354
FE,DBlUL REPORTER.
common counts for money had and received, etc. The bonds described in counts 1 to 11, inclusive, w'ere therein alleged, and by the evidence were shown, to have been given for money borrowed by defendant from the origina.l payees, for the purpose either of building or improving its wharves or streets, or of paying for a city cemetery, and to have been actually used for those purposes. Upon demurrer to like counts in the original petition all these bonds were held to be void, for want of an express grant of power in the charter of defendant to make bonds or borrow money. The bonds described in counts 12 to 17, inclusive, were therein alleged to have been made either in direct payment of subscriptions made by defendant to stock of certain road companies, organized under the laws of Missouri to build gravel roads leading from the defendant city to o.her places in Missouri, by virtue of an act approved in 1857, (Sess. Acts Mo. 1857, p. 302,) or in renewal of other bonds originally so given in payment of such subscriptions. The evidence showed that the allegations as to all of these bonds were true, with the exception of those described in counts 12 and 13. As to these it appeared that while eight-tenths of their consideration was the payment or renewal of bonds so given in payment of road subscription Sf the remaining twotenths was money borrowed from the holders of said bonds, and applied to the general uses of defendant. As to the bond described in the fourteenth count, it also appeared that when due it was surrendered to defendant by its then holder in exchange for a new bond of like amount, and bearing a like rate of interest, but which was made on April 20, 1872, and had not been registered according to the law of Missouri passed March 30, 1872, which required all bonds issued after its passage to be registered. Sess. Acts 1872, p. 56, § 4. It also appeared that after the old bond had been surrendered it came again into possession of its holder at maturity, who transferred it to the plaintiff, who, at the trial, produced it, together with the void renewal bond, and offered to surrender the latter to defendant. The bonds de-
GAUSE
V.
CITY OF CLABKSIILLB.
355
scribed in counts 18 to 27, inclusive, were alleged. and shown to have been made in payment of a subscription' by defendant to the stock of a company organized to build it gravel road irom the ferry landing in Illinois, opposite to Clarksville, to other points in Illinois, under a law of Missouri authorizing such subscription upon condition that the assent of the citi. zens was first obtained by an election. Sess. Acts 1866, p. 254. It was also alleged that such assent was in fact obtained at an election held on October 2, 1866. . Defendant pleaded as a special defence that this election was not valid because the voters were not registered, but at the trial conceded that no registration law was in· force at the time of the election, and then claimed and attempted to prove that the election was invalid because the voters were not sworn as required by 5 of article 2 of the constitution " of Missouri of 1865.· . The evidence showed that the road company negotiated the bonds for value, before maturing, to sundry persons, by whom they were transferred to plaintiff; also, that the subscription was authorized by an ordinance passed by defendant's city council in January, 1867, in the preamble of which 'was the. rollowing recital, to-wit: "Whereas, the legislature of Missouri, by an. act approved March 12, 1866,80 amended the charter of the city of Clarksville as to authorize the citY,council to take stock in roads leading to the city or to the ferry landing opposite totha city, in Illinois, by first obtaining the assent onwo·thirds of the legal voters of the city thereto, and whereas, at an ,especial election helrl for that purpose at the ci,ty haU on the second da.1J of Octo· - · · · - · ber, 1866, the authority was so given to subscribe .the of $15,000: - - · Now, therefore, be it ordained," etc., etc. It also appeared that the bonds were. issued in payment of the subscription only as the work on the road was finished. and that defendant received and voted the stock so subscribed; and still retained the same. Two of these bonds bore date l\.pril 1, 1872, two days after the passage of the act ing registration of bonds, (Sess. Acts 1872, p.56,) and q
FEDERAL REPORTER.
