Summary
In Commissioners v. Call, 123 N.C. 308, this Court says: "An act of the Legislature passed in violation of the Constitution of the State, or in disregard of its mandatory provisions, is, to the extent of such repugnance, absolutely void; and all bonds issued thereunder bear the brand of illegality stamped upon their face by the hand of the law."
Summary of this case from Debnam v. ChittyOpinion
(Decided 9 November, 1898.)
County Bonds — Railroad Stock — Invalidity — Estoppel.
1. Legislation authorizing the creation of county indebtedness must conform to constitutional requirements.
2. A county bond stating on its face the act under which it is issued is notice to the holder, and estops him from controverting the statement.
CIVIL ACTION pending in WILKES Superior Court and heard by consent before Starbuck, J., at Winston, upon a motion by defendants to vacate the restraining order heretofore granted until the final hearing.
The prayer of the complaint was to enjoin the defendant, County Treasurer of Wilkes, from paying the coupons on county bonds issued in aid of the Northwestern North Carolina Railroad Company on the ground that the bonds in controversy were issued by the Board of Commissioners of Wilkes County, without lawful authority so to do, and are invalid and void.
His Honor refused the motion to vacate the restraining order, and defendants excepted and appealed.
The statement of the case fully appears in the opinion of the Court and in the dissenting opinions.
(309) A. C. Avery for plaintiffs.
No counsel contra.
This is an action brought to test the validity of certain bonds issued by Wilkes County in payment of its subscription to the stock of the Northwestern North Carolina Railroad Company. The suit was brought by the Commissioners of the county of Wilkes against the County Treasurer. The defendants Turner and Wellborn, who had become the owners of one of the bonds after the bringing of this action, by leave of the court, became parties defendant, and invited all other bond-holders to come in and join them in resisting the action.
In the face of each bond, dated 1 October, 1889, appears the explicit statement that: "This bond is one of a series of one hundred bonds of the denomination of one thousand dollars each, issued by authority of an act of the General Assembly of North Carolina, ratified 20 February, A.D. 1879, entitled, 'An Act to amend the charter of the Northwestern North Carolina Railroad for the construction of a second division from the towns of Winston and Salem, in Forsyth County, up the Yadkin Valley, by Wilkesboro, to Patterson's Factory, Caldwell County,'" etc. The bond does not allude in any way to any other legislative act, nor does it profess to claim further validity than that derived from the recited act.
It is admitted, as well as clearly shown by the evidence, that this act of 20 February, 1879, was not passed in accordance with the mandatory provisions of the Constitution of this State, as construed by this Court inasmuch as upon the passage of said bill upon its second reading in the House of Representatives, there was no call of the ayes and noes, and further that the vote upon such reading was not recorded (310) in the Journal of the House. Constitution, Art. II, sec. 14. The amendatory act of 1881 is subject to the same objection. In view of the recent decisions of this Court it is useless to discuss this question now, as the rule has been definitely settled in the following cases: Bank v. Commissioners of Oxford, 119 N.C. 214; Commissioners v. Snuggs, 121 N.C. 394; Charlotte v. Shepard, 120 N.C. 411 and 122 N.C. 602; Rodman v. Town of Washington, 122 N.C. 39. Under the authority of these decisions we are compelled to hold that the entire issue of these bonds is null and void for want of legislative authority. An act of the Legislature passed in violation of the Constitution of the State, or in disregard to its mandatory provisions, is to the extent of such repugnance absolutely void; and all bonds issued thereunder bear the brand of illegality stamped upon their face by the hand of the law.
The act under which these bonds profess to have been issued was never legally passed and never became a law. As was said in Norton v. Shelby County, 118 U.S. 425, "An unconstitutional act is not a law; it confers no rights; it imposes no duties; it affords no protection; it creates no office; it is, in legal contemplation, as inoperative as though it had never been passed."
