eral election duly held in the county on the ance of the city ordinance did not necessarily 7th day of November, 1882.

import a compliance with the Constitution Do such recitals estop the county from as. Had the bonds made the additional recital serting against a bona fide holder for value that they were issued in accordance with the that the bonds so issued created an indebt- Constitution, or had the ordinance stated in edness in excess of the limit prescribed by any form that the proposed indebtedness was the Constitution of Colorado? An answer to within the constitutional limit, or had the this question can be found in former deci- statute restricted the exercise of the authorisions of this court. It is necessary to ad. ty therein conferred to those municipal cor. vert to those decisions, particularly those in porations whose indebtedness did not at the which the court considered the effect of re-time exceed the constitutional limit, there citals importing compliance with constitu- would have been ground for holding that the tional provisions.

city could not, as against the plaintiff, disIn Buchanan v. Litchfield, 102 U. S. 278, pute the fair inference to be drawn from such 290, 292 [26: 138, 140, 141], which was a recital or statement as to the extent of its suit on interest coupons of municipal bonds, existing indebtedness.” the defense was made that the bonds were In Northern Bank v. Porter Township, issued in violation of that clause of the Con-110 U. S. 608, 616, 619 [28: 258, 261, 262], stitution of the state providing, that “no which was an action on municipal bonds, county, city, township, school district, or and involved a question respecting the conother municipal corporation shall be allowed clusiveness, as between the municipality and to become indebted, in any manner or for any a bona fide holder for value, of recitals in purpose, to an amount, including existing the bonds that they had been issued in conindebtedness, in the aggregate exceeding five formity to law, the court referred to the per centum on the value of the taxable prop- above rule established in Town of Coloma v. erty therein, to be ascertained by the last as Eaves, and said: “We are of opinion that sessment for state and county taxes previous the rule as thus stated does not support the to the incurring of such indebtedness." This position which counsel for plaintiff in error court said: "Ăs, therefore, neither the Con- | take in the present case. The adjudged stitution nor the statute prescribed any rule cases, examined in the light of their special or test by which persons contracting with circumstances, show that the facts which a municipal corporations should ascertain the municipal corporation issuing bonds in aid extent of their existing indebtedness,' it of the construction of a railroad was not would seem that if the bonds in question had permitted, against a "bona fide holder, to[ 265) contained recitals which, upon any fair con question in face of a recital in the bonds of struction, amounted to a representation up- their existence, were those connected with or on the part of the constituted authorities of growing out of the discharge of the ordinary the city that the requirements of the Consti- duties of such of its officers as were invested tution were met,--that is, that the city's in- with authority to execute them, and which debtedness, increased by the aniount of the the statute conferring the power made it bonds in question, was within the constitu- their duty to ascertain and determine before tional limit, then the city, under the deci. the bonds were issued; not merely for them. sions of this court, might have been estopped selves, as the ground of their own action, but, from disputing the truth of such representa equally, as authentic and final evidence of tions as against a bona fide holder of its bonds. their existence, for the information and ac The case might then, perhaps, }ave been tion of all others dealing with them in referbrought within the rule announced by this ence to it.

The question of legislacourt in Town of Coloma v. Eaves, 92 U. S. tive authority in a municipal corporation to 484 [23: 579), in which case we 'said, and issue bonds in aid of a railroad company now repeat, that “where legislative author. cannot be concluded by mere recitals; but,

ity has been given to a municipality, or to the power existing, the municipality may be (864)its officers, to subscribe for the *stock of a estopped by recitals to prove irregularities

