German Savings Bank v. Franklin County

delivered the opinion of the court.

This-is- a,. suit in equity, c’óirimenced on the 4th of August, •1880, by a.bill in equity filed in the Franklin County Circuit Court, of the State of Illinois, by the county of .Franklin, as' plaintiff, against the Belleville apd-' Eldorado Bailroad Company,- the county clerk of Franklin County, the sheriff and collector of-that county, the auditor of public accounts of the' State of Illinois,; the treasurer of that State, four individuals alleged to be holder® of bonds issued by the county, and the unknown holders of cithers of such bonds.

The bill was founded upon the alleged invalidity of the bonds. It sought an injunction to restrain the auditor of the State and the clerk of the county from taking measures to collect taxes to pay the-interest on the bonds, and to restrain the railroad company and the holders of the bonds from bringing suit against ' the county on any of the coupons, and to restrain the state treasurer from paying the coupons, and to restrain the sheriff and collector of the county from collecting any more taxes to pay the interest on-the bonds, and from ■ paying to the state treasurer any money already collected to pay interest on them; and prayed for a decree declaring an election held in the county on the 11th of September, 1869, on the question of a subscription by the county-to the capital

On the 27th of October, 1880, on due proof of personal service of process on the railroad company, the county clerk of the county, the sheriff and collector of the county, tbe auditor of public accounts of 'the State, and the state treasurer, and on proof of due publication as to the defendants named in the ■ bill as holders of the bonds, and as to the. unknown holders of' them, and there having been no appearance for any defendant, the cause was heard on the bill taken as confessed, and a decree made adjudging the invalidity of the bonds, and granting the relief asked for in the bill.

On the 27th of October, 1881, the German Savings Bank, of Davenport, Iowa, as the owner - of nine of the bonds of the couñty, of $1000 each, (and of eighteen, others of the bonds, of $1000 • each, not involved in the present appeal,) was, on a motion made to the state court, permitted to defend the suit and to answer the bill. It filed its a,nswer in that court, setting up that it had purchased the bonds in good faith, for a valuable consideration, and without notice of any defence or objection to the validity of any of them, before they were due, and before' any default had been made in the payment of any interest on any of them, and before the suit was brought; and that the bonds were valid. At the same time, it filed a petition and a .bond for the removal of the cause into the Circuit Court of the United States for the-Southern District of Ulinois. A copy of the record from the state court was filed in the

A replication was filed to the answer of the Savings Bank, various holders of the bonds were made defendants and answered, and some of them filed cross-bills, proofs were taken, and it was stipulated between the parties that each defendant was, at the commencement of the suit, a Iona fide holder of the bonds specified in the respective answers, and that they purchased the same for value, without any notice of defence.

The nine bonds held by the Savings Bank, involved in the present appeal, are all alike except as to the number, and each one has upon it a certificate of the auditor of public accounts of the State of Illinois, the bond and the certificate being in the form following:

“United States of America, State of Illinois.

“No. 15. Franklin County, eight per cent railroad bond. $1000.

“Know all' men by these presents, That the county of Franklin, in the State of Illinois, acknowledges itself to be indebted to the Belleville and Eldorado Kailroad Company, or bearer, in the sum of one thousand dollars, which sum the said county, for value received, promises to pay said company or bearer, in the city and State of New York, twenty years after date, (payable at any time after five years, and before this bond becomes due, at the option of said county of Franklin,) with interest thereon from and after the fifteenth day of November, a.d. 1877, at the rate of eight per cent per annum, payable semi-annually on the first days of January and July of each year, on the presentation and surrender, at the place in the said city of New York where the treasurer of the State of Illinois pays the interest and debt of said State, of the coupons hereto attached, as they severally become due.

“ This bond is one of a series of fifty of like tenor, for the sum of one thousand dollars each, numbered from one to fifty, inclusive, issued under the provisions of an act of the General Assembly of the State of Illinois entitled ‘An act to authorize cities and counties to subscribe stock to railroads,’ approved

November 6th, a.d.1849, and authorized by a majority of the qualified voters of said county of Franklin at an election held in said county on the 11th day of September, a.d. 1869, in accordance with the provisions of said act.