The Constitution of the State is plenary notice to the world of its organic law. There can be no bona fide holders of unconstitutional obligations, nor can ignorance of public statutes and legislative journals be deemed otherwise than willful or negligent. The journals are published for the information of the public, and are widely distributed and easily accessible, fully as much so as the public records of a (311) county. Surely no one would be heard to say that he was the bona fide owner of a piece of land simply because he held a deed therefor, when an inspection of the records would show that his grantor had no power to convey. It has been well said in U.S. v. Macon County Court, 99 U.S. 582, "The difficulty lies in the want of original power. While there has undoubtedly been great recklessness on the part of the municipal authorities in the creation of bonded indebtedness, there has not infrequently been gross carelessness on the part of purchasers when investing in such securities. Every purchaser of a municipal bond is chargeable with notice of the statute under which the bond was issued. If the statute gives no power to make the bond, the municipality is not bound."
A careful distinction should be drawn between the want of power to issue bonds, and mere irregularities in the exercise of that power. The latter, under certain circumstances, may be cured by recitals, or eliminated by estoppel; but a want of power goes to the very root of the transaction, and destroys its vitality. A tree may yet live though its branches are badly shattered by the storm, but the last leaf falls when the root is dead.
This rule has been clearly laid down by the Supreme Court of the United States in the oft-cited case of Anthony v. County of Jasper, 101 U.S. 693, where Chief Justice White says: "Dealers in municipal bonds are charged with notice of the laws of the State granting power to make the bonds they find on the market. This we have always held. If the power exists in the municipality, the bona fide holder is protected against mere irregularities in the manner of its execution, but if there is a want of power, no legal liability can be created. When the (312) bonds now in question were put out the law required that to be valid they must be certified to by the Auditor of State. In other words, that officer was to certify them before their execution was complete, so as to bond the public for their payment. We had occasion to consider in McGarrahan v. Mining Co., 96 U.S. 316, the effect of statutory requirements as to the form of the execution of patents to pass the title of lands out of the United States, and there say: 'Each and every one of the integral parts of the execution is essential to the validity of a patent. They are of equal importance under the law, and one cannot be dispensed with more than another. Neither is directory, but all are mandatory. The question is not what, in the absence of statutory regulations, would constitute a valid grant, but what the statute requires.' The same rule applies here. The object to be accomplished is the complete execution of a valid instrument, such as the law authorizes public officers to put out and bind for the payment of money the public organization they represent."
By repeated adjudications this has become the settled rule of that court. Police Jury v. Britton, 82 U.S. 566, 570, 572; Claiborne County v. Brooks, 111 U.S. 400, 406; Bank v. Porter Township, 110 U.S. 608, 618; Concord v. Robinson, 121 U.S. 165, 167; Kelley v. Milan, 127 U.S. 139, 150; Norton v. Dyersburg, 127 U.S. 160, 175; Young v. Clarendon Township, 132 U.S. 340; Hill v. Memphis, 134 U.S. 198, 203; Merrill v. Monticello, 138 U.S. 673, 686, 687; City of Brenham v. Bank, 144 U.S. 173; Savings Asso. v. Perry County, 156 U.S. 692, 704.
