Chamberlain v. City of Burlington

Cole, J.

The charter of the city of Burlington was enacte'd and approved June 10th, 1845, and may be found in the “Laws of Iowa,” passed at the extra session of 1845, ch. 54, p. 73. It is conceded by the respective counsel in this case, that if the city of Burlington had the authority to loan its credit, such authority is found in section 27, quoted supra. The charter is quite lengthy, and in view of the agreement of counsel, as to the clause upon which the authority is based, it is not necessary to set the charter out at length, especially, since upon an examination of it, we are agreed in thg fact as conceded by counsel.

Í'njÍcÍ’tÍes: rulings, Considered. The question of the power of a city to bind the municipality by the execution and issuance of its bonds has never been discussed and directly decided by this court; it is a new question in this State. Sed vide Ten Eyck v. Mayor of City of Keokuk, infra. And although Mr. Justice Swayne, in his opinion announcing the judgment of the United States Supreme Court in the case of Gelpdce v. City of Dubuque, 1 Wall., 205 , claims to base the decision upon former adjudications of this court, yet an examination of the cases cited will show that none of them related to any city, nor did they involve the *401 questions of the power of a city to make and issue such bonds. All the cases cited related to the power or authority of a county, and even if they are or were (which ia unanimously denied by this court) clothed with power and authority to make and issue the bonds in the given cases, it by no means follows that city governments were also clothed with the same power. Since each city government must rely upon the terms of its charter for its authority, and such charters (until the adoption of our new Constitution in 1857) were as variant as the cities themselves.

In this case we have no occasion, as supposed by counsel, to controvert (nor do we assent to) the correctness of the judgment in the case of Gelpcke v. City of Dubuque ; and if this case involved the identical questions adjudicated in that, such adjudication would not, as claimed by counsel for defendant, have any binding or authoritative force or obligation upon this court, since it was not an appeal from this court, but relates to questions of that class’ upon which the State courts have the paramount or primary authority to adjudicate, and whose decisions are binding upon, and under the law and precedents should be followed by the Federal Co»rt. Any attempt on the part of the Federal Court to invert this well recognized and settled order'of superiority of judicial tribunals upon such questions, must tend, like any other disregard of law or rightful precedent, to confusion and anarchy.

The following cases determined by this court hold, that counties have no constitutional or legislative authority to bind themselves by the issuance of bonds for railroad stock. The State of Iowa, ex rel. &c. v. The County of Wapello, 18 Iowa, 388; Myers v. The County of Johnson, 14 Id., 47; McMillan v. Boyles et at, 14 Id., 107; Rock v. Wallace, County Judge, &c., 13 Id., 593; Ten Byck v. Mayor of City of Keokuk, 15 Id., 486; Smith v. Henry *402 County, 15 Id., 385. In each of these cases the court was unanimous in its opinion; while in every case cited by Mr. Justice Swayne in the opinion referred to, there was upon that point a divided court. In view of these adjudications the thorough examinations given, and the unanimity of the court, it may well be declared, as in Smith v. Henry County, supra, that the question is settled so far as Iowa is concerned, whatever may be the course of decision by other tribunals of either independent or concurrent jurisdiction. There are, in this case, but two questions requiring our considerations: First. Whether the authorities of' the city of Burlington were clothed with any rightful power to issue the bonds mentioned in the petition, and Second. Whether such bonds can be enforced in the hands of third parties.

3._ bonds, I. As to the first question, we have already seen, that if the power was conferred at all it was done by section 2T of the charter, to wit, “that whenever, in the opinion of the city council, it is expedient to borrow money for any public purpose, the question shall be submitted to the citizens of Burlington,” &c. It will be observed, that this language confers authority to borrow money for any public purpose. The term “any public purpose ” must, of course, be construed to mean any public purpose within the legitimate objects of the charter; that is, any public purpose which may be necessary for the execution of the corporate powers conferred.

