Case ID: ad_66/html/0330-01.html
Source: Caselaw Access Project
Author: {"author": "Williams, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

The Oswego County Savings Bank, Appellant, v. The Town of Genoa, Respondent.
    
      Bonds issued, in aid of the western extension of the New Yoflc and Oswego Midland Bailroad under chapter 398 of the Laws of 1871 are void—a purchaser is chargeable with notice of the fact that the location of the route and terminus was not established—the toion of Q-enoa cannot ratify such bonds.
    
    TJnder chapter 298 of the Laws of ÍS71, known as the Western Extension Act, authorizing the New York and Oswego Midland Railroad Company to extend its lines from the city of Auburn or from any point upon said road easterly or southerly from that city to a point on Lake Erie or the Niagara river, and empowering the towns located along the proposed extension to issue bonds in aid of its construction, the location of the entire route and terminus of the •extension was a condition precedent to the exercise of the power to issue the bonds, and inasmuch as this condition was not complied with before, the bonds of the town of Genoa were issued in aid of the enterprise, such bonds are invalid.
    A purchaser of such bonds is chargeable with knowledge of the statute and must ascertain at his peril whether there has been a compliance therewith. ■>
    'The town could not, by any subsequent act of its officers or otherwise, ratify ", the issue of the bonds or estop itself from questioning their validity.
    Appeal by the plaintiff, The Oswego County Savings Bank, from ■a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of Onondaga on the 13th day •of July, 1899, upon the decision of the court rendered after a trial •at the Onondaga Trial Term, a jury having been waived.
    Chapter 298 of the Laws of 1871, which is referred to m the •opinion, provided “ any town, village or city in any county, through or near which said railroad or its branches may be located, except such counties, towns or cities as are excepted from the provisions •of the general bonding law, may aid or facilitate the construction •of the said New York and Oswego Midland railroad and its branches and extensions, by the issue and sale of its bonds in the manner provided for in the act entitled, ‘ An act to facilitate the construction of the New York and Oswego Midland railroad, and to authorize towns to subscribe to the capital stock thereof,’ passed April fifth, eighteen hundred -and sixty-six, and the acts amendatory of and supplementary thereto.”
    
      
      S. M. Coon and Israel T. Deyo, for the appellant.
    
      Frederic E. Storke, for the respondent.
   Williams, J.:

The judgment appealed from should be affirmed, with costs.

The action was brought to recover the amount of certain coupons upon bonds issued by the defendant in aid of the New York and Oswego Midland railroad. The defenses urged were that the bonds were invalid and uncollectible, because

First. The necessary consents of the taxpayers were not obtained.

Second. The acts of the Legislature, under which the bonds were issued, were unconstitutional, in that .they were private bills and embodied more than one subject.

Third. The railroad did not determine to build and did not locate the line in aid of which the bonds were issued, and this ivas a condition precedent to the issue of the bonds.

The court decided the first question as to the consents of taxpayers in favor of the plaintiff, declined to pass upon the second question, the constitutionality of the acts, and determined the third question in favor of the defendant, holding that the railroad did not determine to build and did not locate the line, and, therefore, the bonds were invalid.

The New York and Oswego Midland Railroad Company was incorporated January 11,1866-, under the General Railroad Law of this State (Laws of 1850, chap. 140) for the purpose of constructing and operating a line from Oswego southerly and easterly to a point on the Hudson river opposite New York city. The main line was located along a route thirty-five miles east of Cayuga county, and forty-five miles east of the defendant, a town in said county, and was being constructed during the years 1866 to 1873, both inclusive.

■In 1867 the Legislature, by chapter 917 of the Laws of that year (commonly known as the Auburn Branch Act ”), authorized' the Midland Company to construct a branch road from its main line to the city of Auburn, in Cayuga county ; and the towns along the branch line, or interested in the construction of the same, were given power to issue bonds in aid of such construction. In Juner 1869, the railroad company began the construction of this branch from Norwich, Chenango county, on its main line. This branch was constructed through Madison county to the village of Cortland in Cortland county, during the years 1869, 1870, 1871,.1872, and was opened for traffic to Cortland June 5, 1872.

