CITY OF I.AMPASAS V. TALCOTT.
so far as they are represented by the trustee in that proceeding, are bound by that decree. If it be said that the effect of that decree was only to determine the amount which should be chargeable upon the mortgaged property, and that the assets now sought to be reached were not covered by the mortgage, it is a sufficient answer that claimant here became a purchaser under that decree, and a party to that suit, and that the bill in sequestration filed by the trustee is not an original bill, but supplemental to the bill of foreclosure, and to the bill of Winston, and that the claimant here comes in under that bill seeking relief, and that all the determinations in these proceedings from the commencement of the litigation are res judie-ata: in other words, coming in under the dee-ree, and asking for relief thereunder, the e-laimant accepts and adopts all that bas been determined, and is not entitled to relief otherwise than in pursuance of the previous decrees. I therefore think the question of the proper rate of interest to allow upon the coupons is foreclosed by the deeree of tbecourt passed at the request of tbe representative of the bondholders, and that decree cannot now be impugned for error. ' The exceptions are overruled, and the report of the master confirmed. CITY OF LAMPASAS v. TALCOTT. (Circuit Court of Appeals, Fifth Circuit. No. 757. MUNrcrPAL CORPORATTONs-DE FACTO OFFICERS-VALTDITY OF BONDS.
May 9, 1899.)
The city of Lampasas was incorporated April 18, 1873, under a special charter, authorizing its mayor and and aldermen, among other things. to construct waterworks and issue bonds for public improvements. Its organization was perfected, and continued until 1876, when its officers ,re: signed, and administration of its affairs was abandoned. In 1883 "an effort was made to form a new municipality, including within its limit& the territory of the original city and a large amount of contiguous territory. Officers were elected, and the new government was organized, and continued to 'perform the functions of a municipal corporation until 1890, when quo warranto proceedings were instituted, and the officers removed, on the ground that the special act of 1818 was still in force, and that the resignation of its officers and its failure to continue the administration of its affairs did not amount to a dissolution of the eorporation. ThereafteI an election was held under the charter of 1873. and its government reorganized, and nearly all of the additional attempted to be ineluded in the new city was subsequently annexed. In 1885, while the illegal organization was in force, it issued bonds for the purpose of constructing waterworks. The waterworks were constructed and accepted by the city. Upon the dissolution of this organization, the waterworks. passed into the possession of one holding a claim for services as superintendent, and the city ceased to exercise control over the same, and paid to the person in possession monthly rates for the use of the water. Held, that the officers acting under the irregular organization were de facto officers of the city, and the bonds issued by them were valid.
In Error to the Circuit Court of the United States for the Western District of Texas.
94 FEDERAL
l>roJ1ght,t() recover the sum of .$2,lrO" ydth inten::Bt, to'l;>e dUf!i on .62 coupons attacijed to bond,s issued by the City of LampMa,s, ,A jury walil. waiyed, by the-;parties, and at the request: Qf' CQunsel for, !lwth ,parties .1;l;Le court made. a finding of the faets. .The courlhel<lJjhat tl;leplaiI].titf W;lS entitled to recover on the ,COUipOPs, and rende;red a jllclg;m.ellt in his favor $2,479.86. The defendant; the city of sued; out a,w.rit of·error. It is assigaedas error that the court a judgme,nt against the city. The foll.ow.ing are· tlw facts as, fOl,lII,4by the. (1) That the Citizens of .the city of ,Lampasas, in Lampasas county, Tex., were l)y specIal act of the legislature; approved April 18, 1873, granted a charter as Rn;mnicipal corporation, unl1er the jname of the "Corporation of the City of Lampasas," with boundaries containing an area of 553 acres, covering the original town plat and it'c6nsiderable' area not laid' out in regular blocks. In thisSlJooIll1 cliarterit was" providecbtbatthe qualified voters should elect a mayor and 'board' of aldermen, consls,ting of. ,eight members, to hold office tellm ;of two, years; !lnd until :successors should be elected and for qualif).ed, ,!1-M it wasflu;:therpJ.'ovided that the mayor 'and five aldermen should constitute quOrllmfot tra.nsaction Of bUsiness.. If: was also provided that the first'· electiion should bif held Within 30' days, and one thereafter on the first Monday In January of each'-alterna.te year thereafter, by the mayor and three aldermen, The act made no provision for dissolving the corporation, and no period of time was fixed for the expi!'ation of the charter. (2) Under this special charter the said mayor and aldermen were granted power, by ordinance,among other things, to construct waterworks, open, grade, and keep in repair the' streets;: build brldges', mid open sewers; to impose and collect taxes, llot e.:'(:ceeding 1 per cent, per annum; and to issue bonds for public improvement's. The' Inayor and aldermen were authorize'd to appoint a city marshal, who should also be-ex .officio assessor and collector of city taxes, and also to appoint a secretary and city attorney; but neither the office of treaSUl'er 'nor any other officer, than those ·named were provided for. (3)' 'That 'ofllcerswere elected,and tb;e saldmunicipalgovernment was exercised by them, under the' satdspe<!lali!charter,: from 1873 until 18';':6, when a mayor and boal1d'of.ll.ldermen were' elected who favored,abolishing .. the said mnnlclplll' gdVernment, and tbey by formal, resolution" to .resign, and did so;·and.'abandoned·theirsaid offices, and thereafte!r:no.stepswere taken, or Rction Of any kind h'll:d, under' ,this special· charter, nntiloMareh, 1890, after tlU! decIsion Of the supreme court of Te:X:/ls in, the'case of Largen v. State, Tex. 323,.13,El; W. 