Brownell v. Town of Greenwich — 8 N.Y. St. Rep. 737

Majority

p. 737

Thomas W. Brownell, App’lt, v. Town of Greenwich, Resp’t.

(Supreme Court, General Term, Third Department,

Filed May 19, 1887.)

Headnote

1 Town bonds to aid railroads—Must be conformable to law.

Bonds issued by commissioners under the provisions of the acts authorizing towns to bond themselves to aid in the construction of railroads, must be conformable to law, or they are invalid as such, and cannot be collected of the town, and the holder is charged with knowledge of any defects; there is no such thing as a bona fide holder of such bonds.

2 Same—When issued—Laws 1869, chap. 907 —Laws 1871, chap. 925.

Pursuant to a judgment, duly filed and entered of record in the county clerk’s office of Washington county, the county judge of said county appointed commissioners for the puiposes set forth in chapter 907, Laws 1869, who entered upon the discharge of their office and prepared eighty bonds for $500 each, purporting to be the town bonds of the town of Greenwich, which were subscribed and sealed by them as commissioners, and dated March 21, 1871, payable on July 1, 1891, with interest coupons attached for the payment or interest semi-annually. Plaintiff purchased five of said bonds on July 1, 1871, paying therefor in cash the par value. The railroad company, to aid which these bonds were issued, paid the interest on said bonds until 1877, and the town of Greenwich paid it for the three following years,and took up the coupons. Thereafter the town refused to pay interest, on the ground that the bonds were void, being issued contrary to the said statute, for only twenty years. Held, that the bonds were not issued, in the legal sense of that term, until they were negotiated, and hence had no legal inception till July 1, 1871; that they were then valid under the amendment of said law, contained in chapter 925, section 6, Laws 1871. Totter v. Town of Greenwich, 33 Hun, 331 , distinguished.

S. Same—Date of issue—Presumption.

The legal presumption is that bonds were issued at the time they bear date, but that presumption may be overcome by proof that they were issued at a different date.

4. Same—Effect of over-issue—Effect of issue of void bonds.

An over issue of bonds subsequent to the time that said bonds were issued, or a previous issue of void bonds, would not defeat the validity of the bonds in question.

5. Same—How ratified by town officers.

Held, that the town, through its officers had ,so far as they were capable, ratified the acts of the commissioners by accepting the railroad bonds and recognizing the validity of the town bonds by voluntarily paying several installments of interest.

■6. Same—Presumption as to acts of commissioners.

It must be assumed that the commissioners did their duty, in the absence of any proof to the contrary.

7. Submission under Code Civ. Pro., §§ 1279, 1280, 1281—Estopped from denying facts conceded in case submitted.

This action was submitted on an agreed state of facts, under the provi

p. 738

sions of Code Civil Procedure, sections 1279,1280 and 1281. The said case contained, among other things, a recital that “ the county judge of Washington county duly adjudged, determined and ordered, as set forth in his judgment or order then made, of which the following is a copy;” then followed the formal adjudication of the county judge, reciting the jurisdictional facts. Held, that with this concession it does not lie with the defendant to challenge the jurisdiction of the county judge to pronounce the judgment.

This action comes before this court upon a submission of a case containing an agreed state of facts under the provisions of sections 1279, 1280 and 1281 of the Code of Civil Procedure.

The action which this submission is intended to determine was commenced between these parties on the 31st day of December, 1884.

The case shows that the plaintiff is of full age and a resident of Washington county, and that the defendant is a municipal corporation and constitutes one of the towns of Washington county. That the Greenwich and Johnsonville Eailroad Company is and was at the times referred to in the stipulation a corporation duly organized and incorporated under the laws of the state of New York as a railroad corporation, and as such has constructed and is operating a railroad between the village of Johnsonville, in the county, of Eensselaer, and the village of Greenwich, in the town of ■Greenwich, in the county of Washington, and has its principal office and depot and terminal buildings in the town of Greenwich. The case shows that in 1870 said railroad company was endeavoring to extend said railroad into the town of Greenwich, in the county of Washington, and for that purpose and to raise the necessary funds therefor, authorized and caused to be issued bonds for $50,000 secured, by second mortgage on said railroad and it franchises. That on the 21st day of March, 1871, the county judge of Washington county duly adjudged, determined and ordered as set forth in the judgment or order made and which is fully set out in the case and constitutes a part of the same.