But it is urged that while the bonds were expressly issued under the act of 1879, there was, apparently unknown to both parties to the transaction, and certainly ignored by them, an existing authority (313) to issue said bonds derived from an ordinance of the Constitutional Convention passed in 1868; and that therefore we should hold that these bonds were unwittingly issued under that ordinance, and are therefore valid. The only authority we can find in that ordinance in any way authorizing the subscription to the stock of the company or the issuing of the bonds, is as follows: "Section 2. That the capital stock of said company may be created by subscriptions on the part of individuals, corporations and counties, in shares of one hundred dollars." "Section 12. Be it further ordained that the stockholders of said company may pay the stock subscribed by them either in money, labor, or material for constructing said road, as the board of directors may determine, and that all counties or towns subscribing stock to said company shall do so in the same manner and under the same rules, regulations and restrictions as are set forth and prescribed in the act incorporating the North Carolina and the Atlantic Railroad Company, for the government of such towns and counties as are now allowed to subscribe to the capital stock of said company." That said ordinance cannot be relied on to support the validity of the bonds at issue is apparent for several reasons: First. We do not see that any authority whatever is given or attempted to be given by either of these sections, to Wilkes County to subscribe to the capital stock of this company. But it is said that section 12, by referring to the charter of the "North Carolina and Atlantic Railroad Company," by which we presume is meant the Atlantic and North Carolina Railroad, chapter 136 of the Laws of 1852, confers upon the different counties, through or near (314) which the Northwestern North Carolina Railroad may run, the same authority to subscribe as was given to the counties tributary to the former company. Said section does not refer generally to the act of 1852, nor does it profess to confer any of the powers therein granted. It simply says that those counties and towns that do subscribe "shall do so in the same manner and under the same rules, regulations and restrictions" as are prescribed in the former act. The words "same restrictions" are peculiarly significant here, as the act of 1852, sec. 45, provides in express terms that "if the said road be not completed within six years after the ratification of this act, this charter shall be forfeited." Therefore, even if the powers granted in the act of 1852 had been given to the Northwestern North Carolina Railroad Company or the counties in its interest, subject to the "same restrictions," those powers would have expired by their own limitation long before their attempted exercise 23 years thereafter. As all such powers must be strictly construed, this restrictive provision must be held to be in the nature of a limitation and not a condition subsequent. That is, the authority given to the counties to subscribe, if it ever existed, expired at the end of six years unless already exercised in such a way as to create vested rights. But it makes no difference how the power was exercised, if there was no power. Section 12 of the ordinance of 1868 does not refer to section 33 of the act of 1852, which confers the power, but is evidently limited by its very terms to sections 34, 35, and 36, which prescribe the manner in which that power must be exercised by the counties or towns to which it may have been granted. It would have been very easy for the convention to have given the same authority granted in section 33, either in express terms or by reference to said section, but it has not done (315) so, and we cannot do so by judicial construction. There is no principle better settled than that all charters granting special privileges or powers must be not only strictly construed, but must be construed most strongly against the grantee. This rule, with the reasons therefor has been so clearly stated by Chief Justice Pearson in R. R. v. Reid, 64 N.C. 155, 158, that we can do no better than to quote his language, as follows: "It is equally well settled that contracts made by the State with individuals, in granting charters, are not to be construed by the same rule as contracts between individuals. In the latter case the rules of common law, which is the same as common sense, is 'words are to be taken in the strongest sense against the party using them,' on the idea that the said interest induces a man to select words most favorable for himself. It is otherwise where the State is a party; for it is known that in obtaining charters, although the sovereign is presumed to use the words, in point of fact the bills are drafted by individuals seeking to procure the grant, and that 'the promoters,' as they are styled in England, or the 'lobby-members,' as they are styled on this side of the Atlantic, have the charters or acts of incorporation drafted to suit their own purposes; and a matter of this kind, instead of being in its strict sense a contract, is more like the act of an indulgent head of the family dispensing favors to its different members and yielding to importunity. So the courts, to save the old gentleman from being stripped of the very means of existence by sharp practice, have been forced to reverse the rule of construction, and to adopt the meaning most favorable to the grantor." The same rule is laid down in R. R. v. Canal Comrs., 21 Pa. St. Rep., 9, 22, where Chief Justice Jeremiah S. Black says for the Court: "It may be that the privilege which the (316) relators claim might arise by implication out of their charter or some other acts cited by their counsel, if we were at liberty to give them the broad construction which we sometimes apply to other laws of a different character. But corporate powers can never be created by implication nor extended by construction. No privilege is granted unless it be expressed in plain and unequivocal words, testifying the intention of the Legislature in a manner too plain to be misunderstood. When the State means to clothe a corporate body with a portion of her own sovereignty, and to disarm herself to that extent of the powers which belong to her, it is so easy to say so that we will never believe it to be meant when it is not said; and words of equivocal import are so easily inserted by mistake or fraud that every consideration of justice and policy requires that they should be treated as nugatory, when they do find their way into the enactments of the Legislature. In the construction of a charter, to be in doubt is to be resolved; and every resolution which springs from doubt is against the corporation. This is the rule sustained by all the courts in this country and in England. No other has ever received the sanction of any authority to which we owe much deference. This Court has asserted it times without number. We have ruled five or six important cases upon it within the last year. We seem not to have made much impression on the professional mind, and we are probably making as little now. But when respectable counsel call upon us hereafter (as they doubtless will) to enlarge corporate powers by construction, we can only repeat again and again that our duty imperatively forbids it. The privileges of the Pennsylvania Railroad Company may be too rigidly restricted. If the usefulness of the company would be increased by extending them, let the Legislature see to it. But let it be remembered that nothing but plain English words (317) will do it."
