Court Opinion

ID: 8632938
Source: CourtListenerOpinion
Date Created: 2022-11-24 19:40:27.662012+00
Date Added: 2024-06-11T16:55:50.034552
License: Public Domain

KREICBL, District Judge
(dissenting). Plaintiff. Jarrott, brings this action against defendant, the city of Moberly, to recover judgment on interest coupons detached from what are termed “Moberly Machine Shop Bonds.” The petition sets out a copy of the bonds, showing that the city of Moberly acknowledges itself indebted to W. F. Barrows or bearer in the sum of $500, in current *369funds, at the Bank of America, in the city of New York, ten years after date, with interest at ten per cent, payable annually, on presentation of coupons, with option on part, of the inhabitants of the town of Moberly to pay the bonds after three years, and payable only by a special tax. The bonds on their face recite that they were issued in pursuance of an election held on the 6th day of March, 1872, to decide whether said town should purchase and donate to the St. Louis, Kansas City, and Northern Railway Company two hundred acres of land for machine shop purposes, the result of said election being two hundred and twenty-eight votes for and one vote against the purchase and donation; and in pursuance to the order of the board of trustees, made on the 18th day of April, 1872, which order was made in accordance with an aet of the general assembly of the state of Missouri, entitled “An act authorizing cities and towns to purchase land, and to donate, lease, or sell the same to railroad companies,” approved March 18th, 1870. The interest coupons are in the usual form.
The petition is demurred to, setting out for causes that from the petition it appears that the city council of Moberly had no authority in law to issue the bonds, the pretended act of the legislature under authority of which the bonds issued being unconstitutional, and because it appears that the legislature of Missouri exceeded its authority in the passage of said law.
The aet, the constitutionality of which is thus brought in question, provides:
“Section 1. It shall be lawful for the council of any city, or the trustees of any incorporated town, to purchase lands, and to donate, lease, or sell the same to any railroad company, upon such terms and conditions as such board may deem proper, for the use of assisting and inducing such railroad company to locate and build machine shops or other improvements upon such lands, and for such purpose to levy taxes upon the taxable property of such city or town, and to borrow money and to issue the bonds of such city or town for such purpose: provided, a majority of the qualified voters of such town or city, at a regular or special election to be held therein, shall assent to such purchase and donation.
“See. 2. At such election the poll-books shall be opened, and the ballots headed and styled ‘For the Purchase and Donation’ and ‘Against the Purchase and Donation,’ and if a majority of the votes cast shall be ‘For the Purchase and Donation,’ the proposition shall be deemed to be carried, and in that case the chairman of the board of trustees of any town, or the mayor of any town or city, is hereby authorized to receive and convey, on behalf of said town or city, said land as aforesaid.”
The 3d section provides' for the giving of notice “for at least two weeks before the terms of the contract to be so submitted as agreed upon between said railroad company and such common council or board of trustees.”
It has been agreed that, for the purpose of this demurrer, all the requirements of the law had been complied with before the issuing of the bonds.
The constitutional provision, in violation of which the law quoted is claimed to have been passed, is found in paragraph 14, art. 9, Const. Mo. 1865, and is in these words:
“Sec. 14. The general assembly shall not authorize any county, city, or town to become a stockholder in or to loan its credit to any company, association, or corporation, unless two-thirds of the qualified voters of such county, city, or town, at a regular or special election to be held therein, shall assent thereto.”
This constitutional provision came up for consideration in the supreme court of Missouri in State v. Curators of State University, 57 Mo. 178, in which the legality of certain bonds issued by the county of Phelps to obtain the location of the school of mines was contested, and it was held that the provision cited applied, and the issuing of the .bonds was enjoined, because no vote had been taken. Napton, J., closes his opinion as follows: “It will be observed that this is a case in which the issue of bonds not authorized by the constitution is proposed to be arrested. When the proposed issue is not sanctioned by the requisite vote, we think it a suitable time to prevent the issue. After such bonds have been put upon the market, and purchasers have invested in them, the question of their validity depends upon essentially different principles.” In the case before the court, we have a vote taken, the bonds have been put upon the market, and plaintiff is a purchaser of them for value. With these important differences between the cases, I feel free to consider the case before the court without that embarrassment which a difference of opinion with a court of such high standing, passing upon its own constitution, would create. The constitutional provision under consideration has a legislative history commencing with the act of January 27, 1837, incorporating the Louisiana and' Columbia Railroad. By the 16th section of that act, county courts were authorized to subscribe stock to the company and issue the notes of the county for such subscriptions, to be signed by all the justices and attested by the clerk, payable at such times and places as might be agreed on. After such subscription, the justices had the right to vote the stock in elections of the company. In the charters afterwards granted to railroad companies, from time to time, by the legislature, this power to subscribe was embodied. No general railroad law was passed until 1853. The act of February 24th, of that year, in its 29th section, granted to the county court of any county, and the city council of any city, the power to subscribe to the capital stock *370of any railroad company organized under the act: “Provided, that the county court or city council subscribing or proposing to subscribe to such capital stock may, for information, cause an election to be held to ascertain the sense of the tax-payers of such county or such city as to such subscription, and as to whether the same shall be paid by issues of county or city bonds.” The act authorizes the collection of taxes to pay subscriptions and the interest on bonds which may be issued.
