amount of taxable property in the town. If a distinct and separate judgment should have been rendered upon each petition, that was at most an error or irregularity to be corrected by review or by motion. We cannot doubt that the county judge had jurisdiction to hear and determine the matters before him involved in the petition, and having such jurisdiction, it is a settled principle that his judgment, until reversed or set aside, cannot be questioned or attacked collaterally in another action. Roderigas v. East River Savings Institution, 63 N. Y., 460 ; Collins v. Bennett, 46 id., 490 ; Hallock v. Dominiy, 69 id., 238 ; Lange v. Benedict, 73 id., 12; Freeman on Judgments, § 135. The commissioners representing the town, and deriving their authority from the judgment and. the statute, had power, therefore, to create and issue the bonds, unless the statute, which alone conferred the power, was itself abrogated by the amendments to the state constitution.

Section 11 of article 8 of the constitution, which went into effect on the 1st day of January, 1875, provides that “ no county, city, town or village shall hereafter give any money or property, or loan its money or credit to, or in aid of, any individual association or corporation, or become directly, or indirectly, the owner of stock in, or bonds of, any association or corporation; nor shall any such county, city, town or village be allowed to incur any indebtedness, except for county, city, town or village purposes.” The bonds were actually delivered to the railroad company subsequent to the date when the constitutional prohibition went into effect.

By chapter 507 of the Laws of 1870, the commissioners of the town and the railroad company are authorized “ to enter into any agreement concerning the issue of said bonds limiting and defining the the times when, and the proportion in which, said bonds or their ¡Droceeds shall be delivered to said corporation, and the , place or places where, and the purpose for which such bonds or their proceeds, shall be applied or used, and any such agreement in writing duly executed by said corporation and the majority of such commissioners shall in all courts and places be valid and effectual.” The commissioners and the railroad company agreed in writing, in conformity with this statute, on the 9th of August, 1872, that when the railroad was finally located and constructed through the town, that the commissioners would then subscribe for the stock, that the company should deliver the same to them, and that they would issue and deliver the bonds to the amount of

$44,000 to the company. This was a valid "binding contract upon both parties, and the town became thereby obligated to deliver the bonds upon the completion of the road, thereby securing better terms from the railroad than provided in the conditions embraced in the petition containing the consents to create the bonds.

The subsequent agreement, also in writing, of August 26,1874, between the commissioners and the company, providing for the deposit of the stock and bonds in escrow, to be finally delivered upon performance by the company of the agreement of August 9,1872, that is, upon the completion of the road through the town, modified the first agreement in some particulars, but was within the general powers of the commissioners, so that when the amendment to the constitution went into effect, the bonds had been signed and delivered in escrow under the terms of a valid contract, upon the faith of which the railroad company acted when it built the road through the town. The obligations of an existing contract can no more be impaired by an amendment to the constitution of a state than by an act of the legislature. It is not to be supposed that the amendment was intended to apply to such a case, even if we were obliged to hold that no delivery of the bonds by the town to the railroad was made till after the amendment went into effect. But for the purpose of justice and the protection of parties acquiring title to the bonds in good faith, it might well be held that the delivery to the railroad related back to August, 1874, when they were deposited in escrow. Frost v. Beehnan, 1 Johns. Oh., 288 ; 4 Kent’s Com., 454, and cases cited.

The case of Falconer v. The B. & J. R. R. Co., 69 N. Y., 491 , is clearly distinguishable from this in several important particulars.

(1) In that case the right or power to issue or deliver bonds was restricted by a condition in the petition, containing the consents, which, in effect, provided that they should not be issued or delivered until the railroad was constructed through the village of Jamestown.

(2.) It was admitted in that case that prior to January 1,1875, the railroad had not been constructed through the village, nor had the power to issue bonds and subscribe for stock been exercised by the commissioners, as it could not be, by reason of these conditions. Therefore, when the amendment went into effect nothing had been done, and the constitution abrogated and swept away all power to create bonds conferred by the statute.

(3.) That was an action between the town, or taxpayers representing the town on the one hand, and the railroad company on the other, for the purpose of restraining and preventing the issue of the bonds in the future, and not, like this, where the town seeks to cancel its bonds lawfully issued before the amendment went into effect, in the hands of a bona fide holder. The railroad has not been constructed from Jamestown west to the Pennsyb vania line, a distance of about twelve mdes, and hence it is urged by the counsel for the plaintiff that the condition contained in the first petition providing for the issue of the last $10,000 of the bonds to be created under that petition upon the completion of the road renders this contract made by the commissioners to deliver the

bonds when the road was' constructed through the town unauthorized and void. We are inclined to think that the completion of the road through the town of Cherry Creek, or from Buffalo to Jamestown, was a substantial compliance with all that was intended by this condition, but if the condition fairly included in its language the additional twelve miles, we think such a departure from it as is shown in this case would not invalidate the bonds in the hands of a bona fide holder. The statute under which the bonds were issued provides that non-compliance with any condition inserted in the petition shall not in any manner invalidate the bonds. Laws 1871, chap. 925, § 1.

We see no ground upon which it can be maintained that the bonds in question were created without legal authority, and in our opinion they are valid. But if the plaintiff’s counsel could establish their invalidity on any of the grounds urged upon the argument, he would then be confronted with another question that is fatal to the right to maintain this action. The plaiRiff has invoked the powers of a court of equity to cancel its own obligations, upon which it has paid interest for six years, prior to the commencement of this action. The action of the commissioners in creating the bonds was reported to the town, and no question was raised as to their validity until years after, and when they had come to the hands of parties who were ignorant of any defect in the proceedings under which they were issued. It must now be regarded as the settled rule that a court of equity will not interfere in such a case to cancel or set aside bonds, issued and purchased under such circumstances, but will leave the town to its remedy by defense at law. Calhoun v. The Delhi & Middletown R. R. Co. et al., 121 N. Y., 69 ; 30 N. Y. State Rep., 759; Alvord v. Syracuse Savings Bank, 98 N. Y., 603 .

For these reasons the judgment must be affirmed, with costs.

All concur.