Society for Savings v. City of New London

Ellsworth, J.

The legislature of this state, by a resolution passed in 1847, empowered the city of New London to issue scrip or certificates of debt, to an amount not exceeding *190$100,000, to aid in the construction and completion of the road of the New London, "Willimantic and Springfield Railroad Company, a corporation chartered at the same session of1 the legislature. To this resolution was appended a proviso, that the power so given should not take effect until the resolution was approved by a two-thirds vote of the citizens, and a copy of their doings lodged in the office of the secretary of the state.

On the 14th day of April, 1852, a meeting of the citizens was duly warned and held, and a vote passed approving of said resolution; a copy of which proceedings was lodged in the office of the secretary of the state. At the same meeting, the city voted that scrip or certificates of debt might be issued, to an amount not exceeding $100,000, in such form as the mayor should think proper. In July following, the city directed bonds to be issued to the amount of $75,000, upon certain conditions which were afterwards fulfilled. The certificates or bonds were accordingly issued, in the name and under the seal of the city, by the mayor and treasurer, and immediately delivered to the New London, Willimantic and Palmer Railroad Corporation, to aid in the construction and completion of the road mentioned in the resolution.

These bonds soon passed into the hands of bona fide holders, at something more than their par value. Some were taken by individuals, and some by the banks of this state. Those taken by the banks, at least some of them, were, during the existence of the general banking law, deposited by the banks with the treasurer of the state, as a basis and security for their circulation, in pursuance of the statute of the state. For several years the bank commissioners reported these bonds to the legislature as so held, which reports were approved, and regularly published in the newspapers in New London and Hartford. The most unreserved publicity was given to all these proceedings, and no objection was ever made by any of the citizens of New London. Further, for several years the city of New London continued to pay the coupons attached to the bonds, and these payments regularly appeared in the city treasurer’s annual reports.

*191Now, if this be all there is in the case, it is most obvious that the city can make no valid defense to the suit. We propose to show, in effect, that this is so, certainly as to bona fide holders of the bonds, whether we examine the case upon principles of natural justice, or of law and equity.

If the resolution of 1847 had not contained a proviso requiring the consent of the city before the authority given should take effect, the resolution would have been in force at once, as an addition to the existing charter of the city, it being a municipal corporation. And hence, if the conditions of the proviso were fulfilled by the facts herein before recited, as they certainly were if there be nothing more in the case, the authority was perfected on the 14th day of April, 1852, the day when the city decided to make the loan of $100,000. It has been said, I know, that this acceptance of the resolution was too long delayed, but the court below has found that the acceptance was within a suitable time, and that under the circumstances the delay was reasonable and proper.

Whether lodging a copy of the acceptance with the secretary, in case of affirmative action, (for it otherwise was not necessary,) was required in order that the government might know that the city had complied with the resolution, or for some other purpose, we need not inquire; it is certain that the plaintiffs had a right to resort to the secretary’s office to learn what the city had done in making the loan; and it may be presumed that they cautiously exercised that right, and conducted in their purchase accordingly; for the bonds contain a reference, on their face, to that vote, as the authority under which they were issued.

What, then, are the objections made to these bonds ? That as to time we have answered already; and were we at liberty to examine that question de novo, we see not why the action of the city might not legally have been delayed as was done. The time obviously was necessarily left to their judgment; the legislature intended that it should be so, we think, by leaving it undefined and general. The city were to have security before they made the loan; but in 1847 the railroad company was scarcely organized; the road had not even been *192surveyed or established; nor, so far as appears from the papers, had any thing been done to satisfy the citizens that the enterprise would be commenced, or, if commenced, that it would be completed; or, if so, that it would result to their benefit, so as to make it worth their while to render the aid expected.

Again: it is said that the citizens at first, and on two other occasions, signified their pleasure not to accept the grant, by voting in the negative, and that this objection is entirely fatal. We think it is not so. The argument is, that the refusal at first exhausted the power to approve, and that this power was, thereafter, wholly extinct. The first answer we make to this is, that the city of New London can not, with propriety, make this objection. The bond holders had no knowledge of this refusal, nor were they obliged to know of it. They found a vote of approval, passed as the resolution required, lodged in the office of the secretary of the state. They might, we think, well rely on this evidence as full authority for the bonds, and were not obliged to search further in the secretary’s office for what the law did not require to be there, a certificate of the refusal of the city to issue the bonds, nor were they obliged to search the records of the city of New London to see if there had been any prior action there; and it is not pretended they had any knowledge in fact of such a negative vote.

