19 Iowa 199 | Iowa | 1865
This view of the law was the one adopted by the court below, in its rulings prior to and upon the trial. Thus, after stating the law applicable to the warrants issued for “ scrip surrendered ” — as to which more will presently be said — the court charged the jury as follows: “As to all the other warrants, they are negotiable, and there is no evidence tending to show that they were issued without authority or without consideration; all evidence of this kind having been excluded, because it was not shown or offered to be shown that the plaintiff had knowledge of such defenses; and if you believe, from the evidence, that the warrants were issued by the defendant and that plaintiff is the owner thereof, you will find for him as to all such warrants.” ■ So the bill of exceptions recites, that “ the defendant, on the trial, offered to show by the record of the proceedings of the city council, that all of said warrants were issued without any authority from the said city council, and without any vote of said council authorizing the same," but this evidence the court refused to receive* because the warrants were negotiable and there
This view of the law is, we think, erroneous. If my name be signed to a promissory note by a person representing himself to be my agent, but “without any authority ” from me, I am not bound; and I am no more bound because the obligation has been put in a negotiable form than if it has been put in a form not negotiable.
And the same rule must and does apply to paper purporting to be issued by the agents or officers of public or municipal corporations. The general principle of law is well known and definitely settled, that the agents, officers, or even city council of a 'municipal corporation, cannot bind the corporation when they transcend their lawful and legitimate powers.
(a.) The orders in suit are not bills of exchange, as a bill of exchange proper involves the idea of at least two distinct parties, drawer and drawee. The instruments in suit are orders by the city on itself — mere directions to its treasurer to pay the amount to thé bearer. In legal effect they are the promissory notes of the city. (Miller v. Thomson, 3 Man. & Gr., 576; followed, Fairchild v. The Ogdensburgh, Clayton and Rome Railroad Company, 15 N. Y., 337; Bull v. Sims, 23 Id., 570, 572; Clark v. Polls
It is a familiar and elementary principle that municipal corporations have and can exercise such powers, and such only, as are expressly granted, and such incidental ones as are necessary to make those powers available and essential to effectuate the purposes of the corporation; and these powers are strictly construed. (2 Kent Com., 298; Mayor v. Cunliff, supra, and the authorities cited in connection therewith.)
It is held that banking and trading corporations have the implied or incidental power to make negotiable paper. (McCullough v. Moss, 5 Denio, 567; Straus v. Eagle Insurance Company, 5 Ohio, 59, 1855; Mott v. Hicks, 1 Cow., 513; Attorney-General v. Life and Fire Insurance Company, 9 Paige, 470; 2 Kent Com., 299; 1 Pars. N. and B., 165.)
These warrants are unlike bonds issued on time, negotiable in form, and for sale in the market, as, for example, those issued by towns, cities and counties to railroad companies, under express act of the legislature (for they cannot be issued without express legislative authorization), in payment for stock subscribed. This class of securities are made and issued for the express purpose of raising money by their sale; and the attainment of this object would be embarrassed or defeated if they were subject to equities in the hands of Iona fide purchasers. They are, therefore, held to be negotiable, with all the incidents.of negotiability. (Clapp v. Cedar County, 5 Iowa, 15; Morris Canal Company v. Fisher, 1 Stock. Ch., 667, 1855; S. C., 3 Am. Law Reg. (O. S.), 423; Gelpecke v. Dubuque, 1 Wal. (U. S.), 175; Craig v. Vicksburg, 31 Miss., 216 ; Jackson v. Railroad, Company, 2 Am. Law Reg. (N. S.), 585; S. C., Id., 748, and note of Judge Redfield ; Chapin v. Vermont and Massachusetts Railroad Company, 8 Gray, 575; Clark v. Janesville, 10 Wis., 136; Maddox v. Graham, 2 Metc. (Ky.), 56; Gould v. Sterling, supra ; White v. Railroad Company, 21 How., 575; Id., 539; Bank v. The New York and New Haven Railroad Company, 3 Kern., 599; S. C., 4 Duer, 480.)
The city council audit and allow claims and demands, and their action in this regard is to be entered of record. (Charter, § 3.) Upon a certified copy of these proceedings, the treasurer of the city would be authorized to pay the claimant.
But by usage, or perhaps under a by-la,w, orders like those before us are drawn upon the treasurer. This mode is adopted for convenience, and these instruments are not to' be assimilated, in all respects, to ordinary commercial paper.
