Court Opinion

ID: 7890486
Source: CourtListenerOpinion
Date Created: 2022-09-08 21:48:16.766046+00
Date Added: 2024-06-11T16:31:53.786352
License: Public Domain

Allen, J.
(dissenting). I concur in holding the title of the act sufficient to include municipal townships, but dissent from the proposition that the act of 1879 authorizes the issuance of negotiable bonds. Neither the word “negotiable” nor any of its synonyms is to be found in the act. The right of the plaintiff to recover in this case depends entirely on the negotiability of the bonds, there being no contention that the original bonds issued in aid of the Sugar-Mill Company were valid. The rule of law rendering the private maker of negotiable paper liable for the full face of it in the hands of a bona fide purchaser for value, even though he In fact received nO' consideration for its execution, is often exceedingly harsh, and is frequently invoked to perpetrate a fraud. It is still more harsh to impose a burden on the *250tax-payers, who have taken no part in the execution of written instruments, to pay that for which they have received no benefit in return ; and the courts have generally held that, to authorize public officers to execute negotiable instruments in the name of a township or other political subdivision of the state, and thereby impose on the public a burden of debt wrongfully and illegally and without benefit to the public, there must be explicit legislative authority. In the case of Merrill v. Monticello, 138 U. S. 673, Mr. Justice Lamar in delivering the opinion of the Court quotes with approval the language of Chancellor Kent, as follows :
‘ ‘ The modern doctrine, is to consider corporations .as having such powers as are specifically granted by the act of incorporation, or as are necessary for the purpose of carrying into effect the powers expressly granted, and as not having any other. The Supreme Court of the United States declared this obvious doctrine and it has been repeated in the decisions of the state courts. . . . As corporations are the mere creatures of law, established for special purposes, and derive all their powers from the acts creating them, it is perfectly just and proper that they should be obliged .strictly to show their authority for the business they assume, and be confined, in their operations, to the mode and manner and subject-matter prescribed.”
In Hill v. Memphis, 134 U. S. 198, Mr. Justice Field said:
'‘ The inability of municipal corporations to issue negotiable paper for their indebtedness, however incurred, unless authority for that purpose is expressly given or necessarily implied for the execution of other express powers, has been affirmed in repeated decisions of this court.”
And in Brenham v. German American Bank, 144 U. S. 173, it was held :
‘' Power in a municipal corporation to borrow money *251not being nugatory although unaccompanied by the power to issue negotiable bonds therefor, it is easy for the Legislature to confer upon the municipality the power to issue such bonds ; and, under the well-settled rule that any doubt as to the existence of such power ought to be determined against its existence, it ought not to be held to exist in the present case.”
See also the dissenting opinion of Judge Caldwell in the case of West Plains Tp. v. Sage, 69 Fed. Rep, 952, cited in support of the opinion of the Court in this -case.
The act does not expressly authorize negotiable bonds to be issued. What necessity then requires the Court by construction and implication to confer -such power? Are not purchasers fairly dealt with if they are allowed to collect bonds rightfully and lawfully issued? What necessity is there for going further and saying that the law implies power, as was attempted in this case, to create a debt without lawful consideration? There is much in the act indicating that the Legislature did not intend that negotiable bonds should be issued and placed on the market, imposing an absolute liability whether with or without •a valid consideration. The bonds are to be issued •only to the holder of the prior indebtedness in pursuance of a compromise agreed on, and on the delivery .and cancellation of the evidences of the prior debt. He, of course, has full knowledge of everything affecting the validity of the bonds. It is with him, and him alone, that the township deals in making the exchange. A purchaser from him, of course, might not have full knowledge concerning the original transaction ; but section 4 of the act requires the County ■Clerk to keep a record of all bonds issued in the •county under the act, showing the date, number and *252amount thereof, to whom and on what account issued,, and requires also a register of the number, amount and date of issue of the canceled obligations. From these records and the inquiries they suggest, a purchaser might readily ascertain whether the refunding bonds were issued for a valid indebtedness or not. He who invests his money in such securities ought to have a motive for inquiring into the réason for the issuance of them. The attention of the taxpayers is not-challenged to the transaction, and no good reason exists for holding them to the exercise of diligence in protecting their rights. They are not parties in any sense to the transaction between the original payee-of the bonds and the purchaser from him. A debt of' the taxpayers ought not to be created by a transaction between strangers, merely because one of them advances his money in reliance on his own ignorance concerning the consideration of the securities he purchases.