Source: https://supreme.justia.com/cases/federal/us/150/182/
Timestamp: 2019-04-26 15:53:11+00:00

Document:
Holders of municipal bonds issued by a county in excess of its authority cannot, by an offer to surrender and cancel so much of such bonds as may, upon inquiry, be found to exceed the limit authorized by law, invest a court of equity with jurisdiction to ascertain the amount of such excess and to declare the residue of such bonds valid and enforce the payment thereof against the county.
Where a contract is void at law for want of power to make it, a court of equity has no jurisdiction to enforce it, or, in the absence of fraud, accident, or mistake, to so modify it as to make it legal and then enforce it.
In equity. Decree dismissing the bill. Complainant appealed.	The case is stated in the opinion.
The question presented by the record in this case is whether parties holding the greater part of a series of bonds issued by a county in excess of the limit fixed by the constitution of the state, and which for that reason are not enforceable at law, can invoke the aid of a court of equity to afford them relief by first ascertaining the extent of such excess or settling the amount of bonds which the county could lawfully have issued, and then proceeding to scale down the issue to the limit thus ascertained, and to declare such excess, only, to be void, and thereupon decree the residue of such bonds good and valid, and enforce payment of such residue, with interest, against the county -- or in other words, can the holders of bonds issued by a county in excess of its authority, by an offer to surrender and cancel so much of such bonds as may, upon inquiry, be found to exceed the limit authorized by law, invest a court of equity with jurisdiction not only to ascertain the amount of such excess, but to declare the residue of such bonds valid and enforce the payment thereof against the county?
percent. of the assessed valuation of the property of the county, each holder surrendering his proportionate share of such excess; that this offer was refused by the county, which, complainants insist, cured any infirmity in the bonds, and that the county was equitably bound to recognize as valid the residue thereof because it and its citizens had received, in the construction of the railroad which the bonds were issued to promote, all the consideration that was intended to be secured thereby. The prayer of the bill was that an account might be taken to ascertain the excess of the issue over ten percent of the assessed valuation of the property of the county; that such excess might be distributed among the holders of the bonds, or be applied to reduce the amount of each bond ratably, so as to bring the entire issue within the limit authorized by law; that the residue might be declared good and valid, and that the county might be decreed to pay the same, with interest at the rate of ten percent from January 1, 1876, to the date of the decree.
The county demurred to the bill on the ground that the complainants had not, in and by their bill, stated such a case as to entitle them to the relief sought. This demurrer was sustained by the court, and, the defects being of such a character that they could not be remedied by amendment, a decree was entered dismissing the bill. 37 F. 304. From that decree the present appeal is prosecuted.
the abatement of that excess, the holders are entitled to have the residue thereof which the county could have lawfully issued treated as valid because of the incidental benefits derived from the construction of the road, which was sought to be secured by the donation of bonds.
"No city, county, town, precinct, municipality, or other subdivision of the state, shall ever make donations to any railroad or other works of internal improvement unless a proposition so to do shall have been first submitted to the qualified electors thereof at an election by authority of law, provided that such donations of a county, with the donations of such subdivisions, in the aggregate shall not exceed ten percent of the assessed valuation of such county."
defectively executed, a suit could not be maintained thereon, and that the holder was entitled to recover the money paid, with interest thereon from the time the obligation of the city to pay was denied.
portion of the bonds in question as the county could lawfully have issued.
Moreover, by the provisions of the Constitution of the State of Nebraska and by the express terms of the proposition submitted to the vote of the people of Dixon County, the bonds in question were issued as a donation to the railroad company, and being intended as a donation, it cannot properly be said that the purchasers of these bonds from the railroad company paid any consideration therefor to the county, so as to raise any equity, as against it, for the amount represented by the bonds or any part thereof. Any equitable demand which might under the circumstances have existed against the county on the theory of consideration received was in favor of the railroad company which constructed the railroad, and thereby conferred all the incidental benefits which the county derived from the transaction. If any equitable claim arises in favor of the holders of the bonds, it must be against the railroad company, from whom the bonds were purchased, and by whom their payment was guarantied, as that company was the recipient of the legal consideration realized upon the negotiation of the bonds.
within the principle announced in Daviess County v. Dickinson, 117 U. S. 657. In that case, under authority conferred by statute, the county voted a subscription of $250,000 to a railroad company, which was made, and, by order of the county court, bonds of the county to that amount were ordered to be sold and disposed of by a committee for the purpose of paying such subscription. The officers of the county, without authority, executed and issued bonds in the amount of $300,000. The bonds, as they were delivered, were separately numbered and entered upon the county register. The Court held that the power to issue bonds was limited to $250,000, and that the bonds issued in excess of that amount were unlawful and void. It was further held that bonds to the amount authorized, which were first issued and delivered, were valid and entitled to payment. In that case, there was a clear and well defined line between the legal and illegal issues, which enabled the court to declare invalid such of the bonds as exceeded the amount authorized and to hold that the illegal excess did not vitiate the bonds which were authorized, and legally issued. There was no scaling of the entire issue in that case so as to bring it within the limits of the county's authority. The $250,000 which the Court pronounced valid had been expressly authorized by the county, and the bonds for that amount were readily separated from the $50,000 excess, which had not been authorized. It did not, therefore, involve any investigation on the part of the court to ascertain what the county could lawfully issue, but was merely the identification of the bonds which it intended to issue. Again, the amount of the bonds issued was not based upon the assessed valuation of the property of the county, but was limited to the amount which the people of the county, by an election duly held, had determined should be issued. There is a radical difference in these respects between that case and the one under consideration.
would be something different from that which was voted by the county and carried into effect by the issue of the bonds. This would involve the making of a different donation from what the county voted and intended to make to the railroad company.
"the proposition submitted to the electors was an entirety, and indivisible. It exceeded the statutory limit, and was therefore wholly unauthorized. The election was simply a void act, conferring no authority whatever upon the county commissioners to issue bonds of the county in any amount whatever."
Several state decisions have been cited in support of the bill. Johnson v. County of Stark, 24 Ill. 75; City of Quincy v. Warfield, 25 Ill. 319; Briscoe v. Allison, 43 Ill. 291; State v. Allen, 43 Ill. 456; Stockdale v. Wayland School District, 47 Mich. 226. But they mostly relate to taxes imposed beyond authority, and stand upon a different doctrine from that involved in the present case. We do not, however, deem it necessary to review them, for if they can be construed to support a bill like the one under consideration, we think they are not founded upon correct principles, and are not in harmony with the decisions of this Court.
of the money loaned or which the city had received upon the issue of the bonds and used in the construction of its public works. The question of their right to recover on the equitable consideration came before this Court in Litchfield v. Ballou, 114 U. S. 190, and it was held that a provision in a state constitution that a municipal corporation shall not become indebted in any manner, or for any purpose, to an amount exceeding five percent of its taxable property therein, forbids implied as well as express liability for the amount or amounts received on bonds issued contrary to such provision, and that a court of equity could not afford relief in such a case either on an express or implied obligation; that the transaction, being invalid at law, was equally invalid in equity. This conclusion was reached after a full review of the authorities on the question, and the court denied the relief sought.
amount represented by the bonds, on the basis of the original consideration. This contention was not sustained, and the complainant was denied the equitable relief sought.
"that wherever the rights or the situation of parties are clearly defined and established by law, equity has no power to change or unsettle those rights or that situation, but in all such instances the maxim equitas sequitur legem is strictly applicable."

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