Kelly v. Town of Milan

21 F. 842 | U.S. Cir. Ct. | 1884

Lead Opinion

Hammond, J.

When this case was first heard there had been a judgment by default against the defendant, and on motion to set it aside ■the parties stipulated that, on the agreed state of facts, the court . should determine the whole controversy, and render judgment according to the facts and law of the case. There were no pleadings whatever except the declaration, and this anomalous condition of the record rendered it quite impossible to do what the parties wished, since there were no issues to which to apply the facts; and the rights of the parties might largely depend on the issues to be made by pleadings. Hence the default was set aside and the parties directed to plead. This having been done, the ease is again heard upon a stipulation as to the facts and by the court without a jury. But this stipulation, as it appears in the record, may not be broad enough to meet the requirements of the statute, for nowhere does it in terms say that a jury is waived, liev. St. § 649. The parties are directed, therefore, before judgment is entered, to amend the stipulation or to file an additional one waiving a jury as required by this section.

This court had occasion, in the case of Green v. Dyersburg, 2 Flippin, 477, to consider very carefully the power of municipaltios in Tennessee to issue bonds like these, under the general statutes relied on here, or any power to bo implied from them or from the general municipal authority of corporations, and concluded such power does not exist. We think that decision is fully sustained by the supreme court of the United States and of the state of Tennessee. Claiborne Co. v. Brooks, 111 U. S. 400; S. C. 4 Sup. Ct. Rep. 489; Wells v. Supervisors, 102 U. S. 625; Pulaski v. Gilmore, MS. (Nashville, 1880.) It is true that in this last case the court reserved any decision as to what the legislature intended by reference to the “execution of all necessary orders, bonds, and payments, in order to carry out a loan or credit,” in the act of January 23, 1871, e. 50, (Term. Code, § 491a;) but it is none the less true that it did distinctly decide that “there is nothing in this act that can possibly be construed, on any fair principle of construction, to authorize the issuance of these bonds in payment of a subscription of stock in a railroad company,” as authorized by the act of January 22, 1852, c. 117, (Tenn. Code, §§ 1142-1165.) And it seems to us clear enough that the purpose of the act of 1871 was to conform the laws of Tennessee, general and special, to the new constitution of 1870, by authorizing all municipalities already in possession of a legislatiye authority to give or lend its credit in aid of any person, company, association, or corporation, or which might thereafter become possessed of such legislative grant, to take the consent of the corporate authorities and of the qualified voters, as required by the constitution, and thereafter “to make and execute all necessary orders, bonds, and payments, in order to carry out such loan or credit voted for as prescribed by this act,” but authorized and prescribed by some other act passed for that purpose. It was not an act to authorize all counties, cities, or towns to give or lend their credit, and “execute all necessary orders, bonds, and payments in order to carry out such loan or credit,” but simply one directing all counties, cities, or towns invested with that authority to take a vote of the people and comply with'the constitution. .It was an act of regulation, and not one for the'creation, of municipal powers. Without the aid of the well-established rule of strict construction of all acts granting this municipal power to issue bonds in aid of auxiliary enterprises, the act of 1871 presents no difficulty, except in the somewhat too general indication of its purpose; with that aid all difficulties vanish.

It affords no argument against this construction of our legislation if the fact be true, as suggested by counsel, which we do not concede, however, that it has never been the habit of the Tennessee legislature to authorize a gift or loan of credit by corporations in any other manner than by becoming stockholders in the enterprise. This -act of 1871 was a general law to enforce a constitutional provision, and in its nature was rather prospective than retrospective, and non con-stat that some act may not be passed which would authorize such a method of aiding corporate enterprises. Under some circumstances the act of 1871 might apply to such an authority already given by the legislature, if any such there be; but under all circumstances it does apply to all future grants of power of that kind, and we are not aided in the construction of the act by any inquiry whether such a grant has ever been made or will be hereafter made by the legislature.

On the other hand, as is well known to those informed as to our Tennessee legislation, although we have long had a system of municipal aid to railroads by stock subscriptions, the payment of which is particularly regulated by statute (Tenn. Code, §§ 1142-1165) in a manner which in no sense contemplates the issue of bonds, the parties interested have been allowed in numerous instances, like that of Tipton Co. v. Locomotive Works, 103 U. S. 523, to anticipate the benefits of- those subscriptions by issuing bonds in payment thereof. But this has always been done by special laws that, providing for the particular scheme adopted, regulate in detail the character of the bonds to be issued, which is on plain business principles necessary for the protection and benefit of all concerned. The absence of such special legislation is, under the circumstances, an indication of the legislative will that a given municipality shall be governed by the general law of the Code regulating its subscriptions.

Sinee- the constitution of 1870 no such special law is allowable, and the authority can be given only by general statute. Const. 1870, art. 11, § 8; art. 2, § 29. But for like prudential considerations based on correct business principles, as well as a sound public policy for the protection of the general welfare, it is presumable that if the legislature intended by any general law to authorize stock subscriptions to be anticipated by the issue of bonds, thereby changing the established system provided for in the Code, (sections 1142-1165,) •it would in that general law carefully prescribe, as it has always done in the special laws, having that purpose in view, the character of bonds to be issued, regulate the whole scheme with regard to its details, and not leave the people who are to pay the money by taxation to the prey of speculators and corruptionists, who may, and too often do, feed upon such enterprises, guard them as carefully as we may. Particularly would this be expected of a legislature meeting under a constitution which had curtailed its powers for this very reason of improvident legislation, as was done by the constitution of 1870. Yet all prudential features of this kind are omitted from the act of 1871, which we are asked to construe as giving to the municipal corporations of Tennessee the most unbridled power to issue bonds in payment of their stock subscriptions that are otherwise so carefully guarded by the Code. We cannot do it.