Applying then to the case the settled doctrines of principal and agent, or the rules of law applicable to negotiable paper, there seems to be no force in this objection.

The city had apparently, and really, complied with all the requisites prescribed in the resolution ; and it may not now urge secret and collateral objections against these bonds, when there was not at the time a single circumstance calculated to excite doubt or suspicion. Could the maker of a negotiable note under like circumstances set up such a defense? We think not, and we do not see why the city of New London, or, if we look beyond the city to the citizens personally, why they should not be governed by the same rule of law.

The proceedings of the city in issuing the bonds were well *193known to all the citizens. We must consider them as conversant with the votes of April 14th and July 31st, and everything that was done under the votes ; the issuing the bonds in the name of the city; the delivery of them to the New London, Willimantic and Palmer Railroad Corporation for their use; the advertisement of them in the public papers; and the fact that they were bought by honest purchasers, from time to time, for the ultimate benefit of the citizens themselves. They knew, too, that the bonds were taken by the treasurer of the state as security for the issues of bank paper. If all this was without authority, why, we ask, did not the citizens then make their objections ? Why did they not enjoin the city agents from further proceedings ? At least why did they not give notice to the public, and put purchasers on their guard, when they knew that a grievous loss must ensue if the bonds were unauthorized. We must believe that, after such acquiescence, it would be an outrage upon morality and justice, and an impeachment of the integrity of the citizens of New London, to allow the city to repudiate its obligations for such a cause. Many of the citizens, we well know, disapprove of and condemn such a repudiation, and we trust all of them would do so were it a simple transaction between man and man, where the culpability could not be thrown off upon a municipal corporation. But it is this very circumstance which enhances the impropriety of the act of repudiation, for the integrity of a public body is its principal virtue. To violate or impair this, is to undermine government itself, and to destroy the very institutions of the civil state. Such repudiation can not receive the countenance of this court of justice. Hitherto repudiation has not any where been countenanced among us, and we trust it would not have received favor in this instance with any of the citizens of New London, had they carefully considered the consequences of the act, and the precedent they were establishing for other and less favored communities. The general doctrine of equitable estoppel, especially as to tax-payers, is most ably discussed and approved in the cases of The State v. Van Horne, 7 Ohio S. R., 327, Knox County Commissioners v. Aspinwall, 21 Howard, 539, *194Tash v. Adams, 10 Cush., 252, Graham v. Maddox, 6 Am. Law Reg., 595, 618, and Gould v. Venice, 29 Barb., 442.

Perhaps no one thing has done more to disparage the fair fame of our country abroad, or to impair the integrity of our institutions at home, than the loose sentiments which prevail in some parts of the land, as to public and corporate indebtedness. It seems to be thought by some people, that as to obligations of this character, nothing more is called for from the debtor than what is agreeable, easy and convenient. Honor, honesty and punctuality are thought to be quite foreign to the subject. But this is a very great mistake, false and ruinous in the extreme. These virtues are as essential to public bodies as to individuals; and the nation, state, city or municipality that does not observe and cherish them, has upon it a blight which will, in the end, destroy its best interests.

It was said on the argument, that, however proper it might be to compel the city of New London to fulfil her engagements, if the city, as such, was alone affected, yet that individual citizens, tax-payers, have rights of their own, which they may defend in the name of the corporate body. But we can recognize no such independent character in the citizen. Besides, the city alone appears here to defend. And if the individual citizens were to be considered as appearing for themselves, they could only defend in the name and according to the rights of the city.

As we have already said, if we may look through the body to notice the individuals as distinct from the corporation, we must notice them as individuals throughout the proceedings upon which we have been commenting, and then we see them sitting with folded hands, silently countenancing the usurpation and fraud of which they are now complaining.

