Court Opinion

ID: 8637804
Source: CourtListenerOpinion
Date Created: 2022-11-24 19:48:09.847266+00
Date Added: 2024-06-11T16:55:59.323339
License: Public Domain

TREAT, District Judge.
Under the decisions of the supreme court of Missouri and of the supreme court of the United States, a bona fide holder of such bonds as those here in question, or of coupons annexed, has a right to recover thereon at maturity, unless there was an absence of authority on the part of the county court to issue them; and the county is estopped by the recitals from disputing that all measures antecedent to the issue were properly and lawfully adopted and pursued when the recitals so state.
When these cases were argued at the last term of this court, several grave questions as to the authority of the respective counties to subscribe to the stock of the consolidated company, and issue bonds in payment of such subscriptions were fully discussed, leaving the court in serious doubt as to the liability of said counties.- Since that term, several decisions have been made by the supreme court of Missouri and the United States supreme court upon the disputed points, and a new argument has been had in the light of those decisions.
What our views might nave been on the many propositions arising under the state constitution of Missouri and the state statutes, were they before us de novo, is unimportant; for while, in cases like the present, the decisions of the state supreme court would not be conclusive in United States courts, yet they will be, and ought to be, followed, unless very cogent reasons to the contrary appear. The •more especially should the United States courts so act, when, under such state decisions, negotiable instruments of the kind sued on have, on the faith thereof, been received in the money markets of the world and passed freely from hand to hand. In the several cases of Iowa municipal and county bonds, the United States supreme court has not only laid down that rule, even disregarding adverse state decisions subsequently made, but has also caused it to be rigorously enforced.
The Alexandria and Bloomfield Railroad Company was chartered in 1S57, and in its charter the privilege was given to the county courts of the counties defendant to subscribe to its stock and issue bonds in payment thereof. Subsequently, that railroad company was authorized to change its corporate name and extend its line. The name was duly changed accordingly, as recited in the bonds.
■ The Missouri supreme court has settled the question that the power given to the county courts by the chartei of 1857 for the Alexandria and Bloomfield Railroad Company remained unaffected by the new state constitution; for that power was a “privilege” of the corporation, not impaired or taken from it. Hence, under the several state decisions, especially in the eases against Sullivan, Clark, and Green counties (State v. Sullivan County Court, 51 Mo. 522; Smith v. Clark Co., 54 Mo. 58; State v. Green Co., Id. 540), it must be considered settled that the county courts of Scotland and Schuyler counties respectively had the power to subscribe, without a previous vote of the people, to the stock of the Alexandria and Bloomfield Railroad Company under its changed name of Alexandria and Nebraska City Railroad Company. Indeed, the case against Clark county was under said charter, and is express on that point.
This case is clearly distinguishable from Harshman v. Bates Co. [Case No. 6,148]. in the United States circuit court for the Western district of Missouri. In that case the previous vote of the people was essential to the authority to subscribe, and that vote was for a subscription to a specified company. But in the cases now before this court no such proposition is involved, foi the powder was granted to these county courtj *970to subscribe and issue bonds of their own motion. These courts could, of their own motion, subscribe to the stock of the Alexandria and Bloomfield Railroad Company, or of the same company under its new name of the Alexandria and Nebraska City Railroad Company, without a previous • vote by the people. But the subscription was not made in' terms to that company.
[These suits were taken to the supreme court by writs of error, where the above judgment was affirmed. 94 U. S. 082; 98 U. S. 169.]
Under the act of March 2, 18G9, authority was given for the consolidation of that company with any other railroad company in Iowa whose track met at the same point on the boundary line of the respective states. Pursuant thereto the consolidation was had, and the consolidated companies were known as the Missouri, Iowa, and Nebraska Railway Company — the company named in the bonds issued. As reference was fully made to the changed name of the Alexandria and Bloomfield Railroad Company, and to said consolidation, the bondholder was bound, in the light of the law as expounded by the United States supreme court, to look only to the authority of these county courts to make subscriptions to said constituent and consolidated company. The decision in the case against Green county seems to have decided this point; but whether that be so or not, the case of Nugent v. Supervisors, 19 Wall. [86 U. S.] 241, appears conclusive. The previous cases of Clearwater v. Meredith [1 Wall. (68 U. S.) 25], and of Marsh v. Fulton Co. [10 Wall. (77 U. S.) 670], were supposed to hold the opposite doctrine. True, in the Case of Nugent the subscription was made to one of the constituent companies and accepted before consolidation, and the bonds were delivered subsequently to the consolidated company. But when a subscription is made to a specified company which has at the time power to consolidate with another company, that subscription is made in full view of the fact that the consolidation may occur without invalidating the subscription. In the Bates County Case the subscription was not made as the vote of the people required. The stockholders of a constituent company may, by vote, decide whether the consolidation shall be made, and even if a non-assenting stockholder could not be bound by the acts of the majority, he who subscribed to the stock of the consolidated company, after consolidation. could set up no such defense. In Tomlinson v. Branch, 15 Wall. [82 U. S.] 460, and other cases cited, it is clearly established that the new or consolidated company has for its constituent parts all the powers and privileges and exemptions pertaining to the constituents previously. Therefore, if Scotland and Schuyler counties had subscribed to the Alexandria and Nebraska City Railroad Company, and, as stockholders in said company, had voted for the consolidation, they would be in exactly the same position as they are now. viz.: stockholders in the consolidated company by their own consent.
It follows, therefore, that if, when the subscription was to a constituent road, and the delivery of bonds to the road consolidated aft-erwards, the bonds are obligatory, the subscription and delivery of bonds, therefore, to the consolidated road are equally obligatory. The main consideration is the. authority to issue said bonds to the consolidated company. That authority does not depend on the fact of previous subscription to a constituent road subsequently consolidated, as authorized by law at the time the subscription was made, which subscription is, by operation of law, carried over to the consolidated road, but on the fact that the court’s authority to issue the bonds was complete, as it had the authority to make the counties stockholders in the consolidated road and issue its bonds in payment of its subscriptions.
Such we understand to be the doctrine-established by the United States supreme court in the recent case of Nugent v. Supervisors, in accordance with which the demurrers in these cases must be overruled.
Demurrer overruled.