desirable to avoid the granting of a power to publie corporations which will enable them to issue valid securities or evidences of indebtedness not subject to defense or an investigation of equities which may exist between the parties.

§ 243. The same subject; legal character.

The Federal government has the exclusive power of coining money and issuing currency or certificates constituting a legal tender for the payment of debts. Where public corporations have issued certificates of indebtedness, promissory notes or other instruments either in the similitude of bank notes or other usual forms of currency, such have been held illegal in their character and the corporation held without power or authority to issue

them.694

Securities of any form intended to circulate as money are held invalid.

Legality based upon purpose for which issued follows the rule of law well settled and constantly referred to. If any such miscellaneous forms of indebtedness are issued as evidence of an indebtedness incurred for a purpose other than that authorized by law since they are subject to all equities, they will be held invalid. Public authorities cannot, by the use of an authorized

sider at any time, and confess and admit what the moment before he denied." In 1874, the City of Little Rock did reconsider. It said: "We will purge the transaction of illegality. We had the authority to accept from you in satisfaction of amounts received by us for legitimate purposes the sums in question. We did so receive and expend for legitimate purposes. We erred in making the payment to you in an objectionable form. We now pay our just and lawful debt by canceling the bank notes issued by us, and delivering to you obligations in the form of bonds, to which form there is no legal objection."

694 Thomas v. City of Richmond, 79 U. S. (12 Wall.) 349; City of Little Rock V. Merchants' Nat. Bank, 98 U. S. 308, 5 Dill. 299, Fed. Cas. No. 9,455. Here bonds had been issued having the form and appearance of treasury notes which were afterwards redeemed and legal bonds issued in their place. The city failing to pay, a holder brought suit. The city resisted on the ground that the original bonds is sued in the form of currency were illegal and their surrender was not a valuable consideration for the bonds given in lieu thereof. The court said: "It can scarcely be doubted that whoever is capable of entering into an ordinary contract to obtain or receive the means with which to build houses or wharves or the like, may, as a general rule, bind himself by an admission of his obligation. The capacity to make contracts is at the basis of the liability. The first liability of the city was disputed by it. It had gone beyond its power, as it said, in making a debt in the form of bank notes. If it had not denied its power, judgment and an execution might have gone against it, and the creditor would have obtained his money. This privilege of nonresistance every person retains, and continues to retain. He can recon- used in the Constitution of the

Wesley v. Eells, 90 Fed. 151; Lindsey v. Rottaken, 32 Ark. 619. Where the city has illegally issued "city money," the holder thereof has no remedy. Dively v. City of Cedar Falls, 21 Iowa, 565. But see the same case, 27 Iowa, 227; Cothran v. City of Rome, 77 Ga. 582; Cheeney v. Inhabitants of Brookfield, 60 Mo. 53; Allegheny City v. McClurkan, 14 Pa. 81; State v. Cardozo, 5 S. C. (5 Rich.) 297. Certificates of indebtedness issued by a state treasurer made receivable in payment of taxes or other dues to the state, not held bills of credit within the sense of that term as

instrument, create an indebtedness for an illegal purpose which will be binding upon the corporation.695

§ 244. Form and phraseology.

The law takes into consideration at all times the bona fides of the parties and the relative condition and circumstances attending the character of the corporation and the issuing of the particular indebtedness. Where the public corporation authorized is what may be termed a public quasi corporation and where the officers of such corporation are not presumed to have the same degree or extent of intelligence, experience and learning as that, which it is presumed similar officers of a higher grade of corporation may have acquired or possess, the law will consider such circumstances or conditions and will hold an instrument valid issued by them which may be technically defective in its form but which substantially complies with the law authorizing its issue. But the question of the payment aside from mere form or execution of such instruments depends upon the principles considered in preceding sections. At all times, questions based upon equities existing between the original parties can be raised and payment or nonpayment depend upon their determination.69

$245. Mode and time of payment.

The manner of payment,

the time," 698 the fund699 from which payable, and the rights of parties holding such instruments

United States. See, also, authori- North Bergen v. Eager, 41 N. J. ties cited, § 233. Law, 184.

695 Clark v. City of Des Moines, 19 Iowa, 199, 87 Am. Dec. 423; Merkel v. Berks County, 812 Pa. 505; Isaacs v. City of Richmond, 90 Va. 30.