We have hitherto proceeded upon the idea that the case is one of election, an election at the first meeting of the city, as if it were the case of private property, or an election under an' instrument conferring title; and have based our remarks upon the inadmissibility of such a defense in a suit by bona fide bondholders. But we are not satisfied that this is a case of that character. In view of the object of the city in getting *195power to loan its credit, and the language used in the resolution granting it, we think it is not. We think it is rather the case of municipal power, to be exercised whenever two-thirds of the voters of the city give their assent that it may be done.

Let it be remembered that the power was given to the city at the same session at which the New London, Willimantic and Springfield Railroad Company was incorporated. At that time the enterprise had assumed no practical form; nothing had been done; and whether any thing would be done, or whether security could be furnished by the railroad company as required by the resolution, or at what time the loan would be called for, were wholly undetermined and uncertain. Of course time and circumstances entered most essentially into the character of the grant. We believe the legislature might well have expected that the city would proceed to act upon the subject at any time whenever two-thirds of the citizens should think it expedient. It might have been found necessary, as it doubtless was, at the early meetings of the citizens, to postpone action, and hence to adjourn for a time, or indefinitely, or, which is the same thing substantially, do nothing at present; which latter course was in effect adopted. But however this may be, the language in the proviso seems to be decisive of the meaning of the legislature; it is “until” — that is, whenever, as soon as — two-thirds of the voters give their approval. This construction of the resolution is not forced or unnatural, and therefore we prefer to adopt it, as best comporting with the justice of the case, and most in harmony with the views of the citizens of New London until after the situation and interests of parties had become fixed. The case of Musser v. Fairmount and Arch St. Railway Company, 7 Am. Law Reg., 284, we do not consider to be applicable to this case. There, the court decided that an election was to be made within a definite period; and, considering the subject matter of the election and the language of the grant, we can not say that they were wrong in the construction which they put upon that grant. They were of opinion that it required immediate action; but that ismot the case before us.

It is further said, that the resolution of 1847 authorized the *196issuing of scrip or certificates to the New London, ’Willimantic and Springfield Railroad Company, whereas these were issued to the New London, Willimantic and Palmer Railroad Corporation. The resolution does not say to whom they shall be issued, but only to whom they shall be delivered. This is very express; while the form of the certificate is left to the city, who have directed these bonds to be issued and delivered to the New London, Willimantic and Palmef Railroad Corporation. These corporations are found by the Superior Court to be one and the same, and that the latter road is the same as that for which the certificates were originally to be issued. It is said that this tan not be true, because it involves a legal impossibility. We think otherwise. They may be one. Such a contingency was originally anticipated, and provision made for it, in the charter of the New London, Willimantic and Springfield Railroad Company. When finally the modification or union of the companies took place, the name and existence of the New London, Willimantic and Springfield Railroad Company were given to and confirmed in the combined company, and all the franchises, rights and property of the former were transferred to and became vested in the latter ; so that the bonds were deliverable to them of right.

Again it is said, that the action should have been brought in the name of the New London, Willimantic and Palmer Railroad Corporation, payees in the bonds. But the bonds are made payable to bearer, and are legally negotiable. It is quite too late, after the accumulated decisions in our books, of the highest authority, to urge this common-law objection as to such bonds. The bonds, as we say, were made payable to bearer that they might be delivered to the New London, Willimantic and Palmer Railroad Corporation to be sold. They were of course to be put into the market, and their value depended very much upon their being negotiable like a note. Without it they would scarcely have been marketable or valuable. It is true that, in most cases, railroad bonds are express ly authorized in the charters of the companies to be sold and transferred, but when this is not expressly declared it is given by implication; so that bonds of this character are, at *197the present time, held to be negotiable, as much as bills of exchange. The old maxim that a chose in action can not be assigned in law, has long since been exploded as to railroad bonds. We refer only to a few cases in support of the proposition. Edwards on Bills, 60. Knox County Commissioners v. Aspinwall, 21 Howard, 539. Craig v. Vicksburg, 31 Miss., 216. Carr v. Lefevre, 27 Penn. S. R., 413.

The statute passed in 1845 is not, in our opinion, applicable to this case. Probably it does not embrace municipal corporations at all. Besides, the resolution of 1847 is excluded by the exceptions in the act of 1845.

We do not advise a new trial.

In this opinion the other judges concurred; except Sanford, J., who being disqualified by interest, did not sit.

New trial not advised.