Again, the constitution of Tennessee, in the very phraseology of article 2, § 29, recognizes the distinction referred to by counsel here between a credit “given or loaned to or in aid of any person,” etc., and becoming “a stockholder with others in any company,” etc., by taking pains to impose the same restrictions on each in separate clauses. They are in no way treated as the same thing; are not confused with each other nok joined together in any way; certainly not in the way the argument here would connect them, by relegating a stock subscription, with bonds to pay the subscription money, to the category of “giving or lending credit.” And the act of 1871, c. 50, follows the same treatment found in the constitution by keeping these two things entirely distinct. The first clause of the second subdivision of the act relates wholly to the “giving or lending of credit;” and in this clause alone do we find the words so much relied on here as giving “full power to make and execute all necessary orders, bonds, payments,” etc. It is in the second and last clause of that subdivision that we find the provision independently made for becoming a stockholder with others “upon a like election and assent of a like majority, as prescribed by this act,” and in that clause there is no provision for making and executing “all necessary orders, bonds, payments,” etc., though it can hardly be doubted that such" power would exist where the corporation had authority under some legislative grant to issue bonds or make orders or payments for its stock subscriptions. This shows that it is an act of supplemental regulation directing an election in cases where before, ana but for the constitution and. this act, such an election was not required. We do not say that a power to issue bonds in payment of a stock subscription might not!fall or be made to fall within a power “to give or lend credit to or in aid of any person, company,” etc., but we do say that the constitution and this act of the legislature treat the giving or lending of credit, as one thing and a stock subscription as another thing, and that naturally in such a division, if kept up as it seems here to have been done,.the issuing of bonds to pay a stock-subscription would fall within the latter subject, and should receive no aid by implication or construction from provisions of the statute relating to the former. It is agreed everywhere that the canons of strict construction in such cases forbid such, liberal implications. It is only necessary implications that are ever indulged in any case; necessary in the sense of being the consequential effect of the use of the language employed, and without which implication the manifest purpose of the statute would fail. This kind of necessity is too often confounded with the necessitous circumstances of the private interests of the parties involved, which can in no sense influence a court in the interpretation of the legislative will. Dill. Mun. Corp. §§ 55, 81-90, 106. Police Jury v. Britton, 15 Wall. 566; Wells v. Supervisors, 102 U. S. 625; Claiborne Co. v. Brooks, 111 U. S. 400; S. C. 4 Sup. Ct. Rep. 489; Milan v. Railroad, 11 Lea, 329, 334.

Legislative authority to support these bonds is sought to be derived from the act of March 18, 1872, c. 20, p. 44, “to authorize the mayor and board of aldermen of any incorporated city or town in the state of Tennessee, having a population of from one thousand and upwards to twenty thousand inhabitants, to issue bonds of said city or town to the amount of $15,000.” The bonds here sued on are in denominations of $1,000, and bear 7 per cent, interest, payable annuafiy; while those authorized by the act were to be “of denominations from twenty-five to five hundred dollars,” and were to bear 8 per cent, interest, payable semi-annually. It was held in Milan v. Railroad, 11 Lea, 329, that this variation of denomination was not admissible, and that the interest could not be increased. A similar ruling was made in. Green v. Dyersburg, 2 Flippin, 477; Whether the mere change of denomination and a diminution of the interest would fall within the principle of these eases, or be held to be “a beneficial modification of the requirements of the statute,”—the fact of this non-compliance with the statute in the issue of these bonds affords an inference that they were not in fact issued under this statute, and that the resort to it is an after thought.

The act, as a whole and in its special features, seems to have contemplated a means of paying the ordinary corporate debts of the cities and towns designated, and not such extraordinary liabilities as arise from aiding the construction of railroads. The bonds issued were to be “alone for the purpose of paying outstanding liabilities,” and were not in any case “to exceed the unsettled and matured liabilities or debts of such city or corporation at the time of issuing thereof.” There is nothing in this record to show that at the date of these bonds there was outstanding against the town of Milan the sum of $12,000 of “unsettled and matured” liability for stock subscriptions to the railroad company. Tho recitals of the bonds state the consideration to be “the location of the Mississippi Central Bailroad by said, town,” and they nowhere refer to any stock subscription whatever, or that they are in payment of the stock. On their face they indicate a direct vote of the bonds to the company without any ecu sideration other than the location of the road. In the bill filed in the state chancery court, wherein the minutes of the town proceedings are set out, there is no indication of a prior stock subscription, and complaint is made that there was none; and the first step seems to have been a vote by the board to issue the bonds, and to direct an election at the polls “for a ratification or rejection of said proposition, ” and at the next meeting the entry is:

“The election was held on the twelfth day of June, 1872, for the ratification or rejection of the action of the board of mayor and aldermen of tlio town of Milan'in regard to the issuance of the @12,000 in bonds to the Mississippi Central Railroad Company upon certain conditions. The returns of said ejection show a vote of 117 for subscription, and 2, no subscription.”