In June, 1871, there was a contract made between the railroad company and one Wood, having in view; the purchase of the Murdock line ” (so called) a partially graded roadbed from Pugsley’s, near Ithaca, northerly through Tompkins and Cayuga counties to the Merrifield road in the town of Scipio in the latter county, eleven miles south of Auburn," for the use of the railroad in constructing a part of the Auburn branch, but nothing came of this contract, the conditions as to raising money by the city of Auburn and some of the. towns never. having been complied with. After the making of this contract, consents of taxpayers of the defendant town were obtained, dated June 20, 1871, and were'tiled August 28,< 1871, and September .9, 1871, the county judge of Cayuga county appointed Hewit, Stevens and Lester railroad commissioners of the town, and they thereafter issued the bonds in question, dated, December, 1871,. aggregating $75,000. In the meantime, and April 5, 1871, the Legislature passed another act, chapter 298 of the Laws of that year (commonly known as the “ Western Extension Act”), authorizing the raijroad company to extend and construct its line from the city of Auburn, or from any point upon said road easterly or southerly from said city upon a route deemed most.feasible, to a point on Lake Erie or Niagara river, and on November 16, 1871, the railroad under this act,, by-resolution, determined to commence the extension and construction westerly, at and from the village of Cortland, and extend it westerly - to Lake Erie or the Niagara river. Pursuant to this resolution, and under this -“ Western Extension Act,” the railroad company in December, 1871, began to construct its “ Western Extension,” commencing at Freeville, Tompkins county, and going westerly and northerly through that county and into Cayuga county,, striking the Murdock line at Osmun’s, Tompkins county, .and thence going, northerly along that line. During, the winter of 1871 and the following year the road was constructed, as far as the village-of Geneva, in defendant’s town, in October, 187.2, and as far as the Merrifield road in December, 1872. A traffic contract was made March 22, 1872, between the Midland Company and the Utica, Ithaca and Elmira Company under which the Midland Company was authorized to use the tracks of the other company between Cortland and Freeville for. the purpose of making a continuous connecting line between Norwich and the line north of Freeville, which later in the year extended to the Merrifield road eleven miles south of Auburn, and in December, 1872, the Midland road began to run its trains between its main line at Norwich and the Merrifield road, and continued so to operate the road until the fall of 1873, when the company failed and a receiver was appointed.

It seems to us quite apparent that the railroad company never decided upon or located any route for the Auburn branch in or through Cayuga county under the act of 1867, and that from and after November 1, 1871, they acted solely under the “Western Extension Act ” passed in April of that year. Nothing had then been done towards constructing the “ Auburn branch” line west of Cortland, and they elected then to commence the “Western Extension,” not at Auburn, but at Cortland, which was easterly and southerly of Auburn. Auburn would not issue bonds in aid of the Auburn branch line, and, therefore, apparently the railroad abandoned Auburn, and started from Cortland under the “Western Extension Act,” and this was before the bonds in question were issued at all, before their date even.

The road was never constructed westerly of the Merrifield road, nor was any location made of the line beyond that point, other than by a map and profile filed in the Cayuga county clerk’s office August 29, 1873, which showed a line from the Merrifield road to Mudlock, a point near the west line of Cayuga county which was called a part of the “Western Extension,” and passed south and west of Auburn, some eight miles from the city. The western terminus on the lake or river was never selected nor decided on, nor was the route to such terminus from Mudlock west ever fixed or designated in any way. No railroad was ever constructed between Cortland and Freeville. The railroad company never determined to build and never did construct any road from the Merrifield road to Auburn. They were waiting for Auburn to raise money, which it never did. The road between Freeville and Scipio fell into the hands of the Ithaca, Auburn and Western Bailroad Company, which later extended the line from the Merrifield road to Auburn, and it was operated between Freeville and Auburn until 1890, when it was abandoned, its rails taken up, and it has not since been operated.

