Court Opinion

ID: 6674139
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:14:30.943459+00
Date Added: 2024-06-11T16:00:38.247087
License: Public Domain

Haskell, A. J.
I dissent from the conclusions reached by a majority of the court, and proceed to present my reasons.
The action is brought in the name of the state, by the attorney-general, ex rel. taxpayers and corporators of the city, against the said city, its public officers and others. It seeks injunction and relief on the ground that breach of trust has been committed; that onerous taxes are about to be and have been imposed to pay the interest on illegal bonds, and that the holders of said bonds, or many of them, being parties to -the legal fraud, should be made to deliver up the bonds. The right of the state to institute such a proceeding, in such behalf, cannot be successfully disputed, nor is that question made in the pleadings or by exception. But comments are made and grounds taken in the opinion, which decides the ease, which so narrow the scope of such a proceeding as to deprive it of all efficacy, and to take away from the members of municipal corporations the substance of the remedy by which they have hitherto been protected when fraud or illegal acts have been perpetrated by the corporation, its officers or parties dealing with them. It does not seem to be denied that the act of March 13th, 1872, creates a trust by conferring power to borrow money, and directing to what purposes the money shall be applied; but it is said that the trust is political *402in its nature, and differs from special trusts, which are cognizable in equity on the demand of a cestui que trust. The meaning of that is that the only remedy possessed by corporators is to be found in the power of electing better officers. To support such doctrine it is said that municipal corporations, in republican governments, possess powers of local self-government which create a wide distinction between the jurisdiction of chancery in England and that in this country on such subjects. The question is serious in its character, and the majority of the court having concurred only in the results reached, it is left entirely open to conjecture what are the processes of reasoning by which such conclusions were reached. I shall, therefore, devote some attention to the jurisdiction which equity has in such cases. The original jurisdiction conferred upon the Court of Chancery in this state was as large as that exercised at the time by the said court in any of the American provinces. See acts 1712, 1721 and 1746, 7th vol. Statutes.
It is shown in the case of Attorney-General v. Jolly, 1 Rich. Eq. 99, and in Vidal v. Girard, 2 How. 127, that the jurisdiction was equal in extent to that exercised by the Court of Chancery in England. The difference being not in the jurisdiction of the courts in the two countries, but in certain powers vested in the Chancellor personally, when he administered for the king, and that the statute of 43 Elizabeth, on charitable uses, not being of force in this state, does not take from the court any of the subjects which it contains, because it conferred no additional jurisdiction on the court in England, which already had jurisdiction of those subjects, but only gave a new or ancillary remedy. Our court, therefore, in the exercise of its original jurisdiction, has charge not only of the subjects recited in the act of Elizabeth, but of many others of like nature not therein mentioned. We can, therefore, with manifest propriety, place great reliance upon the English authorities in such cases when those of like nature come before us. No authorities, English or American, have been cited to sustain the proposition that the jurisdiction over municipal corporations, in cases of public trust, have been modified or diminished, and none can be found in our constitution or statutes; nor any to show that such corporations *403have any right of local self-government independent of the grant contained in the charter.
On the other hand, Judge Dillon, in his work on municipal ■corporations, Section 736, says: “ That there appears to be no difference of judicial opinion as to the right of the taxable inhabitants, wherever the threatened illegal corporate act will increase the burden of taxation, to the aid of equity to prevent it. The difference is as to the proper party plaintiff in a bill of this character. * * * But it is agreed that any taxable inhabitant, or, perhaps, any citizen of the municipality, has such an interest to prevent or to avoid illegal corporate acts j that he may be a relator, on whose application the proper public officer of the commonwealth may, on behalf of the public, file the requisite bill to enjoin the menaced illegal .act, or, if it has been consummated, to have relief against it.” He is fully sustained by the authorities which he cites. That questions which affect at large the interest of the inhabitants of a municipal corporation are “ public ” in their character, flows from the nature of the corporation. It is the creature of legislation, brought into being to share in the civil government of the country, having power, not over specified persons, but over the fluctuating population as it comes within its limits. Such power is held in trust, subject at any time to be revoked by legislative repeal; and its exercise, while it continues in existence, is as properly the subject of judicial supervision and control as the conduct of any person or other legal entity.
"While corporations and their officers may be parties to proceedings at law, they are in many cases peculiarly within the province of equity. For, as is said incidentally by Wardlaw, Chancellor, (Ex parte Greenville Academies, 7 Rich. Eq. 483): “ In truth, nearly all corporations are trustees, as an incorporated bank for the stockholders.”
