§ 531 (419). Rationale of Estoppel. - A correct view of this subject would seem to be this: Officers are the agents of the corporate body; and the ordinary rules and principles of the law of agency are applicable to their acts. Their unauthorized acts are not binding upon the corporate body of which they are the public agents Ordinarily, their unauthorized representation that they have power to do an act is not binding upon the corporation; that is, the question is as to their power, in fact and in law, not what they have represented it to be. The only exception to this rule, in addition to the one herein before treated of, to wit, where it is the sole province of the officers who issued the bonds to decide whether conditions precedent have been complied with, is where both parties have not equal means of knowledge as to the extent and scope of their powers, and where the particular character of their commission and authority is, from its nature and circumstances, peculiarly known to the officer or agent; in which case the principal will or may be bound by the false representations of the agent respecting his authority, and its extent and scope; but where the authority to act is solely conferred by statute, which, in effect is the letter of attorney of the officer, all persons must, at their peril, see that the act of the agent on which he relies is within the power under which the agent acts; and this doctrine is recognized by the Supreme Court of the United States in some of its judgments.1 Accordingly, bonds issued in violation of an express statute or constitutional provision are void, though in the hands of innocent holders for value.2 On the principle that there can be no de facto officer unless there is a de jure office, bonds executed

1 The Floyd Acceptances, 7 Wall. 666 (1868); Marsh v. Fulton County, 10 Wall. 676 (1870). See, also, Clark v. Des Moines, 19 Iowa, 199, 210 (1865); Treadwell v. Commissioners, 11 Ohio St. 183, (1860), reviewing and criticising Knox County v. Aspinwall, 21 How. 539. See, also, Gould v. Sterling (action on bonds), 23 N. Y. 464; s. c. 1 Am. Law Reg. (N. s.) 290, and note of Prof. Dwight; Starin v. Genoa, 23 N. Y. 452; People v. Mead, 36 N. Y. 224; Dodge v. County of Platte, 82 N. Y. 218. United States v. City Bank of Columbus, 21 How. 356 (1858), is a very striking illustration of the general principle that a corporate officer cannot bind the corporation by his unauthorized acts or representations concerning the authority of himself or others. De Voss

v. Richmond, 18 Gratt. (Va.) 339 (1868); s. c. 7 Am. Law Reg. (N. s.) 589. Upon this principle it was held that the legisla ture may make the negotiability of municipal bonds dependent upon their delivery by a State officer, and that a purchaser of bonds purporting to have been issued under a statute containing such a condition, is not a bona fide purchaser without notice, in case the bonds are fraudulently issued without being delivered by the designated officer. McCrary, J., Lewis v. Barbour Co. Comm'rs, 3 Fed. Rep. 191.

2 Aspinwall v. Daviess Co. Com., 22 How. 364; Marsh v. Fulton County, supra; Moore v. New York, 73 N. Y. 238, approving text. As to bonds issued in excess of constitutional and statutory limitations, see supra, secs. 527-530.

by persons purporting to be de facto officers of a county when there was no lawful statute in existence creating the office, are absolutely void for want of power to issue them.1

§ 532 (420). Estoppel by Recitals in the Bond; Illustration. So in a subsequent case, similar in character, the common council of a city were, by virtue of various statutes, authorized to subscribe for stock in a railroad company, and to issue bonds in payment therefor on the petition of three-fourths of the legal voters of the city. Before the issue of the bonds, the council decided that three-fourths of the citizens had petitioned, and the bonds themselves thus recited. The Supreme Court of the United States held that the council was the tribunal to decide whether the requisite number had petitioned; that it was contemplated that this question, which was one of fact, should be ascertained and conclusively settled prior to the issue of the bonds; and that when the city was sued upon the bonds by innocent holders for value, parol testimony was inadmissible to show that the petitioners did not constitute three-fourths of the legal voters of the city.2