“In testimony whereof, the said county of Franklin has executed this bond, by the chairman of the board of supervisors, under the order of the board of supervisors of said county, signing his name hereto, and by the clerk of said board, under the order thereof, attesting the same and'affixing’ hereto the seal of said county. This done at the office of the clerk of said board, this thirteenth day of November, a.d. 1877.-

“John J. St. Clair,

“ Chairman of Board of Supervisors of Franklin Co., Illinois.

“[seal.] “Evan Fitzgerrell,

“ Cleric of Board of Supervisors of FramMin Co., IllirioisC

“Auditor’s Office, Illinois,

“ Springfield, October 24th, 1879.

“I, Thomas B. Needles, 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 fund and provide for paying the railroad debts of counties, townships, cities and towns,’ in force April 16th, 1869.

“ In testimony whereof, I hereunto subscribe my name and affix the seal at my office, at Springfield, the day and year first above written.

• “[seal.] “(Signed) “T. B. Needles,

“ Auditor Public AccountsP

The nine bonds involved in this appeal were purchased by the Savings Bank at Davenport, Iowa, four, of them for 99 per cent and accrued intérest, on the 13th of April, 1880, and five of them at the same price, on the 15th of May, 1880. None of them, and none of the coupons on them at the time of purchase, were overdue; and the first instalment of interest which fell due on them after they.were purchased by the Savings Bank was duly paid by the county.

On final hearing, the Circuit Court made a decree, on July 3d, 1883, adjudging that the nine, bonds in question were issued without authority, of law, and were void, and awarding a perpetual injunction in regard to them, as prayed in the bill. From that decree the Savings Bank has appéaled.

The record shows the following facts : On the 24th of July, 1869, the County Court of Franklin County, purporting to do so under the authority of an act of the General Assembly of Illinois, entitled “An act to incorporate the Belleville and Eldorado Railroad Company,” approved February 22d, 1861, and an act of the General Assembly, approved November 6th, 1849, authorizing counties to take stock in railroad companies, made an order, submitting to the voters of the county, to be voted upon on the 11th of September, 1869, a proposition to subscribe $200,000 to the capital stock of that company, payable in county bonds at par, due in 20 years from date, with ■ interest payable semiannually at the rate of eight per cent per annum, and to be of denominations of not, less than $1000 each, the bonds to be issued. upon certain specified conditions and not until they were complied with, one of the conditions being, “ that said railroad shall be commenced in the county of Franklin within nine months from the date of said election, and .completed through the county by the 1st day of June, 1872.”

On the 6th of November, 1869,.the County Court made an order, reciting that the election had been held on the 11th of September, 1869, in pursuance of the order of July 24th, 1869 ; that, at such election, the qualified voters of the county did, by a majority of their votes, (taking as a standard the number of votes cast for county officers at the last general election previous to such vote had upon the question of subscription,) authorize the County Court of the county to subscribe the sum of $200,000 to the capital stock of the railroad

' -On the 6th of February, 1871, the County Court made an order reciting the fact of the subscription directed to' be made by the order of November 6th, 1869, and that it required that the railroad should be commenced in the county of Franklin within nine months from the date of the election authorizing the subscription to be made, namely, by the 11th of June, 1870, and be completed through the county by the 1st of June, 1872, and that the time for commencing the building of the road had expired; and it therefore ordered, that the time for commencing and completing the road be extended, and that the subscription be made on the stock books of the railroad- company “ upon- the following terms and conditions, and not .until they are fully complied with,” namely, the $200,000 to be payable in the bonds'of the county at par, to be due in- 20 years from the date thereof, and to draw interest, payable semiannually, at the rate of eight per cent per annum, and' to

On the 9th of March, 1871, the County Court made an order reciting the fact of the election of the 11th of September, 1869, and that a majority of the legal voters of the county voted- for the subscription of $200,000 to the stock of the company; and it then stated that the county did, by such order of the 9th of March, 1871, subscribe the sum of $200,000 for 2000 shares of the capital stock of the company, the stock to be subscribed and the bonds to be issued “upon the following conditions, and not until they were fully complied with,” the stock to be paid for in Franklin County bonds at par, payable in 20 years after date, with interest at 8 per cent per annum, payable semiannually in New York, and to be of the denomination of $1000 each, with interest-coupons attached. It then specified when the bonds were to be delivered, and one of the conditions prescribed was, “the said railroad to be commenced within the county in one year, and completed through the county within three years from the date of this subscription.”

