Statement of the Case.

with, and which was subsequently waived by the county. It received certificates for the stock so subscribed for, and still holds them. It paid interest upon its bonds as maturing, and refunded them by an issue of new bonds for like amount under legislative authority. Held, that the bonds originally issued were binding and subsisting obligations of the county, and having been recognized as such by the county authorities by lifting them with new bonds under the refunding act, those funding bonds were valid and binding obligations upon the county in the hands of a bona fide holder for value before maturity.

Where there is a total want of power to subscribe for such stock and to issue bonds in payment, a municipality cannot estop itself from raising such a defence by admissions, or by issuing securities negotiable in form, nor even by receiving and enjoying the proceeds of such bonds. Where a municipality is empowered to subscribe with or without conditions as it may think fit, and where the conditions are such as it chooses to impose, there seems to be no good reason why it may not be competent for such municipality to waive such self-imposed conditions, provided, of course, such waiver is by the municipality acting as the principal, and not by mere agents or official persons.

THIS case came into the Circuit Court of Appeals for the Seventh Circuit, at October term, 1894, on an appeal from a decree of the Circuit Court of the United States for the Southern District of Illinois.

The original action was a suit in equity brought in the Circuit Court of Saline County, Illinois, by the county of Saline as complainant against the treasurer and auditor of public accounts of the State of Illinois and the collector of taxes and clerk of the county court of Saline County, to restrain the levy and collection of the tax required to be levied by the said auditor of public accounts of the State of Illinois, to pay the interest on one hundred registered refunding bonds of the said county.

Luther R. Graves, one of the holders of such refunding bonds, intervened in the Circuit Court of Saline County, and had the cause removed to the Circuit Court of the United States for the Southern District of Illinois, where the Society for Savings, D. B. Wesson, and William Burgoyne, other holders of such bonds, also filed intervening petitions. That court granted the injunction asked for by the county, and the case was then taken by appeal to the Circuit Court of Appeals of the Seventh Circuit, and thereupon the latter court certi

Statement of the Case.

fied to this court the following statement of facts and questions for its opinion and instructions:

The appellants were prior to the year 1883 bona fide holders for value and before maturity of certain bonds issued by the county of Saline to the Belleville and Eldorado Railroad Company and to the St. Louis and Southeastern Railway Company respectively. These bonds ($75,000 in amount to the former and $25,000 in amount to the latter company, and bearing interest at the rate of eight per centum per annum, payable semi-annually) were issued under authority of acts of the general assembly of the State of Illinois, passed in the years 1861 (Pr. Laws of Illinois, 1861, p. 485) and 1869 (Pr. Laws of Illinois, 1869, vol. 3, p. 238) and pursuant to an election duly ordered and held according to law on the 9th day of October, 1869, and in payment of subscriptions to stock in said companies respectively, dated January 15, 1870, duly authorized by said election, upon certain conditions, one of which was that said railroad should be commenced within one year and completed within three years from the date of subscription, and another of the conditions was that the St. Louis and Southeastern Railway should pass and a depot be established within one half-mile of the old court-house in Raleigh, and within one half-mile of the church in Galatia.

These bonds to the St. Louis and Southeastern Railway Company were dated January 1, 1872, payable twenty years after date, with option of paying five years after date, and were issued and delivered to that company February 1, 1872, and were purchased in open market by the appellants and for value and without notice, prior to the year 1876. The railroad was never constructed within one half-mile of the old court-house in Raleigh, or within one half-mile of the church in Galatia, but was constructed in a different direction, and the said condition was in no sense complied with, but was waived by the board of commissioners of said county after July 2, 1870.

The time for the completion of the Belleville and Eldorado Railroad was by the board of commissioners of the county of Saline after July 2, 1870, extended from time to time and

Statement of the Case.

until October 20, 1877, and the bonds were issued and delivered on the 19th day of April, 1877, being dated March 9, 1877, and payable twenty years after the 1st day of January, 1873, with option of paying five years after date.

The amendment to the constitution of the State of Illinois, which went into effect July 2, 1870, provided "no county, city, town, township or other municipality shall ever become subscriber to the capital stock of any railroad or private corporation, or make donations to or loan its credit in aid of such corporation; provided, however, that the adoption of this article shall not be construed as affecting the right of any such municipality to make such subscriptions where the same have been authorized, under existing laws, by a vote of the people of such municipalities prior to such adoption."

The bonds issued to the St. Louis and Southeastern Railway Company were valid obligations of the county in the hands of the appellants under the decisions of the Supreme Court in the cases of Insurance Company v. Bruce, 105 U. S. 328, and Oregon v. Jennings, 119 U. S. 74.

