Court Opinion

ID: 5441473
Source: CourtListenerOpinion
Date Created: 2022-01-08 18:03:50.025384+00
Date Added: 2024-06-11T08:32:01.286445
License: Public Domain

Myrick, J., dissenting.
Under the Act of April 4, 1870, (Stats. 1869—70, p. 746), a vote was had authorizing the granting of aid, and a contract had been made between the board of supervisors of Santa Cruz and the Santa Cruz and Watsonville Bailroad Company, by which aid to the amount of one hundred thousand dollars was granted to that company to assist in the construction of a railroad from the town of Watsonville to the town of Santa Cruz. Bor some reason the work did not progress. On the 25th of September, 1872, the board of supervisors made an order for an election to be held upon the proposition of granting aid for the construction of a railroad from a point on the line of the Southern Pacific Bailroad, at or near the Pajaro, depot, thence through the county of Santa Cruz to the northern line of the county, near Point New Year’s Banch, said aid to. be six thousand dollars per mile, and not exceeding the aggregate, of two hundred and forty thousand dollars, interest-bearing bonds of the county to be issued therefor; said aid to be in lieu of the aid of one hundred thousand dollars theretofore authorized to be granted. In pursuance of this order an election was held, and the result was in favor of the proposition.
Thereafter, on the 15th of June, 1873, the Santa Cruz Bail-road Company made its application for aid. On the 18th of June, 1873, the articles of incorporation - of the Santa Cruz Bailroad Company were filed, such incorporation being for the purpose of constructing, conducting, and maintaining an iron railroad within the counties of Monterey and Santa Cruz, commencing at a point at or near Pajaro station, on the Southern Pacific Bailroad, in the county of Monterey, and running thence *322to and through the county of Santa Cruz to the northern boundary of Santa Cruz County at or near the south boundary of the Rancho Puntadel Ano Nuevo (Point New Year’s Ranch), the estimated length of said railroad being forty miles. On the 4th of August, 1873, the board of supervisors received from Santa Cruz and Watsonville Railroad Company a release of the one thousand dollar aid, and on the same day executed a contract with the Santa Cruz Railroad Company, in which was recited the before-mentioned proposition for aid in the construction of a railroad beginning at or near the Pajaro depot, and thence running in the most practicable direct route through the counties of Monterey and Santa Cruz to the boundary of Santa Cruz county near the southeast corner of the Point New Year’s Ranch, by the issuance of bonds, the same to be in lieu of the one hundred thousand dollars before authorized; the submission of the proposition to the voters of the county; the election and the vote in favor of the aid; the release of the one hundred thousand dollar aid; the incorporation of the Santa Cruz Railroad Company for the purpose of constructing and maintaining a railroad on the entire route; and the solicitation of the company for aid in the construction of such railroad. The contract then proceeded to declare that the county would be greatly benefited by the construction of said railroad, or any part thereof, and provided for the issuance of bonds at the rate of six thousand dollars per mile as the road should be completed in sections specified; but provided that the western terminus of the work to be done thereunder should be at a point within the corporate limits of the town of Santa Cruz. The company was authorized to commence its work at a point near the town of Santa Cruz, and prosecute the same easterly to Pajaro station. It should be noticed that the town of Santa Cruz is about midway between the two ends of the road, as stated in the proposition submitted to the voters. No provision was made in this contract for the construction of a road beyond Santa Cruz, nor was any reference made thereto, except by the recitals above stated; on the contrary, it is perfectly evident from the contract that the board of supervisors on the one hand, and the railroad company on the other, intended that the same should apply only to that portion of the route between Pajaro and Santa *323Cruz. The work of construction so progressed that on the 7th of December, 1874, the board of supervisors made an order for the issuance of bonds to the amount of thirty thousand dollars. At this point one Patterson brought a suit against the board of supervisors for the purpose of restraining the issuance of the bonds; and such proceedings were had that on the 23d of February, 1875, judgment of nonsuit was entered upon the ground that the plaintiff had failed to prove a sufficient case. Thereafter, in 1876, the road having been constructed from Pajaro to Santa Cruz, bonds were issued to the Santa Cruz Bailroad Company, thirty thousand dollars on the 25th of February, and eighty-four thousand dollars on the 11th of March. The bonds on their face refer to the Act of 1870, and recite that they are issued “in accordance with the terms of a contract entered into by the board of supervisors of said county on the 4tli day of August, 1873, with the Santa Cruz Bailroad Company, which said contract is entered, upon the minutes of the board of supervisors in vol. 3, pp. 279, 280, 281, 282, 283, 284, 285, 286.” On the 7tli of August, 1879, the plaintiff purchased the bonds through a broker, having no knowledge of the then holder, paying therefor ninety-five per cent of the par value.
No road has been constructed over any part of the projected route between the town of Santa Cruz and the northern boundary line of the county, nor has such construction been or attempted to be provided for.
This proceeding is a petition for a writ of mandate requiring the respondent as county treasurer, to pay the coupons on the bonds held by petitioner. The petitioner claims as well, that the bonds were properly issued, and are a legal charge upon the county, as that, it being a bona fide holder for value, payment cannot be disputed.