railroad company, and to issue municipal in the exercise of that power; or, when the
bonds in payment, but only on some prece law prescribes conditions upon the exercise
dent condition, such as a popular vote favor of the power granted, and commits to the
ing the subscription, and where it may be officers of such municipality the determina-
gathered from the legislative enactment that tion of the question whether those conditions
the officers of the municipality were invested have been performed, the corporation will
with power to decide whether the conaition also be estopped by recitals which import
precedent has been complied with, their reci- such performance.'
tal that it has been, made on the bonds is- A leading case on this subject is Diron
sued by them and held by a bona fide pur- County v. Field, 111 V. S. 82, 92-94 (28:
chaser, is conclusive of the fact and binding 360, 363, 364), which involved the validity
upor. the municipality; for the recital is it. of bonds issued in the name of Dixon county,
self a decision of the fact by the appointed Nebraska, the Constitution of which state
tribunal.' So, in the more recent case of prescribed conditions upon which donations
Orleans v. Platt, 99 U. S. 676 [25: 404] it could be made to a railroad or other work of
was said that 'where the bonds on their face internal improvement by cities, towns, pre
recite the circumstances which bring them cincts, municipalities, or other subdivisions
within the power the corporation is estopped of the state, and mposed limitations upon
to deny the truth of the recital.'” Again: the amount thereof and upon the mode of
“A recital that the bonds were issued under creating municipality debts of that kind.
the authority of the statute and in pursu. The principal question was as to the conclu-

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siveness of certain recitals in the bonds sued sue bonds upon a condition are not the apon in that case. This court said: “The es pointed tribunals to decide the fact which toppel does not arise, except upon matte: 8 of constitutes the condition, their recital will fact which the corporate officers had autaor: not be accepted as a substitute for proof. In ity by law to determine and to certify. It other words, where the validity of the bonds is not necessary, it is true, that the recital depends upon an estoppel claimed to arise should enumerate each particular fact essen- upon the recitals of the instrument, the tial to the existence of the obligation. A question being as to the existence of power general statement that the bonds have been to issue them, it is necessary to establish issued in conformity with the law will suf- that the officers executing the bonds had lawfice, so as to embrace every fact which the fu! authority to make the recitals and to officers making the statement are authorized make them conclusive. The very ground of to determine and certify. A determination the estoppel is that the recitals are the offi.

and statement as to the whole series, where cial statements of those to whom the law re (266]more than one is *involved, is a determina. fers the public for authentic and final infor

tion and certificate as to each essential par- mation on the subject.”
ticular. But it still remains that there must In Lakc County v. Graham, 130 U. S. 674,
be authority vested in the officers, by law, as 680, 683, 684 [32: 1065, 1067, 1068), the
to each necessary fact, whether enumerated, question was as to the validity of certain
or nonenumerated, to ascertain and determine bonds issued by Lake county, Colorado, un-
its existence, and to guarantee to those dealing der the very statute of that state referred to
with them the truth and conclusiveness of in the bonds the coupons of which are here
their admissions. In such a case the means in suit, namely, the above act of February
ing of the law granting power to issue bonds 21st, 1881, authorizing the several counties
is that they may be issued, not upon the ex: of the state to fund their floating indebted.
istence of certain facts, to be ascertained and ness. It was recited in each of the bonds
determined whenever disputed, but upon the sued on in that case that they were issued
ascertainment and determination of their ex. under and by virtue of and in full com-
istence by the officers or body designated by pliar.ce with that act, and that “all the pro-
law to issue the bonds upon such a contingen- visions and requirements of said act have
cy. This becomes very plain when we suppose been fully complied with by the proper offi.
the case of such a power granted to issue bonds cers in the issuing of this bond.” No one
upon the existence of a state of facts to be of the bonds, let it be observed, contained
ascertained and determined by some persons any recital that it was issued in conformity
or tribunal other than those authorized to to the provisions of the state Constitution.
issue the bonds. In that case it would not be This court said: “Nothing is better settled
contended that a recital of the facts in the than this rule that the purchaser of bonds,
instrument itself, contrary to the finding of such as these, is held to know the constitu-
those charged by law with that duty, would tional provisions and the statutory restric-
have any legal effect. So, if the fact neces- tions bearing on the question of the authority
sary to the existence of the authority was to issue them; also the recitals of the bonds
by law to be ascertained, not officially by the ho buys; while, on the other hand, if he act
officers charged with the execution of the in good faith and pay value, he is entitled to
power, but by reference to some express and the protection of such recitals of facts as
definite record of a public character, then the bonds may contain. In this case the
the true meaning of the law would be that constitution charges each purchaser with
the authority to act at all depended upon knowledge of the fact that, as to all counties
the actual objective existence of the requisite whose assessed valuation equals one million
fact, as shown by the record, and not upon of dollars, there is a *maximum limit beyond [268]
its ascertainment and determination by any which those counties can incur no further
one; and the consequence would necessarily indebtedness under any possible conditions,
follow that all persons claiming under the provided that in calculating that limit debts
exercise of such a power might be put to contracted before the adoption of the Consti.
proof of the fact inade a condition of its law- tution are not to be counted. The statute,
fulness, notwithstanding any recitals in on the other hand, charges the purchaser
that instrument This principle is the es- with knowledge of the fact that the county
sence of the rule declared upon this point, commissioners were to issue bonds, at par,
by this court, in the well-considered words in exchange for such warrants of the county
of Mr. Justice Strong, in Town of Coloma v. as were themselves issued prior to the date
Eaves, 92 U. S. 484 [23: 579), where he of the first publication of the notice provided
states (p. 491 [23: 582]) that it is 'where it for; that the only limitation on the issue of
may be gathered from the legislative enact bonds in the statute was that the bonds
ment that the officers of the municipality should not exceed in amount the sum of the
were invested with the power to decide county indebtedness on the day of notice
whether the condition precedent has been aforesaid ; that while the commissioners
complied with,' that 'their recital that it has were empowered to determine the amount of
been, made in the bonds issued by them and such indebtedness yet the statute does not re-