In and by that judgment it is recited that certain taxpayers of the town of Greenwich have applied to the county judge of Washington county, state of New York, the county in which said town is located, by their petition duly verified and presented under and by virtue of the provisions of chapter 907 of the Laws of 1869, setting forth the due incorporation under the laws of New York of the said. Greenwich and Johnsonville Eailroad Company. That said petitioners are severally tax-payers of said town of Greenwich whose names respectively appear upon the last preceding tax-list or assessment-roll of said town owning and. representing a majority of the taxable property within the limits of said town, and that said petitioners were a major

p. 739

ity in numbers of the tax-payers on the last preceding tax-Est or assessment-roll of said town, and that said petitioners by said petition asked and desired that bonds of said town of Greenwich may be created and issued in the manner specified in said chapter 907 of the Laws of 1869 to the amount of $40,000, and said town bonds be invested in the second mortgage bonds of said railroad company at eighty cents on the dollar.

The said judgment further recites the reading of said petition, and of the order granted on the presentation thereof, and of the taking due proof of the notice issued thereon, and after due publication of said notice and of the facts set forth in said petition, the order proceeds to adjudge and determine that the allegations of said petition are proved and established, and that the said petitioners do represent a majority of the tax payers of the town of Greenwich, in Washington county, as shown by the last preceding tax list or assessment roll of said town, and do represent a majority of the taxable property of said town upon said Est or roll. This judgment was duly filed and entered of record in the county clerk’s office, of the county of Washington, on the 21st day of March, 1877.

The case also shows that the taxable property of the town of Greenwich, on the last preceding tax Est or assessment roll, was $1,404,696.

The case also shows that immediately after the entry of the aforesaid judgment, the county judge of Washington county appointed three commissioners, who were residents and free holders within the town of Greenwich, to be commissioners for said town for the purposes set forth in chapter 907, of the Laws of 1869, and that such commissioners duly accepted and qualified as such and entered upon the discharge of said office. That said commissioner prepared, or caused to be prepared, eighty bonds of $500, each purporting to be bonds of said town of Greenwich, subscribed and sealed by them as commissioners, and dated March 25th, 1871, payable on the 1st day of July, 1891, with coupons attached for the payment of the interest semi-annually at the rate of seven per cent, per annum; said bonds were numbered consecutively from one to eighty, and placed in the hands of one Andrews, who was also the treasurer of the railroad company for sale, with directions to sell the same for said commissioners, and who proceeded to do so as opportunity offered at par for cash, and place the proceeds to the credit of the railroad company, and after completing the sale of the entire series, he delivered to said town commissioners the railroad mortgage bonds amounting to fifty thousand dollars. None of the funds received by Andrews went into the hands of the railroad commissioners.

p. 740

Among, the purchasers of said town bonds, was this plaintiff, who about July 1, 1871, purchased No. 17, 18, 19, 20 and 21, paying therefor in cash the par value of $2,500, and is stiff the owner and holder of said bonds.

The railroad company paid the interest on said bonds until the year 1877, and for the years 1877, 1878 and 1879 the town of Greenwich paid the interest semi-annually to Brownell, and took up the coupons. Since 1879, the town has made no provisions for the payment of the interest on, or coupons of said bond, and refuses to do so, on the ground mainly that by chapter 907, of the Laws of 1869, the bonds are required to run thirty years, and bonds given for twenty years are therefore unauthorized and void.

