U.S. Supreme Court Town of Queensbury v. Culver, 86 U.S. 19 Wall. 83 83 (1873)
Town of Queensbury v. Culver
86 U.S. (19 Wall.) 83
ERROR TO THE CIRCUIT COURT FOR
THE NORTHERN DISTRICT OF NEW YORK
1. There being nothing in the Constitution of the State of New York which makes unconstitutional an act of the legislature authorizing the people of a town to decide whether they will donate its bonds to a railroad company and collect taxes for the amount, such an act (the same being enabling merely and not mandatory) is binding.
2. Where a town, issuing bonds to which coupons or interest warrants are attached, acknowledges in the body of the bond that the town is indebted to the bearer or his assigns in such a sum of money, payable at a future day named, "with interest thereon at the rate of 7 percent, on presentation and delivery of the coupons for the same thereto attached," it may be sued on the coupons alone, though they may have been issued by commissioners specially made agents of the town by the legislature, and by it charged with the matter of issuing the securities, and not made by the ordinary town authorities.
3. This liability of the town is not taken away by the fact that the legislature has directed a special mode in which the money to pay the principal and interest of the bonds is to be raised, the directions being given to the town and county agents, and not to the holders of the bonds or coupons.
4. An act empowered commissioners to dispose of certain town bonds (whose issue for the benefit of a railroad company named, the act authorized), "to such persons or corporation and upon such terms as the commissioners should deem most advantageous for the town, but not for less than par," and to "donate the money which should be so raised to the railroad company." The act, however, required that they should not "pay over any money or bonds " except upon certain conditions specified. The commissioners did not sell the bonds, but handed them over to the railroad company in discharge of the authorized donation. On suit against the town by a bona fide holder of the bonds, held that there was no violation of the act by the commissioners in what they had done.
In May, 1857, the State of New York passed
"An act to authorize the Town of Queensbury, in the County of Warren, to issue bonds to aid in the construction of a railroad from the Village of Glenn's Falls to interest the Saratoga & Whitehall Railroad."
The act enacted:
"SECTION 1. On the application, in writing, of twelve or more freeholders, residents of the Town of Queensbury, it shall be the duty of the county judge of said county to appoint five freeholders, residents of said town, to be commissioners of such town to carry into effect the purposes of this act. A majority of the said five shall constitute a quorum for the doing of any act contemplated in this act."
"SECTION 2. It shall be lawful for the said commissioners to borrow, on the faith of the credit of the town, $100,000 &c.;, . . . at a rate of interest not exceeding 7 percent, and to execute
bonds therefor. The bonds may be in such form as the commissioners shall deem expedient."
"SECTION 3. The said commissioners may dispose of such bonds to such persons or corporation and upon such terms as they shall deem most advantageous for the town, but not for less than par, and the money which shall be so raised shall be donated to such railroad corporation or association as has now or shall hereafter file articles of association to build and operate a railroad from the Village of Glen's Falls to the Saratoga & Whitehall railroad, its buildings and necessary appurtenances, and for no other purpose whatsoever. For the completion of said road and the expenditure of the sum so donated by said town, said corporation shall give full and adequate security to said commissioners, and for the more effectual enforcement of this act, the commissioners shall not pay over any money or bonds to the said railroad corporation until they have been furnished with satisfactory assurances that the sum of $100,000 shall have been subscribed and paid in, and actually expended in the construction and building of the said road. And this act shall not be construed so as to make the said town a party to this corporation, and the said town shall not be taxed hereafter for any appropriation required for said road beside the amount donated in the second and third sections of this act, but such additional amount shall be raised by said corporation."
"SECTION 4. The commissioners shall report annually to the Board of Supervisors of the County of Warren the amount required to pay the principal and the interest on the bonds authorized to be issued under and by virtue of this act, and it is hereby made the duty of the board of supervisors, and they are hereby authorized and required to cause to be assessed, levied, and collected of the real and personal property of said Town of Queensbury, such sum of money as shall have been reported to the said board of supervisors by the said commissioners to be necessary, and the same when collected, shall be paid to such commissioners and by them be applied to the payment of the bonds, with the interest."
