98 U.S.

98
25 L.Ed. 112

COUNTY OF DAVIESS
v.
HUIDEKOPER.
October Term, 1878

ERROR to the Circuit Court of the United States for the Western District
of Missouri.
The facts are stated in the opinion of the court.
Mr. Willard P. Hall for the plaintiff in error.
Mr. Joseph Shippen, contra.
MR. JUSTICE HUNT delivered the opinion of the court.

The plaintiff below brought this suit to collect from the County of Daviess,
Missouri, the amount of forty-four interest-coupons for $35 each, formerly
attached to bonds issued by the county to the Chillicothe and Omaha Railroad
Company, to aid in the construction of its railroad. A demurrer to the amended
petition was overruled, and final judgment for the amount of the coupons was
rendered by the court below, which also certified a division of opinion on
points presented.

The questions certified are as follows:

First, Whether the bonds, for the collection of the interest-coupons of which the
suit was brought, were issued without due authority of law, and are void in the
hands of a bona fide purchaser for value, because the railroad company to
which said bonds were issued, in payment of capital stock by it subscribed, was
not created according to law until subsequent to the favorable vote of the
qualified voters and the order of subscription.

Second, Whether the former judgment recovered by the plaintiffs in a former

bonds again set forth in this suit, estops the defendant from pleading in bar to
the merits herein.
5

The Constitution of Missouri (1 Wagn. Stat. 62), sect. 14 of art. 11, provides as
follows, viz.:

'The General Assembly shall not authorize any county, city, or town to become
a stockholder in, or to loan its credit to, any company, association, or
corporation, unless two-thirds of the qualified voters of such county, city, or
town, at a regular or special election to be held therein, shall assent thereto.'

The General Statutes provide (1 Wagn. Stat. 295) how railroad companies may
be formed, and further provide (id. 305):

'SECT. 17. It shall be lawful for the county court of any county, the city
council of any city, or the trustees of any incorporated town, to take stock for
such county, city, or town in, or loan the credit thereof to, any railroad company
duly organized under this or any other law of the State; Provided, that twothirds of the qualified voters of such county, city, or town, at a regular or
special election to be held therein, shall assent to such subscription.'

Having paid his money in good faith for the bonds issued by this county, and
the interest becoming payable, it is not unnatural that the holder and owner
should demand payment of such interest. The subscription by the county to the
railroad stock, the receipt and holding of the stock by the county, the assent by
two-thirds of the qualified voters of the county that such subscription should be
made, the actual issuing of the bonds, and the purchase of the same by the
plaintiff below, without knowledge of any objection to them, are conceded.

10

It is said, however, that these things were not done in their proper order; that
the vote of the citizens assenting to the subscription was taken before the
organization of the railroad company was complete, and that although that act
was not under the control or direction of the holder of the bond, but an
irregularity of the county, if it is an irregularity, the county is thereby relieved
from the payment of its debts, which would otherwise be not only just and
honest, but lawful. This is the point that is made in the first of the questions
presented by the certificate of the judges. The facts on which this branch of the
case rests are these: The articles of incorporation of the road in question, which
bear date June 18, 1867, contain the statements required by the statute, giving
the length of the road, the amount of the capital stock, and the names of the
directors, and were subscribed by the subscribers for the amounts indicated.

The amount subscribed was not then as large as that required by the statutes of
Missouri, to wit, $1,000 per mile for the length of the road. This sum was,
however, obtained as early as the eleventh day of July, 1868, when the articles
were filed in the office of the secretary of state, and the incorporation became
perfect. On the 1st of July, 1869, the county court made its subscription, issued
and sold its bonds, and with the proceeds paid for and received the stock. The
road was built through the county; and for several years the county levied and
collected taxes to pay the interest of the bonds, and did pay the interest for
those years.
11

The precise question now presented has never been decided in this court, but its
determination depends upon principles which are well settled. These bonds are
securities which pass from hand to hand with the immunity given by the
common law to bills of exchange and promissory notes. The persons who
execute and deliver themthe officers of the county court in this instanceare
the agents of the municipal body authorizing their issue, and not of the persons
who purchase or receive them. If these agents exceed their authority as to form,
manner, detail, or circumstance, if they execute it in an irregular manner, it is
the misfortune of the town or county, and not of the purchaser; the loss must
fall on those whom they represent, and not on those who deal with them. There
must, indeed, be power, which, if formally and duly exercised, will bind the
county or town. No bona fides can dispense with this, and no recital can excuse
it. Thus, if the constitution or the statute should peremptorily prohibit a
municipal body from loaning its credit to or subscribing for stock in a railroad
corporation, a subscription or a loan made subsequently to the passage of the
act would give no right against the county, although the bond should recite that
there was such authority, and the purchaser should pay full value in the belief
of its truth. There is no difficulty in appreciating the distinction stated; and we
are now to ascertain whether the error we are considering, assuming it to be
one, arises from an irregularity in the exercise of an existing power, or whether
there is total want of authority to act.