It should be borne in mind that there is no pretense of authority for the issue of these bonds outside of the charter of the Northwestern North Carolina Railroad Company and its amendments. It has been the actor as well as the beneficiary throughout, and therefore the acts under consideration come peculiarly within the rule of strict construction laid down by the two great Chief Justices from whom we have quoted.
We have not overlooked the fact that in Belo v. Comrs., 76 N.C. 489, this Court strongly intimates that section 12 of the charter did confer the authority given in section 33 of the act of 1852; but it does so incidentally and with little discussion, because it was not denied in the pleadings. This was not the determining point in the case which turned chiefly upon the recitals in the bonds and the ratifying act of 1868. This is clearly shown in the opinion itself, which devotes four pages to the discussion of equitable estoppel arising on the recitals, and about half a page to the possible binding effect of the ordinance, winding up with the significant sentence on page 497 that "as the case is presented to us, that question does not arise, and we do not decide it." It evidently did not receive careful investigation, as it apparently did not arise on the pleadings. The Court stated that "the principle of equitable estoppel is a most important element in the transaction," and that the recitals in the bonds (which were essentially different from those now before us) constituted an estoppel in pais upon the county of Forsyth. Can it be questioned that estoppels must be mutual, and that he (318) who relies upon the recitals in the bond to estop another must himself be bound by them? If this is so, it ends the case at bar, as all the recitals point to the unconstitutional act of 1879. The case of Hill v. Comrs., 67 N.C. 367, considering simply the power of the Legislature to authorize the issue of bonds, has no bearing upon the present case. The Forsyth County bonds recited that they were "authorized by an ordinance of 1868, by an order of the Court of Pleas and Quarter Sessions of Forsyth County at June Term, 1868, and reenacted and ratified and confirmed by an act of the General Assembly ratified 11 August, 1868." The cases are clearly distinguishable. Another important point of difference is that the Forsyth County bonds were voted and subscribed within a few months after the passage of the ordinance, before whatever power it may have given, if any, had expired by its own limitation. It is evident that the Legislature, as well as the railroad company itself, thought that the authority given in the ordinance was not sufficient, as in both cases additional legislation was sought and obtained. But with this essential difference: In the case at bar, the amendatory act having been passed in violation of mandatory provisions of the Constitution, in legal contemplation, was never passed. As it has no legal existence, we have no authority to construe it, but simply to obliterate it. In Jarratt v. Moberly, 103 U.S. 580, 588, the Court in discussing a similar case says: "Further legislation was needed. Such was the evident opinion of the Legislature of the state, for by an additional act, passed on 29 March, 1872, the authority was given in terms." And on page 685 it says: "A constitutional provision should not be construed so as to defeat its evident purpose, but rather so as to give it effective operation and suppress the mischief at which it (319) was aimed."
Secondly. The bonds on their face profess to have been issued under an entirely different statute.