On the 13th of December, 1876, the board of supervisors of the county, which had taken the place of the County Court in respect to the matter in question, made an order, which recited the fact of the election of September 11th, 1869, and the result and terms of the vote, and then proceeded to state, that the board, by authority of the vote and of the acts of February 22d, 18.61, and November 6th, 1849, did thereby subscribe to the capital stock of the company $150,000, being $75,000 by virtue-of each of the two acts, payable in bonds of the county at par, the bonds to be due in . 20 years, and to be payable after the expiration of five years from their date, at the option

There is nothing in the record to show that, down to the 13th of December, 1876, any subscription to stock had been made on behalf of the county on the books of the railroad company, or that the company had accepted or assented to any subscription by the county. Nor is there anything in the record which shows that any subscription was made on the books of the company before the 6th of March, 1877, and it-appears that the subscription made on the books of the company was for $150,000 of stock.

On the 13th of September, 1877, the board of supervisors extended the time for the building of the road until the 15th of March, 1878.

On the 12th of November, 1877, the board of supervisors made an order amending the order of December 13th, 1876, subscribing $150,000 to the stock of the company, so as to read, that the county, under the act of February 22d, 1861, and in accordance with the vote of September 1-lth, 1869, subscribed $100,000 to the stock, payable in bonds of the county at par, the bonds to be due 20 years after their date, and payable, at the option of the county, after 5 years, and to bear interest at the rate of 8 per cent per annum, payable semiannually, and to be of the denomination of $1000 each, and that the county, under the act of November 6th, 1849, and under such vote, subscribed $50,000 to the stock of the company, payable in bonds of the like tenor. The order directed the chairman of the board and its clerk to execute 100 bonds of $1000 each, and of the above tenor, for the subscription under the act of February 22d, 1861, and 50 bonds of $1000 each, of the above tenor, for the subscription under the act of November 6th, 1849, the bonds to be placed in the hands of a trustee and to be delivered to the railroad company “ only on the same condi

The bonds were issued, bearing date November 13th, 1877. The board of supervisors subsequently extended the time for the completion- of the road to the loth of September,. 1878, and again to the 1st of November, 1879. The evidence shows that no part of the road was completed within Franklin County prior to January, 1877, and that it was not completed through Franklin County until about the 1st of November, 1879.

We are of opinion that the decree of the Circuit Court must be affirmed. At the time the vote of Septembér 11th, 1869, was had, the act of the General Assembly of Illinois, which became a law on the 16th of April, 1869, entitled “ An act to fund and provide for paying the railroad debts of counties, townships, cities and towns,” Laws of Illinois of 1869, p. 316, was in force. Section 2 of that act provided that bonds to be issued in payment of a debt created by a county, to aid in the construction of a railroad, should, in order to receive the benefits of that act, be registered by the holder thereof at the office of the auditor of public accounts, who should cause the same to be registered in a book kept for that purpose. The same section provided, that the registration should show the date, amount, number, maturity- and rate of interest of each bond, and under what act and by what county issued, and that the auditor should, under his seal of office, certify upon each bond the fact of such registration. Section 7 of the same act was in these words: “ And it shall not be lawful to register any bonds under the provisions of this act, or to receive any of the benefits or advantages to be derived from this act, until after the railroad, in aid of the construction of which the debt was incurred, shall- have been completed near to or in such countjq township, city, or town, and cars shall have run thereon; and none of the benefits, advantages or provisions of this act shall apply to any. debt, unless the subscription or donation creating such debt was first submitted to an election of the legal voters of said county, township, city or town, under the provisions of the laws of this State, and a majority

The constitution of- Illinois, which took effect July 2d, 1870, provides as follows: “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, how ever, That the adoption of this article shall not be construed as affecting the right of any such municipality to make such' subscriptions where the same have been authorized, under existing laws, by a vote of the people of such municipalities prior to such adoption.”