161,. hereinafter more, fully referred to. (4) That' the said, City o:tkIJampasas was, in 1873, and has since continued to be, the countyfSeat of IJamPa!!llS countY,andhad a population in 1876 of about BOO. That Until, the year'1882 the' sa.id· town' was without railroad facilities, when, upon 'advent of a rallroad,it, begalpto grow rapJdly, and by April, 1883, hall 'a' popUlation of about 4,500 people; with. street railroad and other improvements. A:bout1884 the potlUlation began to: decline, .Rnd continued to decline until about 1890. .: (5) TMt atall times the 'bUsinlJSs part of the town has been chiefly confined to the court·house sqllare and streets leading out. from ikand has been within the bounds of the said' special chll.rtl!n·' but during' Rnd sinee 1882 business hOJJses bunt Bear the railroad depot; i I('}Urtside of said bounds" and outside of 'tl1e present limIts, but -inside of the boundaries' of 1883, Rnd business has been since transacted 'i ' J , i, , (6)' That ilfter the advent of the r·allrblld numerous· additions were laid out to the town, and residences' built thereOD by ''Persons, doIng, business in the town, and it continued to grow 'In· population, until, it! ,reached about 5,000 in 1884 and 1885, when the decline in population began. (7),That.i,n, E'j;bryll,I;7,:188.'}1 a petitipn W!lS prei;lented to. the county jUdge of said Lanlpasas bY' 'thitIl' 51}' qualified voters 'livlngfn and around the limits of saId town, asking that an election be ordered to determine wheth-
a
CITY OF LAMPASAS V. TALCOTT· . , .j' : i
459
living within:thelirhits in said petition set out sh0111d incorpora1e as a city of more than 1,00Q,jnhabitants;::under the provisions ,of. the·geueraJ laws of Texas, as contained in title 17 of the Hevised Statutes. T;pon this petition the said cOUIity judge made his order, and an election was held, resulting in a majority voteifl'favor of said 'corporation,-some of those voting living inside, !lnd. some ou,j:,sidj;!"of. the limits prescribed by, sa.i,d charter; upon return ·there·of the said county judge, by proper order, declared the saId dty ,duly incorporated, with 'the limits in sald"pe'titioti setout, and wh!ch containeda:t(a:reti; of 1,495 acres, all. of the lands !Dcluded within the sam special charter,. and extending nearly one-half mile wcst, north, and east thereof, to include the railroad depot. (8) That, in pursuance' totbis incorporation, a municipal government was organized, with all the officers prescribed In the general charter contained in said title 17 (some of the !lldermen and other officers residing outside of the limits prescribed by said special act), and exercised all the powers and functions of a city of over 1,000 inhabitants, organized ,under the general laws of the state of Texas, levying and collecting taxes, and prel!Cribing and enforcing one contesting or disputing the validity of police its lawful act as such, until )i'ovember 4, 1881}, wheu, upon the relation of a and taxpayer, the district attorney. himself also a resident taxpayer, filed ,an information in the nature of quo warranto against T. J. Largen. who Was mayor, and all other persons assuming to act as city ofiicers under this incorIloration by vote of the people, alleging, that the said incorporation by vote of the people in 1883 was .invlilid, because of· tbe Ithat the said spec-iul chader granted in 1873 bad never been repealed, and that the ae,tion of the officers in resigning in 1876 wJls without effect, and praying that the said Largen and his associates be ousted from office, and the'said incorporation of 1883 be declared invalid. . (H) 'fhat said suit was irfl)tituted by, the said district attorney, without any direction by the attorney or other executive officer of the state, and without making any of the creditors of said incorporation parties, and upon trial resulted in a judgment ousting the said Largen and associates from ofiice, which jUdgment, on appeal, was afiirmed by the supreme court of Texas on the 31st day of January, 1890, and its opinion may be found in. 76 Tex. 323, S. W. 161. ' (10) That after the decision of the supreme court afiirming said judgment of ouster, the . s aid Largen and associates ceased to act, .. lind UP\ln an order for the election of mayor and aldermen under the special chader of 1873, made by the county judge of Lampasas county, an election was held by persons living within the limits of said charter on the 18th day of March, 1890, and the persons elected as mayor and aldermen met and organized }farch 19" 1890, and on March 22, 1890, by unanimous vote of the city council it was resolved to accept the provisions of "title 17 of the Hevised Statutes of the state of Texas in lieu of the charter granted by the legislature," and a copy of this resolution was duly certified and recorded as required by law, and SaId city at once asslllned to act .under the general charter provided in said title 17, and is now acting thereunder. ' (11) That on December 26, 1890, by vote of a majority of the resident citizens of the added territory hereinafter mentioned, there was added to the limits of the city, asset out in the special charter of 187:3, all of the land west of the same which was included within the limits of 1883, and one tier of blocks additional, since wltich time the said city. government has assumed jurisdiction over said added territory, but has not assumed any jurisdiction over that part lying north and east of said original limits, and which was included within the limits of 1883. (12) The area of the territory added in December, 1890, was 428 acres, which embraced the greater part of the residence property of the city outside of its original charter limits of 1873. (13) That the said territory lying north and east of said original limits, and which was within the limits of the charter of 1883, as adopted by the vote of the people, has situated thereon 77 residence houses, occupied by persons 90 per cent. of whom follow.some kind of business within the town, as defined by charter limits of 1873. The following map, introduced in evidence, shows