The plaintiff before the commencement of this action made various demands of the supervisor of said town of Greenwich for payment of the coupons, payment of the interest, payment of the $25,00 and interest, the issue of thirty year bonds, etc., all of which were declined and refused, the defendant insisting that by reason of the defects in the bonds and the irregularities in their issue no liability exists against the town of Greenwich which can be now enforced either at law or in equity.

Westfall & Whitcomb, for pl’ff; Smith, Fursman & Cowen, for def’t.

Unless the case is distinguishable from Potter v. Town of Greenwich, ( 26 Hun, 326 , affirmed in the court of appeals, 92 N. Y., 662 ), then the result in that case must be decisive of this. That was an action upon one of the same series of bonds as the one in suit in this action, and the action in that case was to reform the bond so as to make it conform to the statute, chap. 907, Laws of 1869, and in case said- bond could not be so corrected, then that the defendant be decreed to pay the plaintiff $500, the face value of said bond with the accrued interest on the same. ■ And it was held that the plaintiff was not entitled to either kind of relief asked for.

But it is insisted by the learned counsel for the plaintiff that the case at bar differs essentially in the fact presented and in the relief sought, from the case of Potter v. Greenwich above referred to, and that that difference is so marked that the decision in the latter case is not an authority against the plaintiff’s right to recover in this. It is true that by the case as now presented some of the questions before the court in Potter v. Greenwich are definitely settled by the agreed facts in the case. We think the jurisdiction •of the county judge of Washington county to pronounce the judgment authorizing the issue of bonds by commissioners and the exchange of the same for second mortgage

p. 741

railroad bonds is clearly established by the stipulation and is not an open question in this case for adjudication by this court. The case makes the parties unite in saying that: “on the 21st day of March, 1871, the county judge of the county of Washington duly adjudged, determined and ordered as set forth in his judgment or order then made, of which the following is a copy.” Then follows the formal adjudication of the county judge reciting the jurisdictional facts, and adjudging that the requisite number of taxpayers of Greenwich representing the requisite amount of taxable property of said town had duly petitioned in compliance with the requirements of the law as it at that time existed. With this concession it does not he with the defendant to challenge the jurisdiction of the county judge to pronounce the judgment. If the county judge had not had jurisdiction both of the parties and the subject matter, he could not have “duly adjudged and determined,” as by the case it appears he did; and a judgment having been duly entered, under and in pursuance of the statute, it became binding upon the parties and like any other judgment of a court of record could not be assailed collaterally.

Section 2 of chapter 907 of the Laws of 1869, provides that: “Such judgment and the record thereof shall have the same force and effect as other judgments and records in courts of records in this state.”

Nor can the appointment and qualification of the commissioners be questioned in this case. The case shows that the county judge, “duly appointed” the commissioners for the purposes set forth in chapter 907 of Laws of 1869, and that said commissioners duly accepted said office, took their official oath, and entered upon the discharge of their duties as commissioners. Under the agreed state of facts for the purposes of this action, these commissioners became such de jure, and were clothed with all the powers conferred by the statute upon such railroad commissioners. All the preliminary steps contemplated by the act of 1869 having been complied with to clothe the commissioners with full authority to act, and they having assumed to act as such commissioners by issuing bonds to the amount of $40,000, purporting to be town bonds, issued under chapter 907 of the Laws of 1869, in which the town, by its commissioners, declares itself indebted to the holder of said bond in the sum of $500 with semi-annual interest and the said commissioners so appointed and acting having sold said bonds at par for cash to the plaintiff, and with the proceeds and avails thereof and of other similar bonds, having purchased for and delivered to said town $50,000 in par value of the second mortgage bonds of the Greenwich and Johnsonville railroad company, which so far as appears from the case said