And as is more fully said by Denio, C. J., (Darlington v. Mayor, &c., of New York, 31 N. Y. 197): “ It is the representative or trustee of somebody, or of some aggregation of persons. We cannot conceive the idea of an aggregate corporation which does not hold its property and franchise for some use, public or private. The corporation of Dartmouth was held to be the *404trustee of the donors, or of the youth needing education and moral and intellectual training. The corporation of New York, in my opinion, is the trustee of the inhabitants of that city. The property, in a general and substantial although not in a technical sense, is held in trust for them. They are the people of this state, inhabiting that particular subdivision of its territory — a fluctuating class, continually passing out of the scope of the trust by removal and death, and as constantly renewed by fresh accretions of population. It was granted for their use and ' held for their benefit. The powers of local government, committed to the corporation, are precisely of the same character. They were granted and have been confirmed and regulated for the good government of the same public; to preserve order and obedience to law, and to ameliorate and improve their condition and subserve their convenience as a community.”
The corporation thus holding a trust, and that trust being of a public character, the suit in equity, instituted by the state, is appropriate. Trusts for the benefit of the public have been always held in this state to be within the jurisdiction of equity, {Attorney-General v. Jolly, 1 Rich. Eq. 99,) and come within the rules which govern in all charitable uses. That gifts for general public improvement, utility, ease or convenience are charitable is fully sustained by the authorities. Perry on Trusts, § 704, and cases there cited. The suit, in such case, to enforce the trust or restrain its abuse, and for relief, may be brought by the state, where the government is the only party concerned, or by the state at the instance of relators where the rights of the government are not immediately concerned, but the interests of - the public are affected; See remarks of Harper, Ch., in Attorney-General v. Jolly, supra, and Story’s Eq. PL, § 8.
It remains to be shown, in support of the position I hold, that all funds put into the hands of municipal corporations for public purposes constitute public or charitable trusts, cognizable in equity, and that the relators are, therefore, not confined to the ballot box for relief, but are entitled to the aid of equity. The general answer to this proposition is that while it may be true as to a gift, it does not apply to funds raised by taxation, or by bonds payable by taxation, which amounts to the same thing. *405Or, as it is expressed in Sill on Trustees, *454, the fwnd must proceed from the gift or bounty, either of the crown or state, or some private person, otherwise it will not be charitable, ■and, therefore, rates or assessments, levied under an act of parliament by the inhabitants on themselves for the improvement or benefit of their town, are not charitable funds to be administered by the court, for there is no gift or bounty in the creation of such fund. The authority cited by Hill is Attorney-General v. Heelis, 2 Sim. & Stu. 77, decided in 1824. It is true that such language is there used by the Vice Chancellor, Sir John Leach, who says that he is “ of opinion that it is the source from whence the funds are derived, and hot the mere purpose to which they are dedicated which constitutes the use charitableand he then proceeds to illustrate by supposing the instance described by Mr. Hill, as above. But that was not the case before him, for he held the funds to be charitable, and his opinion is a mere dictum, although it is referred to with great respect. Examination of the authorities will show that the opinion thus expressed by Sir John Leach was never admitted to be law, for, in Attorney-General v. Mayor, &c., of Dublin, 1 Bligh (N. S.) 312, decided in the house of lords in 1827, the very instance supposed by the "Vice Chancellor arose, and the doctrine which he had announced was entirely disapproved by Lord Eldon and Lord Eedesdale, who, in the case of the city of Dublin, delivered the opinion of the house of lords. All the cases are reviewed in the more recent case of Attorney-General v. Eastlake, 45 Eng. Ch., 11 Hare, 205, which is very similar to the case before us, and quite in point. It is there held that the city of Dublin’s case had clearly established the principle that, in a suit brought by the .attorney-general at the relation of rate-payers of the city, the court had jurisdiction to compel the- corporation to account for funds raised by taxation under an act of parliament to supply the city with water works, and to compel the replacement of funds which had been improperly applied. The language of Lord Eldon in Attorney-General v. Browne, which preceded Attorney-General v. Seelis, is cited at length in Eastlake’s case. Only the conclusion need he repeated here. “ I have heard nothing,” says Lord Eldon, “ which prevents my concurring in *406the opinion that a parliamentary grant, destined to such purposes, (public benefit of a town,) is a gift to charitable uses. If that doctrine is to be contradicted, it must be done by higher authority than mine.” The grant was a power to collect toll to-be applied to public purposes, and all the cases cited show that a grant of power to collect a tax for such purpose is precisely similar and governed by the rule laid down by Lord Eldon. The language used in Attorney-General v. Eastlake is a conclusion drawn from the leading cases, and is very clear on both the above points. “The difference of reasoning to which the remarks of Lord Eldon in Attorney-General v. Corporation of Dublin apply, consists in the distinction taken by Sir John Leach,, that you are to look at the source from which the funds proceed, and not merely to their object. However, Lord Eldon, in the case of Attorney-General v. Corporation of Dublin, adheres distinctly to the view which he had taken in the earlier case, (Attorney-General v. Browne); and there can be no doubt that the conclusion of the house of lords was that the mode in which the rate was levied was not to be looked at, but the purpose to which it was to be applied, and I apprehend the purpose must be the real criterion.” The purpose was, in Eastlake’s case, paving and lighting the town. “ It is sufficient to say it is a large and general purpose for this town, although not beyond the limits of the town, and that for that purpose certain moneys are to be levied. I cannot see that the source from which those moneys are here derived, namely, from taxation, can make any difference as to the charitable and public nature, and which would be attributable to the funds if they proceeded from a more limited sphere- of bounty; and if there be no distinction on that ground the attorney-general is the proper person to represent those who are interested in that public and general or charitable purpose.” See, also, Beaumont v. Oliveira, 4 Eng. Ch. App. Cas. 310; Attorney-General v. West, 10 Hart, Jury Com., Eng. Eq. Cas., *152.
