Court Opinion

ID: 8636616
Source: CourtListenerOpinion
Date Created: 2022-11-24 19:46:19.187844+00
Date Added: 2024-06-11T16:55:56.938698
License: Public Domain

WOODS, Circuit Judge.
As the cause is now submitted for final decree, it is too late to grant that part of the prayer of the. bill which asks for a receiver to take possession and charge of the water-works until the final disposition of the case. The only other prayer is that the city may be restrained from selling, leasing or hypothecating the water-works. The theory of the complainants seems to be that the bonds issued by the city in payment for the water-works, being absolutely void for want of power in the city to issue the bonds and therefore to make the contract of sale, in which the issue of bonds formed a necessary stipulation, the sale was void and the Commercial Bank still remained the owner of the water-works; that the present holders of the city water-works bonds are subrogated to the rights and property of the bank, and the city ought to be enjoined from any act which would embarrass the title of the bondholders. In my judgment, the theory of the complainants is unsound.
The act of April 1, 1833, “to incorporate the Commercial Bank of New Orleans,” and which constitutes the charter of the bank, with all its material provisions, is a-contract between the state and the bank, the obligation of which cannot be impaired by subsequent legislation. Dartmouth College v. Woodward, 4 Wheat. [17 U. S.] 518; Providence Bank v. Billings. 4 Pet. [29 U. S.] 514; State Bank of Ohio v. Knoop, 16 How. [57 U. *224S.] 369; Dodge v. Woolsey, 18 How. [59 U. S.] 331; Jefferson Branch Bank v. Skelly, 1 Black [66 U. S.] 436; The Bingkampton Bridge, 3 Wall. [70 U. S.] 51; Allen v. McKean [Case No. 229]. As already seen, the charter provided, that at the expiration of thirty-five years, the city of New Orleans might purchase from the bank its waterworks at an appraised value, and the bank was at the time specified, and on the terms specified, in case the city elected to ptirchase, required to sell. And section 42 of the act of incorporation declared, that the amount of ihe purchase price should be payable in the bonds of the city of New Orleans, bearing interest at the rate of five per cent, per an-num. payable semi-annually, redeemable in not less than ten nor more than thirty years.
It seems to me, that the power of the city to issue bonds, in payment of the purchase money of the water-works, was clearly given by the charter of the Commercial Bank. It is just as clear, that the power of the city to buy the water-works and to issue its bonds therefor, was a provision of the charter of the bank, beneficial to the bank, and that it formed a part of the contract of the state with the bank, expressed in the charter of the bank. The state could not take away from the city the power of purchasing the waterworks without interfering with the charter of che bank in a material particular. It seems to me clear, that after the thirty-five years from the passage of the charter have expired, and the city has, through its proper officers, elected to purchase the water-works, an act of the legislature forbidding the issue of the bonds, or imposing onerous conditions upon their issue, not in force at the date of the charter of the bank, would be a direct and palpable invasion of the chartered privileges of the bank. As soon as the city made its election to purchase, the right of the bank to sell the water works became absolute. The state had agreed, that under such circumstances the city should have power to purchase. and should purchase, and the bank should be compelled to sell, and should, in fact, have the right to sell, and should receive city bonds in payment, which bonds the city was authorized to issue. Any legislation which interfered with these powers and obligations, or any material terms thereof, the state was incompetent to pass. If, therefore, the acts of 1S52, l.s'53 and 1855, were intended to impose conditions upon the issue of waterworks bonds, not contained in the charter of the bank, they impaired the obligation of the contract between the state and the bank contained in the charter, and were, therefore, to that extent unconstitutional and ineffectual. The city, therefore, bad power to issue the water-works bonds, they are not void, and the superstructure of the complainants, built on the theory that they were void, falls to the ground.
Another and conclusive answer to the complainants' claims is this: The bank agreed to take the city bonds for its water-works. The contract was ■ executed and the exact consideration paid. The bank got the bonds and the city the water-works. The city has never repudiated the bonds or denied its obligation to pay them, principal and interest, and does not propose to repudiate them. Until it does so, the bank cannot rescind the contract and ask to have its property restored.
Another difficulty with the complainants* case is. that the bonds are valid and binding on the city in the hands of bona fide holders, whether the conditions precedent to their issue were observed or not. Van Hostrup V. Madison, 1 Wall. [68 U. S.] 291: Gelpcke v. Dubuque, 1 Wall. [68 U. S.] 175. The city cannot, therefore, repudiate the bonds held by bona fide purchasers, if it would, and all holders are presumed to be bona fide:
The complainants and the defendants, who concur in the objects of the bill, only hold $400,000 of the water-works bonds, and there are nearly a million of other water-works bonds scattered over the United States and Europe. How does this court know whether this large majority of bondholders is willing to take back the water-works and surrender their bonds? The bonds are good in their hands and binding on the city.
Ought the possession of the city of its water-works, or its title thereto, to be interfered with until the bondholders express, at least, a willingness to give up the city’s bonds which were paid as the purchase price of the property? Are not the parties to this bill assuming a good deal, when they, representing $400,000 of bonds, undertake to repudiate the contract of sale without consulting the holders of the other $900,000 worth of bonds, constituting a large majority of the whole? Suppose the holders of these $900,000 of bonds prefer their bonds to the water-works, and hold on to their bonds and insist on payment as they have the right to do, where does'this court get the power ito rescind their contract for them, and compel them to give up their bonds and take the water-works against their protest? It must also be borne in mind, that the city itself is an owner of the water-works to the extent of $606,000 in $2,000,000. Are we to pay no attention to this circumstance in passing upon the rights of the city?
But there are other difficulties in the way of any relief on this bill. The great mass of bondholders were not, at the date of the purchase, stockholders in the Commercial Bank, and never were. They hold city bonds, not stock in the Commercial Bank. And if the city had repudiated the bonds the day after their issue, that would not have made the holders of city bonds stockholders in the bank. And if it had that effect, neither they nor the original stockholders would have acquired any rights in the property of the Commercial Bank. The ownership of stock does not give the stockholders any title to the property of the corporation. Morgan v. Railroad Co. [Case No. 9.806]. The water-works’ *225belong either to the city of New Orleans or to ' the Commercial Bank. But the latter is dead beyond resuscitation. It expired in 1869 by the terms of its charter,, when it sold out its water-works. It may have made a bad sale but a sale was made. The bank got precisely what it contracted for. It has used the consideration paid for its property by distributing it among its stockholders, and having thus accomplished the purpose of its creation, it ceased to exist. It has been dead seven years. It has no charter, no officers, no board of directors, no property, no stock, no stockholders. This court cannot breathe into it the breath of life, and the relief contemplated by the bill can be granted only by the resuscitation of this defunct corporation. •
I do not think the complainants are entitled to any relief upon the case made by the bill, least of all the relief which they ask. The bill must be dismissed at complainants’ costs.