Now, there do not here appear to have been any proceedings for a subscription of slock and an issue of bonds to pay it, but only a “subscription” of the bonds themselves. This would seem to indicate that the town was proceeding to give its credit or sell its bonds for the sole consideration of the location of the road, and this under the first scheme mentioned in the constitution arid act of 1871, and not the second, the difference between which has been heretofore adverted to; and, so far as the records of the town are said to show, this is all that was ever done, though when we come to the compromise decree in the state court, the railroad atjrees to issue its stock in payment of the bonds, this being the first time we hear of any stock being involved in the negotiations between the parties. Nevertheless, the parties, by their stipulation in this case, have agreed tuat the “bonds were issued by defendant in payment of a stock subscription made by defendant on the ——- day of --, 187—, to the Mississippi Central Bailroad Company.” This is very indefinite, indeed, .and there is nothing to show the date or other particulars of the subscription, nor whether it refers to the subscription made in the consent decree of the state court, or one made prior to the original action of the board as above set forth.

If we turn, however, to the Code of Tennessee, (sections 1142— 1165,) under which alone the town could make a stock subscription, we find that the requirements of law, as therein declared, show that, if the record of the town correctly state all that was done, there could never be a more reckless disregard of those provisions. And the inference is almost irresistible that the town was not proceeding under the provisions of the Code at all. It would seem, therefore, quite impossible that the very indefinite stipulation of the parties in this ease could refer to such a subscription, and that it rather refers to the subscription made by the consent decree in the state court, from which it will be seen that the bonds were, by agreement, “resealed” and “redelivered” at that date, viz., December 18,1874. This would be, then, the date which should be filled in the blanks of the stipulation of the parties, as filed in this court. When so filled up, it is apparent that the town was not acting under the above-cited provisions of the Code, and that the plaintiffs can receive no aid from those provisions, hut must stand by the contract as they made it on December 18, 1874. The inevitable result would be that the town, in making that contract for stock subscription, was acting without legislative authority, and the debt for it was void. Wherefore, it could not, even under the powers granted by the act of 1872, lawfully issue bonds to pay it; since the act in terms, by section 2, restrained the issuance to holders of bona fide claims against the town, to say nothing of any other restriction of law on the subject.

But if it be conceded that the stipulation refers to some other stock subscription than that of December 18, 1874, as above mentioned, and one made prior and as preliminary to the original delivery of the bonds on July 1, 1873,—as, perhaps, the seventh section in its last clause intends to agree was the ease,—that the town proceeded strictly under the Code in making that subscription, and under the act of 1872 in issuing the bonds, still it appears conclusively by section 1154 of the Code that “not more than thirty-three and one-third per cent, of the stock subscribed as above can be collected in any one year, ” and at most only one-third of the ^12,000 subscription could have been at the date of the bonds an “unsettled and matured liability or debt.” What is to be held to be the effect of this overissue we will not now inquire,for beyond all this there is a more fatal objection to the claim of power under the act of 1872, and we have taken the pains to point out these irregularities and glaring departures from the Code and the act of 1872 more to show how regardless this transaction was of the very statutes now relied on to support it, than to predicate our judgment upon them. And here we may remark, in reply to the argument that the town has received the consideration in its railroad facilities, that if its stock subscription be valid under the Code the remedy of- the plaintiffs would be to proceed under the Code, to compel the collection of the tax to pay for the stock, and not to enforce bonds issued without legislative authority. No matter what the benefits received, all parties dealing with the town knew that it could not bind itself without legislative authority, and only in the manner so allowed.

The agreed statement of facts in this case leaves only one question of fact open for our determination, and that is whether the town of Milan had, at the time of the issue, the requisite “one thousand or more inhabitants” to bring it within this act of 1872. The learned counsel for plaintiffs frankly admits in his brief “that if we are to look to the proof in the record on that point, defendant’s population is proven to have been under that limit,” and we find the fact to be so. . This would end all claim for power to issue these bonds undeif that statute, but it is insisted that defendant is estopped by the recitals in the bonds from denying that its population was sufficient to authorize the town to issue them. The bonds do not recite that the town had any given number of inhabitants, but only that they are issued “in pursuance of the laws of Tennessee;” that the people “voted the samé by a majority, and in the form required by law, the vote being in pursuance of due notice, and in all respects in accordance with the laws of Tennessee;” and that the board acted “in pursuance of the authority given by the people thereof, and in obedience to the duty required of them.”

Under the well-established rules of decision on this subject these recitals are all sufficient to estop the town, as against a bona fide holder for value, from denying the fact of the sufficiency of population, and would be a plenary municipal decision of that fact if the town authorities were vested with power to decide the question. Wilson v. Salamanca, 99 U. S. 499; Coloma v. Eaves, 92 U. S. 484; Marcy v. Oswego, Id. 637; Buchanan v. Litchfield, 102 U. S. 278. There are many other cases to which these will bo a guide. But the casos are carefully reviewed in the recent one of Northern Nat. Bank v. Trustees Porter Tp. 110 U. S. 608, (S. C. 4 Sup. Ct. Rep. 254,) and the rule is there laid down that this estoppel only oporates when the duty of ascertaining the fact has been devolved by law upon the municipal or other authority which undertakes to determine it by the recital. The authority may be conferred by special legislation in the act authorizing the bonds, or elsewhere, or may grow out of the ordinary duties imposed by law upon the particular officers or agents. Now, there is not one word in this act of 1872 imposing the duty of ascertaining the population on the board of mayor and aldermen of the towns and cities referred to in the act, nor any provisions from which such a duty on their part may be fairly inferred. The “consent of three-fourths of the qualified voters voting ah an election to he held for that purpose, under the supervision of said mayor and aldermen,” is provided for, but this does not by any fair implication confer the power to take a census of the inhabitants. There is no general or special act of the legislature requiring these or any officers of our municipalities or of the state to take a census, or keep a record of any enumeration of their respective inhabitants. Generally, when our acts refer to population, and direct its ascertainment, they refer in terms to the federal census as the guide, and we have no law or practice of having municipalities discharge this duty. To do this is not a necessary duty growing out of general municipal power. Each municipality may act as it pleases in this regard. There was, then, no duty devolved on this board to ascertain or determine the fact of population, and their determination of it cannot be implied from the recitals in the bonds. It was a matter in pais, as much open to the payee of the bonds at the time of the contract, and since to the holders of them, as to others to decide for themselves. There is no pretense of any authority in the charter of the town or of the railroad company, or in any other act than those already considered, to support these bonds, and they were and are utterly void for want of legislative power. Ottawa v. Carey, 108 U. S. 110; S. C. 2 Sup. Ct. Rep. 361; Lewis v. Shreveport, Id. 282; S. C. 2 Sup. Ct. Rep. 634.