So much for the jurisdiction and the propriety of the form of action brought. If these views are sustained by the authorities, it follows that the grounds on which relief may be demanded, and the relief itself are of vastly greater extent than is allowed *407in the opinion which represents the majority of the court. In Attorney-General v. Eastlake it was admitted that the money was applied to purposes within the range of the ordinary powers of the body acting; but because the funds were diverted from the purposes for which they had been collected the court enjoined further misapplication, and ordered that the fund so expended should be replaced by the defendants. So, in Attorney-General v. Aspinall, 2 Myl. & Or. 613, which is, in principle, exactly similar to the case before us, parties with whom the corporation had been improperly dealing, were brought in, and it was held that the application of the funds to purposes other than those named in the act was a breach of trust; that the parties so dealing had notice; that the appropriation must be rescinded, and that the funds thus misapplied must be recalled and delivered up. Instances might be multiplied without end, but the above are sufficient to show what are the usual principles of law and practice by which courts are governed in such cases.
I come now to the points properly presented by the pleadings and the exceptions, and on which my conclusion differs very materially from that of the majority of the court. Among the most important differences are those which arise from the constructions put upon the act of March 13th, 1872. It is said (1) that among the primary objects for which money shall be borrowed under the power conferred by the act is an implied object, namely, the recalling and canceling of certain bonds referred to in the act as having been issued in 1871 for the erection of the new city hall and market.
The first section of the act authorizes the city council to borrow money by issuing bonds, but provides, “ that before such issue the city council shall recall and cancel the bonds issued to the amount of two hundred and fifty thousand dollars, issued August 21st, 1871, for the erection of city hall and market.” It is a condition precedent, as absolute as words can make it, for it directs what must be done before the power previously conferred can be exercised. Yet it is contended to mean exactly the reverse, and that the new bonds shall be issued prior to the recall and cancellation of the old, in order that by the sale of the new bonds the city council might acquire means, and out of the pro*408ceeds of the new buy in the old bonds. Such interpretation negatives the power of words to express thought, and renders futile any attempt on the part of the legislature to attach conditions to its grants. The construction, however, really rests for its support upon a clause in Section 6 of the act, which directs that the proceeds of the bonds shall be applied “first to the payment of debts heretofore contracted for the construction of the city hall,” &c. It is said, in substance, that because Section 1, in its-proviso, states that the $250,000 in bonds, issued August, 1871, were “ issued for the erection of city;hall and market,” that those bonds, or any loan for which they may have been pledged, represented the “ debt hei’etofore contracted,” mentioned in Section 6 ; and that Section 6, therefore, entirely superseded the provision in Section 1, and rendered the old bonds the prime object of the new bonds; whereas, from the ordinary sense of the words used, the act would seem to condemn the old bonds, and orders the cancellation of the same before the city shall be allowed to exercise the new power which ib sought and obtained by the act of March, 1872. The legal result of the construction given to the act by the court is the recognition of the validity of the old bonds, and the practical result would have been, if any such idea had then been entertained, that the old bonds would in all probability have been as good as. the new, and consumed the latter, dollar for dollar, in the cancellation of the former. The answer is that the old bonds had been hypothecated to a limited amount, and were under control of the city on payment of that sum. That may be true, but the price obtained for the new bonds may not have been in excess of that sum. The true reply, however, is that there is no evidence of that fact in the statute; and when a court is seeking the legislative intention, it must confine itself to the language used by that body, and not be influenced by extrinsic facts. Sedg. 241.
It is only by the evidence given at the trial that it is shown that the old bonds had been pledged for a debt outstanding at the time the act was passed, yet it is by that fact alone that the clause in Section 6 has been linked to the proviso in Section 1, and thus the true purpose of eacfi portion of the act utterly defeated. It is hardly necessary to say more. The proviso is a *409condition precedent, which must be performed before the trust fund could come into existence. Section 6 is a direction subsequent, and undertakes to dispose of the application of the funds. The latter could not go into force until the former had been done, and it is unjustifiable to suppose that the legislature meant a thing so flagrantly contradictory to what the words express.