neld by a bona fide purchaser, is conclusive fer that board, for the elements of its com[267]* of the fact, and binding upon the municipal- putation, to the Constitution or to the stan

ity; for the recital is itself a decision of the dards prescribed by the Constitution, but fact by the appointed tribunal.' The con leaves it open to them, without departing verse is embraced in the proposition, and is from any direction of the statute, to adopt equally true. If the officers authorized to is-' solely the basis of the county warrants. The




recitals of the bonds were merely to the ef- of each series, and the total amount in all, fect that the issue was ‘under and by vir- estop the county from pleading the constitutue of and in full compliance with the stat. tional limitation? In our opinion these two ute; “that all the provisions and require features are of vital importance in distinments of said act have been fully complied guishing this from Lake County with by the proper officers in the issuing of v. Graham and Dixon County v. Field, this bond;' and that the issuing was au- and are sufficient to operate as an thorized by a vote of a majority of the duly toppel against the county. Of course the qualified electors, etc.; no express reference purchaser of bonds in open market being made to the Constitution, nor any bound to take notice of *the constitutional[ 270) statement made that the constitutional re- limitation on the county with respect to inquirements had been observed. There is, debtedness which might incur. But when, therefore, no estoppel as to the constitution upon the face of the bonds, there was any al question, because there is no recital in re- cxpress recital that the limitation had not gard to it. Curroll County v. Smith, 111 U. been passed, and the bonds themselves did $. 556" [28: 517]. In disposing of the con- not show that it had, he was bound to look tention that, under the doctrines of certain no further. An examination of any paradjudged cases, the county was estopped to ticular bond would not disclose, as it would deny that the bonds were issued in conform in the Lake County Case and in Dixon Counity to the Constitution, the court said: “The ty v. Field, that, as a matter of fact, the conquestion here is distinguishable from that in stitutional limitation had been exceeded in the cases relied on by counsel for defendant the issue of the series of bonds. The purin error. In this case the standard of va- chaser might even know, indeed it may be lidity is created by the Constitution. In that admitted that he would be required to know, standard two factors are to be considered; the assessed valuation of the taxable propone, the amount of assessed value, and the erty of the county, and yet he could not as. other the ratio between that assessed value certain by reference to one of the londs and

and the debt proposed. These being exac- the assessment roll whether the county had (269]tions of the Constitution itself, *it is not exceeded its power, under the Constitution,

