MR. JUSTICE HARLAN, after stating the case, delivered the opinion of the court.
Although the act of 1868 required all bonds issued under its authority to be disposed of for not less than par, and their proceeds invested in the stock of the company, the commissioners exchanged those issued by the town of Thompson directly with the railroad company for an equal amount of the latter's stock. This was in violation of the statute as construed by the Court of Appeals of New York, in several cases to which we had occasion to refer in Scipio v. Wright, 101 U.S. 665. We there held — following the decisions of the State court, some of which were made long prior to the passage of the particular enactment now under examination — that a purchaser of town bonds, having notice that they were exchanged for stock in a railroad company, in violation of a statute similar to that of 1863, was not a bona fide holder, and could not enforce the payment of them. We perceive no reason to qualify that ruling, and therefore proceed to the consideration of other questions not embraced by it.
It is apparent, upon the face of the act of 1871, that the legislature was advised of the fact that the commissioners had departed from the statute of 1868, in exchanging the bonds for stock in the railroad company. And its manifest intention was not only to ratify and confirm such exchange, but to protect any holder of the bonds, who became such in good faith, for a valuable consideration, against any defence arising out of defects or omissions in the consents of taxpayers, provided the exchange was at the par value of the bonds and the issue did not exceed the amount authorized by law.
If it be conceded that the consents were insufficient; that a seal was necessary as evidence of the official authority of the commissioners; that the recitals on the bonds, reasonably construed, gave notice to purchasers that they had been illegally exchanged for stock, when they should have been disposed of or sold, at not less than their par value, and their proceeds invested in the stock of the company, — the town is, nevertheless, liable, if the curative act of April 28, 1871, was within the constitutional power of the legislature to pass. While this question, in some of its aspects, may be one of general jurisprudence, — involving a consideration of the limits which, under our form of government, are placed upon legislative and judicial power, — it is proper to inquire as to the course of decisions in the highest court of New York upon the authority of the legislature to pass such an act. This becomes necessary in view of the fact that the Court of Appeals of that State has adjudged the act, in its main features, to be unconstitutional. That adjudication, it is contended, is conclusive of the rights of parties in this case. As we are unable to give our assent to this view, it is due to that learned tribunal that we should state, with some fulness, the reasons for the conclusion which we have reached.
Prior to the year 1858 the question arose in several cases pending in different inferior courts of New York as to the constitutional power of the legislature to authorize or require municipal corporations to subscribe for stock in railroad com
The decision in People v. Mitchell is important in other aspects of the present case. The main question was as to the validity of a confirmatory statute, the object of which was to cure the defects in certain affidavits filed in proof of the consent of taxpayers to a proposed municipal subscription of stock in a railroad company. The statute declared that the affidavits should be valid and conclusive proof in all courts and for all purposes, to authorize and uphold the respective subscriptions of the stock and the issue of bonds to the amount specified therein, and that the bonds should be valid and binding on the municipality issuing them, without reference to the form or the sufficiency of the affidavits. The court, referring to the confirmatory statute, said that "it was within the scope of legislative authority to modify the limitations and restrictions in the antecedent acts on this subject, to dispense with prior conditions, and to charge the commissioners with defined and imperative duties." And it quotes with approval our
Thus stood the doctrines of the State court upon the question of municipal subscriptions and as to the power of the legislature, by retrospective enactment, to cure defects in the exercise of powers granted to municipal corporations, when the act of April 28, 1871, was passed. But in 1873 the Court of Appeals decided People v. Batchellor, 53 N.Y. 128. That was a case of municipal subscription to a railroad corporation under an act passed in 1867, similar, in its main features, to the one passed in 1868 in reference to the Monticello and Port Jervis Railroad Company. It was claimed that the statute had not been complied with in obtaining consents from tax-payers. A subsequent act of the legislature required the subscription to be made upon the consents filed, which the court found not to be such as were prescribed by the statute under which they had been obtained. Without any subscription having been made, or bonds issued, a mandamus was sued out to compel the town to become a stockholder in the company, and to issue its bonds in payment of the subscription price of the stock. The court held that the consents of the taxpayers did not embrace such an issue of bonds as the subsequent act required; and that the legislature could not compel a municipal corporation to subscribe stock or issue bonds in aid of the construction of the road of a company, which, although public as to its franchise, was private as to the ownership of its property and its relations to its stockholders. The opinion was concurred in by four of the judges, one concurred in the result, one dissented, and one did not vote.