By examination, he may find that these warrants cannot lawfully be issued without the order of the city council. This must be entered of record “ on the journals of the city, which shall be open ” (so the charter declares), “ to the inspection and examination of every citizen.” A warrant issued by the mayor and recorder without the previous order of the couucil, <is void. They have no authority to do it, it would be substantially a forgery. A purchaser of such a warrant is bound at his peril, at least, to ascertain that the claim upon which it is founded has been liquidated and settled by the council. A representation by municipal officers, that this has been done (and the issue of such a warrant is in substance such a representation),'will not be binding upon the corporation. Why? The answer is, because an agent can neither create' nor enlarge his powers by his unauthorized representations. The law on this subject has of late years .been' much investigated, and will be found discussed and examined in a most critical, able and exhaustive manner, in the following important cases: Mechanics Bank v. New York & New Haven R. R. Co. (Schuyler Frauds), 13 N. Y., 599, 1856; Farmers' Bank v. Butchers' and Drovers' Bank (where teller
We have been able, after a very thorough investigation, to find no case which holds that city and county warrants, like those before us, are freed from equities when in the hands of bona fide holders. Nor has the plaintiff’s counsel called our attention to any such. On the other hand, we have found several cases in different States expressly holding that such orders were not commercial paper in the hands of an innocent holder, so as to exclude evidence of the legality of their issue or preclude defenses thereto.' See Halstead v. The Mayor, &c., of New York (on audited city warrants like those in suit), 5 Barb., 218, 1849; S. C., affirmed in Court of Appeals, but where the rights of a bona fide holder were not passed on, 3 Comst., 430, 1850 ; People v. El Dorado County (on audited county warrants dis
In the latter case, speaking of the express power of the City of Dubuque to issue the bonds sued on, Judge Swayne, following Knox Co. v. Aspinwall, laid down this rule: “ When a corporation has power, under any circumstances, to issue negotiable securities, the bona fide holder has a right to presume that they were issued under the circumstances which give the requisite authority, and they are no more liable to be impeached, for any infirmity, in the hands of such a holder than any commercial paper.”
Upon this, without calling in question its correctness in the particular case in which it was used, we remark: 1. That this language was employed in a case where there was express, specific power, on the part of the city, to issue negotiable bonds, and in that respect is distinguishable from the case before us. 2. Experienced jurists, conscious of difficulty and danger attending it, hesitate to lay down general and unqualified rules, professing to embrace all
The true rule is, that the want of corporate power, or the want of authority in the municipal officers, cannot be supplied by their unauthorized acts or representations. (Gould v. Town of Sterling, supra; Treadwell v. Comm'rs, 11 Ohio, 188, commenting on and criticising Knox Co. v. Aspinwall, 21 How., 539.)
Any other doctrine nullifies the limitations and checks contained in the charter for the protectibn of the corporators, and needlessly invests the public officers and agents with the power successfully to “ Schuyleidze” our public corporations, without limit and without remedy. Whether warrants, like those in suit, issued by order of the council, but which order was based upon the allowance of a claim for which the city was not legally liable, would, in the hands of a bona fide holder, be free from equities, is a question of great difficulty, and which we’ pass, because not necessary to be now decided. It will be discussed and decided in some of the authorities before referred to.
To this defense the court sustained the plaintiff’s demurrer, and the defendant excepted and abided by his answer. The legal sufficiency of this defense is one of the questions presented in this appeal. For forbearance or “ giving day of payment,” a creditor under our statute of usury cannot lawfully receive or contract to receive more than ten per cent interest.
The defense pleaded was good pro tanto, and the demurrer should have been overruled instead of sustained.
III. For answer to various other counts in the petition, the defendant pleads, in substance, that they are drawn “ on the West Side road fund, and are to be paid out of
To this defense the plaintiff demurred; the demurrer was sustained, and the defendant excepting, stood upon it. Other questions made on this appeal relate to the sufficiency of these defenses. The same defense, i. &, improper joinder and want of funds, was pleaded to the warrants drawn upon the East Side road fund, together with the following special defense, viz.: “The said warrants'were issued to one George Johnson, under and by virtue of a pretended contract by and between the street committee, on the East Side of Des Moines, and said Johnson, for building a sidewalk on the East Side, in said city; that the street committee had no authority to make such contract, and authorize the building of said walk; that the same was wholly without authority of law, and void, and the warrants issued thereunder without consideration, and void.”
(a.) The plaintiff’s demurrer to this answer was sustained, and defendant excepted and refused to answer over. This ruling is also assigned as error.
If these warrants are not payable out of a particular fund, or, in other words, if the city is liable thereon, irrespective of the fact whether there is or is not a road fund on hand and in the treasury, this disposes of all the claims above stated as being made by the city.