In our opinion the question of the rights of bona fide holders of bonds does not arise and is not for consideration in this case. The bonds on their face refer to the statute authorizing- the granting of county aid, and to the contract between the board of supervisors and the railroad company. Therefore the bonds are as though the statute and the contract were written, word for word therein. The statute authorized the granting of county aid; the election was held thereunder, and the matter *324submitted was: Shall aid be granted for the construction of a. railroad from Pajaro to the northern line of the county? Upon that question, and that question only, the people voted to grant the aid; for that purpose, and that purpose only, the board of supervisors were authorized to issue bonds; there was no vote upon the 'granting of aid for any less distance; the contract was for “ one section ” only—from Pajaro to Santa Cruz—about one half the entire distance voted upon. It cannot be pretended that it is or has been the intention of the railroad company to complete the road. It is manifest that it was the intention of the parties who conducted the transaction on the part of the board of supervisors and the railroad company, to take advantage of a vote which had been had for granting aid for the construction of the road for the whole distance, construct the road for only half of the distance, obtain the issuance of bonds for that half, at 'the rate of six thousand dollars per mile (one hundred and twenty thousand dollars for the twenty miles, that probably being the only profitable part to build or operate), and then omit to proceed with the further construction. The contract, which, by being referred to, is a part of each and every bond, refers, also, to the vote of the people in favor of aid for the road the entire distance—and then, after so referring, assumes to authorize the railroad company to construct but the part, the track laying to commence at Santa Cruz and extend to Pajaro; no word is written or act provided for, having in view any other or further construction. Such transactions are not fair dealing; and of such, in this case, holders of the bonds are bound to take notice. It is a question of power. The board of supervisors had no power to issue bonds to aid in the construction of any quantity or distance of road less than the whole. It acted under a limited and special power of attorney. Possibly bonds might have been issued for miles as the work progressed, but the holders of such bonds would be under the burden of providing for or requiring the entire construction.
" The Supreme Court of the United States in Township of East Oakland v. Skinner, 4 Otto, 255, says: “We have held that there can be no bona fide holding where the statute did not in law authorize the issue of the bonds. The objection in such case goes to the point of power. There is an entire want of *325jurisdiction over the subject. It is not the case of an informality, an irregularity, fraud, or excess of authority in an authorized agent. Where there is a total want of authority to issue the bonds, there can be no such thing as a bona fide holding.”
As was said above, although there was powe* to issue bonds in a certain case, viz., for the construction of the entire distance, yet there was no power to issue in aid of the construction of a less distance. That it was the intent of the railroad company to build, and of the board of supervisors to have built, a part only, is clearly manifest from the proceedings. The board declared (see contract between the board and the railroad company) : “ It appearing that said county will be greatly benefited by the construction of said railroad or any part thereof.” The board had not power to declare any benefit from a part. The people had by their votes declared the extent of the line of the road, and the board had no more power to diminish its length than to increase the amount of aid. The intent to avoid compliance with the law is apparent upon the face of the documents referred to in the bonds, and the purchaser was bound to take notice. The bonds were not like a bill of exchange or promissory note, “a courier without luggage”—but these transactions were tied to them and could not be shaken off.
The Supreme Court of the United States, in School District v. Insurance Co. 13 Otto, 710, said: “As the bonds recite that they were issued under this act [an act which the court held not to give authority for issuing the bonds in question], and that the vote was taken under it, we cannot see that power, purposed to be exercised under other and very different circumstances, can be invoked to give validity to an act which is void by the authority under which it professed to be acting.”
It has been repeatedly urged that the holders of bonds have innocently invested their money, and should, as innocent holders of public securities, be protected. They are not, however, the only persons to be considered. Tax-payers are equally innocent; tax-payers are not to be subjected to extraordinary burdens, or even ordinary burdens, except by law.
To this case may be applied the language used by Justice Field, concurred in by Chief Justice Waite and Justices Grier and Miller, in dissenting from the judgment of the court in *326Rogers v. Burlington, 3 Wall, 668: “ In all such cases the mode becomes the measure- of the power.....This is not a case where the doctrine of estoppel has any application. It is not a case where the purchaser of the bonds was misled by any recitals of conformity to law. Here the statute and the ordinance of the city of Burlington, under which authority to issue the bonds was assumed to exist, are both printed in full in the indorsements upon the bonds; and the ordinance is also referred to in their face. But if this were not so, the case would not be changed, as the statute did not authorize the issue of the bonds. No formality of execution and no extent of recitals could give validity to instruments thus issued.”
There are even stronger objections against the validity of the bonds involved in the case at bar than those considered in the case above referred to.
The length of time which elapsed after the making of the contract and the issuance of the bonds, before the purchase of petitioner, may not be a controlling consideration, but it is certainly significant in one respect. The contract was made August 4, 1873, and the bonds were issued in February and March, 1876; the petitioner did not purchase until about three years and a half thereafter, to Avit, August 7, 1879. During all that period no step had been taken by the railroad company or the board of supervisors for carrying out the Avill of the people as expressed in granting the aid.
The petitioner is not in a position to say it Avas not fully advised of all the proceedings. While it had the proposed purchase of the bonds under consideration, it caused to be examined the Act of April 4, 1870, the popular vote upon the question of extending the aid, the contract bctAveen the board of supervisors and the Santa Cruz Railroad Company, and it had 'the bonds before it. It also caused to be examined an action then pending by the railroad company against the board of supervisors for the further issuance of bonds, AAdiich action was being resisted upon the ground, among others, that no vote had been had for the granting of aid for any less distance than the whole. The writ should be denied.
McKee, J., and Thornton, J., concurred with Myrick, J.
[Note. — After the publication of the foregoing opinions, a writ of error was allowed to the Supreme Court of the United States. The proceedings in that court have lately terminated, without trial there, and the judgment of this court remains in force.]