. I
appeared never to have been registered as required by that act. At the trial, and after the cause had been heard upon its merits, defendant, without having in any way pleaded any want of jurisdiction in the court or of competency of plaintiff to sue, offered to show that all the bonds sued on were owned by residents of Missouri, and had been transferred by them to plaintiff, a resident of Texas, without value, and merely to have him sue thereon in the United States court, and to avoid suing thereon in the state courts., Plaintiff objected to such evidence as irrelevant, and the same was heard subject to such objection, the court reserving its decision as to its relevancy till the final determination of the case. Dryden Ii Dryden, of counsel for plaintiff, cited the following authorities: 1 Peters, 450; ld. 498; 6 How. 4; ld. 23 and 30; 7 How. 198; 14 How. 505; 18 How. 76; 20 How. 264; 3 Sawyer, 599; 57 Mo. 86; 14 Mo. 428; 28 Mo. 597; 35 Mo. 461; 40 Mo. 67; Pomeroy on Rem. §§ 128-130; Gauss v. Clarksville, 8 Cent. L. J. 364; Dillon on Mun. Corp. § 730; 22 Mo. 266; 4 Dill. 208; 21 N. Y. 490; Mayor v. Ray, 19 Wall. 484; Wood v. Louisiana, (MS.) U. S. Circuit Court, E. D. Mo.; 1 Daniel Nego. lnst. §§ 201, 204; 2 Kent's Com. (side,) 467; Story on Bills, §184; 14 Pick. 198; 16 Ohio St. (N. S.) 133; 15 N. Y. 96; 1 Wall. 221,222; 10 Peters, 343; 2 W. & S. 235; 25 Ind. 31; 25 Ark. 350; 2 Daniel Nego. lnst. § 1274; 43 Vt. 319; 73 Pa. St. 400;8 Cowen, 77; 2 Pars. N. & B. 205; 2 Bailey, 574; 19 Mo. 637; 33 Mo. 583; 24 How. 287; 99 U. S. 86; 92 U. S. 484; Id.494. Wagner, Dyer d; Emmons, of counsel for defendant, cited the following authorities: 1 Kent's Com. 349; 2 Wagner's St. page 991, § 2, and page 1015, § 12; Myers' Supp. to Wag. St. page 304, § 12; Aud v. Burrow8, lOtto, 426; Ex parte McNiel, 13 Wall. 243; Pom. Rem. pp. 155, 677, 707; ThompBon v. Railroad, 6 Wall, 134; 1 Wagner's St., title, "Interest," § 1; Southgate v. A. d; P. R. 61 Mo. Story Prom· Notes, §§ 190, 191; Andrew8 v. Pond, 13 Pet. 65; Fowler v. Brantley, 14 Pet. 321; v. Jackson, 9 Otto, 441; Mercer Oounty v. Hackett. 1 Wall. 83; Van Basiro v. Madison
GA.USE V. OITY OF OLA.RKSVILLB..
857
County, ld. 291; Hackett v. Ottawa, 9 Otto, 86; Town of Weyauwega v. Ayling, ld. 112; Supervisors v. Galbraith, Id. 214; Brooklyn v. Ins. Co. ld. 362; Orteans v. Platt, Id. 677.
TREAT, J. Most of the legal propositions involved in this case were heretofore decided on the demurrers to some of the counts. 8 Am. Law Reg. 497. In the case of Wuod v. The Oity of Louisiana, recognized as ccrrect by Judge Dillon in his opinion on said demurrers, it was held that although a municipality issued bonds which it had no authority to issue, and no recovery could be had on the bonds as such, yet if the money derived therefrom was received for an authorized purpose and applied to that purpose, an action would lie as for money had and received, and that the bona fide holder of said bonds could recover as assignee of the original demand. This doctrine receives some support from the views expressed in the case of Little Rock v. National Bank, 98 U. S. Rep. 308, and Shirk v. Pulaski Oounty, 4 Dill. 209. Accepting the doctrines thus stated, it was for the plaintiff to prove what amount the city actually received for wharf and for street improvement bonds, respectively. The evidence that these bonds sold at par, and that the proceeds thereof were paid into the city treasury, and expended for the specific purposes designated. There were ordinances of the city authorizing said improvements, and making the needea appropriations therefor, all of which were lawful, and the money raised therefor by the sale of said bonds faithfully applied. Hence, under the rulings heretofore made in this case, the plaintiff is entitled to recover the amounts so actually loaned, with unpaid interest due from date of demand, at the rate of 6 per cent. The city bought a cemetary lot, to pay for which it borrowed $1,500, and issued a bond for $1,650. As there was no power to issue a bond therefor, the recovery can be only for $1,500, with unpaid interest, at the rate of 6 per cent. The foregoing items cover all the counts, from the first to t3e eleventh, inclusive, on which, as held, there can La no
858
FEDERAL BEPOBTBB.