The true and fair presumption is, that the issue of the bonds in August, 1871, was regarded as an illegal act, and for that reason the recall and cancellation was made a peremptory condition. This view does not arise from the evidence of extrinsic facts, but is a conclusion of law, for the Statutes at Large show that there was no law in existence in August, 1871, authorizing the issue of bonds for the erection of the hall or market, or any kindred purpose. And it is manifest that such was the view taken by the legislators • for, while they ordered the bonds of August, 1871, to be recalled, they, by Section 5 of the act, laid a tax sufficient to pay the interest on the new issue, ■“ and all heretofore issued by authority of law.” If the August, 1871, bonds had been regarded as issued by authority of law, they would have come within the provision of Section 5, and if not recalled and canceled, would have enjoyed its benefit. That, clearly, was not the intention.
The record of the points to which I express dissent is that, as is said, Section 6 of the act must be stripped of the idea that the proceeds of the bonds were a trust to build a city hall and market. I hold that, under Section 6, such proceeds do constitute a trust fund, to be applied in the manner prescribed in Section 6, and in no other.
“ Section 6. That the said mayor and aldermen are hereby authorized and directed to apply the proceeds of the sale of said bonds, first, to the payment of any debts heretofore contracted, or which may hereafter be contracted, for the construction of the new city hall and the new market; and, secondly, for the improvement of the streets, the extension of the water works, and for any other improvements which shall be judged advisable by the said mayor and aldermen.”
The ground that Section 6 constitutes no trust, is taken because the section does not, in terms, order the hall and market to *410be built, the improvement of streets to be completed, and the water works to be extended, &c.; and because it does not explicitly declare that the bonds are issued for such purposes. What force, if any, such argument may have had, had the objects named in Section 6 never arisen, it loses all force the moment such objects come into existence. That debts for the hall and market had been contracted prior to the passage of the act, and large debts for the hall, subsequently, is shown by the evidence throughout the case, and, in fact, is admitted. Further, streets and water works were in existence when the act was passed, and their improvement and extension were clearly specific objects. But the direction to proceed with the city hall and market, which are treated by the act, (Sections 1 and 6), as then being in process of erection, is plainly impliable from the whole act. Indeed, the act differs in little from an ordinary deed of trust. Section 1 creates and vests the trust fund; Section 6 directs how it shall be applied. Each object named in Section 6 was then in being, or has arisen since. It is argued that this plain dedication of the fund does not specify and limit the objects to which the money shall be applied, because it names no object which was not already within the scope of the authority of the mayor and aldermen, and to which they might not have applied the surplus of the ordinary revenue of the city; and that the act, substantially, did nothing more than confer a power to increase the revenue for current purposes. The result would be that the mayor and aldermen could avail themselves of all the other portions of the act, but could cut off Section 6, and hold or spend the money at their sole discretion. I can see no difference between this act and a deed conveying to trustees, already exercising a trust over certain property, additional funds dedicated to the payment of specified debts already incurred and to be incurred in the improvement of the trust property, and then to certain specified, and then to general, improvements. Such a deed is never construed to give license to the trustees to disregard the instructions and spend the money at their pleasure, leaving to the cestui que trust, and to the donor, no remedy. There is no substantial difference, in principle, between this trust and that contained in the will of Stephen Girard. Vidal v. Girard, 2 How. 127. The city of Philadelphia, with *411its own funds could, if it had seen proper, have executed many of the purposes named in that will, but it has never been for a moment contended that this gave it the right to disregard Girard’s instructions. Like this act, it names several objects in successive order, the two latter of which are the maintenance of a police force and the “ improvement of the city property and the general appearance of the city itself.” But, as is held in Vidal v. Girard, supra, and Girard v. Philadelphia, 7 Wall. 1, the first object has the first claim upon the fund, and until that object has been accomplished the city has no power to devote the money to any other purpose. In the case before us, the very first and great object referred to throughout the act, is not near completion; heavy debts are outstanding, and yet the mass of the bonds have been wasted and misapplied. It is needless to argue the point further.
Reference to Perry on Trusts, § 704, will furnish ample authority to show that when a deed, devise or statute endows a corporation or its officers with funds, by direct gift or by power to levy a tax, such funds to be used for the improvement of the town in general terms, or for public water works or buildings, or works of any kind as enumerated in Section 6, such direction constitutes a specific express trust; the funds are held subject to the trust, and the trust can be enforced or protected by the court of equity. See, especially, Attorney-General v. Eastlake; Attorney-General v. Dublin; Attorney-General v. Aspinall, supra.
The third ground, to sustain which it is said that the object of. the statute really was to enable the city to fund its floating debt, &c., giving merely a preference to certain classes of obligations, appears to me to be sufficiently refuted' by the act itself, and I have already, under the second division of my objections, said all that I have to say on that subject.