94 FEDERAJ:., REPORTltft.
ofrthll county judge in 1888, the boundaries aftbe territory adiled in December, tbe'territory lubdivlded Into lots, blocks, etc.: "
the boundaries prescribed by tbe act of 1873, the boundaries defined In the order " ,"
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be found, except tbe l'()lls for the year 1889, from which It appears that. the assessed' value 'of all ;ands' ,Vlthln the city limits of IS89 was $6IH.429, and that the persoual proTlcrty was about $400.000. and that the said assessment was divided as follows as to the lands. no division being shown as to pe'rsOllar property, viz.: Within old limits of 18i3, $452.444.00; within the part added In December, 1890, $157.915; within the parts nortll and east. $G8.9iO. , ' (15) The witness who made the fo!,pg'olng examination stlltes that the saM rolls show the names of 438 voters. dh'ided as Jollows. vIz.: Hesiding within old 'limits of 1813 were 175; residing on part udded in December, 1890, 107; residing. on parts north and 'east, 96. (16) FroI!l the facts recited in the last two findlng-s. tbe court finds that the elty of IJampasasas now organized. and as It haS existed since 1890. embrtlces p.bout 90 per cent. in "alue of all real property situated within. the city as organized under the cbarter adopted by vote of the people, Rnd situated therein when tbeclty government under Lnrg:pn was dissolved, 66 per cent. being in original limits, 24 per cent. In territory added in 18BO. and 10 per cent. in territory now eXcluded, and that of the n11lnber of residetlt" voters therein at the time about 22 per cent. are shown tO'have reSided outSide the present limIts, and 01' these 90 per cent. are shown to have 'followed some line of business In said original charter llmits of 18i3, VI'hich is shown to contain all the business part of the city except that near the depot; lllnd from these faets tbe court finds that the present charter IhnltsemhrnC'e all of tilE' pPl'sons and embraced within the limits at the city uf LUllIllllsas liS it existed
(14) nll the books apd paper!! of tbe city government of the city oI'LampasliSUnd,'r the chart!:!r of 18i3 and 1$83 were lost, and could
CITY OF LAMPASAS V. TALCOTT.
461
under the charter adopted in 1883 by vote of the people, and recognized and acted upon by them as a valid city government from the time of its adoption until the, quo warranto proceedings against Largen and associate officers in 1889, during which time the officers assuming to act as officers undel said general charter were elected in good faith by all persons residing within the said limits of the charter of 1883, and as such officers in good faith discharged the duties. of their respective offices, without dispute by any person residing within the restricted limits of the charter of 1873, or by persons living outside of the same. (17) The court further finds that in January, 1885, the city council of said city of Lampasas, elected under the provisions of the general charter contained in title 17 aforesaid, and assuming to act thereunder, and not under the provisions of the charter of 1873, in good faith, and in response to a general de- . mand of the business men of the city for fire protection, and to furnish water to the city, then having a population of about 4,500, determined to. build a system of waterworks for the city, and to pay for the same with the proceeds of sale of bonds of the city, and to this end, after full and open discussion, did pass ordinances to the following effect, viz.: "Ordinance No. 59 [Printed on Back of Bond]. "An ordinance to be entitled 'An ordinance to provide for the issuance of waterworks bonds of the city of Lampasas and to provide for the payment of the interest and sinking fund of said bonds.' "Section 1. Be it ordained by the city council of the city of Lampasas, that the mayor of said city be, and he is hereby, authorized and required to have engraved or printed coupon bonds of the city of Lampasas, with semiannllal interest coupons attached, falling due on the first days of January and July of each and every year from and after their date at the rate of 7 per cent. per annum interest; said bonds to be styled 'Lampasas City Waterworks BOnds.' . "Sec. 2. Said bonds shall be drawn to mature at fifty years from date of issuance, with the option reserved to the city council to redeem and retire ten thousand dollars of the principal of said bonds at the end of ten years from the date of the issuance of said bonds, and to redeem and retire five tLousand dollars of the principal of said bonds at the end of each period of five years from and after said ten years from date of issuance. . "See. 8. Said honds shall be. issued to the amount of forty thousand dollars ($40,000), 01' so mueh thereof as may be necessary, shall be dated at the time of issuance, and shall bear interest from said date of issuance. "See. 4. Said bonds shall, at the time of their issuance, be dated and signed by the mayor, countersigned by the city