have received the judicial recognition not only of this court, but of nearly every State in the Union, is well known and admitted." See, also, Murry v. Lardner, 2 Id., 110; Thompson v. Lee County, 3 Id., 327; Aurora City v. West, 7 Id., 82; City v. Lamson, 9 Id., 481; Smith v. Sac County, 11 Id., 150; Pendleton County v. Brittain, 15 Id., 566; Kenicott v. Supervisors, 16 Id., 452; St. Joseph v. Rogers, 19 Id., 241; Clark v. Iowa City, 20 Id., 583; Society, etc., v. City of New London, 29 Conn., 174; Bank of Rome v. Village of Rome, 19 N. Y., 20; Voce v. Richmond, 18 Gratt., 338; Barrett v. Schuyler County, 44 Mo., 197; Smith v. Clark County, 54 Id., 58; Craig v. City of Vicksburg, 31 Miss., 217; Johnson v. County, 24 Ill., 92; Clapp v. Cedar County, 5 Iowa, 15; Clark v. Janesville, 10 Wis., 136.

Municipal bonds good on their face.-In City of Lexington v. Butler, 14 Wall., 282, the facts were these: The City of Lexington, Kentucky, in 1853, issued to the Lexington & Big Sandy Railroad Company one hundred and fifty bonds of the city, each of $1,000, with coupons attached, sealed with the corporate seal of the city, and signed by the mayor and clerk of the corporation, in payment of that amount of subscription by the city to the stock of the said railroad company. The railroad company, as the holders and owners, indorsed the bonds in blank and transferred the same to divers persons and corporations, as the means of raising money to construct their road, and in this way the plaintiff became the purchaser of four bonds and the coupons sued on. The bonds on their face recited that they were issued in part payment of said subscription by the mayor and council of said city, as authorized by a vote of the people, in pursuance of an act of the assembly of that State, approved 9th January, 1852.

One ground of defense was, that the city was not liable on the bonds, because the conditions precedent to the right of the corporation to subscribe for the stock of the railroad company and to issue bonds were never fulfilled; that the conditions annexed to the right, as enacted by the legislature, were that the proposition to subscribe should be submitted to the qualified voters of the corporation, and that it should be approved by a majority of those voting on the question; that the proposition as submitted did not authorize a subscription unless a million of dollars were previously subscribed by other parties; that said amount had not been subscribed; that the State court had, by mandamus, compelled the authorities of the city to issue the bonds; and that said action and judgment of the court had been reversed on appeal, etc. The plaintiff filed a replication to the above matter, pleaded by the defendants, denying any notice of the matters set out in said plea.

Mr. Justice CLIFFORD, in this case, observes: "Issued by authority of law, as the bonds purport to have been, and being by the regular indorsement thereof made payable to bearer, they lawfully circulated from holder to holder by delivery, and the plaintiff having purchased four of the numbers in market overt, became the lawful indorsee and holder of the same, together with the coupons annexed; and the interest secured by the coupons being unpaid, he instituted the present suit to recover the amount. Evidently, the prima facie presumption in such a case is, that the holder acquired the bonds before they were due, that he paid a valuable consideration for the same, and that he took them without notice of any defect which

would render the instruments invalid. Impliedly the plea admits that the bonds were purchased before they were due, and that the plaintiff gave a valuable consideration for the same, but the defendants allege that he took the same with notice of the irregularities in issuing the same, as set forth in the plea, and they rely on those allegations as a complete defense to the action, but the replication traversed the averment of the notice and tendered an issue to the county, and the defendants, by demurring to the replication, confessed the allegations of the plea in that behalf were untrue, and that the plaintiff was the bona fide holder of the bonds without notice of the alleged defects in the inception of the instruments.

Coupons attached as interest warrants to bonds for the payment of money, lawfully issued by municipal corporations, as well as the bonds to which they are attached, when they are payable to order and are indorsed in blank, or are made payable to bearer, are transferable by delivery and are subject to the same rules and regulations, so far as respects the title and the rights of the holder, as negotiable bills of exchange and promissory notes. Holders of such instruments, if the same are indorsed in blank or are payable to bearer, are as effectually shielded from the defense of prior equities between the original parties, if unknown to them at the time of the transfer, as the holders of any other class of negotiable instruments.

Admitted, as it is, that the corporation defendants possessed the power to subscribe for the stock and to issue the bonds, it is clear that the plaintiff is entitled to recover upon the merits, as the repeated decisions of this court have established the rule that 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 that they are no more liable to be impeached for any infirmity in the hands of such a holder than any other commercial paper."

Remarks.-This case turned on the question of notice to the plaintiff of the alleged defects in the inception of the instruments sued on. But the act of the legislature gave the city authority to subscribe for the stock of the railroad company only on condition that a majority of the voters of the city voting on the question should authorize it, and although in fact the vote was had, it was not one which submitted the single question whether the subscription should be made, but whether it should be made provided one million dollars were first subscribed by other parties. In reply to the arguments against the application of the doctrine of ultra vires on account of the frequent hardship and injustice arising therefrom, it has frequently been said that the charter, or act creating them, is equally accessible to all, and parties dealing with corporations are presumed to know these powers, and should be held bound to take notice of them, and if they contract with them in relation to matters beyond the scope of the authority conferred upon them, they should not be heard to complain when the plea of ultra vires is made. In the preceding case, the power conferred upon the city to subscribe for the stock was a public act of the legislature, coupled with the condition that a majority of the voters of the city should authorize it. They did not by their vote authorize an unconditional subscription. But on this point the case turned on the fact that the bonds purported to have been issued by au

thority of law, and that the holder had a right to assume that they were issued under circumstances which gave the requisite authority. The same question was presented in the following cases: Knox Co. v. Aspinwall, 21 How., 539; Bissell v. City of Jeffersonville, 24 Id., 287; Gelpcke v. Dubuque, 1 Wall., 203; Supervisors v. Schenck, 5 1d., 784. But, see Police Jury v. Britton, 15 Wall., 566.