The principle laid down by the Federal authorities, and practically of universal acceptance, is that estoppels rest upon the recitals in the bond. The rule is generally cited as laid down in Town of Colonia v. Eaves, 92 U.S. 484, as follows: "When legislative authority has been given to a municipality, or to its officers, to subscribe to the stock of a railroad company, and to issue municipal bonds, in payment, but only on some precedent condition, such as a popular vote favoring the subscription, and where it may be gathered from the legislative enactment that the officers of the municipality were invested with power to decide whether the condition precedent has been complied with, their recital that it has been, made in the bonds issued by them and held by a bona fide purchaser, is conclusive of the fact and binding upon the municipality; for the recital is itself a decision of the fact by the appointed tribunal." Buchanan v. Litchfield, 102 U.S. 278; Bank v. Porter, 110 U.S. 608, 616.
In the case at bar the bonds recite that they were issued under the act of 1879; and as all estoppels of this nature to be operative must be mutual, are not the bondholders themselves estopped from setting up any facts to the contrary? These recitals point out the very act under which the power is claimed, and it was the duty of all persons claiming thereunder to see that the act met the constitution requirements.
Certainly the estoppel can never go further than the recital itself. It cannot operate upon any other act, nor as to the validity of any act. In Gilson v. Dayton, 123 U.S. 59, it was held that, "As it (320) appears on the face of the bonds sued on in this action that they were issued under the special act of 18 February, 1857, which was held void in Post v. Supervisors, 105 U.S. 667, and not under the general law of 6 March, 1867, the judgment dismissing the action is affirmed." As was said in County of Davies v. Huidekoper, 98 U.S. 98, 100: "There must indeed be power, which if formally and duly exercised, will bind the county or town. No bona fides can dispense with this, and no recital can excuse it." In Dixon County v. Field, 111 U.S. 83, 92, it was held that the estoppel arising from recitals, in the face of the bonds, never extended to or covered matters of law, and could arise only "upon matters of fact which the corporate officers had authority to determine and to certify."
Thirdly. That ordinance did not create a contract between the railroad company and the county of Wilkes. The only contract that has ever existed between them was the contract of 1888, which was subject to all the constitutional provisions then existing. The mere authority given in the charter of a railroad company to receive subscriptions from municipal corporations, where no consideration is given and no attempted exercise of the power, has none of the essential elements of a contract, and is held at the pleasure of the law-making power. Much more so is it subject to constitutional restrictions. Town of Concord v. Bank, 92 U.S. 625, 630; Concord v. Robinson, 121 U.S. 165, 169; Loan Asso. v. Perry County, 156 U.S. 692, 697. Concord v. Bank, supra, was overruled in Fairfield v. Gallatin, 100 U.S. 47, only in so far as it applied to the Constitution of Illinois, and for the only reason that the Supreme Court of the United States deemed it proper, in the construction of a State Constitution, to follow the State decisions (321) instead of their own view of the law. The general principle remains unchanged, and meets our approval.
The ratification of the Constitution on 24 April, 1868, when it went into effect for all domestic purposes, annulled all special powers remaining unexecuted and not granted in strict accordance with its requirements. Article II, section 14, is as follows: "No law shall be passed to raise money on the credit of the State, or to pledge the faith of the State, directly or indirectly, for the payment of any debt, or to impose any tax upon the people of the State, or to allow the counties, cities or towns to do so, unless the bill for the purpose shall have been read three several times in each House of the General Assembly, and passed three several readings, which readings shall have been on three different days, and agreed to by each House respectively, and unless the yeas and nays on the second and third reading of the bill shall have been entered on the Journal." Article VII, section 7, is as follows: "No county, city, town, or municipal corporation shall contract any debt, pledge its faith, or loan its credit, nor shall any tax be levied or collected by any officers of the same, except for the necessary expenses thereof, unless by a vote of a majority of the qualified voters therein."