In the present case,. the only vote of the people of the county of Franklin had prior to July 2d, 1870, authorizing a subscription to the capital stock of the railroad company, was the vote of September 11th, 1869. By § 7 of the act of April 16th, 1869, then in force, the county had the right, in

The evident purpose of the provision of § 7 of the act of April 16th, 1869, was to prevent the issue of b'onds in payment of subscriptions to railroad companies until the conditions imposed by the vote, as conditions precedent, had been complied with, and to declare that the bonds, if issued in violation of such conditions precedent, should not be valid' and binding. When the Savings Bank, in April and May, 1880, purchased the bonds in question, it was, notwithstanding the recitals on the face of them, chargeable with notice of the

That was a suit against the town of Eagle, brought by inno- . cent holders for value, to recover on coupons cut from bonds issued by the town to a railroad company, December 1st, 1870, in payment of a subscription to stock, in pursuance of a vote of the people of the town, had November 2d, 1869. In that vote, certain conditions as to time had been prescribed, upon which the bonds should be issued. Those conditions had not been complied with. The question arose in the case, whether the declaration of the statute, that the bohds should not be yalid and binding until such conditions precedent should have been complied with,. was to be confined, in its operation, to the railroad company to which the bonds should have been issued, or whether it extended to innocent holders for value. The court held that, although the statute did not declare that the bonds should be void, its declaration that they should not be-valid and binding until the conditions precedent should have been complied with, was' an imperative and peremptory declaration that the bonds should not be valid and binding until the conditions named should have been complied with, even.in the hands of innocent holders without notice; and it declared the bonds to be invalid in the hand& of the plaintiffs.

This interpretation of § 7 of the act of April 16th, 1869, accompanied all-bonds subsequently issued into the hands of' whoever took them, whether a bona fide holder or not. This court must recognize this decision of the Supreme Court of Illinois as an authoritative construction of the statute, made before the bonds were issued, and to be followed by this court. Douglass v. County of Pike, 101 U. S. 677 ; Burgess v. Seligman, 107 U. S. 20 ; Creen County v. Conness, 109 U. S. 104 ;

The ruling in Town of Eagle v. Kohn was followed by the Supreme Court of Illinois in Richeson v. The People, 115 Illinois, 450, in January, 1886, and was applied by that court to the bonds issued November 13th, 1877, by the county of Franklin to the same railroad company, under the\act of February 22d, 1861, purporting to have been issued in pursuance of the same vote of September 11th, 1869, as in the present case. The court, referring to its decision in Town of Eagle v. Kohn, made at September Term, 1876, said, p. 460: “We there held that bonds in the hands of innocent purchasers were not valid, where the conditions upon which the subscription was made have not been complied with. The language of the statute is plain and explicit; and unless it should be arbitrarily disregarded, we perceive no ground upon which an innocent holder can evade its provisions.” This view was held, as the court said, because, when the vote was taken, the 7th section of the act of April 16th, 1869, was in force. See, also, Parker v. Smith, 3 Bradwell, App. Ill. 356, 366, 367.

In regard to the case of Town of Eagle v. Kohn, it is urged by the Savings Bank, that it does not appear, by the report of that case, that the bonds there in question had been registered by the state auditor, as contemplated by the act of April 16th, 1869; that the provisions of §§ 2 and 7 of the act of April 16th, 1869, imply that the state auditor shall ascertain and determine whether or not the evidence is sufficient to authorize him to register the bonds and to indorse thereon his certificate of registration; that it must be presumed that the presiding judge of the County Court, whose duty it was, under § 7, to certify to the auditor that all the preliminary conditions required by the act to be done, to authorize the bonds to be registered and to entitle them to the benefits of the act, had been complied with, had performed his duty; that, after such registration and the certificate of the auditor on the