These provisions, with the body of the law, passed into the revision of the Missouri statutes of 1855. In the Platte Co. Case, 42 Mo. 171, the supreme court of Missouri decided that this word “may” was obligatory, and must be read as “shall,” holding bonds issued without submission void. The legislature soon after passed an amendatory act, by which the word “shall” is substituted for “may.”
"The only constitutional provisions regarding internal improvements up to 1865 are found in the constitution of 1825, adopted soon after the admission of the state, and are as follows:
“Art. 7. Internal improvements shall forever be encouraged by the government of this state; and it shall be the duty of the general assembly, as soon as may be, to make provision by law for ascertaining the most proper objects of improvement, in relation both to roads and navigable waters; and it shall be their duty to provide by law for a systematic and economical application of the funds appropriated to those objects.”
In 1846 a' convention framed a constitution, which, on submission to the people for ratification, was rejected. This instrument made no mention of internal improvements. The general corporation act of 1855, regarding the. building of plank and macadamized roads, in its 34th section, authorized county courts to subscribe stock to the extent of one-half of the cost of constructing such roads. In no Missouri law or charter, not pertaining to rail, plank, or macadamized roads, is any authority found authorizing municipalities to subscribe stock, with or without submission.
The laws authorizing county courts to subscribe stock in the improvements mentioned remained dormant until the building of railroads, about the year 1850, actually began. The provisions were soon made available by -the companies needing funds for their purposes. Desiring railroads, the people quietly ■stood by and acquiesced in the exercise of the power by the county courts in subscribing stock. The legislative mind first perceived the danger; the requirement of submission in the acts of 1853 and 1855, the change of ■“may” into “shall” in 1860, the provision of the constitution of 1865 requiring a two-thirds vote,- followed. These provisions undertook to beep pace with the rising railroad mania in Missouri.
Congress had made land grants, the state had aided certain railroads liberally, reserving for its security liens on the roads aided, which liens the companies interested sought • to remove or subordinate to others. This was the condition of things in Missouri when the convention of 1865 framed the provision in alleged violation of which the act under which the “Moberly Machine Shop Bonds” issued was passed. Let us now examine the provision itself, and seek from its language and import to ascertain whether applicable to the act claimed to be unconstitutional and void. The act, by its terms, seeks to enable cities and towns to purchase lands and donate, lease, or sell them to railroad companies for the purpose of inducing them to build machine shops, or other improvements, upon such lands, requiring a majority vote for sanction. The language of the constitution is: “The general assembly shall not authorize any county, city, or town to become a stockholder in or loan its credit to any company, association, or corporation, unless two-thirds of the qualified voters of such county, city, or town, at a regular or special election to be held therein, shall assent thereto.” Did the city of Moberly, by the purchase of lands and donating them to the railroad company, become a stockholder in such company, or loan its credit to it? A stockholder in a railroad company may be said to be one who is interested in the funds of the company, and who assumes the liabilities of a stockholder. The city of Moberly, by virtue of its donation, certainly did not become interested in the funds of the company, nor did it assume any liability of the company — hence, did not partake of the character of a stockholder In any way. It cannot, by any possibility, he brought within the prohibitory language of the constitution, “shall not become a stockholder in ¿ny company.”