"SECTION 5. No money shall be borrowed or bonds issued until the question whether or not it is expedient to borrow such money and issue such bonds for the purpose named in this act shall have been submitted to the taxable electors of the Town of Queensbury and affirmatively determined by them. "
"SECTION 8. The said company so to be formed may charge the sum of not exceeding six cents per mile for passengers riding over said road."
Commissioners (including among them H. R. Wing, D. Peck, and W. A. Wait) were appointed under the act, and an election was held at which the majority of those voting were in favor of the project. The commissioners prepared and executed bonds to the amount authorized, with interest warrants attached.
The bonds acknowledged
"that the Town of Queensbury was indebted to the bearer in the sum mentioned for value received in money borrowed, payable on the 6th day of February, 1868, with interest thereon, at the rate of 7 percent, on presentation and delivery of the coupons for the same thereto attached. "
The warrants were in this form:
No money was raised by the commissioners upon the bonds or interest warrants, but both were delivered by the commissioners to the railroad corporation.
One Culver was a contractor with the corporation for the construction of its road. He received certain bonds and interest warrants from the railroad corporation on its contract, and the warrants not being paid he sued the Town of Queensbury in assumpsit upon them. Plea, non-assumpsit. The warrants sued on were detached from the bonds.
The counsel for the defendant requested the court to give various instructions, as:
1st. That the act was in violation of the Constitutions of New York and of the United States.
2d. That if valid, assumpsit would not lie against the town on the interest warrants sued on, they not purporting to be made or issued by or in behalf of the town and the town not being liable in assumpsit on them.
3d. That the only remedy to enforce the payment by the town was to compel an assessment, collection, and payment such as was contemplated by the fourth section of the act.
4th. That in delivering the bonds and warrants to the railroad company as they had done, the commissioners had not disposed of them or raised money on them at not less than par as the statute required them to do; and that they had thus violated the statute.
The court refused all of these requests for instructions or to nonsuit the plaintiff, and verdict and judgment having gone accordingly for him, the Town of Queensbury brought the case here.
MR. JUSTICE STRONG delivered the opinion of the Court.
In view of the numerous decisions made by the highest courts of most of the states, including New York, as also of those made by this Court, it ought to be considered as settled that a state legislature may authorize a municipal corporation to aid in the construction of a railroad in the absence of any express constitutional prohibition of such legislative action. There is no such prohibition to be found in the Constitution of New York, and the courts of that state have many times held that the legislature has power to authorize cities and towns to subscribe for stock of a railroad corporation, to incur indebtedness for the subscription, and to impose taxes for the payment of the debt incurred. It is true no case in the highest court of that state has determined the precise question now presented -- namely whether a municipal corporation may be empowered to donate its
bonds to a railroad company and collect taxes for the payment of the bonds. But subscriptions for stock, equally with donations, are outside of the ordinary purposes of such corporations, and the design of both is the same. It is to aid in the construction or maintenance of a public highway. It is for the promotion of a public use. The inducement to a subscription may be greater than the inducement to a donation. In the one case, there may be a hope of reimbursement by the stock obtained; in the other, there can be no such expectation. In both, however, the warrant for the exercise of the power is the same. It may be that a mandatory statute requiring a municipal corporation to subscribe for stock in a railroad company, or to contribute to the construction of the railroad of such a company is not a legitimate exercise of legislative power, and that it is not even an act of legislation. This was decided by the Court of Appeals of New York in the case of People ex Rel. v. Bacheler. [ Footnote 1 ] But the present is no such case. The legislative act by which the Town of Queensbury was authorized to issue bonds in aid of the railroad from the Village of Glenn's Falls to intersect with the Saratoga & Whitehall Railroad was not mandatory. It was merely enabling. It authorized the issue and donation of the bonds, if approved by a popular vote. It was a mere grant of power upon conditions, coupled with a prescription of the mode in which the power granted might be exercised. And that it was a constitutional exertion of legislative power must be considered as settled affirmatively by the decisions of this Court in Railroad Company v. County of Otoe, [ Footnote 2 ] and Olcott v. Supervisors of Fond du Lac County. [ Footnote 3 ] It cannot, therefore, be maintained, as contended by the plaintiff in error, that the statute under which the coupons in suit were issued was transgressive of the power vested in the legislature. If the Court of Appeals of New York had decided otherwise, we should feel constrained to follow its decision, but no such determination has been made.
