Lawrence Lewis.

American and English corporation cases : a collection of all corporation cases, both private and municipal (excepting railway cases), decided in the courts of last resort in the United States, England, and Canada [1883-1894] online

. (page 63 of 73)
Online LibraryLawrence LewisAmerican and English corporation cases : a collection of all corporation cases, both private and municipal (excepting railway cases), decided in the courts of last resort in the United States, England, and Canada [1883-1894] → online text (page 63 of 73)
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which they were attached.

There are numerous cases where municipal bonds have
been authorized by statute upon a vote of a majority of the
citizens of a city, county, town, or other locality, and officers
designated to ascertain and report as to the vote taken and
issue the bonds. When, in such cases, the bonds refer to the
statute, and recite a compliance with its provisions, and have
passed, for a valid consideration, into the hands of bona fide
purchasers, without notice of any defect in the proceedings,
the obligors hav^ been held to be estopped from denying the
correctness of the recitals. The doctrine on this subject is
well stated by the supreme court of the United States in
the recent case of Pana v. Bowler, 107 U. S. 539. " This
court," is the language used, " has again and again decided
that if a municipal body has lawful power to issue bonds or
other negotiable securities, dependent only upon the adoption
of certian preliminary proceedings, such as a popular elec-
tion of the constituent body, the holder in good faith has the



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LIEBMAN V. CITY AND COUNTY OF SAN FRANCISCO. 607

right to assume that such preliminary proceedings have taken
place if the fact be certified on the face of the bonds by the
authorities whose primary duty it is to ascertain it."

This doctrine is not accepted in many of the State courts,
and has in some instances met with earnest dissent from
judges of the supreme court. It must, however, be conceded
that it is the settled doctrine of that court ; but to its applica-
tion the recitals must clearly import a compliance with the
statute under which the bonds were issued. If fairly con-
strued theyare consistent with any other interpretation ; they
will not estop the municipal corporation in whose name they
are made from showing that they were issued without
authority of law. School District v. Stone, 106 U. S. 186;
Supervisors of Carroll County v. Smith, 11 U. S. 556. And
the recitals when full will estop only the obligors of the
bonds ; they cannot estop others who are not parties to them ;
they cannot aflfect strangers to the transaction. In both par-
ticulars the alleged recitals in the avenue bonds are inopera-
tive to create any estoppel against the city and county.
There is no statement of any fact in the clause called a recital.
The clause is a mere caption to an order or promise of the
board of public works that the treasurer of the city and coun-
ty of San Francisco will pay to the holder the sum of one
thousand dollars. " In conformity with the act," the title of
which is given, says the instrument, *'the treasurer will pay."
Read in connection with what follows, it imports that the treas-
urer will pay the amount designated in accordance with the
act, — that is, out of the fund to be provided by it, — and that
the holder can look to no other source of payment. There is
nothing in the clause which would reach the petition and im-
port that it had conformed to the requirements of the statute.
But the fact which disposes of this question of recitals and
any alleged effect attributed to them in the present case is
that the so-called bonds, to which the coupons in controversy
were attached, are not obligations of the city and county.
They are not executed by it, or under its seal, or by its
agents or oflBcers, but by certain parties constituting the
board of public works. The fact that certain oflBcers of the
city and county are made members of the board to appraise
the property taken and the injuries and benefits caused by



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6o8 LIEBMAN V. CITY AND COUNTY OF SAN FRANCISCO.

the opening of the avenue does not constitute them agents
of the city and county, and render their work as such board
the work of the city and county ; no more than if they were
constituted a board to establish a university, and prescribe
the studies to be pursued in it, would make them the agents
of the municipality for that purpose. Agents can only exer-
cise the powers of their principals ; they cannot lawfully ex-
ceed them. Here the city and county as a municipality is
not authorized to open the avenue, to appraise the value of
the property taken, or the amount of injuries received by or
benefits conferred upon the owners of property along the
line of the avenue, or to sign and issue its bonds to the par-
ties injured. In all these matters the board acts indepen-
dently of the municipality. It is made the agent of the State
to carry out a public improvement directed by its statute,
and not the agent of the city and county.