1 Ante, sec. 276; Norton v. Shelby County, 118 U. S. 425 (1885). In this case it appeared that the administration of local matters in each county in Tennessee had for nearly a century been vested in a County Court, or as often called, Quarterly Court, composed of justices of the peace elected in its different districts. Power was given to the County Court to make a subscription and issue bonds to a railroad company. Before the power was executed the legislature passed an act abolishing the County Court, and vesting its powers, iucluding the power to subscribe for stock and issue bonds, in a Board of County Commissioners. The County Commissioners issued the bonds. The act abolishing the Quarterly Court and creating the Board of County Commissioners was held, after the issue of the bonds, to be unconstitutional by the Supreme Court of the State of Tennessee, on the ground that the County Court was one of the institutions of the State recognized in the Constitution, and that the act creating the Board of County Commissioners and conferring on them the powers of the County or Quarterly Court was unconstitutional and void; and hence it was held by the Supreme Court of the United States that the bonds had

no validity even in the hands of bona fide holders. The validity of the bonds was attempted to be sustained on the ground that the acts of the County Commissioners under a statute subsequently held to be unconstitutional, were to be regarded as the acts of officers de facto, and hence binding in favor of the bona fide holders of the bonds. But the Supreme Court decided otherwise; and, in a very learned and elaborate opinion, reviewing the authorities, by Mr. Justice Field, it is held : First, that it was the duty of the Federal Court on a question of this kind to follow the decision of the highest court of the State. Second, that there could, in law, be no such thing as an officer either de jure or de facto if there be no office to fill; and that the act attempting to create the office of commissioners never became a law and the office never came into existence. The view of the court on this point is tersely summed up in this sentence (Ib., 442) : "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."

2 Bissell v. Jeffersonville, 24 How. (U.S.) 287 (1860), approving Knox County

§ 533 (421). Estoppel by Recitals in Bond; Illustration.
another case, the action was upon coupons payable to bearer

belonging to negotiable bonds issued by a county in payment of stock subscribed for in a railroad company. By an act of assembly,

people prior to the adoption of the Constitution.

Recitals in a bond that it is issued in payment of a subscription authorized by a statute referred to, held not to estop the municipality to show that the issue was not authorized by a vote of two-thirds of the voters of the corporation, as required by the Constitution of the State. Carroll County v. Smith, 111 U. S. 556. Recitals in bonds that they were issued "in pursuance to the vote of the electors of Anderson County, September 13, 1869," held, in favor of a bona fide holder thereof, to be equivalent to a statement that the vote was one lawful and regular in form; and that evidence to show that the thirty days' notice of the election required by the statute was not given was not available to the municipality as a defence. The case was considered to fall within Town of Coloma v. Eaves, 92 U. S. 484, 491; Anderson County Commissioners v. Beal, 113 U. S. 227 (1884). Where the Constitution required the question of local taxation to be submitted to the electors, a statute which empowered the resident taxpayers to authorize a town to issue bonds in aid of a railroad, was declared unconstitutional and void. Harrington v. Plainview, 27 Minn. 224, followed in Plainview v. Winona & St. Peter R. R. Co., 36 Minn. 505.

could be exercised only upon the petition of a majority of taxpayers, "not including those taxed for dogs or highway tax only," a petition stating that the petitioners were a majority of the taxpayers of the town was held to be fatally defective. Town of Mentz v. Cook, 108 N. Y. 504 (1888). Ante, sec. 515, note.

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A city was authorized to take stock in a railroad company on the petition of two-thirds of the citizens, who are freeholders," &c. Bonds of the city were duly issued, signed by the proper officers and attested by the seal of the city, and on their face recited that they were issued by virtue of an ordinance of the city making the subscription. The minutes of the city council simply stated that "the freeholders of the city, with great unanimity, had petitioned," &c. It was held that the city council were the proper judges whether or not the required number had petitioned, and that the city, as against bona fide holders for value, was "concluded" by the ordinance "as to any irregularities that may have existed in carrying into execution the power granted to subscribe the stock and issue the bonds." Van Hostrup v. Madison City, 1 Wall. (U. S.) 291 (1863); s. P. Meyer v. Muscatine (where charter required "a majority of two-thirds of the votes given ") Ib. 384, 893; Aurora v. West, 22 Ind. 88 (1864); contra, People v. Mead, 36 N. Y. 224. Post, sec. 550, note.

