means by which he induced the witness to swear falsely was but an incident. It may be safely asserted that a witness does not often deliberately perjure himself without being induced thereto by some fraudulent or corrupt practice on the part of him who gets the advantage of the perjury. It is a matter of indifference what particular form such corrupt practice takes. The evil and the wrong is in the perjury which follows. In this case the truth of Johnson's evidence was necessarily drawn in question at the trial, and determined by the decision of the court; and all that has since been discovered is another item of testimony bearing on that point. We cannot find any substantial ground upon which this case can be distinguished from U. S. v. Throckmorton, supra. The decision in that case has been approved by this court as recently as In re Griffith, 85 Cal. 113, 23 Pac. Rep. 528 and 24 Pac. Rep. 381. The following decisions of this court are also in point: Allen v. Currey, 41 Cal. 321; Mining Co. v. Mitchell, 59 Cal. 176. Many other authorities to the same effect are cited in the brief for respon. dents. On the other hand, the case of Laithe v. McDonald, 7 Kan. 254, 12 Kan. 340, directly supports the position of appellant, as does the case of Fabrilius v. Cock, 3 Burrows, 1771. The cases of Verplanck v. Van Buren, 76 N. Y. 247, and Dringer v. Railway Co., 42 N. J. Eq. 573, 8 Atl. Rep. 811, contain expressions which seem to imply the same doctrine, but they do not directly support it.

DEFENSES TO MUNICIPAL AID BONDS.

Though the subject presented has not now the practical interest it at one time possessed, owing to the modern disinclination, on the part of municipalities, to enter into obligations which were at one time so common, but which experience taught were, in most instances, simply ruinous, and without benefit either to the municipality or the community, the issue of municipal aid bonds by counties and cities still continues in some States; and therefore a review of the main features of the law by which they are governed, and the defenses which may be interposed in their behalf, may be of some value. By way of preface, it may be said that, in this paper, we shall treat simply of what is known, in general parlance, as railroad aid, or municipal aid bonds. Though many phases and features of the law pertaining thereto will apply equally as well to other kinds of municipal bonds issued for purposes of credit or of obtaining loans, the subject of railroad aid bonds, or bonds issued. by a municipal corporation to assist the building of railroads, and to pay for stock of such railroad, is one peculiar to itself, and has been hedged about with rules, and governed by considerations not generally accorded to ordinary municipal bonds.

3

the first place,

Power to Issue. - In the it may be said that the power, in the absence of special authority, of a municipal corporation to aid the construction of railroads by subscribing to their stock, is sustained in a large number of cases in the different States, and the federal courts,' though in many of the States such power is not recognized by the courts. It is elementary, however, that the legislature of a State, in the absence of constitutional inhibition, has power to authorize municipalities to become shareholders in railroad companies, and to issue honds therefor.* But the doctrine is universal that municipal corporations have no general or implied power to issue commercial paper, in which category municipal bonds are properly classed. other words, a municipal corporation has no incidental or inherent authority, under the usual grants of municipal power, as a means of discharging its ordinary functions, to issue negotiable securities. Such authority, however, may be inferred from special and extraordinary powers, and may depend, in some. measure, upon a true construction of its char-ter, and the legislation of the State applicable to it.6

In

1 Olcott v. Supervisors, 16 Wall. 678; Sharpless v. Mayor, 21 Pa. St. 147, s. C., 59 Am. Dec. 759; Leavenworth v. Miller, 7 Kan. 479, s. c., 12 Am. Rep. 425; Phillips v. Albany, 28 Wis. 340; Butler v. Denham, 27 Ill. 474; Gould v. Venice, 29 Barb. 442; 7 Lawson's Rights and Remedies, § 3947. Counties and towns in Illinois have not the right to make bonds, issued in aid of railroads, payable in the City of New York.. People v. Tazewell, 22 Ill. 147.

2 Hanson v. Vernon, 27 Iowa, 28, s. C., 1 Am. Rep. 215; People v. Salem, 20 Mich. 452, s. C., 4 Am. Rep. 400; M. O., etc. R. R. Co. v. Mayor, 23 Ark. 300; Aurora v. West, 22 Ind. 88, s. c., 85 Am. Dec. 413.