The foundation upon which the doctrine of estoppel from
recitals in municipal bonds rests is that the oflBcers sign-
ing the bonds and inserting the recitals are agents of the
municipality, and authorized to bind it by their acts and rep-
resentations. The principle which gives rise to the estoppel,
as well stated by the defendant's counsel, is that it would be
inequitable to permit a municipal corporation to take advan-
tage of the falsity of solemn declarations of such agents within
the ^cope of their authority. But if the oflBcers making the
recitals are not such agents, there is no room for the doctrine
of estoppel. Their recitals, on no conceivable principle, can
in such cases bind the corporation.

It follows that if any action can be maintained upon the
coupons against any defendant, the validity of the proceed-
ings upon which the bonds were issued must be established
suFFiciEHCT oir ^7 sflBrmative proof of the suflBciency of the peti-
S^S5Sma!5S tion, which was the essential initiative to them.
LT AflsuMED. g^^ ^|^^ questiou is not before us, whether an action
can be maintained against any other party ; it is enough that
we are of opinion that the present action cannot be maintained
against the city and county of San Francisco. The plaintiff
asks for judgment that the coupons are valid obligations of
the city and county ; that there is due, by the city and county,
upon each of the coupons, thirty dollars, with interest; that
the city and county pay the amount thus adjudged due out



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LIEBMAN V. CITY AND COUNTV OF SAN FRANCISCO. 609

of the special tax to be levied under the act, and that the
plainti£F recover his costs of the action. Such judgment could
not be rendered upon the facts stated in the complaint. The
statute to which the complaint refers, and upon which, alone,
the judgment is sought, declares, in express terms, " that the
city and county shall not, in any event whatever, be liable for
the payment of the bonds, nor any part thereof," and " that
any person purchasing said bonds, or otherwise becoming the
owner of any bond or bonds, accepts the same on that express
stipulation and understanding/*

As already stated, the so-called bonds, which, in fact, are
only orders or promises of the board of public works that the
treasurer will pay to the holder the amounts designated, can-
not be the foundation of any liability of the city and county,
and that such liability is sought to be charged appears from
the prayer for judgment, although the discharge of that lia-
bility is to be had out of funds to be raised by the special
tax for which the act provided.

The asserted ground of the action is that it is essential to
establish the validity of the bonds, as a preliminary to an appli-
cation for a mandamus to levy the special tax. ^^^^^^ ^^
Counsel assume that the validity of the bonds issued ^^SItSIwSS
by one party can be determined in an action against <'^"^'''«^^^-
another in no way named in them, nor liable for their pay-
ment We do not so understand the law. We have not met
with any adjudged case to that purport. On the contrary,
we have always supposed that the party actually liable on a
bond must have his day in court, in person or by his repre-
sentative, before a judgment determining its validity as against
him or his estate could be regarded as having any binding
force. Such liability cannot be vicariously imputed to him
or charged upon his estate. Jf the action be to charge par-
ticular property of which there is no representative, there is
a defect in the law which the legislature, and not the courts,
must supply.

It is true that in the enforcement of bonds of municipal
bodies, which are to be paid from funds raised by taxation,
general or special, the validity of the bonds must first be
established by the judgment of the court, — that is, the demand
against the municipality on the bonds must be first carried
into judgment ; then a mandamus will issue, which is in the

9 Cor. Cas.— 39



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6lO LIEBMAN V. CITY AND COUNTY OF SAN FRANCISCO.

nature of an execution. It is the executory process for the
enforcement of the judgpnent recovered. It can only issue to
command the corporation against which the judgment is ren-
dered, or its representatives or officers, to levy the tax prayed,
just as an execution on an ordinary money judgment can only
be issued against the property of the judgment debtor.
Whether, when the judgment against the municipality is ren-
dered, the writ is to direct a general or a special tax upon all
or a portion of the property within its limits or only upon a
particular class of property, real or personal, will depend
upon the directions ot the statute providing for the payment
of the indebtedness created. The judgpnent, however, must,
in all cases, be against the corporation to which, or to whose
representatives or officers, the writ is directed. It is the lia-
bility of the corporation established by the judgment which is
to be discharged by the levy of the tax prayed, and not the
liability of any other body.