As a fourth ground, to sustain the conclusions reached by the court, it is said that the sole equity would consist in the statement that debts of the character provided for in the sixth section were outstanding at the time of the filing of the complaint; that the only debts of that class are debts on account of the city hall, and that as to them there is no equity, because such debts have an additional provision made for them by the tenth section of the *412act, which directs that the income derived from lease of portions of the building shall be made a sinking fund for the payment of such debts. To answer the latter part first — that provision in Section 10 plainly either refers to the bonds devoted to the erection of the hall, or, more properly, is an additional security to the parties contracting to build the hall, for there is nothing in the act limiting the amount which might be expended on the hall. It is inconceivable that it was intended as a shield to cover the trustees in their breach of the trust imposed by Section 6, for such intention certainly is not expressed and ought not to be presumed.
To say that the equity of the case, or the right for relief, is limited to the debt now outstanding on the city hall, is a total disregard of the position occupied by a trustee, and of all the other objects mentioned in the act. It is a fixed rule that a trustee, and all parties dealing with him, with notice of the trust, are liable to account for the entire trust fund. Even if all the objects named in the act had been completed, and there remained a surplus of the proceeds of the bonds, the corporation had no right to devote it to purposes foreign to those named in the act, Merchant Taylors Co. v. Attorney-General, 11 Eng. Ch. Cas. 34, and could be held to account. Whether the act of such a trustee, if done in good faith and for a good purpose, could be confirmed by the court, or would need legislative confirmation, is a question which it is needless to discuss; but that one or the other would be necessary is very clear. If I understand the law, as laid down by the authorities, the plaintiff is entitled to relief against all misconduct of the corporate officers and parties dealing with them in the professed exercise of the powers contained in the act. I readily admit that the court should not go within the scope of the authority conferred, and interfere with its discharge, upon the ground that it is unwise or injurious to the public, but its plain duty is to heep the corporate officers within the scope of their authority, and when they go outside of it to treat them, and all dealing with them, exactly as it treats other parties committing or aiding in breaches of trust. “ So long as those functionaries strictly confine themselves within the exercise of those powers which are confided to them by the law, this *413court will not interfere. The court will not interfere to see whether any alteration or regulation which they may direct, is good or bad; but if they are departing from that power which the law has vested in them, if they are assuming to themselves a power over property, which the law does not give them, this court no longer considers them as acting under the authority of their commission, but treats them, whether they be a corporation or individuals, merely as persons dealing with property without legal authority.” Freeman v. Lewis, 4 Myl. & Cr. 249.
The fifth point which compels dissent is the assumption by the court below, and sustained on appeal, that when the legislature directed that debts “ heretofore contracted for the construction of the new city hall and market ” should be paid out of the proceeds of the bonds, it meant that a certain note to J. L. Neagle, for $75,000, should be so paid. The note to Neagle is not mentioned in the act, and if the court goes outside of the' act to extrinsic facts to ascertain the intention, it violates the settled rule of construction. The general assembly did not mean a debt to any particular person, nor any particular debt, for it did not say so; but it did mean debts of a specified class, viz., debts theretofore contracted for the construction of the hall and market. It devolves upon the court to decide what debts come within such description, and to do that the court properly resorts to evidence, and has no right to say that the legislature has preadjudicated the question of fact, unless that body has done so in explicit language. The evidence is conclusive that the note to J. L. Neagle for $75,000 did not,-to that full extent, represent a debt under Section 6.
The note was given in August, 1871, for money loaned to the city council. The loan was negotiated under and by authority of proceedings of the board of mayor and aldermen, which, by law, are published; and it is admitted in the evidence “ that the proceedings of council, referred to in the testimony in this case, were published in the newspapers of Columbia, S. C.” The proceedings are as follows (July 11th, 1871, p. 99, minute-book of proceedings of city council of Columbia): “ Resolved, That the mayor and committee of ways and means be authorized to borrow money from time to time, as may be necessary to carry *414on contracts for building tbe proposed extension of the market, erecting new city hall, &c., and to secure any advances for this purpose, to dispose of and hypothecate city securities.”
On August 17th, 1871, (minute-book, p. 213,) the following report was made by the committee of ways and means: “ That in furtherance of the duty confided to them to raise money to build city hall and market, and for other purposes necessary for support of city government, they negotiated with various parties, and are able to borrow seventy-five thousand dollars ($75,000) at current bank rates, which loan is to be secured by hypothecating two hundred and fifty thousand dollars’ ($250,000) worth of city bonds. This mode of raising money the committee regards as preferable to the sale of .the large amount of bonds that would be required now to raise the money needed. The committee believe that there will be such an advance in city bonds, in a few months, as to enable council to sell bonds sufficient to liquidate the debt now' created, without suffering the discount and great loss that the sale would now entail upon the city. The committee would, therefore, recommend that the mayor, with the advice of the committee of ways and means, be authorized to execute a note of the city of Columbia for the sum of seventy-five thousand dollars, and to secure the said note by a pledge of two hundred and fifty thousand dollars ($250,000) of city bonds, which bonds he is hereby directed to issue.”