recovery; but that the plaintiff would be remitted to his count for money had and received. The demands embraced in counts f:rom 12 to 17, inclusive, are on bonds issued in payment for subscription to gravel roads, held by Judge Dillon to baa lawful exercjse of municipal authority, from which view I dissented. As his ruling must prevail, the only question open under this head is as to two of said bonds, which the evidence shows were issue4 on renewal, not for· part payment of said subscription alone, but for an additional sum also, then borrowed for general uses of the city. It has been contended that said bonds, though invalid,pro tanto, as to the amount in excess of what pertained to said subscription, should be held "9"alid as to the amount included therein for which the city had authority to issue negotiable securities. If this were so, a suit on a specialty would necessarily require an examination into the various items of the consideration· therefor, and thus, instead of proceeding as on a specialty, with the legal presumption arising therefrom, cause the single demand under one legal head to be split into an indefinite number of demands under various heads. As to those two bonds of this last named series, therefore, the recovery must be had under the count for money had and received; while on the other bonds the recovery will be had as on specialties, according, to their tenor. The counts from 18 to 2'7, inclusive, are also on subscription bonds. To these bonds it is objected that the required assent of the voters was not obtained, because, though numerically the needed vote was given, yet the voters were not registered, nor did they take the oath prescribed by the state constitution of 1865. It was conceded, but if not, such is the fa'Ct, that the. registration clause alluded to was not then in force. No doubt the prerequisite of the oath for qualification to vote was then in operation. Whether such oath was duly administered or not to each voter is doubtful, in the light of the testimony; and if not administered to all, how many voters failed to take it is still more uncertain. It seems that the vote was nearly unanimous in favor of the proposition; so
G.lUSJll II. OI'l'Y 01' OL.lBKSVILL"
359
that, if the inquiry were to extend to each vote, it might appear that the required number of qualliied voters did assent to the subscription. The ascertainment of the preoise facts in this regard is considered unimportant,inasmuch as the ordinance under which these bonds were issued recites that the needed election was duly had, etc. If a reoital on the face of the bonds estops the municipality, as held in all similar cases on munioipal bonds, the same rule should obtain when the recital is in the city ordinance; for the reason of the rule is the same in both instanoes. Two of said bonds are dated after the registry act of the state was in foroe, and therefore are not valid, as bonds, on their face. An effort was made to show, by the evidence, that they were delivered before, and post-dated; but the court finds otherwise. Henoe, the recovery on those two bonds must be as for money had and recAived." As to the fourteenth count the facts are, substantially, that the original bond was lawfully issued, and that the holder of said bond agreed to surrender the same and aooept a renewal bond therefor. Said original bond was returned to the oity, and what purported to be a renewal bond was issued in lieu thereof, but the latter bond was void, beoause the city failed to oomply with the requirements of the then existing law. Henoe, the original bond, being unsatisfied, remains a valid bond, on whioh a right of aotion oan be maintained, suoh original bond being produoed by plaintiff as the holder thereof. There is a grave question of jurisdiotion presented, relating to the plaintiff's interest in this suit. It seems that the bond<;J sued on, and the rights resulting from the assignment thereof, were transferred to the plaintiff, a oitizen of Texas, for the purpose of having him sue thereon in a United Stutes courtevidenoe oonoerning whioh was received, subjeot to the ruling of the oourt as to its admissibility under the issues. By the practioe act of .Missouri, as uniformly ruled, the holder of negotiable paper, to whom the same is transferred merely for the purpose of oollection, oan maintain an action thereon in his own name. But it is urged that if such transfer, or the
060
FEDERAL
assignment of a demand, negotiable or non-negotiable, is for the p1.l.rpose of having the same adj ud leated in a United States court, there is a fraud on the jurisdiction of the latter court; Such a. question should have been presented by a plea in abatement. This case furnishes an apt illustration. The time of counsel and court has 'been occupied fora long period on the merits of this controversy, when, if a plea in abatement had been interposed, a f.ew hours might have sufficed for its determination. If the court, through iS8ues made by pleas in abatement, or in bar, had ascertained that no jurisdiction exists, its judgment would be dismissed without passing on the merits. There are, however, no issues in this case under which evidence of the kin4, to defeat the jurisdiction, can be received. There is no time at command to analyze the varied learning on the subject, and the cases to which the learned counsel have referred. A few are referred to in a note to this opinion. If practicable, a special finding would have been made as to each count; but this opinion will clearly show the conclusions reached and the grounds on which the decision rests. N M'E. -Oonrad v. The Atlantic 111.8. 00. 1 Pet. 450; De Wolf v. Rilband, 1 Pet. 476; Sims v. Hundley, 6 How. 1; Bailey v. Dozier, 6 How. 1; Smith v. Kernsclten, 7 How. 198. This covers the whole ground on the juris-
dictional question. Sheppard v. Graves, 14 How. 505; Jone8 v. League,18 How. 76. These cases discuss the question at great length, both as to pleadings and colora. ble assignments. Dred Scott v.Sandford, 19 How. 393. This case seems to have held, though by a divided court, that, whether the want of jurisdiction appeared through aplea in abatement or in bar,. the judgment of the court must be a dismissal, and not a judgment on the merits. In the case on trial there is no plea, either in abatament or in bar, under which the question can arise; or, in other words, there is no issue in which any evidence on the jurisdictional point could be admitted. Subsequently there was the case of Spencer v. Lapsley, 20 How. 264, in which no reference was made to the Dred Scot1 case, but in which it was held that pleas in abatement and in bar, at the same time, were irregular. TltOlnpson v. Railroad Oompanies, 6 Wall. 134, does not estabhsh a different rule. That states proceedings in a court of equity-an old and familiar rule-and refers to the Ohio statute as to actions at law· III Missouri the real party in interest. or a trustee of an expresa ...· ust, may sue.