secretary, and registered by the city treasurer. "Sec. 5. The city secretary and city treasurer shall each keep a record of the number. date of issuance, and amount of said bonds, and the number, amount, and date of maturity of the coupons thereto attached, and shall indorse the countersigning and registration thereof on each of said bonds. "Sec. 6. Said bonds shall be issued in sums of one thousand dollats each, payable to bearer, and the principal and iuterest thereon shall be payable at S. M. Swenson & Sons' Bank, Xew York Oity, or at the office of the Citl treasurer in Lampasas, the interest being payable semiannually on the coupons attached. "Sec. 7. For the purpose of providing for the payment of the interest on said bonds, and to provide a sinking fund for the redemption of the same, a special ad valorem tax of twenty-five cents on everyone hundred dollars' worth of property is hereby levied and ordered to be assessed and colleded for the year 1885, and for each and every year thereafter 'until said bonds. principal and interest, are paid, on all property subject to taxation within the city of Lampasas. and rendered to and assessed by the city assessor and eollector: provided. however, that the city couneil shall, from time to time, make a prolevied whenever portionate reduction)n the amount or rate of the tax the whole amount of said tax shall not be necessary to meet the interest and sinking fund on the bonds of this issue then outstanding. "Sec. 8. To provide funds for the payment of said interest and sinkiug fund, from the (here is hereby appropriated out of the revenues of the city,
,the 'waterWorks; a? sum atin?llJlr, with the year to make'up the there be) of ll'lnkjng fund 'after' tiiXhereip. 'P,tot1d'ed fot, and the "urns arising tIW' net earnings, bedrawn upon or 'for purpose'untiJ said interest and fund Is fully provided for 'Ifl each-year, ahd theettftreasurer Shall, keep a separate account of all moneys derh'ed from said, tax: aM )let earnings of w!t'terworks, to be knownatid de!ligliiited on hisbooksarid'repfortil as the 'Waterwo'rks Fund.' "Sec, 9. At the end of te1). years from the date of issuaIj.ce ,of said bonds, or as soon,' 'practicable, tbe 'City conncll tiiay designate: 'by an order entered of record"on the minutes''fhe numbers and 'amount of the principal ' (notexceeiUng$10;OOO.OO) a4d date bonds of this issue as the 'CitY desJres tp' redeemrSliid being' designated by lot or otherwise, as the determiJie,'provlded' the designated are consEkutlve" .11nd " 'eoJ;l1" of such' 'shnU,'be pubUShed1b ,'8,oinl! newspaper in the cityO! 'bampasas, and sbchotber 'rlotlce, pers6nally or9'therwlse, may be glveir to"tl1e bllIder' of such deslgbated bonds,' their agents or representatives, ' as the council may determine at the' tUne of such' desrg'llll.tion, and sUch designated bonds shall be paid upon presentation, and shall cease to bear interest from and,attar,tbe date of paYII)e:qt t};ed,.by .said qJ:der;. and at the end of eath ,ot tiye y,ears, dollars of the prIncIpal of said bonds may be redeem¢d, ,tn' like manner·. ' 10., Tl1e bonds proVided,forshali be sold .at Dot less than par, as is. or .may pr:ovlded ordinance, resolu:,or thE! pl'oceeqs 'of devpte4,exclusively tq' ,of a.','. .pf 'W,aterworks ,for tire protection, fltfll,',11;V,'..·.. I.Y; .n,'.,d. ot.hsU,I1t1lleli as tnJll.' be deemed necessary by the council; a ..er,pu,b.JiC aM ,ate. pur.p,Oses, ,.fO.r. the. purpose.o.t strc'/) department, sllJd system 01' {vaterwork:,d:'6be 'operated In such manner as may be hereafter provIded,hy resolution, qr, ,otherwise.. eth,l885.,r '. " '," S.S. Potts, Secretary. "'Passe4Jaimary 6th; 18$5. . ' . · . . S.S. Potts, Secretary. '''I ilie Imllnance, ,6th, 1885. , " ', ,,' "W. J. Suwdefer, ,Mayor of City of Lampasas. "Attest: S. S. Potts, Secretaryr . IIOrdlnance No. 60 [ptlntedonBack ot :Bond]· ,.':':r; ,:, i'i, 'i'-: ',:':;,' , ': " ,: "An ordinance entitled 'An,ordinllPce to Provide fortba collection of a special tax fQr the, J»lyment of interest' ,toprQvide a sinking fund for the redemption, of water'\Yorks,bond,s of of Lampal\ll.s.' "Section 1. Be it ordained hy the city council of the city of Lampasas, that the' ,city, a,ssessorand coIlector be, and ,he ,Is hereby, required to assess and collect a spec,W.l tax, of twenty-tivecents on the one hundred dollars' worth of all property, subject to taxation within, the city of Lampasas, rendered to and assessed by him for the yellr 1885, alild for each and every year thereafter, ·of the semiannual interest, and to provide a sinking fund for for the the redemption of the waterworks bondllof the city of Lampasas, until said bonds, principal and interest, are paid: provided, however, that the clty couna proportionate reduction in the amount of the cil shalLfrom time to time tax hereby levied whenever the whole amount of tax shall not be necessary to meet· the interest and sinking fund on the bondS thenontstanding. "Filed January 6th, 1885. S. S. Potts, Secretary. '''Passed January 6th, 1885. S. 8. Potts, Secretary. "I approve the above ordinance, January 6th, 1885. "W. J. Standefer, Mayor of ,City of Lampasas. "Attest: 8. S. Potts, .secretary." .. "Ordinance No. 65 [Printed.on Back of Bond]. "An ordinance to be entitled 'An ordinance to amend section 9 of Ordinance :'No. 50;.passed and approved January 6th, 1885.' of the City of Lampa.sas that "SectiOn 1. Be it ordained by· the city ',fOr'flon 90f Ordinance No. 59, passed and IlpprovedJanuarr6th, 1885, be 80 amended 80'a$ to reM 'hereafter asfolIowl: " ' ,
