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Statement of the Case.
rington took an appeal to the Supreme Court of the State, but, before it was perfected, the bonds were issued and delivered to the company. The Supreme Court, on October 6, 1880, reversed the judgment below, its opinion being reported in 27 Minnesota, 224. It held that, under the Constitution of Minnesota, it was not competent for the legislature to authorize any person or class of persons, other than the electors of a town or the officers chosen by such electors, to determine what action, requiring local taxation, the town would take in any particular case; that, therefore, section 7 of chapter 106 of the Laws of 1877, which assumed to empower a majority of the “ resident taxpayers,” whether they were electors or not, to bind a town to issue its bonds to aid in the construction of a railroad, was unconstitutional and void ; and that, although the mode for authorizing the issue of bonds provided by section 7 was invalid, yet, as the same act provided another mode for authorizing such issue, which was valid, and as the bonds need not recite under which of the two provisions of the act they were issued, but only that they were issued under and pursuant to such act generally, and a purchaser would then have the right to presume that they were issued under its valid provisions, and there might thus be bona fide purchasers of the bonds, a suit for an injunction would lie to restrain the issuing of the bonds by the town officers under the invalid mode provided by section 7 of the act.
On the 18th of March, 1879, the town board of supervisors passed a resolution that the town issue to the company its bonds in the sum of $50,000, dated on January 1, 1879, to become due on or before 20 years from that date, with interest thereon, payable annually, at seven per cent per annum; that the bonds be signed and issued by the chairman of the board and the town clerk; and that the issue of stock by the company to the town in a corresponding amount was waived. The bonds were issued on the 19th of March, 1879, being one hundred in number, and numbered consecutively from 1 to 100, each purporting to be the bond of the town of Plainview, payable to the Plainview Railroad Company or bearer, for $500, dated January 1, 1879, due on or before January 1, 1899,
Statement of the Case.
with interest at seven per cent per annum, payable annually, according to the conditions of the twenty interest coupons attached, one of them payable January 1, 1880, and one on January 1 of each year thereafter until the maturity of the bond. Each bond contained on its face the following statement: “This bond is issued in pursuance of a mutual agreement between the said town and the said railroad company, which agreement was made in accordance with the laws of the State of Minnesota, and through and by a proposition made by said railroad company, and duly accepted by said town upon petition therefor signed by a majority of the resident taxpayers of said town, said agreement having been fully performed by the said railroad company on its part. This bond is issued in pursuance of the authority given for that purpose by the laws of the State of Minnesota and in compliance with a resolution of the board of supervisors of said town.”
The company, on or about July 9, 1879, sold, transferred and delivered the bonds and coupons to citizens of the State of Wisconsin, who purchased the same without notice of any facts invalidating the bonds, and paid the company $50,000 for them. The bonds and coupons were purchased and acquired
. by Samuel Marshall and Charles F. Ilsley, citizens of Wisconsin, who purchased them in good faith, for value, without notice of any facts invalidating them. On the 29th of January, 1881, Marshall and Ilsley commenced an action at law in the Circuit Court of the United States for the District of Minnesota against the town of Plainview, to recover the amount of 46 coupons for $35 each, cut from said bonds, which coupons fell due January 1, 1881. The action was defended by the town, and was tried before the Circuit Court without a jury, which found in favor of the plaintiffs and entered a judgment in their favor for $1746.98. The opinion of the Circuit Court of the United States is reported in 3 Mc Crary, 35. It held that the recitals in the bonds were conclusive evidence in favor of a purchaser without further information; that the conditions precedent prescribed by the statute had been complied with; that, as the law under which the bonds were issued had been recognized as valid by the highest court of the State of
Statement of the Case.
Minnesota, before they were purchased by Marshall and Ilsley, no subsequent decision could affect their validity in the hands of such purchasers; and that the rule charging every one with notice of pending suits was inapplicable where negotiable securities constituted the subject matter. The case referred to by the Circuit Court, as that in which the Supreme Court of Minnesota had recognized section 7 of chapter 106 of the Laws of 1877 as constitutional and valid, was that of State v. Town of Highland, 25 Minnesota, 355, decided January 10, 1879. The Circuit Court arrived at the conclusion that, as the bonds in question had been purchased by Marshall and Ilsley before the case of Harrington v. Plainview Railroad Company had been decided by the Supreme Court of Minnesota, and that court had said nothing on the subject previously except what was contained in its opinion in State v. Town of Highland, the bonds were not affected by the decision in the Harrington Case. As to the point that the bonds were invalid in the hands of Marshall and Ilsley, from the fact that they were purchased during the pendency of the Harrington suit, the Circuit Court made answer that said purchasers were not parties to that suit and had no knowledge of it, and that the rule that all persons were bound to take notice of a pending suit did not apply to nego tiable securities, citing County of Warren v. Marcy, 97 U. S. 96.