The several cases cited by counsel in support of their con-
tention in no respect militate against these views, but, on the
contrary, illustrate and confirm them. In all of them the
bonds were issued in the name, or were in law the obligations,
of the municipality against which the judgment was prayed,
though in some of them the funds for the payment of the
judgment were to be collected by a special tax upon the prop-
erty of a particular district. It would serve no useful purpose
to comment at length upon the cases in verification of this
statement Every one who may take an interest in the sub-
ject will find, upon examination of them, its correctness sus-
tained.

One of the counsel of the plaintiff indulges in his brief in
some strictures upon the action of the city and county of San
Francisco with respect to these bonds, characterizing it as
"dishonest and dishonorable repudiation." The accusation
falls harmless in the face of the statute under which the bonds
were issued, declaring that the city and county " shall not, in
any event whatever, be liable for the payment of the bonds,
nor any part thereof," and " that any person purchasing said
bonds or otherwise becoming the owner of any bond or bonds
accepts the same upon this express stipulation and under-
standing." Nor can the legislators of the city and county be
subjected to any just imputations of a want of regard to the



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LIEBMAN V, CITY AND COUNTY OF SAN FRANCISCO. 6ll

honor and credit of the municipality in refusing to order the
levy of a tax to pay the interest on the bonds, so long as the
judgment of the highest tribunal of the State, the constitu-
tional expounder of its laws, remains unreversed, declaring
that the proceedings on which the bonds were issued were
taken in disregard of the conditions imposed by the legisla-
ture, and, therefore, were absolutely null and void. If prop-
erty of citizens has been taken and is retained for an avenue
of the city without compensation, upon proceedings not war-
ranted by law, some other remedy must be sought by the
parties injured than such as consists in affirming the validity
of those' proceedings in face of the judgment of that tribunal.
It follows from the views expressed that no recovery can
be had upon the facts disclosed in the complaint ; and the
motion of the defendant to exclude all evidence in support of
its allegations must be granted ; and it is so ordered.

Sawyer, C. J.— This case having been regularly called for
trial, the plaintiflF offered in evidence the bonds and coupons
set out in the complaint, to the introduction of which the
defendant objected, on the ground that the complaint does
not state a case sufficient to justify the introduction of any
evidence whatever ; or, in other words, that the facts.

facts stated in the complaint do not make a case which enti-
tles the complainant to any judgment or relief against the
defendant, or upon which the defendant is in any respect
liable to be sued. The counsel of both parties treated the
objection as, in effect, a demurrer to the complaint, on the
ground that the facts set out, taken as true, do not constitute a
cause of action, and they argued the question very elabor-
ately on that hypothesis.

The first question that meets us at the threshold of the
discussion is whether the defendant — the municipal corpora-
tion, the city and county of San Francisco — is, in any sense,
the obligor on the bonds, or whatever the instruments in suit
may be properly termed; or whether it is in any way a
party to the transaction out of which th6se instruments arose,
in such sense as to cast any liability or duty upon the
municipality in its corporate capacity.

In my judgment, the instruments sued on are not bonds
of the city and county of San Francisco ; and the city and



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6l2 LIEBMAN V. CITY AND COUNTY OF SAN FRANCISCO.

county of San Francisco, in its corporate capacity, does not
stand in any such relation to these obligations as renders the
corporation liable to be sued upon them for any purpose.

The act under which the instruments sued on purport to
have been issued is not an amendment to the city charter,
CHiTAiii oFFi. and it does not purport to enlarge the powers or
iSf^F**ySaS <i"ties of the corporation, or of its oflScers in their
FAUTT. capacity of oflficers or agents of the corporation.