In Knox Co. v. Aspinwall; supra, where the statute of the State of Indiana provided that the board of commissioners of a county should have power to subscribe for railroad stock, and issue bonds therefor, in case a majority of the voters of the county should so determine after a certain notice should be given of the time and place of the election; and the board subscribed for the stock, and issued the bonds, purporting to act in compliance with the statute, it was held that it was too late to call in question the existence or regularity of the notices of election, in a suit against the county by the holders of the coupons attached to the bonds, who were innocent holders; that according to the true interpretation of the statute the board were the proper judges whether or not a majority of the votes in the county had been cast in favor of the subscription to the stock; and that where the bonds themselves import a compliance with the law, a purchaser was not required to look for further evidence of a compliance with the condition to the grant of power.

Where the doctrine was held applicable to the bonds of a county.-In Marsh v. Fulton County, 10 Wall., 676, the county was authorized to subscribe for stock and issue bonds of the county therefor to any railroad company not exceeding $100,000, provided such subscription was previously sanctioned by a majority of the voters of the county at an election called for that purpose. At such election the county was authorized to subscribe to the Mississippi & Wabash R. Co., a company duly incorporated by the legislature of Illinois in 1853. By a subsequent act of the legislature the charter of said company was amended, by which the line of said company was divided into three divisions, designated as the Western, Central and Eastern. A subscription was made and bonds issued to the "Central Division of the Mississippi & Wabash Railroad Company, or bearer." In a suit on these bonds it was held that, notwithstanding it was brought by an innocent holder, they were invalid in his hands, as there was no authority to make and issue them.

In this case Mr. JUSTICE FIELD, who delivered the opinion of the court, observes: "This is not a case where the party executing the instruments possessed a general capacity to contract, and where the instruments might for such reason be taken without special inquiry into their validity. It is a case where the power to contract never existed-where the instruments might, with equal authority, have been issued by any other citizen of the county. It is a case where the holder was bound to look to the officers of the county and ascertain whether the law had been so far followed by them as to justify the issue of the bonds. The authority to contract must exist before any protection as an innocent purchaser can be claimed by the holder. This is the law even as respects commercial paper, alleged to have been issued under a delegated authority, and is stated in the case of Floyd Accept

ances, 7 Wall., 676. In speaking of notes and bills issued or accepted by an agent acting under a general or special power, the court say: In such case the person dealing with the agent, knowing that he acts only by virtue of a delegated power, must, at his peril, see that the paper on which he relies comes within the power under which the agent acts. And this applies to every person who takes the paper afterward, for it is to be kept in mind that the protection which commercial usage throws around negotiable paper cannot be used to establish the authority by which it was originally issued.

* We do not mean to say that liabilities may not be incurred by counties independent of the statute. Undoubtedly they may be. The obligation to do justice rests upon all persons, natural and artificial, and if a county obtains the money or property of others without authority, the law, independent of any statute, will compel restitution or compensation. But this is a very different thing from enforcing an obligation attempted to be created in one way, when the statute declares that it shall only be created in another and a different way." See, also, McCracken v. San Francisco, 16 Cal., 624; Argenti v. Same, Id., 255.

CHAPTER XI.

MUNICIPAL WARRANTS, ISSUED WITHOUT AUTHORITY, ARE VOID EVEN IN THE HANDS OF INNOCENT HOLDERS.

TWENTY-FOURTH SELECTED CASE.

CLARK V. THE CITY OF DES MOINES.*

1. MUNICIPAL CORPORATION: AGENT'S POWER.-Agents, officers, or even a city council of a municipal corporation, cannot bind the corporation by any act which transcends their lawful or legitimate powers. And this rule applies to the issue of negotiable as well as unnegotiable evidences of debt.

2.

3.

—: NOTICE OF POWER.-The duties and powers of the officers of a municipal corporation are prescribed by the statute, and every person dealing with them as such may know, and is charged with knowledge of, the nature of these duties and the extent of these powers.

-: PLEA OF ULTRA VIRES.-A corporation may set up a plea of ultra vires, or its own want of power under its charter or constituent statute to enter into a given contract, or to do a given act, in excess of its corporate power or authority.

4. CONTRACT: NEGOTIABLE.-Negotiability will not validate obligations which are not binding because of want of power to make them.

5. MUNICIPAL CORPORATIONS: WARRANTS.--Warrants drawn by the proper officers of a municipal corporation on the treasury thereof, are not bills of exchange, but are, in legal effect, the promissory notes of the corporation.

6.

: POWERS EXPRESSED AND IMPLIED.-Municipal corporations have and can exercise only such powers as are expressly granted, and such incidental ones as are necessary to make these powers available, and are essential to effectute the purposes of the corporation; and these powers are strictly construed.

*Reported in 19 Iowa, 199 (1865).