Did it loan its credit to the railroad company? By making a donation it certainly did not loan its credit. But it is said that money was obtained on its bonds, in order to make the purchase of the land. Can this fairly be said to be a loan of credit to the company ? I think not. Again, it is said that the constitutional provision is directed ¿gainst the mischief, and that this case falls within it And here is the real point in issue — what was. in the light of the legislation of Missouri and the condition of the state, the mischief at which the constitution aimed? Looking at the legislative history and the attending circumstances, the conclusion is, the improvident employment of community credit in railroad enterprises, in which they could have no other than a common interest, and could exercise, if any, but a very limited. control.
The Phelps Co. Case. 57 Mo. 178, and the St. Louis Co. Court Case, 58 Mo. 175, may be said, so far as the case under consideration is concerned, to fairly neutralize each other — the first with a leaning adverse to the view here taken, the latter favorable to it. *371The constitutional provision under consideration is found in connection with and preceded by a prohibition regarding the state, as follows: “The credit of the state shall not be given or loaned in aid of any association or corporation; nor shall the state hereafter become a stockholder in any corporation or association.” The credit of the state had before that time been given or loaned to various railroads, and the state was, in fact, at the time a stockholder in a bank, both of which connections had proven unprofitable, .and against them the constitutional provision regarding the state was directed. Following -this constitutional provision is found the one in reference to counties, cities, and towns, identical in language, adding the requirement of a two-thirds vote under which they might act in reference to the object named. Next comes the provision denying the legislature power to release the liens which the state had reserved on the railroads when providing for the loan of its credit to them; so that the loan of credit and becoming stockholders, both as affecting the state as well as local communities, was before the mind of the convention. No other matters, except those regarding internal improvements in the larger and extended sense, seem to have been thought of and considered. If the purchasing of property and the donation thereof for the purpose of inducing the location of machine shops, thereby securing a local benefit, had been intended to be prohibited, the word “donation” could easily have been added, as in the constitution of Illinois, which, with this ■ exception, is identical regarding, the subject matter. How the legislative mind of Missouri had run on this subject up to 1865, we have seen from what has been stated; how it has since run, the amendment of the act •of 1870, requiring a majority only, and its change in 1872, making two-thirds the vote required, and the constitution of 1875, altogether prohibitory, would indicate. This prohibitory clause is as follows (section 6, .art. 9): “No county, township, city, or other municipality shall hereafter become a subscriber to the capital stock of any railroad or other corporation or association, or make appropriation or donation, or loan its credit in aid,” etc. Thus, by apt words, appropriations or donations are prohibited. The conclusion reached is, that the law under which the “Moberly Machine Shop Bonds” were issued does not conflict with the constitution of 1865, and is a valid act; that the prohibitions of the constitution were not directed .against the purchase and donation of property for the purpose mentioned in the act. This being so, the legislature had the power to authorize the city of Moberly to issue its bonds on.a majority vote.
Another objection to the validity of the “Machine Shop Bonds” is, that they were not issued for a public purpose. In the Fort Scott Case, 92 U. S. 503, bonds for similar improvements were held valid. The case of Burlington Tp. v. Beasley, 94 U. S. 310, seems to extend and enlarge municipal power. Neither conflicts with the Topeka Case, in which bonds were held void because issued to a private corporation, carrying on its own and exclusively private business. As remarked in one of the decisions of the supreme court of the United States, nearly all of the states have so legislated regarding railroads as to make them public corporations in the essential particulars affecting the interest of the community. State and federal courts have followed in the wake legislation has marked out. Machine shops are a legitimate and necessary part of a railroad, and partake with it of its public character; though they may be locally aided and established, this does not infringe upon or destroy their public character. In parenthesis, I may remark that this case presents, in some aspects, curious features as to legislative and judicial interpretations. The legislature passed the act of 1870, requiring a majority vote in case of donation, then amended it in 1872, requiring a two-thirds vote. The bonds in question upon their face recite that two hundred and twenty-eight votes were cast for and only one against the proposition, thus showing more than a full compliance with the acts of 1870 and of 1872, as well as with the constitutional provision requiring a two-thirds vote. To declare the law under which the bonds issued unconstitutional makes the bonds void, notwithstanding the recital of facts on the face of the bonds that more than the two-thirds required had voted for the issue. Thus the spirit of the law is crushed in the form, and the law made to favor dishonesty rather than honesty. When such is the condition of things, I prefer resolving doubts in favor of the constitutionality of the act giving force to the law enacted by the legislature. On the whole, I am of opinion the demurrer to the declaration should be overruled.