p. 742

town still holds, the question arises, are these bonds so radically defective by reason of their having been issued to run twenty years instead of thirty years as represented by the act above referred to, that they cannot be upheld and sustained so as to represent a valid claim? And if so, does such defect in the bond divest the purchaser and holder thereof of all power to invoke any legal redress for the money invested, and leave the defendant in the unmolested enjoyment of the benefits derived from the use of the plaintiff’s money in the construction of a railroad within its territory with all its attendant advantages of facilities for transportation, increased valuation of property; and the $50,000 in second mortgage bonds of the Greenwich and Johnsonville Railroad? It is well-settled in this state that bonds issued by commissioners under the provisions of the acts authorizing towns to bond themselves to aid in the construction of railroads, must be conformable to law, or they are invalid as such and cannot be collected of the town, and that the holder is charged with knowledge of any defects; or in other words there is no such thing as a bona fide holder of such bonds. Cagwin v. Hancock, 84 N. Y., 532 ; Angel v. Town of Hume, 17 Hun, 374 ; Horton Thompson, 71 N. Y., 513 ; Potter v. Town of Greenwich, 26 Hun, 330 .

If these bonds are to be treated as issued at the time they bear date, then they come clearly within the provisions of chapter 907 of Laws of 1869, which alone was in force at that time, and which required such bonds to become due and payable at the expiration of thirty years; and as these bonds had but twenty years to run, they were in their physical shape, upon their face, void. Potter v. Town of Greenwich, 26 Hun, 326 .

If, however, they were not deemed issued until the time of their actual sale by the agent of the commissioners to the plaintiff, then the purchaser took them under the provisions of law then in force. Angel v. Hume, 17 Hun, 374 . The bonds were actually sold by the commissioners to the plaintiff on the 1st day of July, 1871, who on that day paid the agent of the commissioners the sum of $2,500 in cash and received five town bonds of the par value of $500 each. At the time of that sale the provision of section 6 of chapter 907 of the Laws of 1869 had been amended by section 6 of chapter 925 of Laws of 1871 by adding at the end thereof as follows: "The said commissioners may issue the said bonds, payable at any time they may elect less than thirty years, any law heretofore passed to the contrary.” But the same section provides that not more than ten per cent of the principal of the whole amount of bonds issued shall become due and payable in any one year. This amendment

p. 743

would doubtless authorize the commissioners -to issue the five bonds bought by plaintiff at the time of that purchase, for twenty instead of thirty years. I think that it cannot be successfully maintained that the bonds were issued in the legal sense of that term until they were negotiated, they did not become a valid subsisting obligation against the town until they were negotiated. And the town could not be made liable either for principal or interest while the bonds remained unnegotiated in the hands of the commissioners.

They had no legal inception until they were delivered to some person as an evidence of a subsisting debt against the town. It cannot be pretended that the commissioners or Andrews, their agent, had any such title or interest in the bonds as would enable them to enforce them against the town. And it is well settled “if no party to the instrument who, prior to the holder, could himself bring an action on it against the maker, then no prior party ever owned it, and the holder, being the first owner, must be. held as having loaned the money to the maker. Eastman v. Shaw, 65 N Y., 522 .

The bond was, therefore, not issued until it was negotiated for value, and hence had no legal inception until purchased by the plaintiff, July 1, 1871. The law of the bond at that time was that it might be issued by the commissioners for any length of time less than thirty years, fiotwithstanding the prohibition contained in chapter 907 of the Laws of 1869.

Although the legal presumption is that these bonds were' issued at the time they bear date, yet that presumption may be overcome by proof that they were issued at a different date. Elsey v. Metcalf, 1 Den., 323 , 326.

The presumption of issue at the date is directly overcome by the statement in the case that plaintiff purchased, received and paid for them July 1, 1871, and as the plaintiff had a right to rely upon the law then in force, we do not see how the fact that these bonds ran for twenty instead of thirty years can effect the validity of the bond in his hands.

But it is said by the defendants that the same act which confers the discretion as to the length of time these bonds are to run upon thé commissioners, restricts the amount that shall be made to fall due in any one year, and that in that respect these bonds were issued in violation of law. The case does not show when the other bonds were negotiated, and it does not appear whether they were sold before or after this sale to the plaintiff. Suppose these five bonds were the first bonds sold, then it could not be pretended that these five bonds were an over-issue of bonds

p. 744

maturing at the same time, and if regular in all other respects they would be valid as to amount.