It is next insisted that even if the statute under which the bonds were issued be valid, an action of assumpsit cannot be brought to recover the sums due on the coupons. The reasons given in support of this proposition are that the coupons do not purport to be, and that they were not, made in the name of the town, and that the town is not liable to an action at law for the failure to pay the instruments made and issued by the commissioners designated by the statute. Neither of these reasons is well founded. The bonds to which the coupons were attached do purport to bind the town. They acknowledge that the Town of Queensbury is indebted to the bearer or his assigns in the sum mentioned, for value received in money borrowed, payable on the 6th day of February, 1878, "with interest thereon at the rate of seven percent, on presentation and delivery of the coupons for the same, thereto attached." They are signed by the commissioners who were by the statute made agents of the town for issuing them, and they are countersigned by the clerk of the Town of Queensbury. The coupons attached are all headed "Town of Queensbury Interest Warrant." They are in the form of orders drawn upon a bank, but signed by the commissioners as commissioners and attested by the town clerk. Very plainly, therefore, both the bonds and the interest warrants are evidence of indebtedness by the town. They appear to have been issued in strict compliance with all the requisitions of the statute. It is vain to say the statute imposed no duty upon the town or its officers. No one can doubt that it is competent for the legislature to determine by what agents a municipal corporation shall exert its powers. The statute in question did designate the agents, and their acts, within the authority conferred, are binding upon their principal, upon the town of which they had been constituted the agents.
Equally untenable is the position that an action at law is not maintainable because the holders of the bonds and coupons are entitled only to that remedy for a default of payment which is provided by the statute. There are cases, it is true, which hold that where a statute creates a right
and enjoins a duty, nothing may be done agreeably to the provisions of the common law to enforce the duty or assert the right further than is necessary to give effect to the statute. But we do not perceive that this principle has any bearing upon the present case. The fourth section of the act requires the commissioners designated as the agents of the town to report annually to the board of supervisors of the county the amount required to pay the principal and interest on the bonds authorized to be issued, and makes it the duty of the supervisors to assess, levy, and collect of the real and personal property of the Town of Queensbury such sum or sums of money as shall have been reported to them by the commissioners. The money thus collected the supervisors are required to pay to the commissioners, to be applied by them to the payment of the bonds and interest. These are all directions given to the town and county officers and agents -- not to the holders of the bonds and coupons. They prescribe duties to be performed after the amount of the debt due by the town has been ascertained, either by agreement or by judgment. That amount may be contested. It has been in this case. It could only be determined by an action at law. Only after such a determination could the commissioners report how much was required to be levied by taxation. The action, then, does not take the place of any remedy provided by the legislature. At most, it is a step to give effect to the statutory provision.
The only other error assigned which requires notice is that the court refused to direct a verdict for the defendants because the bonds were not disposed of by the commissioners at not less than par, because no money was received for them by the commissioners, and because they were delivered directly to the railroad company. But a delivery to the railroad company was plainly authorized by the Act of the legislature. True, the commissioners were not at liberty to dispose of them for less than their par value, and they did not. Had they done so and had the plaintiff not been a holder -- without notice and for a valuable consideration -- there might have been a defense to the action. The third section, however,
empowered the commissioners to "dispose of the bonds to such persons or corporation as they should deem most advantageous for the town, but not for less than par." And it required them not to pay over "any money or bonds" to the railroad corporation until certain satisfactory assurances should be furnished them. Thus it appears that delivery of the bonds to the railroad company was contemplated and authorized.
There is therefore no error in the record, and the judgment is
[ Footnote 1 ]
8 Albany Law Journal 120.
[ Footnote 2 ]
83 U. S. 16 Wall. 667.
[ Footnote 3 ]
83 U. S. 16