The intention of the Constitution is obvious. Profiting by the sad experience of other states, it intended to restrict the granting of public aid, and to hold to the strictest accountability every member of the Legislature who assisted in such grant by forcing him to twice record his vote on the Journal, where it would be open to public inspection. (322) It further intended that every such grant should be the deliberate and intelligent act of the Legislature itself as well as of the community affected thereby. It is our duty to give to these salutary provisions that just construction, required alike by the rules of law and of common sense, that will effectuate and not destroy their beneficial purpose. This view we think is sustained by the uniform decisions of the Supreme Court of the United States, the only tribunal before which this decision can ever lawfully come for review. In Wadsworth v. Supervisors, 102 U.S. 534, 537 (citing and reaffirming Aspinwall v. Comrs. of Davies County, 22 How., 364), the Court says: "We held in that case that the popular vote did not itself create a vested right in the railroad company to the bonds, and that a subscription was necessary to create a contract binding the county to issue bonds in payment of the stock, and binding the company to receive stock for the bonds. 'Until the subscription is made,' said Mr. Justice Nelson, speaking for the whole Court, 'the contract is unexecuted and obligatory on neither party.' Hence the new State Constitution was held to govern the case, and from the time of its adoption to have withdrawn from the county commissioners all authority to make subscriptions to the stock of incorporated companies, except in the manner and under the circumstances prescribed in that instrument." In Norton v. Brownsville, 129 U.S. 479, 490, Chief Justice Fuller, speaking for the entire Court, says: "These cases (referring to Concord v. Savings Bank, 92 U.S. 625; Falconer v. R. R., 69 N.Y. 491; R. R. v. Falconer, 103 U.S. 821; Wadsworth v. Supervisors, 102 U.S. 534, and Aspinwall v. Comrs., 22 Howard, 364) sufficiently illustrate the distinction between the operation of a constitutional limitation upon the power of the Legislature and a (323) constitutional inhibition upon the municipality itself. In the former case, past legislative action is not necessarily effective, while in the latter it is annulled. Of course, if an entirely new organic law is adopted, provision in the schedule or some other part of the instrument must be made for keeping in force all laws not inconsistent therewith, and this was furnished in this instance by the first section of Article II, but such a provision does not perpetuate any previous law, enabling a municipality to do that which it is subsequently forbidden to do by the Constitution. The inhibition being self-executing and operating directly on the municipality, and not in itself enabling the latter to proceed in accordance with the rule prescribed, further legislation is necessary before the municipality can act." In the late case of R. R. v. Texas, 170 U.S. 226, it is held that "a clause in a charter of a railroad company granting it power to consolidate with or become the owner of other railroads, is not such a vested right that cannot be rendered inoperative by subsequent legislation passed before the company avails itself of the power thus granted." It is useless to cite the cases themselves cited in the cases referred to herein.
It is further urged on the part of the defendants and those whom they represent that the issuing of these bonds was authorized by sections 1996 to 2000 of The Code. This question was definitely settled in Comrs. v. Snuggs, 121 N.C. 394, 400, 401, and we see no reason to reverse our ruling, nor do we find any facts taking this case from its operation. We can add nothing on this point to what was therein so fully and ably said in the opinion of the Court, except to say that (324) if the construction contended for by the defendants must be placed upon those sections, then they are in direct violation of the letter and spirit of the Constitution, inasmuch as they practically annul one of its essential provisions. If the word "uncompleted" can refer to any road not yet begun, and the word "interest" apply to a mere friendly feeling or supposed advantage to be derived from the general building up of the country, then the several counties may go on forever subscribing unlimited amounts to any railroad in esse or in futuro that may be located within the range of their knowledge. Such a construction would simply nullify the Constitution by making its explicit restrictions vain and worthless. It cannot be adopted by us, but if we were forced to adopt it, we would be equally forced to declare those sections null and void. If they mean that, they have no place upon the statute books. While the Legislature may, in individual cases, grant to specific counties the necessary authority in accordance with the provisions of the Constitution and subject to its restrictions, it cannot, by a sweeping act of unlimited application, utterly destroy its operation. If the Legislature or the railroad company or the county had placed any such construction on those sections, additional legislation would have been deemed useless, and the recitals in the bonds would have been different. It is true that this road had been begun and was in one sense uncompleted when the subscription was made, but it was not begun when the Constitution was ratified, and the county at that time had no pecuniary interest in it, nor any interest contemplated by the statute.
