U.S. Supreme Court Lewis v. City of Shreveport, 108 U.S. 282 (1883)
Lewis v. City of Shreveport
Decided April 16, 1883
108 U.S. 282
I N ERROR TO THE CIRCUIT COURT OF THE UNITED
STATES FOR THE DISTRICT OF LOUISIANA
1. Ottawa v. Cary, ante, 108 U. S. 110 , reaffirmed.
2. Unless power has been given by the legislature to a municipal corporation to grant pecuniary aid to railroad corporations, bonds issued for that purpose,
and bearing evidence of the purpose on their face, are void even in the hands of bona fide holders.
3. Corporate ratification, without authority from the legislature, cannot make a municipal bond valid which was void when issued for want of legislative power to make it.
Action to recover interest due on municipal bonds issued in aid of a railway. Defense that the charter of the municipality and the laws affecting it conferred no power to issue such bonds, and that the bonds were issued without authority and are void. The charter of Shreveport contained no express
authority for the issue of such bonds. The parties agreed to the facts on the hearing below. The following are the most material parts of that agreement
"2. That on the 26th of June, 1872, an ordinance was introduced and passed by the City Council of Shreveport authorizing purchase of real estate by the city to be donated to the Texas & Pacific Railway Company upon which depots and machine shops were to be permanently established and maintained by said company, and providing that for purchase of said property 260 forty-year $1,000.00 bonds should be issued and sold on market, said bonds bearing interest at rate of 8% per annum, payable semiannually, with coupons attached; providing further that said ordinance should be submitted to the vote of the people for their ratification and approval, and it is admitted that said ordinance was never considered by said council on any other day prior to said 26th June, 1872, and that it further provided for levying a tax to pay interest and create a sinking fund for redemption of bonds."
"3. That in pursuance of said ordinance, an election was held in said city on July 1st, 1872, and said ordinance was then and there ratified and approved by the voters, 705 votes being cast for said ordinance and 3 against it."
"4. That in pursuance of said ordinance and said vote ratifying same, the said city issued 260 bonds, each for $1,000, payable at 40 years, bearing interest at 8%, payable semiannually, with interest coupons attached, said bonds bearing date July 1st, 1872, a copy of which said bonds is attached to and made part of plaintiff's petition, a copy of coupons attached to said bonds being set out in and made a part of plaintiff's petition."
"17. That plaintiff acquired ninety of said bonds with coupons attached in open market, being bonds to which the interest coupons sued on belong, paying therefore 85 cents on the dollar, and that said plaintiff is bona fide holder of said bonds and of interest coupons sued on for value."
"18. It is admitted that the Texas & Pacific Railway Company has not now and never had any charter from the State of Louisiana, or any right arising from any statute of that state passed in favor of said company, but that said company held a lease from the Vicksburg, Shreveport & Texas R. Co., not yet expired, of the railroad from Shreveport to Texas line."
"19. It is admitted that the ordinance of June 16, 1872, is the only ordinance of said city authorizing the issue of said 260 forty-year bonds."
The court below held that the bonds were issued without lawful authority, and were null and void. The plaintiff below excepted, and brought the case on error here.
MR. CHIEF JUSTICE WAITE delivered the opinion of the Court.
This was a suit brought to recover the amount of certain coupons cut from bonds issued by the City of Shreveport, Louisiana, which appear on their face to have been issued "in aid of the Texas and Pacific Railroad Company." In point of fact, the bonds were used to buy lands to be donated to the railroad company as a site for depots and machine shops.
We have had occasion at this term, in the case of City of Ottawa v. Carey, ante, 108 U. S. 110 , to repeat and apply a rule which has always been recognized and adhered to in this Court, to the effect that, unless power has been given by the legislature to a municipal corporation to grant pecuniary aid to railroad corporations, all bonds of the municipality, issued for such a purpose, and bearing evidence of that fact on their face, are void even in the hands of bona fide holders, and this whether the people voted the aid or not. Every purchaser of such a bond is chargeable in law with notice of the want of power in the municipal authorities to bind the body politic in that way. This principle is elementary.
In the present case, it is not pretended that any such power was expressly granted to the City of Shreveport, and we find no provision of the charter from which anything of the kind can be implied. The authority to purchase and hold property of all kinds relates only to such property as is needed for municipal
purposes. It is a matter of no importance that the city employed agents to sell the bonds, or that its law officer gave an opinion in favor of their validity, or that they have been recognized in official statements as binding obligations, or that taxes have been levied to pay either principal or interest. Corporate ratification, without authority from the legislature, cannot make a municipal bond valid which was void when issued for want of legislative power to make it. These bonds carried on their face full notice to every purchaser that they were issued for a purpose not authorized by law; that is to say, to aid a railroad corporation. This whole subject was so fully considered in City of Ottawa v. Carey, supra, 108 U. S. 110 , that we deem it unnecessary to discuss the subject further now.
In Edey v. Shreveport, 26 La.Ann. 636, which is relied upon as establishing the power of the city to issue the bonds, the question was whether the vendor of the land, which had been only partly paid for out of the proceeds of the bonds, could enforce his mortgage and vendor's privilege on the land to recover the balance of purchase money due him, and it was decided that he could. This is no more than was in effect held by this Court at the present term in City of Parkersburg v. Brown, 106 U. S. 487 . All that was said by the Supreme Court of Louisiana must be construed in connection with the question then up for decision. There is not a word about the validity of the outstanding bonds, nor of the right of the holders to recover upon them in a suit against the city. The whole effect of the decision is that the city could not keep the land as against the vendor without paying for it. That the court would have held the bonds void, if it had been called on to decide that question, is shown beyond all doubt in the case of Wilson v. Shreveport, 29 La.Ann. 673, where the power to issue bonds, apparently of a much less objectionable character, was expressly denied.
The judgment is affirmed.