It does not confer any authority whatever upon the cor-
poration to do any act, in its corporate capacity, or impose
any duty or obligation upon the municipality relating to
the opening and dedication to public use of Montgomery
Avenue. The corporation is not authorized to do the acts
necessary to the opening and dedication of the street to the
public use contemplated by the act, or required to see that
the costs of the work, upon completion, shall be collected or
paid ; in short, the corporation, as such, is neither required
nor authorized to perform any act in relation to the opening •
and dedication of the avenue, or in relation to payment
therefor, when accomplished. Clearly, it seems to me, the
State has undertaken to do this work through the instrumen-
talities chosen by itself, of which instrumentalities the cor-
poration called the city and county of San Francisco is not
one. Some of the oflScers of the city, it is true, are designated
as instrumentalities for carrying out the scheme provided
for ; but in carr)nng it out they do not act by virtue of any
authority derived under the charter of the corporation, or any
act amendatory of the charter, or enlarging its powers, or
under the authority of the corporation, but they act solely by
authority of the act in question, independently of any act of
the corporation, their designation by their oflBcial titles being
only descriptio personamm to indicate the particular parties
chosen for the work.

The act describes a specific tract of territory within the
city and county of San Francisco by metes and bounds, and
then declares that " it is hereby taken and dedicated for an
open and public street, and, when paid for as hereinafter
provided, the title thereto shall vest in the said city and coun-
ty for such purposes forever, as the title of other public
streets in said city and county now is vested." This, with
a provision for subsequent improvement and care, is the only



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LIEBMAN V. CITY AND COUNTY OF SAN FRANCISCO. 613

one in the whole act in which the city and county, in its
corporate capacity, is brought into any relations with the im-
provement contemplated ; and this relation only commences
after the work of dedication and opening is fully completed,
and paid for, by the agencies and in the manner appointed
by the act. The expenses of dedication to public use and
opening the avenue are to be paid for by assessments on a dis-
trict of land specifically described and designated by the
act as benefited by the improvement. The board of public
works provided for is not a board of public works of the city
and county of San Francisco, with powers derived under the
charter of the city, or any act enlarging those powers, or act-
ing by authority of the corporation or its charter. It is not
one of the branches of the municipal government

This board is a special board of public works created by
the statute, without any reference to the powers and duties
of the corporation, to carry out this particular improvement
undertaken by the State, without reference to any action of
the corporation, and without consulting its pleasure. It is,
it is true, composed of three persons, who are also officers of
the corporation, and their official name is used to designate
the individuals who are to constitute the board. But their
individual names might just as well have been used, or any
other three persons having no connection with the corporate
government might have been appointed to perform precisely
the same acts ; and had this been done, there would be just
as good ground for considering them agents of the corpora-
tion, and not instrumentalities employed by the State itself to
carry out its purposes, as there is, now, to consider the
board as an agent of the municipality, and not an instrumen-
tality of the State. Doubtless, the legislature might have
enlarged, the powers of the corporation, or conferred the
authority, or imposed the duty, upon it to perform the con-
templated work; but it did not see fit to do so. " The mayor,
tax-collector, and city and county surveyor" of the city and
county of San Francisco — that is to say, the persons who for
the time being filled those offices — are ** created a board of
public works, within the meaning and intent of this act, and
as such board are hereby authorized, empowered, and di-
rected to perform all and singular the duties herein enjoined
upon the board of public works as herein provided." A sal-



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6l4 LIEBMAN V. CITY AND COUNTY OF SAN FRANCISCO.

ary of two thousand dollars per annum is allowed to each
for his services in such board, payable out of the ^' Mont-
gomery Avenue Fund," to be assessed upon the property
benefited, as a part of the expenses of the opening of the
avenue. Section 25 provides that "the board of public
works shall provide itself with an official seal, which shall
be used to verify such acts of the board as are herein de-
scribed to be done, under the seal of the board; thus,
apparently making it an independent corporation, or quasi-
corporation, for the purposes of the act