The purpose must relate to, and be connected with, the objects of the incorporation, and it must be/i public purpose, that is,. relating to and concerning the public, as contradistinguished from one or more individuals or corporations. '

The loaning of money to a citizen for the purpose of building a residence for himself would not be & public purpose ; nor would the character of the purpose be changed *403 by the fact that such citizen was going to build a store, or a bank, or a ball with the money thus borrowed. The purpose would be individual, or private, although the citizen intended to make money for himself by the public use of the store, bank, or hall. Nor would the fact be changed, although the individuality borrowing the money should chance to be a corporation instead of a natural person, or that it was to be used for the establishment of a line of stages or cars, instead of a bank or hall, to be publicly used for the advancement of the private or corporate interests of the borrower. Mr. Webster says that “in general, public expresses something common to mankind at large, to a nation, state, city or town, and is opposed to PRIVATE, which denotes what belongs to an individual, to a family, to a company, or corporation.”

4_-paw-errow.or Again, the power conferred was to borrow money. This power to borrow, might doubtless well be held to include the power to execute the obligation or security for repayment. But the difference between the execution of an obligation to repay money borrowed, and the ban of a promise or obligation to pay money at a future day, is too apparent to require or admit of argument to demonstrate or prove it.

We hence conclude that the power to borrow money for any public purpose, did not confer even the semblance of authority to loan the credit of the city to a corporation for its private or corporate purposes. The proposition is too plain, it seems to us, to admit of a doubt, and its bare statement conclusively repels all controversy.

6.— notice ity* II. Can such bonds be enforced in the hands of third parties ? It will be remembered that the ordinance submitting mitting the question to the electors of the city was so framed as to require them to vote whether1 the city would “ issue and lend to the Burlington and Missouri River Railroad Company,” &c. It was not whether- *404 the city would' borrow money for any purpose, but whether it would “ issue and lend ” seventy-five thousand dollars of the bonds of the city. And, also, that after the vote was had, the common council passed the ordinance requiring its mayor to “ execute with the said company a contract of loan." And, also, that the ordinánce was entitled, “ An ordinance to authorize a loan of city bonds,” &c.; and that the ordinance was not only printed upon the back of the bonds, but the very face of the bonds them-' selves showed the same facts in express terms.

In view of these facts, it was clear, beyond reasonable doubt or possible controversy, that the bonds were issued without any authority or color of right, and this too was apparent upon the face as well as upon the back of the bonds. Any purchaser of the bonds must, therefore, have taken them charged with notice that they were issued without authority, and no person could, in any legal sense, become a good faith purchaser of them. The bonds are, therefore, vulnerable to the same defense in the hands of third parties, as in the hands of the original payee, the railroad company.

The officers of the city of Burlington were possessed of no power or authority, under any circumstances, to loan the credit of the city, and hence any obligation executed by them for such purpose, was wholly void and not enforceable in the hands of any person. Neither the question, as to the constitutional right of the legislature to • confer such power, nor the regularity of its exercise, are necessarily involved in this case. Nor are we required, as claimed by counsel, in order to determine this case, to decide whether, where a corporation has power under any . circumstances to issue negotiable securities, the bona fide holder has a right to presume that they were issued under the circumstances which give the requisite authority, and hence that they are enforceable in the hands of such *405 holder, like other commercial paper, as has been held by tbe Supreme Court of the United States in Commissioners of Knox County v. Aspinwall, 21 How., 539 , and followed in Gelpcke v. City of Dubuque, supra, and other cases supra.

But it is proper for us to remark that we do not recognize the correctness of the rule, as stated in those cases. There •can be no reasonable question of its correctness, when applied and limited to private or trading corporations; but it certainly cannot be the correct rule as to counties and other quasi corporations or municipalities. The failure to observe the difference in principle between the two classes of corporations, doubtless led the court to declare, as a general rule for both, that which was alone applicable to the one class. This is apparent from the authorities cited by. the court in 21 How., supra, which were cases relating to private corporations. The application of the rule to counties and other municipalities, has no support in principle nor in authority, aside from that single tribunal. But the determination of this case does not require, nor does our time and business permit, us to review the authorities or discuss the principle further.

The judgment of the District Court is

Affirmed.