Where the act authorizing a municipality to issue bonds was not to take effect until "approved by two-thirds of the electors present at a city meeting held for that purpose, and a copy of its doings lodged in the office of the secretary of State," bona fide purchasers of such bonds are not bound to look beyond the certificate thus lodged, and are not affected by the action of the city, refusing at prior meetings to approve the act. Society for Savings v. New London, 29 Conn. 174 (1860).

As to proceedings preliminary to issuing of bonds. Ante, secs. 163, 515, note; Knox Co. Comm'rs v. Nichols, 14 Ohio St. 260; Atchison v. Butcher, 3 Kan. 104 (1865); Mercer County v. Hacket, 1 Wall. 83; Rogers v. Burlington, 3 Wall. 654; Moran v. Miami Co., 2 Black, 722; Flagg v. Palmyra, 33 Mo. 440; Commonwealth v. Allegheny Co. Comm'rs, 37 Pa. St. 237; compare Marsh v. Fulton County, 10 Wall. 676 (1870); Treadwell v. Hancock Co. Comm'rs, 11 Ohio St. 183 (1860); post, sec. 550; Pendleton County v. Amy, 13 Wall. 297; City of Lexington v. Butler, 14 Wall. 284; St. Joseph Township v. Rogers, 16 Wall. 644 (1872); Grand Chute Fraud in the election authorizing the v. Winegar, 5 Wall. 372 (1872); New subscription must be set up before rights Haven, M. & W. R. R. Co. v. Chatham, 42 have accrued. Butler v. Dunham, 27 IL Conn. 465. 474; People v. San F. Sup., 27 Cal. 655. Where authority to issue town bonds Further as to the construction of powers

the county commissioners were authorized to subscribe the stock and issue the bonds only upon the following "restrictions, limitations, and conditions, and in no other manner or way whatever:" 1. " After, and not before, the amount of such subscription shall have been designated, advised, and recommended by a grand jury of the county." 2. Said "bonds shall, in no case, be sold by the railroad company at less than par." 3. That the acceptance of this act shall be deemed the acceptance of another act fixing the gauges of railroads in the county of Erie. The plaintiff was a bona fide holder for value, of a number of the bonds issued by the county. To defeat a recovery, the county on the trial offered to show, not that no recommendation by a grand jury was ever made, but that no such recommendation was made as the act required. The following was the recommendation: The grand jury "would recommend (omitting the words 'designate and advise') the commissioners of Mercer County to subscribe an amount not exceeding $150,000," but not otherwise designating the amount. The bonds referred on their face to the act of assembly and its date, which authorized their issue and recited that they were issued in pursuance thereof. This was regarded by the court not as an offer to show " that no law exists to authorize their issue, but as one to show that the recitals in the bonds are not true, and to show that they were not made in pursuance of the acts of assembly' authorizing them;" and, following Knox County v. Aspinwall, 1 it was adjudged that the matters thus offered to be shown constituted no defence against a bona fide holder, on the principle that "where bonds on their face import a compliance with the law under which they were issued, the purchaser is not bound to look further." And following Woods v. Lawrence County, it was also ruled that it was no defence against such a holder that the bonds were sold by the railroad company for less than par, they being negotiable and the plain

to aid in the building of railways, see ante, chap. vi. sec. 153 et seq. Ante, secs. 515, 519, and notes.

1 Knox Co. Comm'rs v. Aspinwall, 21 How. 539.

2 Woods v. Lawrence County, 1 Black, 386. In Woods v. Lawrence County, above cited, it was also held where the statute requires the grand jury to fix the amount of a subscription to railroad stock, and to approve of it, and upon their report being filed empowers commissioners to carry the same into effect by making its subscription in the name of the county, that if these things be done agreeably to

1

the law, the county cannot afterwards deny its obligation to pay the amount subscribed. In a suit brought to recover the arrears of interest on such bonds, it is not necessary for the holder to show that the grand jury fixed the manner and terms of paying for the stock; nor is it a defence for the county to show that the grand jury omitted to do so. It is enough that the manner and terms of payment were agreed upon between the company and the commissioners. This case, among others, was cited and approved in Grand Chute v. Winegar, 15 Wall. 372 (1872); s. c. 5 Chicago Legal News, 337.