12

The case concedes that the question of subscription to the stock of this very
company was submitted to the voters of Daviess County, that two-thirds of the
qualified voters of that county assented to the making of that subscription, and
that the bonds, the coupons from which are here in suit, were issued pursuant to
an order of the county court of Daviess County, made under authority of the
Constitution and General Statutes of the State of Missouri.

13

After admitting that it made a contract with this company to take its stock, and
not with some other company, and that the contract with this identical company
was authorized with the forms and solemnities set forth, and that it received,

and, so far as known, has ever since held and enjoyed, and now holds and
enjoys, the profits of the stock of this very company issued for such bonds; and
also admitting that when the bonds were so issued and delivered by it the
incorporation had been completed in form and detail for one year,can it now
be permitted to urge as a defence that such company was not a legally
organized corporation when the election was held, and did not become such
until after that period?
14

The Missouri statute already quoted shows that the municipal body, in regard to
its privileges, liabilities, and responsibilities as a taker and holder of railroad
stock, stands like an individual subscriber. Its eighteenth section is as follows:

15

SECT. 18. Upon the making of such subscription by any county court, city, or
town, as provided for in the previous section, such county, city, or town shall
thereupon become, like other subscribers to such stock, entitled to the
privileges granted, and subject to the liabilities imposed, by this chapter or by
the charter of the company in which such subscriptions shall be made; and in
order to raise funds to pay the instalments which may be called for from time to
time by the board of directors of such railroad, it shall be the duty of the county
court, or city council, or trustees of such town making such subscription, to
issue their bonds or levy a special tax upon all property made taxable by law for
county purposes, and upon the actual capital that all merchants and grocers and
other business men may have invested in business in the county, city, or town
to pay such instalments, to be kept apart from other funds, and appropriated to
no other purpose than the payment of such subscription; but the total amount of
tax levied for railroad purposes in one year in any county, city, or town shall
not exceed thirty per cent of the subscription made by such county, city, or
town.'

16

It shows, also, that it devolved upon the county court, subject to the question of
power before stated, to determine whether a subscription had been made, and to
raise money for its payment. This included a determination of the questions
whether an assent had been given by the voters, and whether a subscription had
in fact been made by the county court. It did determine both of these questions
in the affirmative, and so certified in the bonds issued by the same authority,
and which are now in suit.

17

Under these circumstances, the authorities in this court and in the State of
Missouri hold that the decision of the voters and the action of the county court
in issuing the bonds in question, and their subsequent action in receiving and
retaining their benefits, gave validity to the bonds, and that they are now to be

taken as valid instruments.

Among these authorities are the following: Town of Coloma v. Eaves, 92 U. S.

19

These authorities show that if the county had made a contract with the railroad
company in April, 1868, it would not have been permitted, under the
circumstances stated, to deny it. But here was no contract. It was a simple
indication of the pleasure or wish of the voters of the county that aid should be
furnished to this railroad. The statute was intended as a guard against hasty
action in this respect, and makes no requisition that the corporation shall be so
perfected that a quo warranto could not reach it. If assent is given to a specified
aid to a railroad named, we are of the opinion that a perfection of the
corporation before the subscription is made and the bonds issued is a
compliance with the statute.

20

Ruby v. Shain (54 Mo. 207) is cited to the contrary. There are several reasons
why that case does not control the one we are considering.

21

1. The question of the legality of the subscription was never properly reached.
Whether the tax which was levied to pay the county subscription for stock was
legal or illegal, it was certain that the collector, who had a warrant for its
collection valid on its face, and who was the defendant in that suit, was not
liable for enforcing it. That an officer in such case is protected by his writ, and
that to protect himself he need not even produce the evidence of a judgment,
was held as long ago as in Holmes v. Newcaster (12 Johns. (N. Y) 395), and has
been so held from that time to the present. Such, too, is the express holding of
the court in Ruby v. Shain, and an examination of the merits of the case was
unnecessary.

22

2. It differed from the present case in the fact that not only the township vote of
assent, but the subscription to the stock and the issuing of the bonds, all
occurred before the organization of the company. The vote was taken in June,
1869, the subscription ordered and the bonds issued on the 9th of November,
1869, while the articles of association were executed on the 10th, and filed with
the secretary of state on the 12th of the same month and year. In the present
case, the election was held April 7, 1868, the articles were filed July 14, 1868,

the subscription made and the bonds dated July 1, 1869. The organization was
complete for a year before the subscription was made.
23

3. In that case, the subscription was needed to complete the organization. In this
case it was not. The court, in Ruby v. Shain, say, 'that it is not intended that
counties, cities, or towns shall, by their subscription, form the basis on which a
future corporation is to be erected, a nucleus around which aid is to be gathered
from other quarters, to construct roads, but that they may, by their subscriptions
or loans, aid corporations already in existence.' There is a broad difference
between the cases where the subscription is actually made and the bonds are
issued in fact after the corporation is complete, and where these things are done
while the corporation remains incomplete.

24

Upon the whole matter, we are of the opinion that the case was well decided.
The first question certified is answered in the affirmative, and as that disposes
of the entire controversy, no attention need be given to the second question.

25

Judgment affirmed.