The bonds issued to the Belleville and Eldorado Railroad Company were void even in the hands of bona fide purchasers for value, within the decision of German Savings Bank v. Franklin County, 128 U. S. 526.

The bonds to the St. Louis and Southeastern Railway Company were issued before and those to the Belleville and Eldorado Railroad Company were issued after the decision of the Supreme Court of Illinois, in the case of Town of Eagle v. Kohn, 84 Illinois, 292, decided in 1876.

The validity of none of these bonds was at any time questioned by the county of Saline until December 30, 1889, and the county had annually paid the interest on all of these bonds from the time of their issue until they were exchanged for funding bonds of the county as hereinafter stated.

The county of Saline has always retained and now has the stock in said railway companies obtained by it for the bonds so issued to said railway companies respectively; but such stock is now and always has been wholly worthless and of no value.

Statement of the Case.

The general assembly of the State of Illinois, by act approved February 13, 1865, and by acts amendatory thereto approved April 27, 1877, and June 4, 1879, enacted as follows (Rev. Stat. Illinois, Cothran's annotated ed. 1881, p. 1119, 2 Starr & Curtis's Stats. c. 113, p. 1877):

"SEC. 1.. That in all cases where any county, city, town, township, school district or other municipal corporation has issued bonds or other evidences of indebtedness for money, or has contracted debts, which are the binding, subsisting legal obligations of such county, city, town, township, school district or other municipal corporation, and the same, or any portion thereof, remain outstanding and unpaid, it shall be lawful for the proper corporate authorities of any such county, city, town, township, school district or other municipal corporation, upon the surrender of any such bonds or other evidences of indebtedness, or any number or portion thereof, to issue, in lieu or place thereof, to the owners or holders of the same, new bonds prepared as hereinafter directed, and for such amounts, upon such time, not exceeding twenty years, payable at such place, and bearing such rate of interest, not exceeding seven per centum per annum, as may be agreed upon with the owners or holders of such outstanding bonds or other evidence of indebtedness: Provided, That bonds issued under this act, to mature within five years from their date, may bear interest not to exceed eight per cent per annum. And it shall also be lawful for the proper corporate authorities of any such county, city, town, township, school district or other municipal corporation to cause to be thus issued such new bonds, and sell the same to raise money to purchase or retire any or all of such outstanding bonds or other evidences of indebtedness; the proceeds of the sales of such new bonds to be expended, under the direction of the corporate authorities aforesaid, in the purchase or retiring of the outstanding bonds or other evidences of indebtedness of such county, city, town, township, school district or other municipal corporation, and for no other purpose whatever. All bonds or other evidences of indebtedness, issued under the provisions of this act, shall show upon their face that they are issued under this act,

Statement of the Case.

and the purpose for which they are issued, and shall be of uniform design and style throughout the state, to be prescribed by the state auditor, whose imperative duty it shall be to devise and prepare such uniform style and draft adapted to the classes of bonds herein provided for, namely, the first class to consist of bonds of which only the interest is payable annually; the second class to consist of those of which the interest and five per centum of the principal are to be paid annually; and the third class to consist of a graduated series, the first grade made payable, principal and interest, at the end of one year from the date of issue; the second at the end of two years, and thus to the end of the series, the class to be issued being at the option of the legal voters expressed as herein provided. In any case, the new bonds, or other evidences of indebtedness, authorized to be issued by this act, shall not be for a greater sum in the aggregate, than the principal and accrued or earned interest unpaid of such outstanding bonds or other evidences of indebtedness. And when such new bonds or other evidences of indebtedness shall have been issued, in order to be placed on the market and sold to obtain proceeds with which to retire outstanding bonds or other evidences of indebtedness, it shall be the duty of the state auditor, on the request of the corporate authorities issuing them, and at the expense of the corporation in whose behalf the issue is thus made, to negotiate the same, at not less than par value, and on the best terms which can be obtained: Provided, always, That any such county, city, town, township, school district or other municipal corporation issuing bonds under the provisions of this act, may, through its corporate authorities duly authorized, negotiate, sell or dispose of said bonds, or any part thereof, at not less than their par value, without the intervention of the auditor of state: And provided further, That no new bonds or other evidences of indebtedness shall be issued under this act, unless the same shall be first authorized, as hereinafter provided by a vote of a majority of the legal voters of such county, city, town, township, school district or other municipal corporation voting at some general election, or special election held for that purpose."