Source: https://openjurist.org/88/us/317
Timestamp: 2019-04-24 02:36:48+00:00

Document:
ERROR to the District Court for the Middle District of Alabama.
Clews & Co. brought an action at law, in the court below, against Chambers County, Alabama, to procure payment of certain coupons attached to ninety-three bonds of $1000 each, issued by the county.
The bonds purported to be issued in aid of a certain railroad named in each of them, and to have been issued under the authority and in pursuance of an act of the legislature of the State of Alabama, approved December 31st, 1868.
The statute authorized a subscription and loan by the county only upon the basis of a proposal in writing from the railroad company, made by the president and a majority of its directors, proposing that the county should take an amount of its capital stock, to be named, at a certain price per share, and pay for the same in such bonds of the county as should be specified in the proposal. This proposition was to be submitted to the qualified electors of the county for their acceptance or rejection. Notice of the terms and amount of the proposed subscription was required to be published. If a majority of the qualified voters voted for 'subscription,' the proposition of the company was to be deemed to be accepted, and the subscription authorized to be made in the manner and upon the terms set forth in the application, and the bonds might be issued in payment thereof.
Each bond was set out—each being for $1000—and each being declared to be one of a series issued by the said county of Chambers under authority and in pursuance of an act of the legislature of the State of Alabama entitled 'An act to authorize the several counties, towns, and cities of Alabama to subscribe to the capital stock of such railroads throughout the State as they may consider most conducive to their interests;' and approved December 31st, 1868.
Pleas: 1st. A special plea that the bonds were issued by the authorities of Chambers County in payment of a subscription to the stock of the railroad company named, under the act of December 31st, 1868, and that the said company did not, prior to or since the issuing of the bonds, by its president and a majority of its directors, propose to the defendants that they should take and subscribe for a certain amount of stock at a certain price per share, and pay for the same in the bonds of the county; that the bonds were issued without authority of law and were void, and that the plaintiffs were not bona fide holders of them without notice.
To the special plea the plaintiff demurred specially. That the plea amounted to the general issue was not among the causes assigned for demurrer. On the other, he took issue. The demurrer was sustained, and the cause tried on the plea of general issue alone, without verification.
1st. That there was no evidence that the bonds were authorized to be issued by the defendants.
2d. That there was no evidence that the seal annexed was the seal of the probate judge, or of the defendants.
This objection also was overruled and the bonds and coupons let in.
The defendant now, to show that the proposition had been made to the county to subscribe before the railroad company was fully organized, and while it was simply located, which he alleged it could not legally do under the act of December 31st, 1868, proposed to read a transcript from the records of the Court of County Commissioners of Chambers County, containing the letter of the president of the road (bearing a certain date) making the proposition; the action of the Commissioners' Court of the county ordering an election; and the order of an issue of bonds as upon an election held.
It was also set up that the act of the Alabama legislature, under which the county made the subscription, was unconstitutional; inasmuch as it was an act authorizing the issue of county bonds for a private purpose: a proposition overruled by the court.
Verdict and judgment having been rendered for the plaintiffs, the defendant brought the case here on exceptions to the admission or rejection of the evidence, as already stated, and for erroneous judgment on the demurrer to the special plea.
Mr. R. T. Merrick, for the plaintiff in error; Mr. S. F. Rice, contra.
The special plea was demurred to specially, and the demurrer was sustained by the court. We have held many times, in relation to bonds of this character, that where the persons appointed by law to certify that the preliminary requisites have been complied with, do so certify, that their certificate is conclusive in favor of the holder who, on the strength of such certificate, pays his money for the bonds without notice of the defect or illegality.1 We have never, however, held that such defect or irregularity could not be set up by the maker of the bonds where the suit upon them was brought by one who had not paid value for them, or who had notice of the defect or irregularity. In this lies the difficulty with the demurrer to the plea we are considering. The plea alleges in substance that no legal proposal was made to the county by the railroad in question. This proposal is undoubtedly a matter of substance. The statute authorizes a subscription and loan by the county only upon the basis of a proposition in writing, such as it prescribes. The proposition is a necessary preliminary without which there can be no legal action in issuing the bonds. Where a plea avers that there was no such proposition, and avers also that the plaintiffs are not bona fide holders of the bonds without notice, a case is stated in which the validity of the bonds cannot be sustained by any holding of this court.
