§ 137. Doctrine in the State Courts.-The questions just discussed were in cases where the power was admitted, for the Supreme Court of the United States, as well as other courts, adhere to the doctrine that when there is no power the bonds are void. The State courts generally, where the power exists and the defects are mere irregularities, agree with the Supreme Court of the United States, that the issuing of the bonds and recital on their face that they are issued in accordance with the statute, is a determination, by a proper tribunal, that they have been issued regularly, which cannot be controverted by the corporation whose bonds are in the hands of a bona fide holder for value.' The Ohio cases are based on a statute declaring that the bonds issued and negotiable "shall be deemed conclusive evidence of the regularity of everything required by this act preliminary to the issuing and negotiation." In Connecticut, the statute directed a certificate, showing that two-thirds of the electors had voted in favor of the subscription, to be lodged with the secretary of State. Such a certificate being lodged, the bonds issued were not allowed to be attacked by showing that at previous elections the vote was unfavorable. The holder of the bonds need not go beyond the certificate in his inquiries as to the power to issue them.2

Where shares of stock have been received in exchange for the bonds, and interest paid by levying a tax for the purpose for a number of years, the State courts enforce the estoppel, considering such acts a ratification of the act of the agent. So where a town voted money for a centennial celebration, issuing bonds of the town, the committee acted, made contracts, and the celebration took place, taxpayers who stood by and knew what was done, were refused an injunction to restrain a levy of a tax to pay the bonds, on the ground that they were guilty of laches and bad faith. And so it is held in Kentucky and Texas, that the negotiability of the paper protects it in the hands of the holder, not only from all equities between the original parties, but that the holder has the right to presume that all conditions of issue have been complied with. But while they generally

4

1 Steines v. Franklin Co. 48 Mo. 167; Lathrop v. Dowling, 50 Mo. 134; State ex rel. Treadwell v. Comm'rs of Hancock Co. 11 Ohio, N. S. 183; Commissioners v. Nichols, 14 Ohio, N. S. 260; Railroad Co. v. Evansville, 15 Ind. 395; People v. Mitchell, 35 N. Y. 561; s. P. as 14 Ohio, N. S. 260.

2 Society for Savings v. New London, 29 Conn. 174.

3 Johnson v. Starke Co. 24 Ill. 90; Keitsburg v. Frick, 34 Ill. 421; Commonwealth v. Pittsburgh, 43 Penn. St. 391.

'Tash v. Adams, 10 Cush. 252.

5 Maddox v. Graham, 2 Metc. (Ky.) 56; San Antonio v. Lane, 32 Texas, 405; affi'd by cases in the Supreme Court of the United States.

agree that mere irregularities as to the mode in which the authority is exercised may be cured by the recitals of bonds, being considered a determination that they were regularly issued, there is much difference of opinion as to what constitutes irregularity, and whether in the particular case the defect was one of irregularity or want of power.

In Wisconsin, a town was authorized to subscribe to stock and issue bonds in aid of a railroad, conditioned on a majority vote by the electors. The election was to be called by ten electors, a notice of ten days being given in five public places. The supervisors were to make affidavit of the posting of the notice, which with the applications of the electors, was to be recorded in the office of the town. clerk. The inspectors of election were to make a statement of the vote, and a certificate of their determination as to the result, which was likewise to be recorded in the same office; copies of the affidavits and certificate were made evidence of the facts stated therein. The bonds were issued by the supervisors, and recited that in pursuance of the act of the legislature, the legal voters of the town had authorized the supervisors of the town to subscribe for the stock and issue the bonds. But no notice was given, and no affidavit or certificate recorded in the office of the town clerk. These bonds were declared void. The defect was not a mere irregularity, but a want of power, and it was distinguished from the cases in the Supreme Court of the United States, decided prior to and including Moran v. Com'rs of Miami Co.1 In those cases the record was fair on its face, but here the defect was in the record. The case of the Royal British Bank v. Torquand was considered one of irregularity and not a want of power.3

2

The town of Lathrop issued bonds signed by the president and clerk of the board of trustees, reciting that they were "issued under and pursuant to an order of the board of trustees of the town of Lathrop aforesaid, made under authority of the Constitution of the State of Missouri, and authorized by a vote of the people of said town at a special election for that purpose." The statute required the assent of two-thirds of the voters of the town at a general or special election. The evidence showed that there were from four hundred to six hundred voters in the town, and that sixteen votes were cast all in favor of the subscription, but there was no registration before the election, no return made to the trustees, or certificate of

1 2 Black, 722.

26 Ellis & Bl. 327.

3 Veeder v. Lima, 19 Wisc. 280; affi'd in Bishop v. Milwaukee, 21 Wisc. 257.

the result of the election, and no evidence of any judges of election, or that any poll-books were kept. It was held that there was no such election as was contemplated by law, and that the failure to have an election was not an irregularity which could be cured by recitals-it was a want of power. The previous cases in that State in which recitals had been held sufficient were cases in which the voters had voted to confer authority, and there was irregularity in the notice or in casting up the vote.

