35 F. 32 | U.S. Circuit Court for the District of Eastern Missouri | 1888
This is an action on coupons of certain bonds issued by the town of Kahoka on January 1, 1873. The petition also contains a count upon a judgment against the town recovered April 10, 1877, on other coupons of the same bonds. The town of Kahoka was incorporated by two orders or decrees of the county court of Clark county, Mo., made and entered of record respectively on June 8, 1869, and November 14, 1872, pursuant to chapter 134, Wagner’s Revised Statutes of Missouri. Thereafter, both before and long subsequent to the execution of the bonds in suit, the town assumed the exercise of corporate functions. Among other things done in a corporate capacity it elected boards of trustees, levied and collected taxes for municipal purposes, brought and defended suits, and issued the bonds now in question. It was clearly a corporation de facto, if not de jure. In October, 1886, by a quo warranto proceeding brought against the town in the circuit court oi Clark county, it was ousted of its franchises (as the information and decree recites) for non-user of the same. Immediately thereafter, on November 1, 1886, the present defendant, the city of Kahoka, embracing substantially the same population and territory as the former town of Kahoka, was incorporated as a city of the fourth class pursuant to existing laws.
Under the circumstances above stated, the present city of Kahoka must be esteemed (so far as corporate creditors are concerned) the legal successor of, and as such liable for all valid indebtedness contracted by, the former town of the same name. Even if a municipal corporation can forfeit its franchises by non-user, such forfeiture will not operate to extinguish debts of the corporation contracted before the forfeiture was incurred or declared. Furthermore, if corporate creditors are not made parties to the proceeding by which the forfeiture is ascertained and declared, they are not bound by the judgment of ouster. Municipal corporations cannot extinguish their debts by changing their names, or reorganizing under new charters, or by failing to exercise their corporate powers. A debt once contracted by a municipal corporation will survive as a debt against whatever corporate entity is subsequently created to take its place and exercise its power of local government over substantially the same people and territory. Broughton v. Pensacola, 93 U. S. 266; Mobile v. Watson, 116 U. S. 289, 6 Sup. Ct. Rep. 398; Laird v. De Soto, 22 Fed. Rep. 421; People v. Murray, 73 N. Y. 535.
It is contended, however, (and this seems to be the main defense) that the decree incorporating the former town of Kahoka, of date November 14, 1872, was a nullity, because the outboundaries of the town, as defined by the decree, embraced some 40 acres of agricultural lands that had never been subdivided into town or village lots. It is conceded that incorporated towns in Missouri at the time the bonds in suit were issued had ample authority to issue such bonds, (1 Wag. St. Mo. p. 305, § 17;)
Some questions not heretofore alluded to were discussed on the trial of the cause. For example, it was urged that in no event can any party but the state take advantage of a defect in the charter of a municipal corporation of the kind involved in this suit, and that the state of Missouri
It was furthermore contended that the town of Kahoka contracted the debt sued for as a corporation, and was a corporation defacto if not de jure, and for that reason cannot defend against an innocent purchaser of the bonds, even though the order of incorporation was a nullity. Alter v. Town of Cameron, 3 Dill. 198. I have not found it necessary to consider the last proposition critically, and accordingly express no opinion as to its merit, preferring to rest my decision on the grounds before stated.
Judgment will be entered for the plaintiff'.