3 Cole v. City of La Grange, 20 Cent. L. J. 209; Harshman v. Bates County (U. S. S. C.), 3 Cent. L. J. 367.

4 Johnson v. Stark, 24 Ill. 75; Perkins v. Lewis, 24 Ill. 208; Keithsburg v. Frick, 34 Ill. 405; Bank of Rome v. Rome, 18 N. Y. 38; Grant v. Courter, 24 Barb. 232; Clark v. Rochester, 24 Barb. 446; Sharpless v. Philadelphia, 21 Pa. St. 147, s. C., 59 Am. Dec. 759; Commonwealth v. Taylor, 36 Pa. St. 263; Commonwealth v. Perkins, 43 Pa. St. 400. An authority to a city corporation to subscribe for stock in a railway company "as fully as any individual," authorizes also the issue by the city of its negotiable bonds in payment of the stock. Seybert v. Pittsburg, 1 Wall. 272; Commonwealth v. Pittsburg, 43 Pa. St. 391.

5 Merrill v. Town of Monticello, 16 Cent. L. J. 90; Hopper v. Town of Covington, 8 Fed. Rep. 777; Ryan v. City of Watertown, 30 Wis. 259. Even the legislature has no power to authorize a municipal corporation to issue its bonds to a private manufacturing corporation. Cole v. City of La Grange (U. S. S. C.),

20 Ĉent. L. J. 209.

6 Gause v. City of Clarksville, 5 Dillon C. C. Rep. 165, 8 Cent. L. J. 358.

8

Effect of Absolute Want of Power. If the power to issue bonds in aid of railway and other like publie enterprises does not in fact exist, they are void, into whosoever hands they may come. This results from the fact that municipal bonds payable to bearer are negotiable instruments, and subject to the same rules as other negotiable paper, among which is the one that a bona fide purchaser of negotiable paper for value, before maturity, takes it freed from all infirmities in its origin; the only exceptions being where the paper is absolutely void, for want of power in the maker to issue it, or where the circulation is prohibited by law for the illegality of the consideration. Therefore, there must be an original authority by statute to the municipality to issue bonds. As said by Mr. Justice Clifford, in the leading case on the subject: "Bonds payable to bearer issued by a municipal corporation to aid in the construction of a railroad, if issued in pursuance of power conferred by the legislature, are valid commercial instruments; but if issued by such a corporation which possessed no power from the legislature to grant such aid, they are invalid even in the hands of innocent holders."'10 Thus, wherever a want of power exists, a purchaser of securities is chargeable with notice of it, if the defect is disclosed by the corporate records or by other records, where the power is required to be shown." Thus where bonds, purporting to have been issued by a county, contain no recitals of an election or of proproceedings and orders of the county board, but are naked promises to pay, every purchaser and holder of the securities, is chargeable with notice of whatever appears upon the face of the county records; and if, in such case, it appears upon the face of such records that the officers had no authority or power to issue the bonds, the county may avail itself of that want of authority as a defense to an action even of a bona fide holder.12

7 Marsh v. Fulton County, 10 Wall. 676; Sherrard v. Lafayette County, 2 Cent. L. J. 347; Harshman v. Bates County, 92 U. S. 569, 3 Cent. L. J. 367; County v. McKenzie, 94 U. S. 660; Township v. Skinner 94 U. S. 255; Ogden v. County of Daviess, 102 U. S. 634; Hayes v. Holly Springs, 114 U. S. 120.