It is proven that under a resolution of the said city council, adopted on the said 17th day of August, 1871, (see p. 212 minute-book,) the report was adopted, and thus became a resolution of council. The date of the note, the sum and the security prove that the loan was obtained under the authority conferred by the latter resolution of August 17th, and not under the resolution of July 11th, 1871, as is said by the majority of the court. And the chairman of the committee of ways and means testifies that “upon the resolution of July 11th, 1871, we negotiated the loan with Dr. Neagle. After the adoption of the report made August 17th, we closed the transaction.”
The testimony further shows, and it is admitted by both sides, that the proceeds of the note were disposed of by January 1st, 1872, prior to the passage of the act, as follows:
*415For city ball.................................$14,494 66
For market..................................... 6,302 70
Total................................$20,797 36
For the ordinary current expenses of the city government, having nothing to do with the hall or market, $53,917.08, leaving a balance of $285.56 unaccounted for.
It thus appears that the transaction was not completed under resolution of July 11th, which is construed to refer solely to hall and market; that the power to borrow money, conferred by that resolution, was not exercised, but that the committee came back and said that they might be able to borrow $75,000 for the hall and market and other purposes necessary for the support of the city government, but that for this loan securities were demanded which were not in their hands, and recommended that instead of their acting as under July 11th resolution, the power be confided in the mayor, under their advice, to give a note of the city of Columbia; to hypothecate as security for said note $250,000 in bonds, and to enable him to do the latter he be forthwith directed to issue the said bonds, which had thus to be brought into existence before they could be pledged. It is as plain as words can make it that the loan rests on the authority of the resolution adopted August 17th, 1871, and the resolution of July 11th has no more to do with the contract of loan and the note as perfected than if it had never existed. It was insufficient to support the scheme, and it was set aside, and one of far greater magnitude put in its place. The money was thus borrowed for several purposes, of which the hall and market were the two minor, and the sum necessary for the support of city government the major, as the testimony shows. It is useless to say that J. L. Neagle loaned under the resolution of August 11th, 1871. His own demand for $250,000 in bonds, which had not then been put in the committee’s hands, shows that he was the very person who objected to the July 11th resolution, and required better and stronger note and security than that resolution authorized. He was satisfied with the resolution adopting the report on August 17th, 1871, because it was in full compliance with his requirements as therein set forth, and forthwith completed *416the transaction on those very terms, of which he had full notice in the published resolution. He cannot now, with any merit, claim that he thought the loan was for the city hall, nor can his assignees, for the legislature did not make that the measure by which the object of the debt should be determined, but left it to be fixed by the ordinary rules of evidence. So much only as was paid for the hall and market is a debt contracted for their construction; the residue is a debt contractéd for other purposes “ necessary for the support of city government.”
As to other points in the case, I concur in the following:
1. That the validity of the bonds is not impaired by the defective “ abstract ” of the act endorsed thereon.
2. That the failure to recall and cancel the $250,000 in bonds, referred to in Section 1, prior to the sale of the new bonds, does not, per se, invalidate the sale. No objection was made at the time the sales were made, and the bonds in question had been recalled and canceled before this action was brought. The plaintiff may be considered as bound by acquiescence, or with length of time having elapsed,as estopped by laches. The failure to recall was a gross irregularity, but, no one having complained, the city was able'afterwards to make amends byrecalling the bonds, and thus, substantially, did comply with the results contemplated by the act. This view does not at all affect the right on the part of the plaintiff to object to the use of the proceeds of the sale of the new bonds to recall the old. The two questions are entirely disconnected — one is an irregularity which may be waived or repaired, the other is a plain breach of trust, and stands on a different footing.
3. That the bonds were advertised and put up at public sale substantially in compliance with the act (Section 3.) The first advertisement and sale was literally in compliance; the two subsequent, being on days fixed by public adjournment, were regarded as mere resumptions of the first sale. The public stood by, acquiescing to such construction, and it is too late now to complain.
I concur, therefore, so far as concerns the public conduct of the sales, but I differ widely from the view which is taken of the completion of these sales by subsequent negotiation. The *417intention of Section 3 of the act was to secure the best market price, by attracting public attention, and to prevent fraudulent private negotiation. The evidence shows that this intention was fully carried out. The city council, to prevent sacrifice, limited the price at which the bonds should be allowed to go, and had large amounts thus bid off by its agents. But bidders at auction sales do not perfect their titles until they have complied with the terms. The city, which was both vendor and vendee, when it bid off the bonds by its agents, held them still subject to the same trusts as before, and the same limitations, with this exception, viz., that, having complied with the requirements of the act, intended to fix a fair market price, it was left to the discretion of the city officers whether they would put the bonds up again for public sale, or transfer the city bid to third parties at ■the same or an advanced price for the benefit of the city, subject to the purposes of the act.
