Citation Numbers: 31 S.E. 481, 123 N.C. 308
Judges: DOUGLAS, J.
Filed Date: 11/9/1898
Status: Precedential
Modified Date: 1/13/2023
This is an action brought to test the validity of certain bonds issued by Wilkes County in payment of its subscription to the *Page 231 stock of the Northwestern North Carolina Railroad Company. The suit was brought by the Commissioners of the county of Wilkes against the County Treasurer. The defendants Turner and Wellborn, who had become the owners of one of the bonds after the bringing of this action, by leave of the court, became parties defendant, and invited all other bond-holders to come in and join them in resisting the action.
In the face of each bond, dated 1 October, 1889, appears the explicit statement that: "This bond is one of a series of one hundred bonds of the denomination of one thousand dollars each, issued by authority of an act of the General Assembly of North Carolina, ratified 20 February, A.D. 1879, entitled, `An Act to amend the charter of the Northwestern North Carolina Railroad for the construction of a second division from the towns of Winston and Salem, in Forsyth County, up the Yadkin Valley, by Wilkesboro, to Patterson's Factory, Caldwell County,'" etc. The bond does not allude in any way to any other legislative act, nor does it profess to claim further validity than that derived from the recited act.
It is admitted, as well as clearly shown by the evidence, that this act of 20 February, 1879, was not passed in accordance with the mandatory provisions of the Constitution of this State, as construed by this Court inasmuch as upon the passage of said bill upon its second reading in the House of Representatives, there was no call of the ayes and noes, and further that the vote upon such reading was not recorded (310) in the Journal of the House. Constitution, Art. II, sec. 14. The amendatory act of 1881 is subject to the same objection. In view of the recent decisions of this Court it is useless to discuss this question now, as the rule has been definitely settled in the following cases: Bankv. Commissioners of Oxford,
The act under which these bonds profess to have been issued was never legally passed and never became a law. As was said in Norton v. ShelbyCounty,
The Constitution of the State is plenary notice to the world of its organic law. There can be no bona fide holders of unconstitutional obligations, nor can ignorance of public statutes and legislative journals be deemed otherwise than willful or negligent. The journals are published for the information of the public, and are widely distributed and easily accessible, fully as much so as the public records of a (311) county. Surely no one would be heard to say that he was the bona fide owner of a piece of land simply because he held a deed therefor, when an inspection of the records would show that his grantor had no power to convey. It has been well said in U.S. v. Macon CountyCourt,
A careful distinction should be drawn between the want of power to issue bonds, and mere irregularities in the exercise of that power. The latter, under certain circumstances, may be cured by recitals, or eliminated by estoppel; but a want of power goes to the very root of the transaction, and destroys its vitality. A tree may yet live though its branches are badly shattered by the storm, but the last leaf falls when the root is dead.
This rule has been clearly laid down by the Supreme Court of the United States in the oft-cited case of Anthony v. County of Jasper,
By repeated adjudications this has become the settled rule of that court. Police Jury v. Britton,
But it is urged that while the bonds were expressly issued under the act of 1879, there was, apparently unknown to both parties to the transaction, and certainly ignored by them, an existing authority (313) to issue said bonds derived from an ordinance of the Constitutional Convention passed in 1868; and that therefore we should hold that these bonds were unwittingly issued under that ordinance, and are therefore valid. The only authority we can find in that ordinance in any way authorizing the subscription to the stock of the company or the issuing of the bonds, is as follows: "Section 2. That the capital stock of said company may be created by subscriptions on the part of individuals, corporations and counties, in shares of one hundred dollars." "Section 12. Be it further ordained that the stockholders of said company may pay the stock subscribed by them either in money, labor, or material for constructing said road, as the board of directors may determine, and that all counties or towns subscribing stock to said company shall do so in the same manner and underthe same rules, regulations and restrictions as are set forth and prescribed in the act incorporating the North Carolina and the Atlantic Railroad Company, for the government of such towns and counties as are now allowed to subscribe to the capital stock of said company." That said ordinance cannot be relied on to support the validity of the bonds at issue is apparent for several reasons: First. We do not see that any authority whatever is given or attempted to be given by either of these sections, to Wilkes County to subscribe to the capital stock of this company. But it is said that section 12, by referring to the charter of the "North Carolina and Atlantic Railroad Company," by which we presume is meant the Atlantic and North Carolina Railroad, chapter 136 of the Laws of 1852, confers upon the different counties, through or near *Page 234