Thereafter, Marshall and Ilsley brought five other suits against the town of Plainview, to recover severally upon coupons cut from said bonds, which coupons became due from year to year, two of which suits were defended by the town, and in all of them judgments were recovered against it, amounting respectively to $1717.31, $1154.08, $2595.57, $771.15 and $3906.22, three of which six judgments the town paid.
Like judgments with those against the town of Plainview were recovered in the Circuit Court of the United States for the District of Minnesota by Marshall and Ilsley against the town of Elgin, Minnesota, and one of the judgments against each of the two towns was brought to this court by a writ of
Neither of the two judgments exceeding $5000, this court dismissed the writ of error in each case, 106 U. S. 578,
Statement of the Case.
583, for want of jurisdiction in this court, although the defendants in error were holders and owners of bonds to the amount of more than $5000, from which the coupons sued on in the two cases were cut.
On the 3d of March, 1881, an act passed by the legislature of Minnesota was approved by the governor, entitled “ An act to authorize the Winona and Saint Peter Railroad Company to purchase the stock and to purchase or lease the property and franchises of the Plainview Railway Company," Special Laws of Minnesota of 1881, c. 414, the provisions of which were as follows: “Section 1. The Winona and Saint Peter railroad company is hereby authorized to purchase the stock or to purchase or lease the property and franchises of the Plainview railway company; and said last-named company hereby authorized to sell and convey or to lease its property and franchises to the said first-named company, upon such terms as may be agreed upon by the respective boards of directors of said companies, so as to make the property and franchises of the last-named company a part of the property and franchises of said Winona and Saint Peter railroad company to be used and operated by it under its charter. Provided, that, any such purchase of the property or franchises of the Plainview railway company shall be made, and all such property held by said Winona and Saint Peter railroad company, subject to all demands, claims and rights of action against said Plainview railway company, arising or growing out of the latter company's having heretofore obtained and disposed of certain bonds and coupons purporting to have been issued by the towns of Plainview, Elgin and Viola to said Plainview railway company, and in taking such transfer under this act said purchasing company shall assume all claims and demands against said Plainview railway company to the extent and value only of the property and franchises so transferred. Sec. 2. The Winona and Saint Peter railroad company is hereby authorized to issue its capital stock to an amount necessary to make and complete the purchase aforesaid. Sec. 3. This act shall take effect and be in force from and after its passage.'
Statement of the Case.
In September, 1884, the town of Plainview brought a suit against the Winona and Saint Peter Railroad Company, in the District Court for the county of Wabasha in the State of Minnesota, the complaint in which set forth the making by the Plainview Railroad Company of the proposition in writing and the aforesaid acts of compliance with the provisions of chapter 106 of the Laws of 1877, and the filing with the town clerk of the petitions signed by the taxpayers, and alleged that the petitions were not signed by a majority of the electors or legal voters of the town; that no election was held in the town to authorize the supervisors to agree to the proposition or to issue any bonds; that the. board of supervisors adopted the resolutions before referred to without authority or right from the electors of the town or otherwise, the supervisors and the railroad company well knowing that a majority of the electors or legal voters of the town had not signed the petitions and that no election had been held authorizing the passing of the resolutions; that there was no authority to pass the same, or to bind the town thereby, or to issue the bonds; that the bonds were issued and delivered to the company; and that the latter, on or about July 9, 1879, intending to injure and defraud the town and deprive it of any defence to the bonds or coupons as against bona fide holders thereof for value, sold and transferred the bonds to citizens of Wisconsin, who purchased the same of the company bona fide, without notice of any of the facts invalidating the bonds, and paid the company $50,000 therefor. The complaint then set out the suits and judgments against the town by Marshall and Ilsley, and the passing of the act of March 3, 1881, and averred that the passage of that act was procured by the Winona and Saint Peter Railroad Company, and the act duly accepted and assented to by that company; that the bonds and coupons mentioned in that act were the same before referred to, and the said company under said act issued and disposed of its stock to an amount necessary to make and complete the purchase authorized by the act; and that, about May, 1881, that company, acting solely under the provisions of the act, purchased all the property and franchises of the Plainview Rail