The bonds were bid off at the three sales as follows :
Clark Waring, for himself........................ $10,000
B. K. Scott (per Donaldson)...................... 20,000
Central National Bank (per Gambrill).............. 10,000
City of Columbia (per Alexander, Waring & Wilder,) 210,000
$250,000
The question is whether the sales were perfected by payment, for, unless payment was made, (the sales being made in pursuance of a statutory trust, of which all had notice,) the title would not pass, and the bonds, in the hands of original purchasers, or persons having notice, are affected by the trust, and should be delivered up. To answer this inquiry it must first be fixed what, under the act, is a payment. The act, Section 1, empowers the mayor and aldermen “ to borrow money by issuing city bonds,” and directs that the issue be made by public sale. Section 3. One buying in the manner prescribed by the act, and paying money, is responsible for nothing which may occur in the future by reason of the conduct of the corporate officers, provided, always, that he is not particeps. Therefore, if the bonds had been sold for money, and the money paid, bondholders would not properly be parties to this action. The sole question would *418be as to the application of the money, and in that only the corporation, its officers and parties dealing with them, could be concerned. But not $1 of money was paid for the $250,000 in bonds thus bid off, and the whole transaction is thereby opened to inquiry where the original parties are before the court. Money is the only payment technically admissible, because the express purpose of the issue is to “ borrow money ” by sale of the bonds. There may, nevertheless, be an equivalent for money. Debt, to the payment of which the money is dedicated by the act, is an equivalent. Section 6 defines such debt. A debt contracted for the construction of the hall and market was, from the first, an equivalent of money, and could be delivered up, satisfied, in payment for bonds. It matters not whether such debts were in the hands of original creditors, assignees or the city council, which had borrowed money to pay them, and remained liable for the amount. The proceeds of the bonds would be applicable thereto, and any obligation representing such debt could be taken as money. But an obligation for money previously borrowed by the city council, on the mere pretence that it was for a purpose, such as the act afterwards named, and not actually so applied, occupies no such position, and cannot be used in payment for bonds, for the council is a mere trustee under the act; the relators are the true parties in interest, are liable on the bonds, and should not be made to bear any burthen, or suffer any loss but such as results from the act, strictly construed. Therefore, in testing the validity of the sales, the payment for the bonds must be subjected to the rule thus laid down; it must be in money, or what, under Section 6, is its equivalent. The evidence shows, as already stated, that the city hall is not yet completed, and that debts contracted for its construction are still outstanding to a large amount. The city council has, therefore, up to this time, had no power to apply the proceeds of the bonds to any other purpose, (Vidal v. Girard, Girard v. Philadelphia, supra,) and, consequently, no other class of indebtedness or obligation has been receivable in lieu of money.
I will now pass upon the sales in detail.
Clark Waring, who was then the contractor charged with the construction of the city hall, bid off $10,000 in bonds, and paid *419for them by crediting the amount on the debt then due to him on city hall account. The payment was valid under Section 6, and those bonds are free from objection.
The Central National Bank bid off $10,000 in bonds, and for payment delivered up a note held against the city council and a small parcel of city coupons. The note was for money loaned to the council and expended for ordinary purposes, not included in Section 6. The payment was not good, and the bonds being in the hands of the original purchaser, should be delivered up, and the parties restored to their original position, leaving the bank to such remedy as in law it might have.
B. K. Scott bid off $20,000, and for payment entered a credit to the amount of his bid on a note he held against the city council for money previously loaned to aid in paying the $75,000 note held by J. L. Neagle. The credit was prima fade no payment, and the bonds should be delivered up; but another feature in the transaction will be subsequently noticed. The remaining $210,000 were in hands of the city officers, as vendors and bidders at the public sales, still subject to the conditions of the trust, and negotiable thereunder, but with the right, on the part of the council, to transfer their bids to purchasers on the terms and in the manner above laid down. The fact that the bonds were still in the hands of the city officers refutes the idea that purchasers from them can be regarded as holders of negotiable instruments, without notice. Possession by the city was notice that the bonds had not been issued, and none put up such defence except the Carolina National Bank. As to that defendant its own evidence and transactions conclude it by showing that it was intimately acquainted with the whole matter, and recognized the bonds as unissued and still the property of the city.
