Memphis daily appeal. [volume] (Memphis, Tenn.) 1847-1886, 1875-12-21
MEMPHIS, December Ia, 1876.
Hon. John Loarue, Mayor:

lore Lle supreme court h0sp6cGIully,
JOHN LOAGUE, Mayor.
MEMPHIS, December Il, 1876.
hon. John Loagne, Mayor:
DEAR SIR-I think it proper to report to you
my action as assistant 10 the city attorney In
the cases lately pending In The supreme court
involving the question OF the cfty's liability
upon certain classes of bonds heretofore issued
by the city authorities. united with the
city attorney in presenting the following de-
fenses:
First-As to the one hundred and thirty-fiye
thousand dollars in bonds issued under the
Leftwich administration. 1t was contended
that these were absolutely void because they
were issued without any authority. The
claim to issue them was the authority OF the
act of 1860, allowing an issue of funding boAds
to the amount of two hundred and fifty thou
sand dollars, and the subsequent act of 1867
allowing the issue OF bonds for funding, under
which there was an ordinance passed author
lzing the issue OF one MI milton Ion oI bonds: The
First-That.the act of 1857 repealed the act OF
1880 in this srticuiar.
Second That the ordinance under this
act of 1867 repealed the former ordinance, and
limited the power to issue funding bonds to
the amount of three million dollars.
And thos tnere remained no power to issue
lutely void, binding the holder, however re-
mote and however bona Jide. 1t is well settled
that municipal corporation cannot bind the
Inhabitants by the issue of negotiable securi-
ties, except under the express authority of the
legislative Fanctton. This view was enter
tsined by the court; the coupon in suit was
pronounced void, and the peremptory man
dsmus as to it refused. Notwithstanding
there seems to be curious effort, reaching
even to an editor Of leading paper in the
city. to under value this decision, I consider
IL of great importance, because it is the first
constr uction oy the court of last resort in the
state OF the statutes under which the authori-
ty to issue these bonds is supposed to rest; and,
being SO, IL will doubtless be received by the
Federal and other courts as conclusive OF the
meaning and effect of those statutes. under
stand Fula in the ESdaral IN ho
That while these courts will examine Tor
themselves whether the adjudications of the
Stste courts oa aStatute impair the obliga-
ton of q contract, and while they win not
necessarily adopt the state decisions ON Ques-
tons OF general commercial law, they adopt
as OF course the construction by the supreme
court of tue State, OF The statutes, frat given,
and from which rights have been or may be
derived. doubt not the effect will be wholly
TO relieve me city OF these bonds and the In
lerest coupons thereon, amounting, am in
formed, to near four hundred thousand dol
lars. Even II these bonds were issued to sup
ply the place OF former bonds, legally issued,
but surrendered and cancelled, as sonae sup
pose which i see no evidence OF, but the con-
trary-this would give them NJ more validity
In law or equity the hands Of any holder,
than bonds issued to fund the floating or any
other debt of the city, justly owed. Defense
was also made against the validity OF the four
hundred thousand dollars issued OF paving
bonds-under the act of 1866. This defence is
placed
Flrst.-on the ground that there was no leg
lklaIlVe 6QLnOTlLy issue Ll0En.
And this called for the construction Of the
third section, second subsection, Of that act,
known as the public improvement section.
II was contended that the PUBLIC improve
ment spoken OF in that section did not mean
street paving, ipasmuch as there was pro-
vision In the act of 1860, specially, for paving
certain streets; and the amount authorized
was limited to five hundred thousand dollars;
and IN the same act of 1876, in section other
than that referred 10, there are provisions for
paving all the streets by appoItioning and
charging the cost thereof on the adjoining
lots in proportion to their respective fronts,
and making it mandatory on the council to
the coupons or pleadings involved in the liti-
CATION raised this question distinctly enough
TO evoke the opinion OF the court upon II, and
this remains yet an open question. Although
the law, as TO the sections last referred TO,
was pronounced unconstitutional, 1t may
well be looked to, to discover the mean
ing OF the legislature in The use
of the words, "PubIIc Improvement in the
third section, as above. IL this be so, and it
appears that the legislature intended to pave
ali the streets by apportioning the charge on
the frontage, then they did not mean BY
public improvement" the paving of the
street. And II these TOUR hundred thousand
dollars Of bonds could not issue under that au-
thoTity, then there was no power to issue
them, and they would be void and the infer
ence seems Irresistible. was Of the opinion,
and am still so, that the nve hundred thou
sand dollars of paving bonds Issued under the
third section ofths act OF 1850 are also void for
these reasons.
ElIbI-lJ II huu1lLtou IHhJ bu6To huSL DC q
power to issue by legislative act, and a con-
hrming ordinance.
Second-To this power the holder, however
remote. must look for his title. 1t Is only as
against an irregular exercise Of a power that
he is protected. Here the power is granted to
Issue five hundred thousand dollars of paving
bonds. But, as provision of the power, and
before 1t can be exercised, the council is re-
quired 10 provide 6y ordinance,
lst. For the payment of the annual interest.
I'd. A sinking fund to meet and secure the
Now if the council had passed such ordt-
Tdnce, making these provisions, but the proper
officers had never put it in force, and the
bonds had so issued, then there would have
been power and an irregular exercise of 1t,
and the innocent holder would be pro-
putting in force the act OF the legislature CIV
ing the power, instead of conforming TO, con-
traYenes II, II Is not only an absence OF power,
OF the statute which contains its
80 e authority, and failure to pass the ordi-
nance required would be such contravention.
4 S II is the duty Of any holder to investigate
the power, and as in making this iuyeSC1ga-
tlon he must necessarily see that the ordi-
nance is violstive of the enabling act, he is
not entitled to protection any more than the
original parties.
Again: The same act expressly prohibited
the issue of these bonds at q greater interest
tnan ten per cent Now, If the ordinance had
their issue at ten per cent, follow.
Ing the act but the mayor had, by discount
ing, issued them al fifteen per cent, IL would
not affecting the innocent holder. But IL the
bonds, in violation of the act and ordinance,
tad been Issued at fifteen per cent. Interest on
their face; or If, notwithstanding the act, the
ordinance had authorized their discount at
hfteen per cent, either Of these acts would be
q positive ana notable violation of the poloer,
because a violation OF the prohibition OF the
act, in the former case on the face Of the bond,
In the latter on the face OF the ordinance,
which is part OF the holders title, and OF
v hich he is Obliged 20 take notice. This lat
Ter was the case. The very ordinance which
put in force the enabling act
authorized the mayor TO issue
bonds at eighty-hYe cents on the
dollar, in direct contradiction OF the
prohibition Of the act, that they should not be
issued al a greater rate OF interest than ten per
cent. think these bonds ara absolutely void,
Or else the doctrine that municipal corpora
lions can only bind the Inhabitants to the
under power from the Legislature, must be
abandoned, and this other doctril be estab-
lished that an usurpation of power, notwith-
standing the prohibition OF a statute, makes
good bond while usurpation in the absence
Of any statute inval dates.
This would be Teductto ud d6stSrddHD incon.
sistent with any principle of Law. As TO all
the bones issued by Mr.. M'Davits TO Mabry,
Cash, Davis, Fisher and Malloy, 1 am OF the
opinion that they are also void for these Tes.
SONS.
rirst-The act OF 1867 authorized the issue Of
bonds for funding the indebtedness OF the
city.
hold that the term 'funding" has 9 legal,
definite, and technical Specification. II Inn
plies duty 70 provide for the annual inter