1885'
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'I
CITY, OF, LAMPASAS V. TALCOTT·
463
.. 'Sec. 9. At the end of ten years from the date of issuance of said bonds, or as soon thereafter as practicable, the city council may designate, by an order entered of record of .the minutes, the numbers and amount of the principal, not exceeding $10,000.00, and date of payment of such bonds of this issue as the city desires to redeem; said numbers so designated shall be consecutive, beginning at No.1, and a copy of such order shall be published in some newspaper in the city of Lampasas, and such other notice, personally or otherwise, may be given to the holder of such designated bonds, their agents or representatives, as the council may determine at the time of such designation, and such designated bonds shall be paid upon presentation and shall cease to bear interest from and after date of payment fixed by said order; and at the end of each period of five years thereafter five thousand ($5,000.00) of the principal of said bonds may be in like manner.' "Sec. 2. That this ordinance take effect and be in force from and after its passage. I "Passed March 21st, 1885. Approved March 21st, 1885. "W. J. Standefer, Mayor. "Attest: S. S. Potts, Secretary." (18) As bearing on the question of the validity of said ordinances as the act of de facto officers under the charter of 1873, it is here stated' that under said charter of 1873 it is provided: "Sec. 12. All ordinances and resolutions ,enacted by said corporlltion shall be published by posting notice at three public places in the limits of the corporation or by publication for at least three successive weeks in a newspaper published within the limits of said city." And it was further shown that the city council that passed said ordinances was composed of the mayor and five aldermen, all of whom were elected by general vote of the entire corporation within the limits of the charter under the incorporation of 1883, and that two of the said aldermen and the city sec.retary resided in the territory outside of the charter limits of 1873, and one of said two aldermen resided in territory northeast of said limits and outside of the present city limits. . (19) After the adoption of the ordinances aforesaid,. the saht city counell advertised for bids for the construction of a system of waterworks, and personally inspected similar works in neighboring towns, and also tried to negotjate a sale of bonds for cash. Failing to effect a sale of the bonds by the time set for recei'Ving the bids, the letting of the contract was postponed. At this time several bidders were ready to submit plans and bids, but, as all contemplated being paid in cash, no bids were made or received. It is shown that there were present at this time, prepared to submit a bid, a responsible party willing to .build a system of waterworks for $25,000 in cash; but it was not shown what kind of; a system this party intended building, as to the size of mains,: pumps, standpipe, or other details, to enable the: court to draw any comparison as to whether this bidder proposed to build as good a system as was subseliluently bUilt, or not;-the fact being that this bidder demanded cash payment; ,and was unwilling to take bonds in payment. (20) Ata later date the said city council· awarded the contract toa bidder who was willing to build a system aecording to his plans at the· pllice of $40,000, to be paid In bonds of the said city, and this contractor proceeded to build the said system, and the same was fully tested by the city council before acceptance, lWd upon such test and approval the said works were accepted.and paid for by the delivery by the city council of the bonds as called for in the contract. The city officers paid for the waterworks in bonds, because they had been unable to sell the bonds for money. The bonds were not considered good for their face value. If they had been so. considered, the waterworks could have been constructed for less." I ' . (2'1) It was' shown, over:the objection of plaintiff as to the competencY' of the witnesses, by two persons who became familiar with the nature and ex. tent of the said system as built, one about .one year. and the other about· two years' after it was constructed, that in their judgment the said system was .·worth, at cash values, based upon c.ost of cQnstruction, according to the estimate of one', tbesnm of $25,000, and of ,the. othe. $26,279; neither witness al-
464
{)4'FEDERAL REPORTER.