The bonds in question upon being issued were delivered to the railroad company or were sold to others at various times between March 1 and December, 1872, and the proceeds applied to the payment for the stock of the railroad company subscribed for by the railroad commissioners. A certificate for the stock was issued to. the railroad commissioners November 20, 1872. The railroad'commissioners of the town paid the interest coupons upon the bonds to and including September 1, 1887, from moneys raised by tax upon .the town as provided bylaw. None of the interest coupons of a later date have been paid. The coupons were paid promptly as they matured, except those for 1875 and 1876, which were not paid until the money therefor Was raised by taxation in 1876. The money to pay the coupons for 1888 was raised by taxation in 1887 and paid to the railroad commissioners, but those coupons have not been paid by the commissioners.

It is not necessary further to recite the facts in - detail. The court held and decided among other things that the location of the route and terminus of the line in aid of which the bonds were issued was a condition precedent to the exercise of the power to issue the bonds that the bonds were not issued in aid of the “ Auburn branch ” line under the act of 1867, but of the “Western Extension.” under the act of 1871, and neither the terminus, nor the route from Mudlock west Were ever located. Therefore, there was no authority to issue the bonds, and they were invalid and cannot be enforced. There was abundant evidence to support the findings of fact made by the. court. We cannot interfere with such findings. They were correct. As to the law, we must conclude that the bonds were issued without authority of law, under the principles laid down in People ex rel. Akin v. Morgan (55. N. Y. 587); Purdy v. Lansing (128 U. S. 557), and cases therein referred to.

In these cases it' was clearly held that in order- to authorize the-issue of bonds- under this act of 1871, the “ Western Extension Act,” the-railroad must, before such issue, have designated or located the entire route of the extension.

In order, therefore, to avoid the remaining proposition of law, that the bonds were illegal and cannot be enforced, the plaintiff, must maintain one of its contentions.

First. That any defects in the proceedings for and the issue of the bonds have been validated by subsequent legislation, or

Second. That the defendant by its subsequent acts has ratified the issue of the bonds, and is estopped from questioning their validity in the hands of bona fide holders.

First. We are aware of no legislation tending to cure the defect, here complained of, that the route and terminus of the Western Extension ” in aid of which the bonds were issued, were never located or determined upon. The proceedings for the issue of the-bonds were commenced by the appointment of the railroad commissioners September 9,1871. Until then this defect did not exist, and, therefore, the acts passed in 1866, 1868 and 1869 .could have no curative effect as to this defect.

The only other act referred to is chapter 548 of the Laws of 1873,.. and that act expressly provided that it-should not in' anywise affect any suit thereafter brought to test the bonding of any town in Cayuga county in aid of the Midland road, its branches or extensions. It could, therefore, have had no curative effect upon the defect complained of here.

Second. The plaintiff cannot be a bona fide holder of the bonds in question. (Cagwin v. Town of Hancock, 84 N. Y. 532, 542, and cases cited.)

It was said in that case: There can be no bona fide holders of bonds, within the meaning of the law applicable to negotiable paper, which have been issued without authority. A town has no general authority to issue such bonds. It can issue them only by virtue of special authority conferred by some statute. Unless issued in the way pointed out by statute,' they cannot bind the town. The statute specifies the powers of the agents of the town and the precise conditions upon which the bonds could be issued, and all persons taking the bonds are chargeable with knowledge of the statute, and they must see to it that the statute has been complied with before they can with absolute safety take the bonds. Such is the. law as laid down in this State.”

The defendant could not, by any subsequent acts of its officers or otherwise, ratify the issue of the bonds or estop itself from-ques-Honing their validity. (Calhoun v. Millard, 121 N. Y. 69, 81, and eases cited.) ,

In this case it was said: “ Municipal corporations, since they possess no general authority to issue such bonds, cannot, by recognition •or subsequent ratification, validate obligations which they had no power to create.”

We are unable to see how the plaintiff can avoid the conclusion of law found by the trial court, that the bonds in question are illegal and cannot be enforced.

Our conclusion is that no error was committed by the trial court in the disposition of the case upon the grounds on which it was placed, and that the judgment appealed from should be affirmed, with costs.

All concurred, except McLennan, J., not voting, and Rumsey, J., not sitting. ■.

Judgment affirmed, with costs.