The next question which demands our attention is that arising out of the proceeding in the state chancery court which is pleaded as res adjudicata. If this be a good plea, we have the anomaly of a municipal corporation issuing bonds without legislative authority making those bonds valid, by an equally void agreement of its agents that they shall be so. We held in this court, the same judges siJting as in this case, in Norton v. Shelby Co., (not reported,) that bonds issued by usurping corporate officials which were void could not, for want of compliance with the constitutional and statutory prerequisite of an election by the people, be ratified by the corporate action of the rightful officials after their restoration, a ruling which was supported by decisions of the supreme court before and since. Marsh v. Fulton Co. 10 Wall. 677; Lewis v. Shreveport, 108 U. S. 282; S. C. 2 Sup. Ct. Rep. 634; Ottawa v. Cary, Id. 110; S. C. 2 Sup. Ct. Rep. 361. It was said by the supreme court, in Northern Nat. Bank v. Trustees Porter Tp. 110 U. S. 608, S. C. 4 Sup. Ct. Rep. 254, speaking of an estoppel by recitals, that it did not go to the extent of precluding an inquiry into legislative authority to issue the bonds; and it certainly must be said of any contract of ratification, that, when pleaded as an estoppel qua contract, it cannot prevent an inquiry into legislative authority to issue the bonds. Does it receive any additional force when the contract of ratification has been made the basis of a judicial decree which in terms declares the bonds to be valid only because the parties have agreed that they, shall be valid? It must be admitted that when in a court of competent jurisdiction, and without collusion or fraud, there has been a decree in invitum pronouncing, directly or by implication from the adjudication, that there was legislative authority to issue the bonds, that decree estops the parties from thereafter denying the authority. And we may go further and, for the argument, admit that if that'decree be pronounced upon an agreed statement of facts, like that upon which we are now deciding this.case, for example, the estoppel is equally as effective as if the facts were determined by the formal verdict of a jury or the judgment of a court upon the proof heard at the trial.

Judgments could not be so rendered at common law, where the admission must be strictly one of record, as by demurrer, default, confession, retraxit, or the like. Hence the necessity of such statutes as we have in Tennessee, permitting the parties to submit an agreed case to the decision of a court. Tenn. Code, §§ 3450, 3454, 4229, 4497. And, in the absence of a statute, such practice has been established by general usage. Derby v. Jaques, 1 Cliff. 425. From a judgment of this kind it was at first thought there could be no writ of error, but it was later decided otherwise. Id.; Stimpson v. Railroad, 10 How 329. Similarly, in a court of equity, it was always the rule that parties by themselves, or counsel, might agree upon a decree, and it was irreversible, and could not be appealed. 2 Daniell, Ch. Pr. (1st Ed.) 616-619, 668; Id. (5th Ed.) 973, 1453, and notes; Bradish v. Gee, 1 Amb. 229; French v. Shotwell, 5 Johns. Ch. 555; Ketchum v. Farmer’s Trust Co. 4 McLean, 2; Musgrove v. Lusk, 2 Tenn. Ch. 576; Williams v. Neil, 4 Heisk. 279; Ragsdale v. Gossett, 2 Lea, 729; Jones v. McKenna, 4 Lea, 630.

But, obviously, it does not follow from this binding force of the decree that it can be always pleaded as res adjudicata. That depends upon other circumstances than its mere binding effect as a decree in the court where it is rendered. Tor example, a judgment of nonsuit, or a hill dismissed by plaintiff, or for want of jurisdiction, cannot bo pleaded as res adjudicata, because not a decision on the merits, while a judgment on demurrer, which is a decision of the court on facts admitted, or a bill dismissed for want of equity, or upon determination of the court in favor of defendant, can he so pleaded. Homer v. Brown, 16 How. 354; Manhattan L. Ins. Co. v. Broughton, 109 U. S. 121; S. C. 3 Sup. Ct. Rep. 99; Gould v. Evansville, 91 U. S. 526; Durant v. Essex Co. 7 Wall. 107; Badger v. Badger, 1 Cliff. 237; Mabry v. Churchwell, 1 Lea, 416; Buckhead v. Alloway, 1 Tenn. Ch. 207.

So, in a case like the one we are imw trying, again using it as an example, it is plain that the parties have used the agreed statement of facts as a convenient mode of placing the court in possession of the facts, without producing the evidence on which they would he otherwise ascertained; hut they have left the decision of the rights of the parties growing out of those facts to the court, and have not by consent of parties determined, by themselves and for themselves, what those rights are. That which they have done is very like what they do when by a demurrer they admit the facts and the court decides the case, or when by a, retraxit they confess the facts and the court directs a judgment. What they have not done is more like that which they do when they take a nonsuit or voluntarily dismiss their bill.