lowfIiF :anythlng by way of profits to the contractor. This was all the testitriony oit' 'this point. Neither of these witnesses were shown to have been tM price of material and 'labor in 1885, nor to have had any of building waterworks at that time: bilt one of them operated the works' from ,l.885 to 1891, and the' other' had 'been, engaged since 188T in putting in waterworks under contract in varioUs c1ti'eilf in Texas. , (22) ThepIaintiff Introdu,Ced and readln eVidence, for the purpose of- identification,a'tid to prove the ordinances indorSed thereon and hereinbefore set out, one of th'e bonds alleged to have been iSSlled by defendant in payment for the said system' 6f bond is in words and figures as follows: · 'j" ., ,
"State of Texas. "Lampasas City Waterworks Bond.. "The Oity of Lampasas "Will pay one thousand dollars to .bearer, fifty years after date hereof, with interest from date at the rate of seven per cent. per annum, payable semiannually, on the first days of January and July, in each year, payable at the office. of S. .M, Swenson & Son in the city of New York, or at the treasurer's office in the city of Lampasas, on presentation of the proper coupon hereto attached. Isstied under authority of an ordinance entitled 'An ordinance to provide for the issuance of waterworks bonds of the city of Lampasas, and to provide for the payment of the interest and sinking fund of said bonds,' passed January 6th, 1885, a copy of which ordinance is printed on the reverse side hereof, to which reference is made. "Witness the band of the mayor of the city of Lampasas, attested by the city secretary, with the corporate seal affixed, in the city of Lampasas, state of Texas, this twenty-seventh day of March, A. D. 1885. I "W. J. Standefer, Mayor. "Attest:· [Seat} S. S. Potill, , Secretary." Attached to the said bond were coupons Nos. 24 to 100, inclusive. In the upper left-hand corner, in transverse form, and separated from the body of the bond by vignette line, was the following: ' ----,-.', Comptroller State of Texas. "s. S. Potts, Secretary Oity of S. Morris, Treasurer City of Lampasas." On the back of said bond was the following indorsement: "Registered March 28, 1885. Wm. J. Swain, Oomptroller." But no seal was affixed to such signature or indorsement. On the back of this bond was printed copies of the ordinances under which it was issued, lis hereinbefore set out. (23) The pllliintit'J' introduced in evidence a certificate from the comptroller of public accounts of the state of Texas, made after the institution of this suit, certifying that, the records of his office showed that on March 28; 1885, there were duly registered 40 bonds of the city of Lampasas, of the denomination of $1,000 each; known as "Waterworks Bonds." And the plaintiff further introduced in evidence a certified copy of a statement submitted byW.. J. Standefer, mayor, and S. a.potts; secretary, of the city. of Lampasa!l, to the comptroller, when said bonds were tendered for registration, that the assessed 'value of all property situated within the 'limits of said city of Lampasas,as shown by the tax rolls for the 1884, was $1,447,200. (24) The plaintiff read in evidence 62 coupons, described in hiS' petition, each of the sum of $35," and maturing at thedit'J'erent dates set out in his petition, which .ll9.idcoupons,' except as to due date and number of bond, were of the following form: "$35: The City of Lampasas $35. "Will pay ,the bearer thirty-five dollars at the office ·of S. M. Swenson & Son in the city of York. or at the treasurer:s office .in the city of Lampasas, on the 1st 189-, being sixmontns' interest Qn bond No. . "S. S. Potts, Secretary." Upon which coupon thecourt finds tha,ttpere is, due the piaintiff on this day the sum of $2,i70 principal and $309.86 irlterest. . .
CITY OF LA.\[PASAS V. TALCOTT.
465
(25) At the time of the affirmance of the judgment in Largen v. State, 76 Tex. 323, 13 S. W; 161, one H. E. Hedeman was in charge of the waterworks so acquired for said bonds, he having taken charge of said waterworks as superintendent before the dissolution of said organization of 1883. He held possession of saidwater;vorks under a claim for $150, back salary due him from the dissolved organi7,Rtion, and for some other moneys due him for a house placed on the waterworks grounds. Asserting such claim, he remained in charge of such waterworks for over one year from the dissolution of said corporation of 1883. He delivered possession of said waterworks to Coler & Bro., bankers and brokers of New York City, through their agent, W. L. Vining, for the reason that Coler & Bro. paid him the debt due him and for his interest in said house,-said Vining at the time exhibiting to him one of said bonds of said series, and stating' that said Coler & Bro. owned it and all other bonds of said series; and said Coler & Bro. and their assigns have from that time controlled and elaimed to own said waterworks, and still control and claim to own said system of waterworks. It was not shown that the bond exhibited to said Hedeman by Vining was one of the number from which any of ,the coupons in suit was taken, nor was any further proof made that Coler & Bro. owned any of said bonds, or represented any of the owners thereof. It was· shown that the said Hedeman did not pretend to act for the city of LampasaH in making a settlement of said bond, and only aSHumed to act in the protection of his own individual claim. (26) The court further finds that, since the reorganization of the city government in 1890, under the special charter of 1873 and the general charter adopted immediately thereafter, the city of Lampasas has exercised no control over said waterworks, but 'has paid, monthly, first to said Hedeman and then to Coler &. Bro., for the use of water supplied by said waterworks system, and that since said reorganization in 1890 said city of Lampasas has not taken possession of any other property within its limits that. was acquired or constructed between 1SS::{ and 1890, except one bridge, built prior to 18BO, whleh was not paid for, but which, on account of such nonpayment, was taken possession of by the builders, and sold by them to the county of Lampasas and the city as organized in 1890. (27) It was shown that the pumping station of the waterworks as originally constructed was situated within the corporate limits as defined in the charter of 1883, but was removed by the city in 1887 to a point without the corporate limits of 1883, and has remained at said place ever since. It was further shown that the standpipe was located at a point near the west line of the charter limits of 1883, but within such limits, and that the distributing water mains leading from said standpipe were distributed through the part of the city west of the original charter limits of 1873, thence through the business part of the city within said original limits, and extending eastward and northward to the railroad ,depot, and that said standpipe and all of said distributing mains and fire hydrants are within the limits of the city as now existing (composed of the original charter limits and the tetritory added in 1800), except that for a distance of about 000 yards one of said mains extends northward to said depot, with one fire hydraJJ.t thereon. (:28) It was shown, and the court so finds, that there has at all times been a well-defined business center in the city of Lampasas, which is within the limits of the charter of 1873; and the court also finds that between 1883 and 1800 a number of business honses and residences were established in the neighborhood of the railroad depot, all of which were within the limits of the charter of 1883, but are not within the limits over which the present city government assumes 'Within this territory it was shown that there are 77 Inhabited dwellings and 2 vacant dwellings. It was shown that of the persons occupying these dwelling houses 90 per cent. did business within the present limits of the city.