8 Cromwell v. Sac, 96 U. S. 51, s. c., 6 Cent. L. J. 209.

13

Where bonds recite on their face that they are 'funding bonds," and issued to fund the town's indebtedness, purchasers assume, at their peril, that the legislature had authorized the issue of bonds for that purpose. And in another case, bonds of a city issued as appears on their face, pursuant to an act of the legislature, to a private manufacturing corporation, were held to be void for want of constitutional power in the legislature, even in the hands of a purchaser in good faith for value.14 If, on the other hand, the power exists in the municipality to issue bonds, a false recital of such power on the bonds themselves will not vitiate them in the hands of an innocent holder. 15

Power Must be Strictly Pursued. The power, when it has been conferred to aid or engage in extramunicipal enterprises, being extraordinary in its nature, and burdensome to the citizen, must (except as modified by the doctrine of estoppel in favor of the bona fide holder hereafter referred to) be strictly pursued according to the terms and conditions of the grant conferring it.16 Thus, in a case where a county had by the legislative act no authority to issue its bonds to the railroad company unless upon the sanction of a previous vote, after thirty days notice of the issued and negotiated before there is any decision by the courts of the State against the validity of the act authorizing their issue, the Supreme Court of the United States does not consider itself bound to follow a subsequent decision of the local courts invalidating such securities, but will decide for itself whether under the constitution and laws of the State such securities are valid or not. Westerman v. Cape Girardeau County, 7 Cent. L. J. 353; Gelpecke v. Dubuque, 1 Wall. 175; Butts v. Muscatine, 8 Wall. 575. But in cases depending upon the constitution or statutes of a State, the Supreme Court of the United States adopts the construction of the constitution or statutes given by the courts of the State, when that construction can be ascertained, and when different and conflicting interpretations have not been made by the State courts. Fairfield v. County of Gallatin, 9 Cent. L. J. 467; Polk's Lessees v. Wendell, 9 Cranch. 98; Nesmith v. Sheldon, 7 How. 818; Walker v. State Harbor Commissioners, 17 Wall. 651.

13 Merrill v. Town of Monticello (U. S. C. C. Ind.), 16 Cent. L. J. 90.

14 Loan Assoc. y. Topeka, 20 Wall. 655; and see also Parkersburg v. Brown, 106 U. S. 487; Allen v. Jay, 60 Me. 124; Lowell v. Boston, 111 Mass. 454; English v. People, 96 Ill. 566; Central Branch v. Smith, 23 Kan. 745.

15 Smith v. Clark County (Mo.), 1 Cent. L. J. 5; Crane v. Lessee, 6 Peters, 598.

16 Starin v. Genoa, 23 N. Y. 439; Woods v. Lawrence County, 1 Black, 386; Gould v. Sterling, 23 N. Y. 456; Harding v. Rockford R. R. Co., 65 Ill. 90; Williams v. Roberts, 88 Ill. 11; 1 Dillon on Mun. Corp. § 163.

election to be held for that purpose, the Supreme Court of Illinois held, in a direct proceeding against the county to enjoin it from issuing its bonds, that although there was an election at which a majority voted in favor of the subscription, yet the failure to give the thirty days notice was a fatal defect, and the issue of the bonds was restrained.17

Estoppel From Defenses.-But as against innocent and bona fide holders for value of such securities, the municipalities may be estopped by recitals in the bonds, by the subsequent levy of taxes to pay interest thereon, or by retaining the stock which was received in exchange for the bonds or purchased with their proceeds, to set up in defense a noncompliance with preliminary conditions.18 This doctrine of estoppel has been established by repeated decisions of the United States Supreme Court, which has always watched with jealous care the interests of innocent holders of municipal bonds, 19 and has been followed by the State courts generally.20 The doctrine proceeds, also, upon the ground that such bonds are commercial paper, and in the hands of an innocent holder have the same protection. Thus, when a corporation has power, under any circumstances, to issue negotiable securities, the bona fide holder has a right to presume that they were issued under the circumstances which gave the requisite authority, and no more liable to be impeached in the hands of such a holder than any other commercial paper. 22 All these decisions are in substance, that the mere irregularities of officers in endeavoring to comply with the provisions of statute giving the power, where the recitals in the bonds are in proper form, and do not convey notice of such irregularities, will not invalidate the bonds in the hands of bona fide holders.

Who is Bona Fide Holder ?-The question

17 Harding v. Rockford, etc. R. R. Co., 65 Ill. 90. 18 Knox County v. Aspinwall, 21 How. 539. 19 Township v. Rogers, 16 Wall. 644; Grand Chute v. Winegar, 15 Wall. 355; Lynde v. Winnebago County, 83 U. S. 6; Township v. Morrison, 10 S. C. Rep. 333; Kimball v. Town of Lakeland, 41 Fed. Rep. 289, 29 Am. Law Reg. (N. S.) 380, note.