In the language of the case of the Manhattan L. Ins. Co. v. Broughton, 109 U. S. 125, S. C. 3 Sup. Ct. Rep. 99, “a trial upon which nothing was determined cannot support a plea of res adjudicata or have any weight as evidence at another trial” and, as decided in Russell v. Place, 94 U. S. 606, if it .appear by the record or aliunde that the matter was not litigated and decided, there could be no estoppel. Now, does it -.not appear, by what the parties actually did in the state chancery court, that this matter was not litigated and not decided? And here lies a distinction that must not be overlooked in cases like this between a consent to submit a case to the court for its decision and a consent as to what the decision shall ho. Again, there is a distinction between that estoppel which the parties put upon themselves by their agreement which may be pleaded and bind them as an estoppel in pais, and that which arises out of the adjudication as an estoppel of record. The agreement is none the less an estoppel because it takes the form of a judicial decree, but not necessarily does it operate as an estoppel of record. The pleas respectively setting them up would be essentially different. 2 Daniell, Ch. Pr. (1st Ed.) 175, 187; Id. (5th Ed.) 659, 666. In both, the record would be used as evidence; in one case conclusive in its effect to support the plea of res adjudicata; in the other it would not be conclusive, might be averred against, and would be overcome by countervailing proof of sufficient force.

The text writers agree that in England a consent decree cannot be pleaded as res adjudicata, and is effective when pleaded only so far as the estoppel arises out of the agreement itself. Bigelow, Estop. 17; Ereem. Judgm. § 331; Wharf;. Ev. § 783. They say, however, that the decisions of the American states, generally, are against this doctrine Id.; Wells, Bes. Adj. §§440-460. We have examined very carefully a great many of the cases cited in support of this supposed distinction between the American and English courts, and find that if critical attention is given to the distinctions to which we have already adverted between a case decided by the court upon an admitted state of facts, and one decided by the parties themselves solely by their own consent, which the court admits of record by registering, the agreement, and between the estoppel of the agreement and that of the judgment, and to distinctions arising out of local statutes regulating the subject of judgments by confession and agreed eases, it may be doubtful if there be so much divergence between those courts on this subject.'

To illustrate: In Merritt v. Campbell, 47 Cal. 543, a dismissal by consent under the local statute was held equivalent to a judgment upon retraxit at common law, and was a decision on the merits under the act, because, like a retraxit, it was “an open and voluntary renunciation of the suit in court." In Ellis v. Mills, 28 Tex. 584, it does not appear whether it was the compromise agreement which was a bar as a matter of evidence, or the judgment as a matter of record. In Fletcher v. Holmes, 25 Ind. 458, there was an agreement for a judgment not otherwise supported by the complaint, but it was not a plea of res adjudicata at all. Gates v. Preston, 41 N. Y. 113, is more in point, but there was a divided court. In Bank v. Hopkins, 2 Dana, 395, there was in effect a decision on an agreed statement of facts. And. so we might go through the cases and distinguish them; but it is not necessary, for we have not found one where a municipal corporation has been held to have validated its bonds, otherwise void, by a consent decreee declaring the bonds valid, and showing on its face that it was so decreed solely because the parties had agreed to it.

Individuals sui jim-is may agree to almost anything' and bind themselves, but corporations must act within their delegated powers. It is undoubtedly within their power to compromise litigation, and they may, when sued, consent to orders and decrees, and if the subject-matter of the suit be within their authority this consent will bind as it will individuals. As in Board Liquidation v. Louisville & N. R. Co. 109 U. S. 221, S. C. 3 Sup. Ct. Rep. 144, it was held that the city authorities had “under the statutes of the state” the power to compromise a suit relating to certain property belonging to the city, and in Hillsborough v. Nichols, 46 N. H. 379, the suit'compromised was one for injuries by a defective highway which the authorities had a right to compromise', the subject-matter being within corporate jurisdiction. In this last suit, so much relied on here, and cited by the text writers above named, it is to be noted that there was no plea of res adjvdicata at all, but it was an action by the town to recover money paid to the plaintiff under the compromise judgment. We cannot say that if the plaintiff in that suit had brought another action for the injuries, the former judgment by consent would have been held to sustain a plea of res adjudícala. These compromise judgments may be binding in other respects, but not necessarily for that reason pleadable as res adjudícala. Whether they are binding in other respects depends on the circumstances of the ease; but whether they are binding on a plea of res adjudícala depends on whether the judgment or decree conforms to the rules of law which give it that effect. In Lamb v. Gatlin, 2 Dev. & B. Eq. 37, an exception to the report of a master equivalent to the plea oí res adjudícala failed, because the former decree “was not in truth a decree rendered in invitnm, and by judgment of the court to which defendant was compelled to submit, and which therefore not only binds him, but those for whose benefit he held the estate, unless it can be impeached for fraud, but it was a voluntary settlement, etc. A decree thus rendered has no force, except so far as seen to be just.”