Franz Fiset, C. H. Miller, and J. C, Matthews, for plaintiff in err·or. T, B. C-ochran and R. G. West, for defendant in error. Before PARDEE, McCORMICK, and SHELBY, Circuit Judges. 94F.-aO
94 FEDERAL REPORTER.
. i.:
Circuit Judge (Ilfterstating the fa;cts as abowe). The cityof:Lampasas was made a municiIJal corporation' by special act of on April 18, 1873.' Untilt876 the corporation this spedal act. The city officers then resigned, and the administration of the affairl!! by officers was,abandoneq; In 1883, the population of the town having increased, an effort was made to form a new municipal corportltion. The procedure W);t$ under intended to, apply to towns that had. never been incorporated. The citizens of Lampasas were acting on the mistaken' presumption that they had effectually abandoned anda,nnuned the incorporation of the town under, act. , 'rhe JQwn, last organized, embraced substantially all of the territory covered by the special act, and also otber lands so as to include a railroad depot. Each organization pro'yided, for the government of the town by a city council, and the usualofUcer,s were prqvided by each. The offiCe of treasurer was not pl10vided for by the special act. The lastorganization continued in practical force from February, 1883, to January 31, f890, when,the supre:rp.e c6urt ofTexassustaiued 9uo warranto proceedings, 'l1J;ld removeq 'the, city, offl,cerf;! holding under an electionbad organization ,of 1883. The supreme court held that the effort to" incorporate the rownunder the general laws was was onl),l!lpplicable to unineffectual l m:ld'that tQ'1ns. of",tb.e!. court's ,0pim0J;l was to show that the special act ,of 1873,continuea in force. Largen v. State, 76 Tex. 823,13 is. ,W. 16L ;Afterithe' opinion of the supreme court waS rendE;re9) electipn, of 1818, andsqqn the, CIfy, ac:cepted, tlleprOYISlOlll;l of the general"laws relative to municipal corporations, as stated in'the findihgs"of the, the charter of 1878 ,the 'nia;r()( l1"/1d aldel'il;J.en" were po",er::tq, '''construct for public illlprQ;"enients." The b(lnds wereisslled;. and used to secure the erection of tbewater works.' ,The"wollks are'shown to be worth not less than from $25,900 to. $26,000,' llla4,e, by' the contractor. Tge bonds lW:$r,e.,ps,ed ,to pay for the ' XIi the "absence ofprooI to the.. contr.ariY,they&,re,presumed to ,h&,ve passed into the possession of the IJlaintiff before maturity, fol' a valuable consideration, lindWithoutnotice of 3.fiyobjection'to"which they were ,v. 96 U. ,S..314. ,If, it be tryethat thed::m1pocatiOll.hadautn.orityundeJ.:ilany circumstances toillsue the secul'ities; 'the bona fide holder' ha'sa, right to presume t4ey were IegaJl)' i,ssued, Id. '" " .. " '" , "'',rlle d,ojriiillUi;t is, had:tbe at the date: of, the right i}oissue them?,; In one aspect a municipal corporation is an agency of the state government to per,f()rm is the state, and can' otily' be"annu11ed' by the creatIve power, or pursuant to laws regular.l;r, :rp.ade" .e;is,ten,ce,ca.nnQt be collaterally attacked. dparty to' a cotitract, it must be looked on as an in:asa: priN'ate corporation, ;for. its :contractsi are equally
as
As
CITY OF LAMPASAS V; '£ALCOTl'.