within the power of a legislature to dispense in the premises. True, if a purchaser had with them, either directly or indirectly, by seen the whole issue of each series of bonds the creation of a ministerial commission and then compared it with he assessment whose finding shall be taken in lieu of the roll, he might have been arde to discover facts. In the case of Sherman County v. whether the issue exceeded the amount of inSimons, 109 U. S. 735 [27: 1093], and oth debtedness limited by the Constitution. But ers like it, the question was one of estoppel that is not the test to apply to a transaction as against an exaction imposed by the legis- of this nature. It is not supposed that any lature; and the holding was that the legis- one person would purchase all of the bonds lature, being the source of exaction, had at one time, as that not the usual cuurse created a board authorized to determine of business of this kind. The test is, What whether its action had been complied with, does each individual bond disclosc? If the and that its finding was conclusive to a bona face of one of the bonds had disclosed that, fide purchaser. So also in Oregon v. Jen- as a matter of fact, the recital in it, with renings, 119 U. S. 74 (30: 323), the condition spect to the constitutional limitation, was violated was not one imposed by the Consti- false, of course the county would not be tution, but one fixed by the subscription con- bound by that recital, and would not be es. tract of the people."

topped from pleading the invalidity of the This brings us in our reference to the au- bonds in this particular. Such was the case thorities to the important case of Chaffee in Lake County v. Graham and Dixon CounCounty v. Potter, 142 U. S. 355, 363, 364, ty v. Field. But that is not this case. 366 [35: 1040, 1043, 1044). That was an Here, by virtue of the statute under which action upon coupons of bonds issued by the bonds were issued, the county commisChaffee county, Colorado, under the act of sioners were to determine the amount to be February 21st, 1881, under which the bonds issued, which was not to exceed the total here in suit were issued. The bonds and amount of the indebtedness at the date of the coupons were in the same form and contained first publication of the notice requesting the the same recitals as the above bonds issued holders of county warrants to exchange their by Gunnison county, and were of like date. warrants for bonds, at par. The statute, in The defense in part in the Chaffee county case terms, gave to the commissioners the deterwas that the bonds, and each of them, were mination of a fact, that is, whether the is. issued in violation of the Constitution of the sue of bonds was in accordance with the Constate. After referring to the decision in stitution of the state and the statute under Lake County v. Graham (the bonds in which which they *were issued, and required them[271) did not contain any express recitals as to to spread a certificate of that determination the constitutional limit of indebtedness), and upon the records of the county. The recital stating that it was based largely on the rul. in the bond to the effect that such determi. ing in Dixon County v. Field, this court nation has been made, and that the constisaid: “To the views expressed in that case tutional limitation had not been ccceeded in we still adhere; and the only question for us the issue of the bonds, taken in connection now to consider, therefore, is: Do the ad- with the fact that the bonds themselves did ditional recitals in these bonds, above set not show such recital to be untrue, under out, and in the absence from their face of the law, estops the county from saying that anything showing the total number issued 'it is untrue. Town of Coloma v. Eaves, 92

v. Illinois, it was said, replying to the argu- | regular trains carrying passengers, if so ment that the state statute applied in terms many are run daily, Sundays excepted, to only to transportation within the state: stop at any station, city, or village of three "Whatever may be the instrumentalities by thousand inhabitants, for a time sufficient to which this transportation from the one point receive and let off passengers, so tar from be to the other is effected, it is but one voyage, ing unreasonable, will subserve the public as much so as that of the steamboat on the convenience.” Mississippi river. It is not the railroads But the question of the reasonableness themselves that are regulated by this act of of a public statute is never open to the the Illinois legislature so much as the charge courts. It was not open even to the supreme for transportation, and if each one of the court of the state of Ohio to say whether the states through whose territories these goods act in question was reasonable or otherwise. are transported can fix its own rules for Much less does the power of the legislature prices, for modes of transit, for times and of Ohio to pass an act regulating a railroad modes of delivery, and all the other incidents corporation depend upon the judgment or of transportation to which the word 'regu- opinion of this court as to the reasonablelation can be applied, it is readily seen that ness of such an act. the embarrassments upon interstate trans- * And again: “It was for the state of Ohio[332] portation, as an element of interstate com- to take into consideration all the circummerce, might be too oppressive to be submit- stances affecting passenger travel within its ted to.. As restricted to a transporta- limits, and, as far as practicable, make such tion which begins and ends within the limits regulations as were just to all who might of the state, it, the regulation, may be very pass over the road in question. It was not just and equitable, and it certainly is the bound to ignore the convenience of its own province of the state legislature to determine people, whether traveling on this road from that question. But when it is attempted to one point to another within the state, or apply to transportation through an entire from places in the state to places beyond its series a principle of this kind, and each one limits, or the convenience of those outside of the states shall attempt to establish its the state who wished to come into it, and own rates of transportation, its own meth- look only to the convenience of those who ods to prevent discrimination in freights, or desired to pass through the state without to permit it, the deleterious influence upon stopping.” the freedom of commerce among the ates It was, I respectfully submit, just such and upon the transit of goods through those action on the part of the state of Ohio, and states cannot be overestimated.”