In Allen v. Richardson, 9 Rich. Eq. 53, it is said: “A consent decree is the mere agreement of the parties, under the sanction of the court, and is to be interpreted as an agreement.” In Rosse v. Rust, 4 Johns. Ch. 300, where a bill had been dismissed on a former bearing because no one appeared for the plaintiff, the decree was ploadod as res adjudicata, and Chancellor Kent said that tobe a bar the merits must be decided, and where the merits were never discussed and no opinion of the court ever expressed upon them, the case does not come within the rule. lie was overruled in Ogsbury v. La Farge, 2 N. Y. 113, not upon the principle thus enunciated, but in his application of it, and it was held that a bill so dismissed after publication of proof was the same as a decision on tlio merits, and not like a voluntary dismissal or a nonsnit at law. But it must be admitted that in French v. Shotwell, 5 Johns. Ch. 555; S. C. 6 Johns. Ch. 235; S. C. 20 Johns. 668, that learned chancellor does decide that a decree by consent dismissing the bill may lie pleaded in bar to another bill for the same relief, though, in that case, the agreement itself was likewise pleaded as an estoppel, and, without tho decree, would have been just as effectual as with it; for, if the plaintiff had not dismissed the bill according to the agreement, the defendant, by proper pleading, even in that suit, might have called upon the court to dismiss it. In fact, the agreement settled the merits of the controversy, the parties being competent to agree; and the plaintiff, having waived the fraud and expunged the usury, there was nothing to do but dismiss the bill, and all other bills setting up that fraud and usury. All the authorities agree that if the plaintiff had voluntarily dismissed his bill he might have brought another suit. He did voluntarily dismiss it, but upon a valid agreement to do so; and from this it would seem that it was the agreement, at last, that worked the estoppel. But the chancellor did not put his judgment on this ground, and the ease is a very strong one for the plaintiffs here, unless there be a distinction to be taken on the want of power in the corporate authorities of Milan to make the agreement. The case seems to have been affirmed; but, it is said in Shufelt v. Shufelt, 9 Paige, 137, not on that point, though the chancellor there followed it as to a confessed judgment. The cases cited by Chancellor Iíent are not all of them cases of pleas of res adjudicata, those at page 565 being applications for relief on sci.fa., or direct applications to vacate the judgments, while Loyd v. Mensell, 2 P. Wms. 73, and Wishall v. Short, 2 Eng. Cas. Abr. 177, were original bills to impeach the judgments for fraud, and it was held that the judgments might, in that kind of suit, be pleaded in defense, if accompanied by an answer denying the fraud. In Baird v. Berdwell, 60 Miss. 164, the case establishes that where it is shown by the decree that it was not heard upon its merits, there is no bar to another suit. It was a bill dismissed on motion of defendant for want of prosecution after the ease had been set down for final hearing. In Pelton v. Mott, 11 Vt. 148, there was an agreement to dismiss on the merits, which being done it was held to be a bar; and Hicks v. Aylsworth, 13 R. I. 562, was a similar case. The parties, by their agreement in those cases, intended to provide against the distinction between a voluntary dismissal, or a dismissal for want of prosecution, and an adjudication on the merits. In Rollins v. Henry, 84 N. C. 569, 578, the action of the court was more like that in this case than any we have found, except that in that case the decree followed the technical result of the agreement which settled the rights of the parties and formally dismissed the bill, while in this the bill was not technically dismissed, but was retained only so far as necessary to enforce the final execution of the decree. Substantially, the bill was dismissed, as in the North Carolina case, in which it was held that the decree could not be relied on as res adjudicata because “it does not appear that the merits of the dismissed proceeding were considered and passed on; and the mere dismissal of the case is not, in our opinion, followed by the consequences supposed.” The case cited by the court calls attention to the fact that in equity courts to “dismiss the bill” is the entry, whether the case is heard on the merits and decided for defendants, or otherwise dismissed; while in courts of law the form of the entry shows for itself whether it was a mere discontinuance or a judgment on the merits. Jenkins v. Johnson, 4 Jones, Eq. 149. Plence, in courts of equity, we must have a caro to find whether tho decree was indeed an adjudication in invitiim or only the agreement of the parties to act voluntarily.

In Massachusetts the rule seems to be that where issue is joined a decree by consent on that issue is a bar; but where no issue is joined, as whore a plea in abatement has been sustained, after which there was a consent judgment, it is no bar. Powers v. Chelsea Bank, 129 Mass. 44; Jordan v. Siefert, 126 Mass. 25. Now, in the ease we have in hand there was never any issue joined. After the demurrer was overruled the plaintiffs had a rigid to an answer from the defendants, and, failing in this, to a decree pro confesso, and ultimately a decree in their favor. Technically, overruling tho demurrer was.a decision in favor of the bill and an adjudication that the bonds were void; but by agreement of the parties this result was defeated by declaring the botids valid, dissolving the injunction, and substantially dismissing the bill. There could be no decision on the merits, for there was no issue on the merits. The demurrer may have made an issue, but that was overruled, and this was a decision against the plaintiffs, and not in their favor. This is an anomaly in this class of cases, but it would be stretching the doctrine of this estoppel very far to allow the plaintiffs, in the face of an overruled demurrer, to have the benefit of a decree as if their demurrer had been sustained upon the issues made by it and thereby deciding the merits. Gilman v. Rives, 10 Pet. 298, 301; Aurora v. West; 7 Wall. 82, 99; Gould v. Evansville Railroad, 91 U. S. 526.