(314) which the Northwestern North Carolina Railroad may run, the same authority to subscribe as was given to the counties tributary to the former company. Said section does not refer generally to the act of 1852, nor does it profess to confer any of the powers therein granted. It simply says that those counties and towns that do subscribe "shall do so in the same manner and under the same rules, regulations andrestrictions" as are prescribed in the former act. The words "same restrictions" are peculiarly significant here, as the act of 1852, sec. 45, provides in express terms that "if the said road be not completed within six years after the ratification of this act, this charter shall beforfeited." Therefore, even if the powers granted in the act of 1852 had been given to the Northwestern North Carolina Railroad Company or the counties in its interest, subject to the "same restrictions," those powers would have expired by their own limitation long before their attempted exercise 23 years thereafter. As all such powers must be strictly construed, this restrictive provision must be held to be in the nature of a limitation and not a condition subsequent. That is, the authority given to the counties to subscribe, if it ever existed, expired at the end of six years unless already exercised in such a way as to create vested rights. But it makes no difference how the power was exercised, if there was no power. Section 12 of the ordinance of 1868 does not refer to section 33 of the act of 1852, which confers the power, but is evidently limited by its very terms to sections 34, 35, and 36, which prescribe the manner
in which that power must be exercised by the counties or towns to which it may have been granted. It would have been very easy for the convention to have given the same authority granted in section 33, either in express terms or by reference to said section, but it has not done (315) so, and we cannot do so by judicial construction. There is no principle better settled than that all charters granting special privileges or powers must be not only strictly construed, but must be construed most strongly against the grantee. This rule, with the reasons therefor has been so clearly stated by Chief Justice Pearson in R. R. v.Reid,
It should be borne in mind that there is no pretense of authority for the issue of these bonds outside of the charter of the Northwestern North Carolina Railroad Company and its amendments. It has been the actor *Page 236 as well as the beneficiary throughout, and therefore the acts under consideration come peculiarly within the rule of strict construction laid down by the two great Chief Justices from whom we have quoted.
We have not overlooked the fact that in Belo v. Comrs.,
Secondly. The bonds on their face profess to have been issued under an entirely different statute.
The principle laid down by the Federal authorities, and practically of universal acceptance, is that estoppels rest upon the recitals in the bond. The rule is generally cited as laid down in Town of Colonia v. Eaves,
In the case at bar the bonds recite that they were issued under the act of 1879; and as all estoppels of this nature to be operative must be mutual, are not the bondholders themselves estopped from setting up any facts to the contrary? These recitals point out the very act under which the power is claimed, and it was the duty of all persons claiming thereunder to see that the act met the constitution requirements.
Certainly the estoppel can never go further than the recital itself. It cannot operate upon any other act, nor as to the validity of any act. In Gilson v. Dayton,
Thirdly. That ordinance did not create a contract between the railroad company and the county of Wilkes. The only contract that has ever existed between them was the contract of 1888, which was subject to all the constitutional provisions then existing. The mere authority given in the charter of a railroad company to receive subscriptions from municipal corporations, where no consideration is given and no attempted exercise of the power, has none of the essential elements of a contract, and is held at the pleasure of the law-making power. Much more so is it subject to constitutional restrictions. Town of Concord v. Bank,
The ratification of the Constitution on 24 April, 1868, when it went into effect for all domestic purposes, annulled all special powers remaining unexecuted and not granted in strict accordance with its requirements. Article II, section 14, is as follows: "No law shall be passed to raise money on the credit of the State, or to pledge the faith of the State, directly or indirectly, for the payment of any debt, or to impose any tax upon the people of the State, or to allow the counties, cities or towns to do so, unless the bill for the purpose shall have been read three several times in each House of the General Assembly, and passed three several readings, which readings shall have been on three different days, and agreed to by each House respectively, and unless the yeas and nays on the second and third reading of the bill shall have been entered on the Journal." Article VII, section 7, is as follows: "No county, city, town, or municipal corporation shall contract any debt, pledge its faith, or loan its credit, nor shall any tax be levied or collected by any officers of the same, except for the necessary expenses thereof, unless by a vote of a majority of the qualified voters therein."
The intention of the Constitution is obvious. Profiting by the sad experience of other states, it intended to restrict the granting of public aid, and to hold to the strictest accountability every member of the Legislature who assisted in such grant by forcing him to twice record his vote on the Journal, where it would be open to public inspection. (322) It further intended that every such grant should be the deliberate and intelligent act of the Legislature itself as well as of the community affected thereby. It is our duty to give to these salutary provisions that just construction, required alike by the rules of law and *Page 239
of common sense, that will effectuate and not destroy their beneficial purpose. This view we think is sustained by the uniform decisions of the Supreme Court of the United States, the only tribunal before which this decision can ever lawfully come for review. In Wadsworth v.Supervisors,
It is further urged on the part of the defendants and those whom they represent that the issuing of these bonds was authorized by sections *Page 240
1996 to 2000 of The Code. This question was definitely settled inComrs. v. Snuggs,
It is not necessary for us to consider the fact that the first section of the road had been completed to Winston, beyond which all idea of extension seems for years to have been abandoned. The act of 1881 has (325) no reference to the bonds in question, and is subject to the same objections as the act of 1879, which we have been discussing.