just such reasoning made to support that In Illinois Central R. R. Co. v. Illinois, action, that are forbidden by the Constitu11]stress was justly *laid on the manifest pur- tion of the United States and by the deci

pose of Congress to establish a railroad in sions of this court hereinbefore cited. If
the center of the continent, connecting the each and every state through which these
waters of the Great Lakes with those of the interstate highways run could take into con-
Gulf of Mexico, for the benefit of interstate sideration all the circumstances affecting
commerce, as well as of the military and passenger travel within its limits, and make
postal departments of the government. such regulations as, in the opinion of its leg-

A similar purpose has been manifested by islature, are “just and for the convenience
Congress in the legislation hereinbefore re- of its oum people," then we should have re-
ferred to, by authorizing the formation of stored the confusion that existed in commer-
continuous lines of transportation, by creat-cial transactions before the adoption of the
ing a permanent commission to supervise the Constitution, and thus would be overruled
transactions of railroad companies so far as those numerous decisions of this court nulli-
they affect interstate commerce, and by em. fying state legislation proceeding on such
ploying such continuous and connecting propositions.
roads for the transportation of its mails,

Again it is said:
troops, and supplies.
These views by no means result in justi- the state and the corporation created by it

“Any other view of the relations between fying the railroad company defendant in would mean that the directors of the corporfailing to supply the towns and villages ation could manage its affairs solely with through which it passes with trains ade- reference to the interests of stockholders, and quate and proper to transact local business. Such failure is not alleged in this case, nor

without taking into consideration the infound to be a fact by the trial court. "And terests of the general public. It would mean, if the fact were otherwise, the remedy must not only that such directors were the exclube found in suitable legislation or legal pro- sive judges of the manner in which the corceedings, not in an enactment to convert poration should discharge the duties imposed through into local trains.

upon it in the interest of the public, but that Some observations may be ventured on the the corporation, by reason of being engaged reasoning employed in the opinion of the in interstate commerce, could build up cities court. It is said:

and towns at the ends of its line, or at fa"In what has been said we have assumed vored points, and by that means destroy or that the statute is not in itself unreasonable. retard the growth and prosperity of interIn our judgment this assumption is not un vening points. It would mean that the dewarranted. The requirement that a rail. fendant railway company could, beyond the road company whose road is operated within * power of the state to prevent it, run all of[338) the state shall cause three, each way, of its its trains through the state without stor

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of our former decisions. This course has al. The remaining five bonds owned by the so been pursued in order to bring out clear: plaintiff corporation were also purchased ly the fact that the present case is controlled from Stanley, who received them directly by the judgment in Chaffee County v. Potter. from the county in exchange for warrants