The best that can be said for the plaintiffs, after this demurrer was overruled, is that upon a naked bill, without any issues of any kind or any pleading by defendant, the parties agreed to dismiss it, (though the decree does not in fact dismiss it,) upon a stipulation that the facts and law were with tho defendants. The declaration by the court that the bonds were valid adds no force to the decree, which should have been simply that tho bill be dismissed, if the court so decided. All the authorities, as we have shown, agree that such a decree is not a bar unless it be a decision on the merits, and the inquiry is always to see whether it is such a dismissal or one otherwise procured. Hore the bill was dismissed after a decision of the only issue in the case made by the demurrer, in favor of the plaintiff, that tho bonds were void. Technically, then, it seems tho decree cannot be a bar except upon the theory of a purely consent arrangement to dismiss a bill, before answer filed, by an adjudication without issues, shown upon the face of it to be not the judgment of the court, but the judgment of the parties as to their own rights.

In Jenkins v. Robertson, H. L. 1 Sc. 117, there was a suit by a town for a right of way for foot passengers. The town had a verdict, but afterwards abandoned it and agreed to a judgment absolving, the defendants, and to pay the costs and expenses, and the court so declared. That was a case precisely like this, except that the subject-matter was clearly within the power of the municipality to arrange Nevertheless, the house of lords held that a decree so procured by consent was not a bar to a new action by the town, and reversed a decree below to the contrary. It was announced in the most emphatic 'terms that the law of England and Scotland was that a decree so pronounced could not be res adjudieata except so far as an estoppel could grow out of the agreement. And in the Earl of Bandon v. Becher, 3 Clark & E. 479, 509, the same court approved the statement of the doctrine, as made by the solicitor general in the Duchess of Kingston’s Case, 20 How. St. Tr. 478, that such decrees may be attacked when so pleaded for collusion or fraud, because there is no real prosecution, no real defense, and no real decision.

In a case like that we are considering, an agreement that would impose, without legislative authority, a tax upon the citizens of the municipality to pay bonds that, were void, is itself a fraud, no matter how well intentioned, or how much the parties believed in their power to make it. After the agreement was made, it was a collusive suit and a collusive decree to all intents and purposes, and it is a mistake to suppose that there should have been a corrupt bargain, by which the persons acting for the town profited themselves to invoke this principle of fraud and collusion. Its effects are the same, and it was none the less fraudulent in contemplation of law because the parties got nothing for the wrong, or thought they were doing right. Ensminger v. Powers, 108 U. S. 292, 301; S. C. 2 Sup. Ct. Rep. 643. Objection is made that the decree of a state court pleaded as an estoppel cannot be attacked in this court for fraud in procuring it. Christmas v. Russell, 5 Wall. 290. But this does not apply when the infirmity appears in the record and on the face of the decree itself, as it does here. It is then a question of the character of the judgment itself, in its relation to the conduct of the parties procuring it. It is not attacking the judgment for fraud and collusion, but the presentation by the plaintiffs themselves of a record which recites the collusive arrangement, and makes it felo de se as between the parties to it. They had no power to issue bonds, assumed to supply if by contract between themselves, and sought to sanction that assumption by a judicial decree. They might as well without a suit have taken a judicial decree in the form of an act of the legislature, and in lieu of it. Indeed, such a decree is a usurpation of legislative power when it undertakes to declare by mere consent of parties the validity of the bonds. If the legislature had especially invested the courts with power to make such declarations, and thereby make valid bonds that were void by want of legislative authority, it would be unconstitutional as a delegation of legislative power. Jones v. Perry, 10 Yerg. 59; Cooley, Const. Lim. 87-114, 392.

The supreme court of the United States in Gaines v. Relf, 12 How. 472, 537, decides with emphasis that a collusive suit cannot be res adjudieata, because there is not a real controversy really litigated. That was, in principle, a case like this, only the agreement did not appear on the face of the decree, as it does here. It was throughout a consent judgment, and we regard the case as quite applicable here. So is the case of Gay v. Parpart, 106 U. S. 679, S. C. 1 Sup. Ct. Rep. 456, where a decree, that was merely “the judicially recorded supposed agreement” of the parties, was not allowed to stand in the way of doing justice between them. And in Ensminger v. Powers, 108 U. S. 292, S. C. 2 Sup. Ct. Rep. 643,—-a very remarkable case,-—the court denied effect to a- plea of res adjudicata on a bill of review, because the decree pleaded was not the “deliberate judgment of the court upon the facts in the record, ” and “the functions of the judge were abdicated,” etc. It is a very instructive case.

The most that can be said is that the authorities are conflicting on the question whether purely consent decrees are res adjudicata. But, certainly, we should not be asked to give this decree greater effect than it would have in the state courts of Tennessee, where the supreme court, in the case of Hix v. Gosling, 1 Lea, 560, has, in terms, adopted the English doctrine. Rice v. Alley, 1 Sneed, 52; Penniman v. Smith, 5 Lea, 130.

We do not wish to he understood as ruling that a record is not to be taken for all that it implies when pleaded as res adjudicata, or that the trial of that plea will require an inquiry into the extent of the litigiousuess of the parties, or the quality and quantity of consideration given to the ease by the court rendering the decree, or whether its action was based on a formal or informal presentation of the facts and law, but only that the technical character of the judgment must bo such that, necessarily, there was an adjudication of the merits by the court, invoked or sustained, it may be, by consent of parties, but none the less an adjudication, and not simply a, judicial registration of an agreement of the parties. And while a consent decree upon agreement as to the facts and, possibly, as to the law of a case, may, under some circumstances and as to some parties, have' all the force, and as effectually estop the parties as would a decree in invitum, it is not, in our opinion, competent for the authorities oí a town to agree that its void bonds shall bo made valid by patting that agreement into the form of a judicial decree, which, on the face of it, shows that it is not the judgment of the court upon the facts and law of a case actually litigated, but merely the record of an agreement of the parties that it shall have that effect; the authorities of the town assuming to act without legislative authority to ratify the bonds in that or any other manner.