20 Smith v. Clark County, 1 Cent. L. J. 5; 7 Lawson's Rights and Remedies, 6217 and cases cited in note.

21 Cromwell v. Sac Co., 96 U. S. 51.

22 City of Lexington v. Bullen, 13 Wall. 296; Knox County v. Aspinwall, 21 How. 539; Gelpecke v. City of Dubuque, 1 Wall. 175; Smith v. Clark County, 1 Cent. L. J. 5.

as to who is a bona fide holder of a municipal bond is very much the same as in cases of ordinary commercial paper. One who purchases bonds in open market, supposing them to be valid and having no notice to the contrary, will be deemed a bona fide holder. 23 In one case a holder of bonds the city of Ottawa, knowing that they were issued to aid a manufacturing company in the development of the water power of the city, which was not a corporate purpose within the meaning of the constitution of Illinois, is not a bona fide holder, and the bonds as to him are void.24

Defects Cured by Estoppel.-As to what constitutes mere irregularities of officers within the rule, has given rise to considerable discussion and some conflict between the courts. It is clear and well established that an election without notice,25 or upon insufficient notice, 26 or one in which the the requisite majority is not obtained, or at which disqualified voters are allowed to vote-in other words, mere formal defects are contemplated.27 So, also, formal defects or irregularities by officers in the execution of the bonds, not apparent on their face.28 But, in some cases, the question was debated with considerable vigor, whether the acts of the officers, required as a condition precedent to the issue of the bonds, were of such character as that absolute default on their part to comply therewith defeated the bonds, upon the ground of a lack of inherent power to issue. As an example, the question arose whether a total absence to hold any election, where one is required to be held, I will vitiate the bonds.29 In one of the earlier cases, where the county commissioners were by statute authorized to issue bonds upon a previous affirmative vote of the electors, and the bonds were issued, though no such vote was in fact held, the court decided that, the bonds

23 Galveston H. and. H. R. R. Co. v. Cowdrey, 78 U. S. 459.

24 City of Ottawa v. Carey, 108 U. S. 10. 25 Knox County v. Aspinwall, 62 U. S. 539. 26 Marshall County v. Schenck, 72 U. S. 772. 27 City of Lexington v. Butler, 81 U. S. 282; Thompson v. Perrine, 103 U. S. 806.

28 Weyanwega v. Ayling, 99 U. S. 112; Ralls County v. Douglas, 105 U. S. 728. But see McClure v. Oxford Township, 94 U. S. 429; Anthony v. County of Jasper, 101 U. S. 693; Cole v. City of Cleburne, 131 U. S. 162, where the defects of execution were held of such character as to charge the purchaser with notice.

29 Smith v. Clark County, 1 Cent. L. J.5; Grand Chute v. Winegar, 15 Wall. 355; Marsh v. Fulton County, 10 Wall. 676.

containing no recital, the bona fide holder had no right to presume that they were issued under the circumstances which gave the requisite authority, and that he was bound to take notice of the county records, which showed that no authority existed. But the difficulty in that case arose from the fact that there was no recital in the bonds. When such recital exists, it has been held conclusive against the municipality, even where there there has been absolute default on the part of the officers to comply with the conditions precedent. The doctrine may be stated thus, that where the bonds on their face import a compliance with the law under which they were issued, the purchaser is not bound to look further for evidence of the conditions of the grant of power, and that when the board, or the records of the municipality contain a recital of an election, and all other conditions precedent as prescribed by the statute, the municipality is concluded by that recital, and may show that, as a matter of fact, no took place. The discussion of this question caused, at one time, some between the federal and State courts as to whether a bona fide purchaser generally is chargeable with notice of defect or irregularity which is disclosed by the county records; or, in other words, whether he must look beyond the recital of the bond. The federal courts, as stated, held the municipality concluded by the recital in the bonds. The State courts, on the contrary, declared the bondholder chargeable with notice of whatever appears upon the county records, notwithstanding recitals.84 Both, however,

32

not election general conflict

33

30 Marsh v. Fulton County, 10 Wall. 676. 31 Grand Chute v. Winegar, 15 Wall. 355.

-31 Bissell v. City, 24 How. 287; Grand Chute v. Winegar, supra.