The answer to these suggestions is, that- the preliminary conditions required by § 7 of the act of April 16th, 1869, to exist, in order to authorize the registration of the bonds, are only that “the railroad in aid of the construction of which the debt was incurred shall have been completed near to or in such county, township, city or town, and cars shall have run thereon; ” and that the subscription creating the debt should have been voted for by a majority of the legal voters of the county, township, city or town, living therein. Those preliminary conditions are the only ones which are required, to be certified to, by the presiding judge of the county court, in order to authorize the registration of the bonds. It is not required by § 7, that the presiding judge of the County Court shall , make any certificate as to a compliance with the terms and conditions of any subscniption. Section 7 requires, as a preliminary to registration, that the railroad shall have been completed near to or in the county, and that cars shall have run thereon; bno it does not require that the road shall have-■been completed by any time prescribed as a condition precedent, in the vote. The registration of the bonds by the state auditor has nothing to do writh any of the terms or conditions on which the stock was voted and subscribed. Neither the registration nor the certificate of registry .covers or certifies any fact, as to compliance with the conditions prescribed, in

The cases of Insurance Co. v. Bruce, 105 U. S. 328 , Pana v. Bowler, 107 U. S. 529 , and Oregon v. Jennings, 119 U. S. 74 , are relied upon by the Savings Bank, in this case, to sustain its view that the decree of the Circuit Court was erroneous.

In the case of Insurance Co. v. Bruce, the bonds were issued by the town of Bruce, in the State of Illinois, on the 1st of December, 1870, in payment of a subscription to the capital stock of a railroad company. The bonds recited upon their face that they were issued by virtue of two statutes' of the State, one of which was the before-named act of April 16th, 1869; and the bonds also certified on their face, that,' at a special election held in the township, on the 7th of September, 1869, a majority of the legal voters participating at the same had voted in favor of the subscription and of the issue of the -bonds. Certain of the conditions as to time, imposed by the vote of the people, had not been complied with, and the bonds were in the hands of bona fide holders

In Pana v. Bowler, the bonds were issued by the town of Pana, in Illinois, June 23d, 1873, prior to the decision in Town of Eagle v. Kohn. The vote of the people of the township was had on April 30th, 1870, while the act of April 16th, 1869, was in force, and the bonds, as in the case of Insurance Co. v. Bruce, recited on their face, not only that they were issued in compliance with the vote, but that they were issued in accordance with the provisions of the act of April 16th, 1869. No point was raised in that case that, the bonds having been issued after the new constitution of Illinois came

In Oregon v. Jennings, the bonds were issued on the 31st of December, 1870, nearly six years before the decision was made in Town of Eagle v. Kohn, and the election was held in the town of Oregon, Illinois, on the 23d of June, 1870. Section 7 of the act of April. 16th, 1869, appears to have been considered by the court in that case, and it held, that the recitals in the bonds estopped the town from taking the defence, as against a bona fide holder of the bonds, that the first division of the road was not completed by the time specified in the vote of the people. The court observed, that it had been referred to no decision of the Supreme Court of Illinois, made prior to the issuing of the bonds in that case, namely, December 31st, 1870, which held to the contrary of the views it announced. But, in tFe present case, the decision in Town of Eagle v. Kohn was made prior to the issue of the bonds.

In County of Randolph v. Post, 93 U. S. 502 , the bonds were issued by the county of [Randolph, in Illinois, January 1st, 1872, under a vote of the people had June 6th, 1870, which imposed a limitation of time as a condition precedent. In October, 1871, the County Court extended the time from December 27th, 1871, to February 1st, 1872. This court held, that it could do so notwithstanding the provision, above cited, in the constitution of July 2d, 1870. But the act of April 16th, 1869, does not appear to have been before this court, and the decision in Town of Eagles v. Kohn was not made until more than six years after the vote was had, and more than four years after the bonds were issued, in County of Randolph v. Post.

In Concord v. Robinson, 121 U. S. 165 , this court held, that subscriptions and donations in aid of railroads, voted by municipal corporations of Illinois, prior to July 2d, 1870, such vote being authorized by laws in force when it was taken, could be completed after that date, according to the conditions attached to the vote. In that case, the vote of the town of Concord, Illinois, had been had on November 20th, 1869, in

"Without considering other grounds on which our decision might be rested, we are of opinion that the' decree of the Circuit Court must be

Affirmed.