Supervisors of Cumberland County v. Randolph , 89 Va. 614 ( 1893 )

Lewis, P.,

(after stating the case,) delivered the opinion of the court.

The first point made by the appellants is that, upon the facts stated in the answer, which was not traversed, the writ ought to have been denied. But this is a mistaken view. At common law the return was not traversable, the party being left to his action for a false return. If in such action the return was falsified, a peremptory mandamus Was granted. Bac. Abr., tit. “ Mandamus.” The defects of this procedure were, to a certain extent, remedied by the statute, 9 Anne, ch. 20, which statute has not been re-enacted in Virginia. Section 3014 of the Code, however, provides that the answer shall be “subject to any just exceptions”; and here, it is true, there are none. But treating the answer as though it had been demurred to, the result by no means follows for which the appellants contend.

And, first, it is to be observed that the competency of the legislature to authorize counties or other municipalities to subscribe to the stock of a railroad company, and to issue bonds in payment of such subscriptions, is unquestionable. And this authority may be conferred with or without the sanction of a popular voté. The legislature possesses all legislative power not prohibited to it, and there is no constitutional restriction upon its powers in matters of this sort. The provision of the Constitution of Virginia that “ the state shall not subscribe to, or become interested in, the stock of any company, association, or corporation,” refers to subscriptions by the state, and not to a case like the present. Redd v. Supervisors of Henry County, 31 Gratt. 695 ; Railroad Company v. County of Otoe, 16 Wall. 667.

Legislative authority, moreover, as in the present case, to issue “ coupon bonds,” implies authority to issue bonds and coupons payable to bearer, which are negotiable instruments, having all the qualities and incidents of commercial paper. Arents v. Commonwealth, 18 Gratt. 750; Gelpeke v. Dubuque, 1 Wall. 175 ; Thompson v. Lee County, 3 Id. 327; Livingston County v. Portsmouth Bank, 128 U. S. 102; 1 Dill. Mun. Corp. (4th ed.), sec. 513.

It is also important to observe that the holder of such instruments is presumed to be a bona-fide holder for value before maturity, unless fraud or illegality in the inception of the paper be shown. 1 Danl. Neg. Instr., sections 812, 815 ; Smith v. Sac County, 11 Wall. 139. And the question, therefore, is, do the matters set up in the answer constitute a good defense as against such a holder?

The main ground relied on is that the election held under the act of February 5, 1886, was not legally held, for want of notice. But the bonds from which the coupons in question were detached were not issued under that act, but under the act of February 8, 1888. And independently of this consideration the objection is without merit.

The docti-ine of the Supreme Court of the United States, and the one most consonant with reason and justice, is that where a municipal corporation has legislative authority to issue negotiable securities, dependent only upon the adoption of certain preliminary proceedings, such as a popular election, the iona-fide holder has a right to assume that such preliminary proceedings have been regularly taken, if the fact be •certified on the face of the instruments, or on the face of the bonds from which negotiable coupons are detached, by the proper officers whose duty it is to ascertain it. In such case the recital is itself a decision of the fact by the appointed tribunal, and estops the corporation, as against such holder, to contest it. The latter is not bound to ascertain the truth or falsity of such recital, or to look further than to see whether the requisite legislative authority has been conferred.

Accordingly, such instruments have often been held valid, in the hands of a bona-fide holder, under circumstances which ivould sustain a direct proceeding against the municipality to aunul them, or to prevent their issue. Commissioners of Know County v. Aspinwall, 21 How. 539; Supervisors v. Schenck, 5 Wall. 772; St. Joseph Township v. Rogers, 16 Id. 644; County of Warren v. Marcy, 97 U. S. 96 ; Town of Coloma v. Eaves, 92 Id. 484; Commissioners v. Bolles, 94 Id. 104; 1 Dill. Mun. Corp. (4th ed.), sec. 549.

Indeed, this court, in De Voss v. City of Richmond, 18 Gratt. 338, went further, and applied the principle of estoppel in respect to a bond not negotiable. In that case the bond in question was issued 'by the city in lieu of a bond which had been previously confiscated by the late Confederate government; but there was nothing on its face to indicate that fact, it being in form an unconditional promise to pay. It was conceded, moreover, that in re-issuing it in that form the city authorities disobeyed the mandate of an express ordinance in regard tore-issuing bonds in lieu of confiscated bonds, and exceeded their authority. But as, in the opinion of the court, its unconditional form was equivalent to a representation by the city that it could be purchased with safety, it was held that, as against a bona-fide holder for value, the city was estopped to deny its validity.

“ From the nature of the business,” said the court, “ the city knew that this representation, conveyed by the form of the bond, would be relied on, and must have intended that it should be. When a party has relied upon it, and in good faith paid his money on the faith of it, it would be the heighth of injustice to allow the city to say that it is not true, and that it was his folly to believe it.”

Besides, whatever ground of objection there might be if the case stood upon the act of February 6, 1886, alone, any irregularities which may have occurred in the proceedings under that act were cured by the act of February 8th, 1888. The latter act recognized the validity of the subscription that had been made, and all that had been done under the prior act, and in express terms authorized the issue of coupon bonds, on the completion of the railroad across the counties of Cumberland and Powhatan, in lieu of the conditional bonds which had already been issued to the railroad 'company under the prior act. This it was clearly competent for the legislature fo do, both on principle and authority. As was remarked by Judge Burks, in Redd v. Supervisors of Henry County, 31 Gratt. 695, “ defective subscriptions may, in all cases, be ratified where the legislature could have originally conferred the power”—citing Thompson v. Lee County, 3 Wall. 327; St. Joseph Township v. Rogers, 16 Id. 644, and other cases.

In the present ease the bonds from which the coupons in question were detached are payable to bearer, as are the coupons, and are regular and unconditional on their face. They; moreover, recite that they are issued in- pursuance of the statutes above mentioned. This is an implied representation that the only condition precedent prescribed or contemplated by the act of February 8th, 1888—namely, the completion of the road across the said counties—had been complied with ; and the bona-fide holder, as already stated, was not bound to look beyond this recital, except to the act authorizing the bonds to be issued.

Nor is there any merit in the objection founded on the pendency of the appeal from the order of the board of supervisors rejecting the petitioner’s claim on account of the coupons in question. It was not necessary to present the claim for allowance to the board, for, to all intents and purposes, it was audited when the bonds were issued. The coupons were binding obligations of the county, and the board had no power to disallow them. Its duty in the matter was clear and purely ministerial—viz., to levy a tax to pay them, as section 1248 of the Code requires. Its order, therefore, rejecting the claim, from which the appeal was unnecessarily taken, does not, in any degree, partake of the nature of a judgment. A board of supervisors in Virginia has no judicial powers of any sort. This was decided in Board of Supervisors v. Catlett, 86 Va. 158, and there are many like decisions by courts of other states. Nor is there any doubt that mandamus lies to compel a levy to be made, although the coupons have not been reduced to judgment; for, had a judgment been obtained, the only proper remedy to enforce it would be by mandamus. County of Green v. Daniel, 102 U. S. 187; County Commissioners v. King, 13 Fla. 451, 467.

Nor is tlie case affected by the allegation in the answer that the petitioner purchased the coupons at a discount. A similar objection was overruled in Cromwell v. County of Sac, 96 U. S. 51, in which case it was said that, as the sales of such securities are usually made with reference to prices current in the market, and not with reference to their par value, it would lead to inconceivable confusion if bona-fide purchasers in the market were restricted in their claims upon such securities to the sums they had paid for them.

This sufficiently disposes of the case, and renders it unnecessary to consider any other question discussed at the bar.

Judgment affirmed.