Where elections in aid of railroads were authorized to be ordered by the county court, and the statute was repealed and the authority vested in the supervisors of the county, the county court ordered an election, bonds were issued, taxes levied, and interest paid for several years. The defect was considered not an irregularity, but a want of power. The discretion to order the vote was vested in the supervisors, and the county court had no authority on the subject at all.2 The Constitution of Illinois requires the final passage of every bill on the ayes and noes to be entered on the journal, and no bill can become a law without a majority of the members of each house; it also requires every bill to be read three times, unless, in cases of emergency, three-fourths of the house, when the bill is pending, dispense with the rule. An act authorizing the issue of bonds in aid of a railroad was not read three times, or the rule dispensed with as required by the Constitution. The bonds issued under the act were void. This was not an irregularity, it was a want of power, and no subsequent recognition of their validity by the local authorities could so far vitalize them as to prevent the tax-payers from denying the validity.3

In New York the statute required the written assent of two-thirds of the resident tax-payers on the assessment roll to be obtained and filed in the clerk's office of the county, with an affidavit that the assents filed composed two-thirds of the tax-payers. Under this statute assents were obtained and filed with the affidavits of the supervisors. The bonds were issued reciting that they were issued pursuant to the act of the legislature, and to them was attached a certificate of the clerk as to the assents and affidavit filed in his office. The court held that there must be evidence of the signatures of the tax-payers, and that they were residents of the town, and that there is no power to execute municipal bonds unless all the conditions are per

'Carpenter v. Lathrop, 51 Mo. 483.

2 Marshall Co. v. Cook, 38 Ill. 44. This case was reversed in Supervisors v. Schenck, 5 Wall. 772, on the grounds of irregularity and estoppel in levying taxes and receiving stock.

formed. As to the question of estoppel by the recitals of the bond, it was claimed that the doctrine was founded on the rule of law that where a power is conferred, if the agent does an act which is apparently within the terms of the power, the principal is bound by the representations of the agent as to the existence of any extrinsic fact essential to the proper exercise of the power, when such fact, from its nature, rests peculiarly within the knowledge of the agent, as in the case of the certification of a check by the teller of a bank. He has peculiar means of knowing the facts, not open to the holder of the check, and the act is within the scope of his apparent agency. A distinction was taken between the case of an agent on whom authority was voluntarily conferred, and the case of a town which conferred no authority upon its agents, the authority being conferred by the legislature, but only vesting when the tax-payers have given their assents. A representation as to such assent would be a representation as to the very existence of the power. Such representations do not bind the principal. The reason on which the rule is founded binding the principal when the agent exceeds his authority is, that when one of two innocent parties must suffer through the misconduct of another, it is reasonable that he who has employed him, and clothed him with authority, and held him out as worthy of confidence, should be the loser. This would not apply to a town whose bonds are issued under an act of the legislature, designating the officers to issue them, and and the terms on which they are to be issued.1 The authority of this case as to requiring evidence to establish the validity of the assents, other than that furnished by the filing of the written assents and the certificate, may well be doubted, even in the State of New York, but on the general question of the estoppel it is worthy of the most serious consideration.2

In Virginia, during the late war, a bond of the city of Richmond was confiscated, and the city was directed to issue another bond payable to H. L. Brooke, the receiver of the court. The council of the city directed a new bond to be issued, showing on its face that it was issued under the decree of the court in lieu of the confiscated bond, and that any subsequent issues should show the same thing. The bond was issued as directed by the auditor of the city. It came into the hands of R. H. Mauray & Co., who procured another bond to be issued to them in lieu of this bond. This last bond did not show on

1 Gould v. Town of Sterling, 23 N. Y. 462-464; citing Farmers' & Mechanics' Bk. v. Butchers' & Drovers' Bk. 16 N. Y. 125; Hern v. Nichols, I Salkeld, 289.

2

People v. Mead, 24 N. Y. 114; s. c. 36 N. Y. 224; Town of Venice v. Murdock, 13 Alb. Law Jour. 269; s. c. 2 Otto, 494.

its face that it had been issued in lieu of the confiscated bond.

The

bond was not negotiable, but had passed into the hands of a bona fide holder for value. The city of Richmond filed a bill to have the bond delivered up and canceled. The city was considered as estopped by the acts of its officer in issuing the bond, and the title of the holder sustained. The case contains an elaborate review of the cases on the subject, and places the decision on the ground of an estoppel in pais. "Where one by his acts or conduct willfully causes another to believe the existence of a certain state of things, and induces him to act on that belief, so as to alter his own previous position, the former is concluded from averring against the latter, a different state of things existing at the same time.” 2

§ 138. Conclusion.-There are several propositions on which all the authorities are agreed:

a. When there is a grant of the power to issue, and bonds purporting to be issued under such grant have been exchanged for the stock of the railroad in aid of which they are made, if taxes have been levied by the corporation for the payment of the interest due on such bonds for a period of years, such acts are a ratification of the act of issuing the bonds, and the corporation, county, or town is estopped to deny their validity, notwithstanding defects in the exercise of the power. They will not be allowed to retain the fruits of the bonds, and repudiate the obligation imposed by them.3

b. Although there may be fraud in the origin of such bonds, yet if negotiable in form, the holder for value without notice is not affected by such fraud, nor by any defects which might have affected the paper in the hands of the original payee. He has title, for the paper passes by delivery. But the Supreme Court of the United States very illogically say that if the circumstances of fraud are strong, the holder must show that he paid value for the bonds, and this will not be presumed as in ordinary cases of negotiable paper.

c. Where there is a grant of power, and the defects in the execution of it consist of matters in pais, not of record, the evidence of which may be easily lost and obscured by the lapse of time, if the bonds issued by the proper officers recite upon their face that they are issued in pursuance of and in accordance with the act granting the power, such recital is conclusive that the bonds were regularly issued.

1 De Voss v. Richmond, 18 Gratt. 339.

Lord Denman, in Pickard v. Sears, 6 Ad. & Ellis, 469.

3 City of Lexington v. Butler, 14 Wall. 282; 2 Black, 722; 13 Wall. 297; 24 Ill. 90; 34 Ill. 421; 43 Penn. St. 391; 10 Cush. 252.

4 14 Wall. 282; 11 Wall. 139; 3 Wall. 634; 2 Metc. (Ky.) 56; 32 Texas, 405.