Section 8 requires the board, at the proper stage of pro-
ceedings, to prepare and issue bonds for an amount in the
aggregate " necessary to pay and discharge all said damages,
costs, and expenses." " Said bonds shall be known and desig-
nated as * Montgomery Avenue bonds,' and the bonds shall
signed by all the members * of the board,' and the seal thereof
shall be affixed to each bond." There is nothing to authorize
the issue of bonds by or in the name of the municipal cor-
poration. They are to be issued by the board specially
created for the purpose, under its own seal, provided for by
the act, and not under the seal of the municipal corporation,
and not signed by the mayor as mayor or agent of the city.
Under section 11, a fund sufficient for the purpose of pay-
ment of coupons and redemption of the bonds is to be levied,
assessed, and collected ki the same manner as other taxes in
said city or county are levied, assessed, and collected upon
lands within the district supposed and determined by the act
itself to be benefited. Thus, the same machinery and instru-
mentalities used for collecting other State as well as city
taxes are adopted for assessing and collecting the special tax
provided for the purposes of the act. The moneys so col-
lected are to b e paid, not into the treasury of the city and
county as a part of its corporate funds, but to the treasurer
of the city and county personally designated for the purpose,
and is " to constitute the Montgomery Avenue fund," " to be
paid out by said treasurer only in payment of the coupons
attached to said bonds," . . . and " in redeeming the bonds
issued in pursuance of the provisions of this act."

The fund thus provided is set apart for this specific purpose,
having no connection with the funds of the municipality,
under the sole charge and management of the board of public



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LIEBMAN V. CITY AND COUNTY OF SAN FRANCISCO, 615

works, and the person who happens, for the time being, to be
treasurer. The municipal corporation, as such, has no power
or authority over it — nothing whatever to do with it. Nor
has the board of supervisors, the legislative and govemjng
body of the corporation. It is under the exclusive authority
and control of the agents of the State, especially designated
by the act, to carry out the will and purpose of the State as
manifested by the act.

As if not enough to declare its purpose to make the
improvement, to designate its own instrumentalities, and
point out the mode of executing its will, leaving nothing to be
done on the part of the corporation, or of its legislative and
governing body, and to carefully avoid bringing the corpor-
ation or its legislative body into any relations whatever with
the work ; and as if to cut off all possibility of doubt upon
the subject, it was expressly provided in the last section but
one of the act " that the city and county of San Francisco
shall not, in any event whatever, be liable for the payment of
the bonds, nor any part thereof, provided to be issued under
this act ; and any person purchasing said bonds, or otherwise
becoming the owner of any bond or bonds, accepts the same
upon that express stipulation and understanding." Thus the
statute in no provision authorizes the city and county of San
Francisco, in its corporate capacity, or by the board of super-
visors, its legislative and controlling body, or otherwise, to
do anything in the matter of opening and dedicating to
public use Montgomery Avenue, or to meddle with the
funds provided for the purpose, or to assume any obligation
or responsibility in the matter. The act imposes no obliga-
tion or duty upon the corporation or upon its controlling
body, nor does it even confer any power to act, in any
manner, in regard to the work of opening Montgomery
Avenue, while, on the contrary, it expressly provides that it
** shall not, in any event whatever, be liable for the payment
of the bonds, nor any part thereof, provided to be issued
under this act ; and any person purchasing said bonds, or
otherwise becoming the owner of any bond or bonds, accepts
the same apon that express stipulation and understanding."
Thus the statute in no provision authorizes the city and
county of San Francisco, in its corporate capacity, or by the
board of supervisors, its legislative and controlling body, or



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6l6 LIEBMAN V. CITY AND COUNTY OF SAN FRANCISCO.

Otherwise, to do anything in the matter of opening and dedi-
cating to public use Montgomery Avenue, or to meddle with
the funds provided for the purpose, or to assume any obliga-
tioa or responsibility in the matter. The act imposes no
obligation or duty upon the corporation or upon its control-
ling body, nor does it even confer any power to act, in any
manner, in regard to the work of opening Montgomery
Avenue ; while, on the contrary, it expressly provides that it
** shall not, in any event whatever, be liable for the payment
of the bonds, nor any part thereof, provided to be issued
under this act."

The act does not authorize the issue of any bonds of the
corporation, and the board of public works must have so
understood the statute, for it did not, in fact, issue any such
bonds. The instruments, set out in the complaint neither in
substance, in form, nor in law, can be regarded as bonds of



Online LibraryLawrence LewisAmerican and English corporation cases : a collection of all corporation cases, both private and municipal (excepting railway cases), decided in the courts of last resort in the United States, England, and Canada [1883-1894] → online text (page 63 of 73)