If regular, therefore, at the timé of the purchase by this plaintiff, could they be affected in his hands by the subsequent over-issue of bonds of a similar character by the commissioners ? The answer seems obvious that they could not.

Or supposeihat before the passage of section 6 of chapter 925 of the Laws of 1871 the commissioners had issued more than ten thousand dollars in these bonds due at the same date, would the issue of those void twenty-year bonds prohibit the commissioners after the passage of chapter 925 of Laws of 1871 from issuing five $500 bonds under the last mentioned act ?

The answer seems equally clear that it would not. It would seem from the above statements that upon the points discussed there is nothing that defeats the validity of these bonds in the hands of the plaintiff. In Potter v. Town of Greenwich ( 26 Hun, 331 ), the court hold that the bond in suit in that case was issued under chapter 907 of the Laws of 1869, and that for that reason was void because it was for twenty years and not for thirty years as required by that act, and the court of appeals affirms that decision ( 92 N. Y., 662 ), but that case does not seem to discuss the question of the effect of the provisions of chapter 925 of the Laws of 1871, and the whole question seems to be discussed as arising under chapter 907 of the Laws of 1869.

In that respect, therefore, this case is different from the case of Potter v. Greenwich (supra), and if this be so, the decision in that case not being predicated upon a state of facts such as appear in this case, is not controlling and does not conclude the plaintiff in this action.

All the essential benefits which the tax-payers of the town contemplated at the time they petioned for leave to bond the bond were realized, accepted and adopted by the town and the tax-payers thereof, or so far as appears by this case in the full enjoyments of its fruits; and the town through its officers have, so far as they are capable, ratified the acts of the commissioners by accepting the railroad, bonds and recognizing the validity of the town bonds by voluntarily paying several installments of interest, and while it is true that the payment of the interest after the bonds were issued would not be an estoppel, yet it is at least a recognition of the validity of the bonds and a ratification of the acts of the commissioners in issuing the same. And the courts have in some instances treated such ratification as equivalent to an original agreement.

I think the subsequent acts of the town and its officers may be taken and treated as an admission on the part of

p. 745

the town that the bonds in suit were issued under chapter 925 of the Laws of 1871.

In Peterson v. Mayor ( 17 N. Y., 449 ), the court of appeals, discussing the question of the ratification by a corporation, says: " This ratification may be by express assent or by acts and conduct of the principal inconsistent with any other supposition, than that he intended to adopt and own the act done in his name. I am of the opinion that the principle is as applicable to corporations as to individuals.”' Peterson v. Mayor, 17 N. Y., 453 .

In Hoyt v. Thomson’s Ex’r ( 19 N. Y., 218 ), the court says: “ A corporation may, like an individual, ratify the acts of its agents done in excess of their authority, and such ratification may, in many cases, be inferred from an informal acquiescence in and approval of those acts.”

To the extent, therefore, that the act of the town by its officers tends to show a ratification of the validity of these' bonds, those acts may properly be considered in determining this case. Nor can this court indulge in any inference not, supported by the facts against the validity of these bonds. On the other hand, it is the duty of the court to hold, (unless the contrary appear from the case) that these commissioners did their duty according to law, and that the-bonds in suit were issued under the act of 1871, and were not in excess of the amount which the commissioners were authorized to sell, maturing at the time mentioned upon the face of the bond.

In Whiting v. Town of Potter ( 18 Blatchf., 165 ), the court say: “ It must be assumed that the commissioners, did their duty * * in the absence of any proof to the. contrary.”

All the apparent equities being in favor of the plaintiff in this case, and upon the view we have taken of the facts-presented, there being no legal objection to the validity of the bond in suit, we are of the opinion that the plaintiff is entitled to recover in this action the interest due and unpaid on these bonds represented by the unpaid coupons.

Learned, P. J.. and Landon, J., concur.