The views of the circuit court, as expressed that he owned and held. There is no reason 1274Jin its charge in * this case and as enforced by why upon the surrender of county warrants

its peremptory instruction to find for the de- for county bonds he was not entitled to the fendant, cannot be approved without over- benefit of the rule above declared as to the ruling that case. It was expressly decided conclusiveness of the recital in the bonds, or in the Chaffee county case that the statute why he may not be regarded as much an inunder which the bonds there in suit (the nocent holder of the bonds exchanged for bonds here in suit being of the same class) county warrants as of the other bonds purauthorized the county commissioners to de- chased by him in open market. There is no termine whether the proposed issue of bonds proof that at the time of such exchange he would in fact exceed the limit prescribed by had or was chargeable with knowledge or the Constitution and the statute; and that notice that the debt created by the bonds exthe recital in the bond to the effect that such ceeded the constitutional limit; consequentdetermination had been made and that the ly, in taking the bonds in exchange he was constitutional limitation had not been exentitled, for the reasons heretofore given, to ceeded, taken in connection with the fact that rely upon the truth of the recitals contained the bonds themselves did not show such re- in them. When the board of county comcital to be untrue, estopped the county, un- missioners, proceeding under the act of 1881, der the law, from saying that the recital was offered to exchange county bonds for the not true. We decline to overrule Chaffee warrants held by him, he was entitled under County v. Potter, and upon the authority of the circumstances disclosed to assume it to that case, and without re-examining or en be true, as recited in the bonds, that the conlarging upon the grounds upon which the stitutional limit was not being exceeded. decision therein proceeded, we adjudge that

It is insisted with much earnestness that as against the plaintiff the county of Gun- | the principles we have announced render it nison is estopped to question the recital in impossible for a state by a constitutional prothe bonds in question, to the effect that they vision to guard against excessive municipal did not create a debt in excess of the consti- indebtedness. By no means. If a state tutional limit, and were issued by virtue of Constitution, in fixing a limit for indebtedand in conformity with the statute of 1881, ness of that character, should prescribe a and in full compliance with the requirements definite rule or test for determining whether of law.

that limit has already been exceeded, or is We have assumed thus far that the plain- being exceeded by any particular issue of tiff corporation was a bona fide purchaser or bonds, all who purchase such bonds would holder of the bonds to which the coupons in do so subject to that rule or test, whatever suit were attached. Upon this question we might be the hardship in the case of those concur in the views expressed by the circuit who purchased them in the open market *in[276; court of appeals. Speaking by Judge Thayer, good faith. Indeed, it is entirely competent that court said: "The testimony contained for a state to provide by statute that all obin the present record shows, we think, with. ligations, in whatever form executed by a out contradiction, that the plaintiff was a municipality existing under its laws, shall bona fide holder when the suit was brought be subject to any defense that would be alof at least five of the bonds which are in- lowed in cases of non-negotiable instruments. volved in the present controversy, because it But for reasons that everyone understands holds the title of Joseph Stanley, who was no such statutes have been passed. Munichimself an innocent purchaser of said bonds ipal obligations executed under such a statbefore maturity, for the price of ninety- ute could not be readily disposed of to those eight cents on the dollar. The rights which who invest in such securities. Stanley acquired by virtue of such purchase It follows that the circuit court erred in inure to the plaintiff, by virtue of its pur- directing the jury to return a verdict for the chase of the bonds from Stanley in June, defendant. 1892, and this without reference to any What has been said renders it unnecessary knowledge which the plaintiff may have had to consider various questions arising upon

at the latter date affecting the validity of exceptions to specific rulings in the circuit [275]the securities. *A bona fide holder of com court as to the admission and exclusion of

mercial paper is entitled to transfer to a evidence, and as to those parts of the charge
third party all the rights with which he is to which objections were made. Those rul.
vested, and the title so acquired by his in- ings were inconsistent with the principles
dorsee cannot be affected by proof that the herein announced.
indorsee was acquainted with the defenses As neither the circuit court nor the circuit
existing against the paper. Commissioners court of appeals proceeded in accordance
of Marion County v. Clark, 94 U. S. 278, 286 with the principles herein announced, the
[24: 59, 62]; Hill v. Scotland County, 34 judgment of each court is reversed, and the
Fed. Rep. 208; Dan. Neg. Inst. 4th ed.) 8 cause is remanded for further proceedings
803, and cases there cited." 49 U. S. App. consistent with this opinion.
399, 413.

It is so ordered.

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