467
under the protection of law. The prohibition against their impairmentis as effective as in the case of the contracts of individuals. It is protected, even against execution, in the ownership of property necessary to the exercise of its public functions. It holds for taxation the reid estate within its limits and the personal property of its residents. These are its resources for discharging its debts. The people living in it are the units of which the corporation .is composed. The. people and the property are the whole debt'paying elements of a municipal corporation. Thl: organization is the mere'shell that holds it in shape. The kernel is composed of the people and the property. Looking atthe substance, ratherthariat the form, the courts have uniformly held that no change of name or of organization will enable a municipal corporation to avoid the payment of its debts. Whatever the name may be, whatever the officers may be called, the new organization would be the successor of the old, would be composed of the same, or nearly the same, units, would embrace the same territory, holdingthe same, or nearly the same, sUbjects of taxation,.and would in fact be the successor of the first organization. As the second government succeeds to the rights of the first, it is also subject to its liabilities. Shapleigh v. City of San Angelo, 167 U. S. 646, 17 Sup. Ct. 957; Laird v. City of De Soto, 22 Fed. 422. In the case at bar the legal charter. under the special act was laid aside. One illegal, but having all the appearances of legality, was formed. It named the necessary officers, elected them, and performed all the functions of a municipal corporation fora period of nearly seven years. The state, during this period, did not challenge its exercise of power. It issues $40,000 of bonds, obtains the benefit of their sale. Then, by judgment of the court, the officers are reillQved as officers of the new organization, and others elected under the first charter. Can it be held that the city, composed of the same people, including the same resources for revenue, is now absolved of all liability upon the bonds? Can a city, under an illegal and irregular change of limits, preserving the same name,· obtain credit for public improvements, and, when the irregular charter is vacated, return to the use of the first, which has all a}.ong been in force, and then stand freed of the debt? The people and property now sought to be charged were all, or nearly all, included and represented in the irregular corporation which issued the bonds. They get the benefit of the bonds. The facts show that the city and citizens were acting in good faith. The bonds were issued with public approval, and without objection. The improvements were accepted, and it was intended that the bonds should be· paid. If it had been otherwise, if the irregular organization had been assumed in order to obtain credit, and abandoned to avoid payment, could such a scheme receive judicial sanction? This would not be permitted. It would open wide an avenue for fraud and imposition. If it is plain that such a plan, no matter how ingeniously executed, would not be permitted to succeed, it must be equally clear that, when the citizens and acting officers· of the irregular corporation acted in good faith, and believed their
action tq be regular and valid, such irregularity will not be permitted. to injustice. '.fhe officers representing the city in the issuance of the ,bonds believed that the;y were clothed with authority by the proce<lure of 1883. Ip this they mistaken. The charter of 1873 'was stilI in existence. It authorized the election of officer(il of the city. These officers ha,d been elected. Although they that they held office under the new organization,' they were offi<;ersdefacto of the, city, actually filling places created by the of 1873. ''J;.'he special act of incorporation authorized the issuance, of the bonds for public improve;r:nent. ,An ordinance, Wlit(il passed to issue them. The. bond.s, we hold, were not made invalid by reason of the illegal effort at incorporati'on made in 1883. , There are other defense,s sllggested in argument, but it would serve no liseful purpose to extend this opinion. The whole of the findings of fact by the Circuit court will appear in the statement of the elise, anll it is sufficient to say that we concur in the conclusion of the learned judge presiding in the circuit court that the plaintiff was entitled to judgment. The judgment of the circuit court is affirmed. , UNDERWOOD v. PATRICK. Court of Appeals, Eighth April 24, 1899.) No. :1,,146.
1.
VJ;NDOR AND PURCHASER - SALE OF LAND TO SYNDICATE NOTES OF O,NE MEMBER FOR PURCHASE, ,MO,NEY.
ACCEPTANCE OF
A ven40r who sold land to a syndicate, conveying to one member and accepting his' Individual nMes, secured by, mortgage on the property for the unpaid purchase money, with knowledge that such arrangement was made for the express purpose of' relieving another of the purchasers from personal ,liability for such unpaid purchase moneJ', is estopped to claim such liability, ,and has no right of action against him on the notes, or otherwise, to a deficiency remaining due after foreclosure of the mortgage; nor was such right given by a declaration of trust executed by the. grantee, declaring the interest of each member of the syndicate in the property and their several liabilities as between themselves.
2. 3.
LIMITATION OF ACTIONS-WHAT LAW GOVE,RNS.
A plea of .tM statutE of limitations relates to the remedy, and is governed by the law of the forum.
SAME-ACCRUAL elF CAUSE OF ACTION.
'Where a vendor sold land to a syndicate, taking notes of one member for deferred payments of purchase money. a right of action by the vendor 'against another member of. the sJ'ndicate for the recovery of such purchase money, if any existed, accrued on the maturity of the notes. As an action against another of the purchasers, who did not sign the notes, would not be based thereon, but on a collateral promise,. a payment on the notes after their maturity by the maker or a subsequent grantee would not extend the time within which such action could lJe brought.
4.
SAME-EFFEC'l' OF ,PAYMENTS.
In Error to the Circuit Court of the United States for the District of Oolorado. Eliza ,V, Patrick, the dMendant in error, brought this action against Frank L, Underwood. the plaintiff in error, to recover certain sums of money daimed to be due her on executed by one Kathan D. Allen. The substance of