33 Grand Chute v. Winegar, supra; Town of Colona v. Evans. Cent. L. J. 325; Township v. Rogers, 16 Wall. 644; Pollard v. City of Pleasant Hill, 1 Cent. L. J. 155.

34 Flagg v. City of Palmyra, 33 Mo. 440; Clark v. City of Des Moines, 19 Iowa, 199; Smith v. Clark County, 54 Mo. 58; Lewis v. Commissioners (Kan.), 1 Cent. L. J. 16; Veeder v. Town of Luna, 19 Wis. 280; Starin v. The Town of Genoa, 23 N. Y. 439.

STOPPAGE IN TRANSITU-DELIVERY, ACTUAL OR CONSTRUCTIVE.

KINGMAN V. DENISON.

Supreme Court of Michigan, Feb. 27, 1891.

A consignee of goods became insolvent before their arrival, and when they were delivered by the carrier his store was in possession of his mortgagees. The mortgaged property was subsequently sold, and bid in by one of the mortgagees, who sold part of the goods in question. The consignors remained ignorant of the true state of affairs for two months, when they replevied the portion of the goods remaining unsold in the hands of the mortgagee: Held that, as the goods had never actually come into the possession of the consignee, the consignors could assert their right of stoppage in transitu as against the mortgagee; that this right was not divested by the purchase of the goods at the mortgage sale; and that the mortgage lien would not attach to the goods, as against the consignors, even under a clause in the mortgage conveying after-acquired property.

LONG, J.: On July 8, 1889, defendant Denison wrote the plaintiffs at Peoria, Ill., ordering 5,000 pounds of twine. No dealings had ever been had between the parties prior to that time. The plaintiffs received the letter the next day, and at once wrote Denison: "We have entered your order, and twine will go forward to-morrow." On July 11th the twine was shipped to W. C. Denison, Grand Rapids, Mich., plaintiffs taking shipping bill from the railroad company there, and on same day sent it to Denison, with statement of account for value of the twine. The twine was received at Grand Rapids by the Grand Rapids & Indiana Railroad Company, July 17th, and on the 18th they turned it over to a teamster, who delivered it at the store which was occupied by Denison at the time the order was made. It appears that on July 9th the Grand Rapids Savings Bank caused an attachment to be levied upon Denison's property. On that evening Denison gave the bank a chattel mortgage on all the goods in the store and at a warehouse there, and a store situate at another place outside of Grand Rapids. July 10th, 11th, and 12th he gave mortgages on the same property to the bank and several other creditors, two of them being given to the defendant the McCormick Harvesting Machine Company. The goods mortgaged were held in the store by the agents of the bank until they were sold under one of the mortgages, which was about July 18th, at which time the defendant the McCormick Harvesting Machine Company bid the goods in, and continued to occupy the store, putting Mr. Denison in as their agent. The McCormick mortgage contained a clause, after a description of the property mortgaged, as follows: "And all additions to and substitutes for any and all the above-described property." On September 7th plaintiffs, who had no notice or knowledge of the changed condition of Mr. Denison's affairs, drew on him at sight for the amount of the bill. This draft was not paid, and on September 14th plaintiffs wrote him for prompt remittance, which

was not made. On September 19, 1889, plaintiffs brought replevin against the defendants, for the twine, finding about one-half of it; the balance having been sold out of the store] by the McCormick Harvesting Machine Company. On the trial of the cause the defendants waived return of the property, and had verdict and judgment against the plaintiff for $351. 91, the value of the twine taken, aħd costs. Plaintiffs bring error.

