Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1874-01-15
TOWN ISSUES OFRAIL1K4Y BONDS.

The recent decision OF the United States
Supreme Court, affirming the validity of GER
tain bonds issued in aid of railroad in the
State of Illinois, is subject of considerable
comment among Wall ST., bankers and brok-
ers. The case in question, they say, has all
the attributes and effect of a test case, and the
decision consequently covers about every liti-
CATION now pending or likely to be brought in
any State court founded upon the reputation
of their railroad bonds by the towns which
issued them. The defense raised by the town
in question, that the bonds were illegally is
sued, is claimed to be the very strongest de-
fence that can be presented in any case of the
kind, and as the Supreme Court has declared
that defense insufficient there remains no other
alternative for recusant towns than to manful-
ly meet their obligations. There are very few
railroads in the country that have not re-
ceived aid to some extent by the issue Of
bonds by the towns along their lines. 1t has
very generally occurred that the towns have
rendered such aid very enthusiastically, in
order to secure the passage of railroads
through their borders. When the road is fin
ished, however, and the interest on the bonds
is demanded or the principal falls due, the
towns frequently experience reaction, and
from an enthusiastic tender of money aid pro-
coed to discussion of means for Withholding
payments altogether. The pretense of fraudu-
lent issue has hitherto been the strongest and
most popular argument for reputation. With
that plea, a number of towns have gone into
the courts, before the case in question was de-
cided, for the purpose of relieving themselves
of their debts. 1t is not known whether any
such cases have been carried up to the Su-
preme Court before, but it is believed that
this is the first where such an important prin-
ciple was laid down. The decision will faver-
ably affect great many bankers and bond
holders throughout the country, but will not
affect in any way the railroads in whose aid
the bonds have been issued. The railroads
never board the bonds. They sell them at
once, often at low rate because OF the feel
ing of insecurity growing cut OF these fire.
auent litigations; and while reputation might
very seriously affect the innocent bondholder
who bought the bonds as an investment or on
speculation, it would in no way retard the
building of the railway or have an influence
against the practical benefits which town re-
ceived from the passage OF the railway
through it. The decision will probably have
much influence wherever the building OF a new
railroad is proposed, by teaching town author
ties that promises made in moments of en-
thusiasm, though repented afterwards, must
be fulfilled; and further political influence
on elections, as enforcing the rule that the
people are financially responsible for the acts
Of their agents. The basis of the decision is
that even irregularities previous to the tradu-
lent issue cannot make worthless the bonds in
the hands OF an innocent holder, a maxim that
has always held good in relation to the issue
of commercial paper by business men.
The amount of town bonds in existence is
beyond computation except by an exceedingly
complicated and uncertain process. There
are certainly many millions of dollars worth
of them held in this city against towns Of this
State as well as other States. The records of
legislatures are filled with special acts au-
thorizng towns to issue bonds in aid of rail-
roads. In Western States the system of
towns issuing bonds has been more practiced
than in any other part Of the United States
T..,tt