In Town of Duanesburgh v. Jenkins (57 id. 177), decided in 1874 by the commission of appeals, — of concurrent jurisdiction and equal authority with the Court of Appeals, — the court, by Johnson, J., reviewed the prior cases in the Court of Appeals involving the questions discussed in People v. Batchellor. In reference to the latter case it was intimated that the
In Williams v. Town of Duanesburgh (66 N.Y. 129), decided in May, 1876, the Court of Appeals of New York recognized the correctness of the principles announced in People v. Mitchell and Town of Duanesburgh v. Jenkins, citing, among other authorities, Gelpcke v. Dubuque, 1 Wall. 175; Thompson v. Lee County, 3 id. 327; Beloit v. Morgan, 7 id. 619, and St. Joseph Township v. Rogers, 16 id. 644. Alluding to the statutes for bonding towns in aid of railroads, the court held that the legislature could overlook the defective execution of the power conferred, and, by retroactive legislation, cure defects in the action of municipalities under those statutes. The legislature may, said the court, "by subsequent legislation, when there has been a failure to perform conditions precedent, and the bonds have been issued, dispense with such conditions, and ratify and confirm, and make valid and obligatory upon the municipality, bonds issued without such performance, — at least it may do so in cases where the municipality has, through the construction of the road, or by the receipt of the stock of the company in exchange for the bonds, received the benefit which the statute contemplated as the equivalent for the liability it was authorized to incur. The officers authorized under these statutes to issue the bonds are public agents, and the legislature, looking over the whole matter, may, when in its judgment justice requires it, ratify and confirm their acts, which otherwise would be valid. In this case, the legislature could originally have authorized the bonds of the town of Duanesburgh to be issued under the precise circumstances existing when they were issued, and if the acts of the commissioner have, by subsequent legislation, been ratified, it is equivalent authority
But it is contended that the Court of Appeals of New York, in the later case of Horton v. Town of Thompson (71 N.Y. 513), has decided the identical statute under examination to be unconstitutional, and that this court is bound by the decision. The case was commenced about the time the Circuit Court of the United States for the Southern District of New York sustained the validity of that statute, and gave judgment against the town for the amount of some of the bonds embraced in the issue of $148,000. Cooper v. Town of Thompson, 13 Blatchf. 434. Horton v. Town of Thompson was decided in the Supreme Court of the State after the present action was instituted. It was a suit upon two interest coupons of $35 each, belonging to the same issue of bonds. It was finally determined in the Court of Appeals shortly before the trial of this case in the court below. The questions raised were, whether the consent of the taxpayers was defective in not naming the railroad to the construction of which the fund should be applied; and whether the validating act of April 28, 1871, in so far as it declared the exchange of bonds for stock to be legal, was not unconstitutional. Upon the first question the court said, that as the consent was sufficiently comprehensive in its terms to embrace the road in question, and inasmuch as the legislature might legally have authorized it to be in the form in which it was actually given, the act of 1871 "probably cured the defect in its form." But the court, passing that question as one that need not be finally determined, held, upon the authority of People v. Batchellor, that the legislature had no power to authorize, or direct, the commissioners originally to contract the debt without any consent
It is to be observed that the court does not refer to or overrule Bank of Rome v. Village of Rome, People v. Mitchell, Town of Duanesburgh v. Jenkins, or Williams v. Town of Duanesburgh, supra.
We are unable to reconcile Horton v. Town of Thompson, upon the points now raised, with the doctrines of those cases or of others decided in the Court of Appeals prior to People v. Batchellor. It certainly cannot be said that there is such an established, fixed construction by that court of statutes similar to those of 1868 and 1869, or to the confirmatory act of 1871, as obliges us to follow Horton v. Town of Thompson, or that will justify any one in saying that the present question is finally at rest in the courts of that State. But independently of any such consideration, there are conclusive reasons why we cannot, in opposition to our own views of the law, as expressed in numerous cases, accept the principles of that case as decisive of the rights of the present parties. When the act of April 28, 1871, was passed, it was the established doctrine of the highest court of New York, as it was of this court, that the legislature, unless restrained by the organic law of the State, could authorize or require a municipal corporation, with or without the consent of the people, to aid, by a subscription of capital stock, in the construction of a railroad, having connection with the public interests of the people within the limits of such municipality, and to provide for payment by an issue of bonds or by taxation; that defects or omissions, upon the part of such municipal corporation or its officers, in the execution of the power conferred, or in the performance of the duty imposed, could be cured by subsequent legislation, — certainly, where the corporation had received the benefits which the original subscription was designed to secure. As, therefore, the legislature
The assignments of error present another question which it is our duty to notice.
The town pleaded in bar of the action a judgment of the Supreme Court of the State in an action commenced in June, 1869, by the attorney-general of the State, on the relation of Charles Kilbourne and others, taxpayers, against the Commissioners of the Town of Thompson, F.C. Crowley, C.L. Colt, William D. Colt, the Monticello and Port Jervis Railway Company, and the Town of Thompson. A temporary injunction was obtained on 24th June, 1869, restraining the respondents and each of them from using, loaning, or selling the bonds and from executing any other bonds based upon the consents given by the taxpayers. But that injunction was vacated and set aside on 27th July, 1869. A final decree was rendered in 1872 by which the bonds were declared to be null and void, and they as well as the certificates of stock exchanged therefor directed to be delivered up, by the respective parties, and cancelled. The general ground upon which the decree rested was that the provisions of the act under which they were issued were not complied with. From that judgment no writ of error or appeal seems to have been prosecuted. We have already seen that the entire issue of bonds was delivered to the railroad before the commencement of that action, that is, in May, 1869; and that after the dissolution of the injunction, to wit, in September and November, 1869, a large portion of the bonds had found their way into the hands of others who purchased them for value and without any notice of the pendency of the suit in the Supreme Court.
There is an insuperable difficulty in the way of plaintiff in error using the judgment in that case to defeat the present action. The bonds were negotiable securities, which had passed from the town before the action in the Supreme Court of the State was commenced. Those who purchased them, in the market, pending that litigation, or after it terminated,
It is scarcely necessary to say that the decree of the Supreme Court of the State can derive no special force, as against the defendant in error, by reason of the third section of the act of April 28, 1871. That section only protected from the operation of the act any action or proceeding at law, commenced or pending at the time of its passage. That provision furnishes, perhaps, an explanation of the failure of the Supreme Court, in its opinion, to refer to the act of 1871, which had passed before its final decree was entered. The purpose of the third section was only to require existing actions or proceedings at law to be determined without reference to that act, and does not affect the rights of a bona fide purchaser who was not a party to the suit, and was without notice of its pendency.
We perceive no error in the record.