It is not necessary for us to consider the fact that the first section of the road had been completed to Winston, beyond which all idea of extension seems for years to have been abandoned. The act of 1881 has (325) no reference to the bonds in question, and is subject to the same objections as the act of 1879, which we have been discussing.
We have given this case the most thorough investigation and careful consideration on account of the important principles and the large amount involved. We deeply deplore the fact that many parties must suffer, who are in morals, if not in law, innocent holders of the bonds, but their loss comes from their misplaced confidence in those from whom they received the bonds, and the negligence of the corporation to which the power was professedly given and the bonds were issued. The only authority for their issue is found in a railroad charter, and we cannot undertake to validate defective or unconstitutional legislation by judicial construction. The suggestion of repudiation, so strongly urged here and elsewhere, has no weight with us. The so-called repudiation of an unconstitutional obligation is a contradiction in terms, and its assertion amounts simply to a moral and legal absurdity.
It has been said that the usual difference between heterodoxy and orthodoxy is the difference between your doxy and my doxy, and that in financial ethics the same distinction exists between stealing and financiering. This distinction we cannot endorse. It is just as wrong to wring from an unwilling and perhaps a suffering debtor an unjust debt as it is to deprive a creditor of a just debt. We will try to do neither, but will hew to the line. The strictly moral aspect of the case is not before us, but it is possible that the plaintiffs, representing an honest, industrious and intelligent people, may have reasons for their action as strong in morals as in law. (326)
Enough appears to indicate, what is common knowledge, that the stock for which these bonds were issued has been swept away in the maelstrom of corporate reorganization. It may be that the plaintiffs, deprived of every vestige of consideration by the decree of a court of equity, may not feel any moral obligation beyond the strict letter of the law. They may see no difference between repudiation and reorganization when both accomplish the same result, to retain the benefit and shift the burden.
In Lewis v. Pina County, 155 U.S. 54, 58, it was held that bonds issued under an act of the Legislature of the territory of Arizona, which was in violation of the Revised Statutes of the United States, were void, and "created no obligation against the county which a court of law can enforce." In the carefully considered case of Brenham v. Bank, 144 U.S. 173, 182, 188, the Court says: "It is easy for the Legislature to confer upon a municipality, when it is constitutional to do so, the power to issue negotiable bonds; and, under the well-settled rule that any doubt as to the existence of such power ought to be determined against its existence, it ought not to be held to exist in the present case. . . . As there was no authority to issue the bonds, even a bona fide holder of them cannot have a right to recover upon them or their coupons." Citing Marsh v. Fulton County, 10 Wall., 676; East Oakland v. Skinner, 94 U.S. 255; Buchanan v. Litchfield, 102 U.S. 278; Hayes v. Holley Springs, 114 U.S. 120; Davies County v. Dickinson, 117 U.S. 657; Hopper v. Covington, 118 U.S. 148, 151; Merrill v. Monticello, 138 U.S. 673, 681, 682.
It has been suggested that the defense in this case has been only (327) colorable, as but one of the bonds was represented. Under the circumstances we think that was sufficient. An elaborate answer, evidently prepared by able counsel, has been filed, presenting every reasonable defense; and while no argument was made before us for the defendants, every phase of the case has been carefully examined by us in the five months during which we have held it under advisement. The plaintiffs had no means of knowing who held the bonds, as they are payable to bearer and pass from hand to hand without endorsement or registration. The bondholders themselves could have become parties at any stage of the proceedings, and would have been gladly heard by us; but the mere fact that they deliberately refrained from any participation in the defense when they had every opportunity of doing so should not deprive the plaintiffs of all power to protect the rights of the people they represent in a court of competent jurisdiction, where alone this action could be brought by them.
The current of authority from other states sustains the conclusions we have reached in this case, but owing to the large number of cases, we have thought it best to cite only from our own decisions and those of the Supreme Court of the United States.
For the reasons stated in this opinion, the judgment of the court below is
Affirmed.