STEWART V.
CHESAPEAKE
& OHIO OANAL CO.
861
STEWARTV.
THE CHESAPEAKE AND
OHIO
CANAL CO. and others.
(Circuit Court, D. Maryland. SUIT IN EQUITY-SUIT PENDING
March 5,1880.)
IN STATE COUItT-DIFFERENT GROUNDS FOR RELIEF.-A bill filed in behalf of the holder of certain corporation bonds secured by a trust mortgage, alleging the refusal of the trustees to proceed under the mortgage according to its provisions, and a misappropriation by the defendant of the tolls and revenues mortgaged, will not be dismissed because a bill, to which such trustees were made parties, had been previously filed in the state court to determine the priorities of the various lien creditors of the defendant corporation.
SAME-PARTIEs-NoN-RESIDENT TRUSTEE.-A non-resident trustee is not a necessary party to such suit, Where four out of five of such mortgage trustees have been served with process and have dUly answered. SAME-SAME-STATE OF MARYLAND.-The State of Maryland is not a necessary party to such suit, although it owned four-fifths of the whole capital stock of the defendant corporation, and held a prior mortgage upon all the property of such corporation, including its tolls and revenues, when, by a subsequent act of the legislature of that state, the corporation had been duly authorized to mortgage its tolls and revenues to secure another loan and issue the bonds in suit for the same, and when it had been further enacted that the l'ights and liens of the state upon the tolls and revenues of the defendant should be " waived, deferred and postponed" in favor of the bonds so issued, so as to make such bonds, and the interest accruing thereon, preferred and absolute liens on the revenues of the defendant company, until such bonds, with the interest thereon, should be paid.
PER CURIAM. This BUit is brought by Damel K. Stewart, an alien, as a holder of the bonds issued by the defendant company, in his own right, and for the benefit of such others in like interest as may come in and support the suit. The facts alleged and admitted, which are necessary to determine the questions now submitted, are briefly these: The state of Maryland, desiring that a canal should be built from tidewater to Cumberland, in that state, chartered the defendant tion and became a stockholder in it to the extent of 50,000 shares, each of the value at par of $100. This was about. five-eighths of the whole capital stock. From time to time, the corporation being unable to complete the canal with the money received froni the SUbscriptions to its stock, the state loaned to it further sunis of money, to secure the repayme1t:
362
of which it took mortgages from the defendant company upon all its property, including its tolls and revenues. The assistance thus had from the state's liberality proved insufficient to complete the canal to Cumberland, and the state, being unwilling to assist the corporation further by direct contributions of money, passed the act of 1844, chapter 281, by which the defendant was authorized to mortgage its tolls and revenues to secure another loan from the public generally, for which it was to issue its bonds in an amount not to exceed the sum of $1,700,000, which was to be used to complete the canal to Cumberland. And by that statute it was enacted that the rights and liens of the state upon the revenues of the defendant should be "waived, deferred and postponed" in favor of the bonds issued under the act of i844, chapter 281, so as to make such bonds and the interest accruing thereon preferred and absolute liens on the revenues of the defendant company until such bonds, with the interest thereon, should be fully paid. And the state further authorized the company, by the act referred to, to execute any deed,mortgage, or other instrument of writing deemed necessary or expedient to give the fullest effect to the provisions of the act. Authorized by this act, the defendant company issued the bonds mentioned therein and now in suit, and executed a mortgage upon its revenues and tolls arising from the entire and every part of the canal, to William W. Corcoran, of the District of Columbia, and four others, who having since died, four other citizens of the state of Maryland have been substituted in their places. By said mortgage, in certain contingencies, which the complainant alleges have arisen, the said trustees were to enter and receive possession of the canal, and collect the tolls and revenues thereof, and apply them as in said mortgage directed. The complainant is a holder of the bonds, which, by the act last above referred to, are made preferred and absolute liens on the tolls and revenues of the defendant company, which are due and unpaid. The bill alleges that the complainant has applied to the trustees named in the mortgage above mentioned to proceed under it, and take possession of the