The plaintiffs asked the court to instruct the jury that plaintiffs were entitled to a verdict; and in the ninth request asked an instruction that "if Mr. Denison did not in fact receive the twine at his store, but was not there when it was delivered, and never received and accepted it for his use in any way, except that, finding it in the store, he allowed the mortgagees to assume control of it, plaintiffs could retake it as against him." And in the tenth request it was asked that the jury be instructed that the McCormick Company, as mortgagee, is in no better position than Mr. Denison. Its mortgage does not cover this twine, nor is it a bona fide purchase. Several requests were also asked for instructions to the jury relating to the insolvency of Mr. Denison at the time of the purchase, and his inteut not to pay for the twine at the time of its purchase, or at the time when it was received at the

store, on the 18th of July. These lastnamed requests we do not deem it necessary to set out here for an understanding of the points involved. The requests set out were refused by the trial court, and upon such ruling the plaintiff assigns error. The court, in its charge to the jury, stated: "Plaintiff claims the right to the possession of these goods at the time this suit was commenced-First, because they were ordered by Mr. Denison at a time when he was insolvent, and had no intention, or at least no reasonable expectation, of paying for them according to the terms of the contract; and counsel also claim the right of stoppage in transit. All I need to say in regard to the latter claim is that I think the right of stoppage in transit, under the facts in this case as shown by the evidence, has no application whatever; there is no such right existing." This part of the charge relating to the right of stoppage in transit is assigned as error. The court was in error in refusing these requests to charge and in the charge as given. It is not seriously contended here but that under the evidence given on the trial, the defendant Denison was insolvent at the time the goods were ordered. At least this was a question of fact which should have been submitted to the jury; and, if so found, the question of the right of stoppage in transit was an important question in the case. The right of stoppage in transit is a right possessed by the seller to reassume the possession of goods not paid for while on their way to the vendee, in case the vendee becomes insolvent before he has acquired actual possession of them. It is a privilege allowed to the seller for the particular purpose of protecting him from the insolvency of the con

signee. The right is one highly favored in the law, being based upon the plain reason of justice and equity that one man's property should not be applied to the payment of another man's debts. Gibson v. Carruthers, 8 Mees. & W. 337. But it is properly exercised only upon goods which are in passage and are in the hands of some intermediate person between the vendor and vendee in process, and for the purpose of delivery, and this right may be exercised whether the insolvency exists at the time of the sale or occurs at any time before actual delivery of the goods, without the knowledge of the consignor. O'Brien v. Norris, 16 Md. 122; Reynolds v. Railway Co., 43 N. H. 580; Blum v. Marks, 21 La. Ann. 268; Benedict v. Scaettle, 12 Ohio St. 515. This right of stoppage in transit will not be defeated by an apparent sale, fraudulently made, without consideration, for the purpose of defeating the right. There must be a purchase for value without fraud, to have this effect. Harris v. Pratt, 17 N. Y. 249. In the present case it appears that the goods arrived in Grand Rapids, July 17th, and were taken to the store on the 18th. Mr. Denison was not in the store at the time they were taken in. Mr. Talford was in possession of all the goods and of the store at this time for all the mortgagees, and after the sale under the mortgage the McCormick Company took possession, and were in possessson at the time this replevin suit was commenced. The testimony tends to show that at the time demand was made upon the McCormick Company and Mr. Denison for the twine Mr. Denison stated that he thought the plaintiff, having heard of his financial affairs, would not ship the twine, and that he did not know it had been shipped until it was in the store; and he was very sorry it had come, under the circumstances. The McCormick Company claimed that by the terms of their mortgage they were entitled to hold it. The court was in error in not submitting to the jury the question whether the goods had come actually to the possession of Mr. Denison. circumstances tend strongly to show that he never had actual possession of them, and never claimed them as owner. He had made the order, and was notified that they would be shipped; but from that time forward it is evident that he made no claim to them. The McCormick Company claimed that they passed to them under the terms of their mortgage. They, however, stood in no better position than Denison. If the goods never actually came into the possession of Denison as owner, the mortgage lien would not attach, even under the clause in the mortgage covering after-acquired property. They do not stand in the position of bona fide purchasers of the property. The right of stoppage could not be divested by a purchase of the goods under the mortgage sale. The transit had not ended unless there was actual delivery to Mr. Denison. These were questions of fact for the jury, which the court refused to submit. If the jury had found that Denison was insolvent at the time the order

The