We have given this case the most thorough investigation and careful consideration on account of the important principles and the large amount involved. We deeply deplore the fact that many parties must suffer, who are in morals, if not in law, innocent holders of the bonds, but their loss comes from their misplaced confidence in those from whom they received the bonds, and the negligence of the corporation to which the power was professedly given and the bonds were issued. The only authority for their issue is found in a railroad charter, and we cannot undertake to validate defective or unconstitutional legislation by judicial *Page 241 construction. The suggestion of repudiation, so strongly urged here and elsewhere, has no weight with us. The so-called repudiation of an unconstitutional obligation is a contradiction in terms, and its assertion amounts simply to a moral and legal absurdity.
It has been said that the usual difference between heterodoxy and orthodoxy is the difference between your doxy and my doxy, and that in financial ethics the same distinction exists between stealing and financiering. This distinction we cannot endorse. It is just as wrong to wring from an unwilling and perhaps a suffering debtor an unjust debt as it is to deprive a creditor of a just debt. We will try to do neither, but will hew to the line. The strictly moral aspect of the case is not before us, but it is possible that the plaintiffs, representing an honest, industrious and intelligent people, may have reasons for their action as strong in morals as in law. (326)
Enough appears to indicate, what is common knowledge, that the stock for which these bonds were issued has been swept away in the maelstrom of corporate reorganization. It may be that the plaintiffs, deprived of every vestige of consideration by the decree of a court of equity, may not feel any moral obligation beyond the strict letter of the law. They may see no difference between repudiation and reorganization when both accomplish the same result, to retain the benefit and shift the burden.
In Lewis v. Pina County,
It has been suggested that the defense in this case has been only (327) colorable, as but one of the bonds was represented. Under the circumstances we think that was sufficient. An elaborate answer, evidently prepared by able counsel, has been filed, presenting every reasonable *Page 242 defense; and while no argument was made before us for the defendants, every phase of the case has been carefully examined by us in the five months during which we have held it under advisement. The plaintiffs had no means of knowing who held the bonds, as they are payable to bearer and pass from hand to hand without endorsement or registration. The bondholders themselves could have become parties at any stage of the proceedings, and would have been gladly heard by us; but the mere fact that they deliberately refrained from any participation in the defense when they had every opportunity of doing so should not deprive the plaintiffs of all power to protect the rights of the people they represent in a court of competent jurisdiction, where alone this action could be brought by them.
The current of authority from other states sustains the conclusions we have reached in this case, but owing to the large number of cases, we have thought it best to cite only from our own decisions and those of the Supreme Court of the United States.
For the reasons stated in this opinion, the judgment of the court below is
Affirmed.
Hill v. . Commissioners , 67 N.C. 367 ( 1872 )
R. R. v. . Reid , 64 N.C. 155 ( 1870 )
Rodman v. . Washington , 122 N.C. 39 ( 1898 )
Charlotte v. . Shepard , 122 N.C. 602 ( 1898 )
Belo v. . Com'rs of Forsythe , 76 N.C. 489 ( 1877 )
Bank v. . Commissioners , 119 N.C. 214 ( 1896 )
Hill v. Memphis , 10 S. Ct. 562 ( 1890 )
Lewis v. Pima County , 15 S. Ct. 22 ( 1894 )
Fairfield v. County of Gallatin , 25 L. Ed. 544 ( 1879 )
Wadsworth v. Supervisors , 26 L. Ed. 221 ( 1881 )
Merrill v. Monticello , 11 S. Ct. 441 ( 1891 )
Hayes v. Holly Springs , 5 S. Ct. 785 ( 1885 )
Comrs. v. . Snuggs , 121 N.C. 394 ( 1897 )
Aspinwall v. Board of Commissioners of the Cty. of Daviess , 16 L. Ed. 296 ( 1860 )
Hopper v. Covington , 6 S. Ct. 1025 ( 1886 )
Concord v. Robinson , 7 S. Ct. 937 ( 1887 )
Kelley v. Milan , 8 S. Ct. 1101 ( 1888 )
Norton v. Board of Comm'rs of Taxing Dist. of Brownsville , 9 S. Ct. 322 ( 1889 )
Anthony v. County of Jasper , 25 L. Ed. 1005 ( 1880 )