696 Clark v. City of Des Moines, 19 Iowa, 199, 87 Am. Dec. 423; City of New Orleans v. Strauss, 25 La. Ann. 50; Chandler v. City of Bay St. Louis, 57 Miss. 326; Cheeney v. Inhabitants of Brookfield, 60 Mo. 53; Knapp v. City of Hoboken, 38 N. J. Law, 371; Inhabitants of

697 Allen v. McCreary, 101 Ala. 514; Armstrong v. Truitt, 53 Ark. 287; Marshall v. City of San Antonio (Tex. Civ. App.) 63 S. W. 138.

698 Owen V. Lincoln Tp., 41 Mich. 415. Notes issued by a city not having been presented for redemption within the time prescribed by the act, the city is not under any obligation in law or equity to redeem them.

Brewer v. Otoe County, 1 Neb.

whether the original payee or his assignee,700 all depend upon the principles sufficiently discussed.

VI. THE POWER TO CONTRACT.

The discussion of the power of a public corporation to contract in this and succeeding sections will be confined to certain peculiarities and rules applying to and controlling the making of contracts by such corporations. The general principles of law regarding contracts, their form, execution and enforcement, will not be considered except as they may be incidentally treated.

702

A public corporation, it must be remembered, is first an artificial person, and second an artificial person of such a character that, as compared with others, its powers are still further restricted and limited. This principle arises from the fact, so often repeated, that a public corporation is a governmental agent, one organized for the benefit and advantage of the community at large without special reference to any individual, family or class. The right to contract is one of the powers usually conferred upon public corporations through charter,701 statutory,70 or constitutional provisions as construed and defined by court decisions. The tendency of the courts is to confine the exercise of corporate powers strictly to such as are clearly given, and following this rule the power to contract, of a particular public corporation of whatever class, will be determined not by the application of general rules or principles of law but by the specific right given to such corporation in some grant of legal authority. Public corporations have only such rights and powers as are especially granted them or absolutely necessary to carry into effect the rights and powers so granted. This rule applies with its full force to the making of contracts,704 therefore, we find many cases where the legality of the contract, as executed by a public cor

701 City of Memphis v. Brown, 87 U. S. (20 Wall.) 289; Ex parte City of Birmingham, 116 Ala. 186, 22 So. 454; Hall v. Cockrell, 28 Ala. 507; Zottman v. City & County of San Francisco, 20 Cal. 96; Covington & M. R. Co. v. City of Athens, 85 Ga. 367; Goodrich v. City of Detroit, 12 Mich. 279; Rae v. City of Flint, 51 Mich. 526; Kelly v. Broadwell, 3 Neb. Unoff. 617, 92 N. W. 643; Kernitz v. Long Island City, 50 Hun (N. Y.) 428; Francis v. City of Troy, 74 N. Y. 338, reversing 10 Hun, 515; City of Buffalo v. Bettinger, 76 N. Y. 393; Noel v. City of San Antonio, 11 Tex. Civ. App. 580, 33 S. W. 263.

702 Berry v. Mitchell, 42 Ark. 243; Santa Rosa Lighting Co. v. Woodward, 119 Cal. 30; Ramish v. Hartwell, 126 Cal. 443. Construing Street

Improvements Act, § 6, fixing time for commencement and completion of street improvement work.

Nelson v. City of La Porte, 33 Ind. 258; Stidger v. City of Red Oak, 64 Iowa, 465; Swift v. Inhabitants of Falmouth, 167 Mass. 115; Rumsey Mfg. Co. v. Inhabitants of Schell, 21 Mo. App. 175; City of Lexington v. Lafayette County Bank, 165 Mo. 671; Chamberlain v. City of Hoboken, 38 N. J. Law, 110; Hubbard v. Norton, 28 Ohio St. 116; Blackburn v. Oklahoma City, 1 Okl. 292. The contracts of a de facto corporation can be enforced. Town of Levis v. Black River Imp. Co., 105 Wis. 391, 81 N. W. 669.

703 State v. Hogan, 22 Mont. 384. The approval by the governor and treasurer necessary to the validity of a contract under Const. art. 5,