It would bo a dangerous rule if it were otherwise, and afford opportunities to impose fraudulent bonds upon communities with more facility than could be done under any device hitherto resorted to by those anxious to evade the restrictions of law on that power.

Judgment for defendant.

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Concurrence Opinion

Matthews, Justice,

concurred fully in the reasoning and conclusion of the foregoing opinion.

[ÍTote. The manuscript opinion of the supreme court of Tennessee, cited in the foregoing opinion, and printed in the briefs of counsel, is herewith appended, as it is not elsewhere accessible in print:]

OPINION.

Mayor and Aldermen of Pulaski vs. Gilmore & Cherry O'Connor & Co. (Nashville.)

In 1874 the directors and commissioners of the Memphis & Knoxville Railroad Company petitioned the board of mayor and aldermen of the town of Pulaska for a subscription of $40,000 to their capital stock, on such terms and limitations as the board might see proper. The question was submitted to a vote of the people and approved by the requisite majority. The proposition involved the idea of issuing bonds having twenty years to run, each of the denomination of $500, bearing eight per cent, interest; stock to be issued to the corporation equivalent in amount to the bonds thus proposed to be issued. As part of the proposition it was agreed that these bonds of $500 each were to be issued to pay for the .expenses incident to a survey of the line of the road through'Giles county. These bonds were issued and came into the hands of the parties plaintiffs in this ease before due, and are the basis of the present suit.

We may assume, for the purposes of this opinion, that the proceedings, if not perfectly regular, have nothing in them that can fix any right to urge it against the present holders. They stand as innocent purchasers for value. The only defense that can be made availacle against the liability sought to be enforced, is a want of authority in the corporation to issue the bonds in question. This is a defense at all times available in such a case, unless it may be the doctrine of estoppel in pais may be an exception allowed in certain cases.

The question then is, did the corporation, under the constitution and laws of the state, have the power to issue these bonds? If so, plaintiff was entitied to his recovery on the coupons; if not, defendant should have had a verdict. It is the case of a subscription to ¡lie stock of a contemplated railroad. The fact that these particular bonds Vv ere to be applied to pay for a specific part of the work necessary in the construction of the road, cannot alter the character of the bond, nor aid in arriving at a solution of the question of power. Whether to be used for this, or any other purpose connected with the construction of the road, the case would be the same. The proposition submitted to the people, and the contract attempted to be made, was simply a subscription for $40,000 of stock in the corporation, which was expected to build the road, and the bonds of the corporation (thesethree included) were to be issued in paying for said stock. By our present constitution, which in this respect is the same as that of 1834, § 2, art. 29, the general assembly shall have power to authorize counties and incorporated towns in this state to impose taxes for county and corporation purposes, respectively, in such manner as shall be prescribed by law, and all property shall be taxed according to its value upon the principles established in regard to state taxation. By the constitution of 1870 there is added: “But the credit of no county, city or town, shall be given or loaned to or in aid of any person, company, association, or corporation, except upon an election to be first held by the qualified voters of such county, city, or town, and the assent of three-fourths of the votes cast at such election.”

We need not examine, discuss, or decide the question whether the addenda gives any additional or different power to the legislature from that conferred in the first clause of the section quoted; that is, to levy taxes for county and corporation purposes, respectively. It suffices that it was decided many years since that a railroad was a county and corporation purpose, and taxes might bo levied under authority from the legislature, to be used in aid of such enterprises. It is not improper to say that while this is all now settled in our state as an original question, the writer oí this opinion did not and does not now concur in its correctness. The question, however, is whether, under the statutes existent at this time these bonds were authorized, the power to issue them is given. We need not, as we have said, go into the question of the constitutional power to authorize them. We need scarcely say that in order to the issuance of such bonds there must be an express authority given the city or town, either by a general law of the land, or by a special law for this purpose. No such power can be implied or can bo inferred from any of the ordinary powers of such corporations. “No argument,” says Judge McKinney, in the caso of Cook v. Sumner Spinning & Manuf’g Co. 1 Sneed, 714, “can be necessary to show that the authority to purchase stock in a manufacturing company, or to issue bonds for the payment thereof, cannot be derived simply 'from the power of taxation conferred in a charter.” See, also, 9 Heisk. 584.

Taxation and payment of all liabilities directly from this moans is the normal work of action by such bodies. .Bonds on time are not incident to this, and can only be issued when authority is conferred by law. The old act of .1852, (’■ode, § 1142, and other provisions of that article, is the basis in our general law for such action as may be taken by counties and corporations in subscribing for stock in railroads running to or contiguous to such towns. It is too clear for argument that no such authority is found in these sections. The act of January, 1871, intended to regulate elections, under the constitution, in first, section, simply embodies the authority contained in the constitution as to counties and towns levying taxes for county and corporation purposes, prescribing in the subscriptions the conditions and regulations by which the power shall be executed. But there is nothing in this act that can possibly be construed on any fair principle of construction to authorize the issuance of these bonds in payment of a subscription of stock in a railroad company. What was intended by the reference to “execution of all necessary order's, bonds, and payments, in order to carry out” a loan or credit, we need not now determine. See section 2; Code, § 491a. It suffices that there is no authority in this act to issue such bonds as are the basis of this suit; the same having been issued without authority of law, are simply void, whether in the hands of innocent .purchasers or others.

Reversed, etc. [Signed] "Freeman, J.