The city officers undertook to sell the bonds, as follows, to—
B. K. Scott....................................... $50,000
Carolina National Bank......................... 100,000
John English.................................. 3,500
Clark Waring.................................. 4,500
John Alexander................................ 750
Union Savings Bank............................. 15,000
$173,750
*420And pledged as collaterals—
South Carolina Bank and Trust Company........... $29,250
Thomas B. Jeter............................... 6,000
Leaving in hand.................................. 1,000
The sale to John English was bona fide; the money was paid, and the bonds are free from objection.
The sale to Waring was likewise unobjectionable. Valid payment was made by credit duly entered on his account for work done on the city hall.
The sale to John Alexander was void, for payment was made by credit on an account not within the objects named in the act. As to the rights of the subsequent holder, who has not answered, the court has disposed of them generally, and it is unnecessary to discuss the question in a mere dissent.
The second sale to R. K. Scott, is of the same character with the first, and should be set aside, except to the extent hereinafter indicated.
The sale to the Carolina National Bank is good in part, and, as to the residue, is of the same character, in part, with the sales to R. K. Scott, and in part is without any legal or equitable validity. The amount professedly given for the bonds was $66,000. It was paid by crediting on obligations held against the city council to the amount of $52,420.30, and by putting to the credit of the city $13,579.70. The latter was a valid payment, and to the extent that amount covers the bonds the sale is unobjectionable. Of the remaining $52,420.30, the amount, $35,513.25, represents money which the bank had loaned to aid in taking up the note to J. L. Neagle. R. K. Scott loaned $40,000, which was applied to the same object. Scott and the bank, therefore, represent any equity which was attached to Neagle’s note. As already indicated, that note was to the extent of $20,797.36, entitled to be paid out of the proceeds of the sales of the bonds. The right to that sum, or rather to bonds which would represent that amount, is held by R. K. Scott and the bank in the proportion of $40,000 to $35,513.25, and in the additional proportion of the price at which they respectively bought the bonds. As to the balancé of the bonds bought by Scott and by the bank, the sale should be set aside and the bonds *421delivered up, and the parties restored to their respective rights as they stood at the time of the attempted sales, except in so far as the sales are confirmed by the rules above laid down.
The sale commonly called a sale to the Citizens’ Bank of Petersburg, Va., was, in fact, a sale to the Union Savings Bank, as is shown by the testimony of the then mayor and treasurer, whatever may have been the intention in the mind of the purchaser, an agent, who represented both banks in the transaction. Parties dealing through agents are bound by the acts and by the knowledge on the part of their agents, within the scope of the authority. The testimony is that the sale was made to pay demands held by the Union Savings Bank as against the city. It makes no difference whether the agent paid by check on the Union Savings Bank, which he represented, and paid the check by crediting the amount on demands against the city, or paid down the money of the Citizens’ Bank of Petersburg, Va., with one hand and took it up in the other, to satisfy the demands of the Union Savings Bank. In either course of conduct he colluded with the city council in the misappropriation of the proceeds of the bonds to debts not comprehended by the terms of the trust, and the law should fall, not upon the innocent relators, but upon the principal, who should be made to deliver up the bonds, and go for remedy against its agent and the Union Savings Bank.
The hypothecation of $29,250 of the bonds with the Carolina Bank and Trust Company was clearly illegal, and, in the hands of the original holder, the bonds could have been at once recalled • but being negotiable in their character, and having passed into the hands of others by subsequent pledge, and then by public sale, and there being no evidence of notice, they have passed beyond the reach of the power of the court, and are valid obligations. There seem, however, to have been other bonds sold at the same time that were of the number delivered to R. K. Scott. They were pledged by his agent and were bid in by himself. As to these, no change was effected, and they are open to the original objection, and have be.en already disposed of. R. K. Scott was the owner of the pledge, and had notice of the defect in the title. It cannot be held that by pledging the bonds *422and suffering them to be put up at public sale he could perfect his title by bidding them in, when he had full notice.
The hypothecation with Thomas B. Jeter to secure a loan, was without authority and ought to have been rescinded, and the bonds delivered up. It is alleged in the answer that they have been pledged in the Central National Bank, but there is no evidence that the pledge was made prior to the commencement of this proceeding.
The result of these views would be to reverse the judgment of the Circuit Court, and to order a decree confirming the sales of bonds to the amount of about $55,000 in bonds, and establishing the validity of the $29,250, which are made valid by their character of negotiability.
The power of the city council to borrow money and thus impose burthens on the city, is questioned in the case, but the court has not deemed it raised by the pleadings, and has not passed upon it. I am inclined to think the point does arise, but have already gone to such length that I am indisposed to say more than that very sound authorities seem disposed to lean against the exercise of such power by a corporation. The power to borrow money is distinct from the right to give certificates or evidence of indebtedness for services rendered, &c., and the case of Neely v. Town of Yorkville, 10 S. C. 141, by no means settles the former question.
Decree.