By section 23 of the charter, the “ city ” (Des Moines) “ is hereby constituted a road district.” By section 27 it is provided: “ That all property and road poll tax due from persons within the corporate limits, shall be paid into the city treasury; that there shall be two road districts, East and West Side, a street commissioner in each (appointed by the city council, sec. 4), under whose supervision all moneys collected for street and road purposes shall be expended; Provided, all moneys so collected shall be expended in the districts where they are levied or may ■ fall due.” Taking all of the provisions of the charter together, it is plain that the care of roads and streets is a corporate matter. The corporation has charge of all streets and roads, and it, and it alone, levies and collects the taxes to defray the expenses of making and keeping them in order. All of these taxes go into its treasury. All charges of this character are payable out of it. While there is to be a street commissioner on each side, he is subject to the control of the council. It is the council that determines the extent of expenditures or indebtedness for road purposes. The effect of the proviso in section 23, supra, is simply to prevent the council .from expending, in :the West Side, money and taxes collected for road purposes in the East Side, and vice versa. It
We therefore hold, that the reference in the orders to the Bast Side and West Side road funds, is not to express the idea that the obligation to pay is dependent upon a fund in esse, at the time of demand or suit brought, but to enable the officers of the city to keep the account above suggested. This is a matter which does not concern creditors who look alone to the city. The officers of the city will have no difficulty, after judgment, in ascertaining, by an inspection of the warrants, how much to charge to the Bast Side and how much to the West Side road account or fund. This view is entirely consistent with all, and is directly sustained by many of the following authorities: Kelly v. The Mayor, &c., 4 Hill, 263; Lake v. Trustee, 4 Denio, 520, 1847 ; Bull v. Sims, 23 N. Y., 570; Fairchild v. Ogdensburg, Clayton and Rome R. R. Co., 15 Id., 337; Bank of Kentucky v. Saunders & Wier, 3 A. K. Marsh., 184; Commissioners v. Mason, 9 Ind., 97; Bayergul v. San Francisco, 1 McAll C. C. (Cal.), 175; Campbell v. Polk Co., 3 Iowa, 467; Pease v. Cornish, 19 Me., 191; Edwards on Bills, 143, distinguishing (which is here applicable) “between bills drawn payable out of a particular fund and those that are simply chargeable to a particular account.” Chit, on Bills, 138 ; Story on Notes, §§ 25, 26.
The power of the city (charter, § 14), “ to improve sidewalks, alleys and streets,” “ to make by-laws necessary and proper for the good regulation, safety and health of the city,” would not authorize it to erect or aid in the erection of a toll-bridge by a loan of the corporate credit.
To recognize such a right would be to break down, to a great extent, tbe checks and limitations on tbe power of tbe corporation •— checks and limitations designed to protect and secure the inhabitants against the dangers of speculative and extra municipal projects. . Though the averments are not very full and specific, tbe answer sets up that the warrants were loaned to Turner to aid him in building a toll-bridge for himself, and this, prima facie at least, is in excess of tbe corporate authority of tbe city. If the bridge was already erected on one of the streets of the city, if Turner, by law, had tbe right to exact tolls from the citizens, we will not say that tbe corporation would not be authorized to make, among other agreements that might be imagined, an arrangement whereby its citizens might pass free from tolls, and issue its warrants in payment for the privileges thus acquired. No such case is presented. We decide only that it cannot loan its credit or paper to aid an individual in constructing a toll-bridge, or to aid any other scheme essentially private. To prevent municipal corporations from engaging in banking and speculative enterprises, it is necessary, as this case shows, and as the current history of these bodies has demonstrated,
To this the plaintiff responds, in substance: that the scrip itself was issued by the city, and used by it to redeem city warrants founded upon a valuable consideration. It appeared on the trial, that in 1857 the city, council passed an ordinance reciting: “the present scarcity of money,” “the impossibility of collecting taxes,” “the impolicy of paying interest on loans,” and the policy of issuing “for general circulation, convenient warrants” that tax payers might become enabled to pay their taxes, and providing for the issue of engraved city warrants in denominations of $1, $2, $3 and $5. In phraseology the warrants thus issued are like those now in suit. In appearance they are like bank bills, being on bank note paper with vignette, &c.
This scrip the treasurer was authorized to receive for taxes and to exchange for outstanding city warrants- drawn in the usual form. The evidence does not show that any scrip was issued by the city, except to pay city indebtedness, or in exchange for their outstanding evidences of city
On this part of the case the court charged that the scrip was illegal, and so far the defendant does not complain ; but it further directed the jury, in substance, that if the city owed a valid and admitted debt, paid it in scrip, and then took up the scrip by issuing the warrants in question, he law regards this as a settlement of the transaction, and the warrants would be supported by a sufficient consideration, and be valid and binding. The jury so found the fact to be, and the evidence fully sustains the finding. Under the circumstances, this defense is entitled to no favor. Unless corporations are exempt from the ordinary principles of fair dealing that apply between man and man, this defense has no just foundation. It is the duty of .courts not to allow the honest and just merits of a cause to be entangled in the meshes of sophistical reasoning, and rules purely technical. Not a member of the city coqncil would, we are persuaded, make such a defense for himself. We have multiplied and constantly recurring examples of the fact, that under the shield of their corporate character men daily do acts which they would never
That the charge of the District Court was correct, even conceding the scrip to be illegal, we have no doubt. (See Mullarky v. Cedar Falls, June T., 1865; Alleghany City v. McClinkan, 14 Pa. 81, 1850; Farly v. Mahan, 19 Johns., 147.)
.The judgment of the District Court in the plaintiff’s fa-vor, on demurrer, for $2,632 is affirmed, less the amount of the Keyes and Crawford and Turner warrants. The District Court will ascertain the amount thus to be deducted and credit the same on the judgment for $2,632, or set it-aside and render a new judgment for the sum that remains after making the deduction above directed.