While we think there was error in the judgment upon this plea, it seems to have been a harmless one. The defendants had another plea which covered the same ground. In Chute v. Winegar,2 we held that where a plea had been improperly stricken out, but no harm had resulted therefrom, that it was not cause for reversing the judgment.
The parties in this case went to trial on the plea of the general issue, without verification, and a jury was impanelled and sworn to try the issue as joined. The plaintiffs claimed to recover the amount of certain coupons 'attached to ninety-three of the bonds of the said corporation.' One of the bonds was set forth, purporting that the county of Chambers acknowledged its indebtedness for $1000 as therein stated, the same being recited to be one of a series of bonds issued by the said county of Chambers under authority and in pursuance of an act of the legislature of the State of Alabama.
Both pleas did involve the question of authority. When the plaintiffs alleged that certain persons for the county of Chambers had issued their bonds, that they were the bonds of the corporation, they thereby alleged that the persons issuing them had power and authority to act for the county in issuing them. When the defendant denied that in fact it undertook and promised, as the plaintiffs in their complaint alleged, but not denying that in form its bonds were issued, it denied the authority of the persons who so professed to act in its behalf. The same issue in this respect was presented in the two pleas.
The logical and orderly mode of a trial, where it was intended to investigate the issue we have been considering, would be this: To sustain their claim the plaintiffs produce the bonds and coupons. The execution not being put in issue, this establishes the plaintiff's case, and establishes presumptively that they are holders for value before maturity without notice.5 The defendant then produces such proof as it may possess that the plaintiffs were not holders for value, or that they received the coupons after maturity, or that they had notice of the defects alleged. If it establishes either of these points the question of authority in the agent is then open.
The question and the order of proof in these respects would be the same, whether the trial was had upon the general issue or upon the special plea. It seems quite clear that the judgment upon the demurrer to this plea worked no harm to the defendant.
On the trial the plaintiffs produced the bonds and coupons and offered to read the same in evidence. To this the defendants objected, for the reason that there was no evidence that the bonds were authorized to be issued by the defendants, and that there was no evidence that the seal annexed was the seal of the probate judge, or of the defendants. We have already considered this point, and have shown that the objection was not valid for either of the reasons mentioned. There was no issue upon the execution of the bonds.
These decisions are binding upon us, and we see no occasion to controvert them.
Further evidence in relation to the proposal was offered by the defendant. The defendant's counsel was inquired of whether any other evidence was proposed in connection therewith, meaning to inquire, as we understand, whether evidence of want of ownership or of good faith for value, or a knowledge of the defects alleged was intended to be offered. The question was answered in the negative, and the evidence was excluded. We think this ruling was right.
Grand Chute v. Winegar, 15 Wallace, 355; Lynde v. The County, 16 Id. 6; Railroad v. Otoe, Ib. 667.
Clay's Digest, 340, § 152; Sorrel v. Elmes, 6 Alabama, 706, Lazarus v. Shearer, 2 Id. 718.
Sisson v. Willard, 25 Wendell, 373; Brown v. Littlefield, 11 Id. 467; Edson v. Weston, 7 Cowen, 278.
Swift v. Tyson, 16 Peters, 1; Goodman v. Simonds, 20 Howard, 343, 365; Murray v. Lardner, 2 Wallace, 110.
See supra, pp. 319, 320.
Railroad Company v. Gladmon, 15 Wallace, 401.
See, however, Pugh v. McCormick, 14 Wallace, 375.
Selma and Gulf Railroad Company, 45 Alabama, 696; Lockhart v. City of Troy, and Commissioners Court of Limestone v. Rather, 48 Id.

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