§ 1172. A legislature has no power to authorize the issue of municipal bonds in aid of private enterprises or objects, and such bonds are void, even in the hands of bona fide holders.

But suppose the enactment under which the bonds in question were issued is not "a special act conferring corporate powers" within the meaning of the constitutional prohibition, the other objections made to the validity of the bonds remain to be considered. The act authorizes the creation of a debt by the municipality to raise money by the issue of bonds to be given as a donation or bonus "to aid in the erection or completion of buildings at or near the city of Iola to be used for the purpose of manufacturing Z. King's patent bridges, and as a foundry and iron works," and the act also authorizes and requires the levy and collection of such taxes as may be necessary to pay the interest and principal of these bonds. It is important to be observed that this is undeniably a private enterprise. These buildings and works are the private property of the owners. No public or municipal control over this property or the enterprise aided is specially reserved or provided for, and none exists different from that which exists as to all other property owned by private persons and devoted to private uses. The proprietors of these works are under no obligations, by reason of the aid extended and the burden of taxation thereby imposed upon the municipality, to render it or the state any duty or service whatever - not even to repay the loan, or to maintain for any specified time the contemplated manufacturing enterprise. The state or city could not compel them to complete or operate the works or prevent their removal at pleasure to some other locality. And thus we have presented the inquiry, than which no question concerning the property rights of the citizen is of more transcendent moment, viz.: Whether the legislature may thus compel or coerce the citizen to aid in the establishment of purely private enterprises or objects because these will or may incidentally promote the general good of the community or locality. I think it safe to affirm that no such principle has yet received judicial sanction. On the contrary, the principle has been declared unsound by courts of the highest respectability.

$1173. Extent of the taxing power.

The general subject of the extent of the taxing power in connection with municipal aid to railways has been thoroughly discussed in a majority of the states of the Union, and recently by the supreme court of the United States. Olcott v. Supervisors, reported 5 Ch. Leg. N., 397 (16 Wall., 678); Railroad Company v. Otoe County, Dec. Term, 1872 (16 Wall., 667). The courts everywhere have agreed that taxes can lawfully be imposed for public purposes only; and therefore, in the language of Chief Justice Black, "The legislature has no constitutional right to create a public debt or authorize any municipal corporation to do it in order to raise funds for a mere private purpose. No such authority passed to the assembly by the general grant of legislative power. This would not be legislation. Taxation is a mode of raising revenue for public purposes. When it is prostituted to objects in no way connected with the public interests or welfare, it ceases to be taxation and becomes plunder. Transferring money from the owners of it into the possession of those who have no title to it, though it be done under the name and form of a tax, is unconstitutional, for all the reasons which forbid the legislature to usurp any other power not granted to them. An act of the legislature authorizing contributions to be levied for a mere private purpose, or for a purpose which, though it

... ·

be public, is one in which the people from whom they are exacted have no interest, would not be a law, but a sentence commanding the periodical payment of a certain sum by one portion or class of people to another. The power to make such order is not legislative, but judicial, and was not given to the assembly by the general grant of legislative authority." Sharpless v. Philadelphia, 21 Penn. St., 147. Similar language is held by Mr. Justice Strong in delivering the opinion of the supreme court of the United States in the recent case of Olcott v. Supervisors of Fond du Lac County, Dec. Term, 1872, reported 5 Ch. Leg. N., 397 (16 Wall., 678). The learned justice says "that the taxing power of the state extends no further than to raise money for a public use, as distinguished from private, or to accomplish some end public in its nature." Again he says: Again he says: "No one contends that the power of a state to tax, or to authorize taxation, is not limited to the uses to which the proceeds may be devoted. Undoubtedly taxes may not be laid to a private use." land v. Hastings, 10 Allen, 570; Tyson v. School Directors, 51 Penn. St., 9. § 1174. What are public and what are private works and enterprises.

The only question, therefore, is whether the use for which taxation in the present case is authorized is a public or a private use. The supreme court of the United States, in sustaining the validity of legislative acts authorizing municipal aid to railways, place it upon the distinct ground that highways, turnpikes, canals and railways, although owned by individuals under public grants or by private corporations, are publici juris; that they have always been regarded as governmental affairs, and their establishment and maintenance recognized as among the most important duties of the state, in order to facilitate transportation and easy communication among its different parts. Rogers v. Burlington, 3 Wall., 654 (§§ 837-841, supra); Mitchell v. Burlington, 4 Wall., 270 (§§ 1151-53, supra); Railroad Co. v. Otoe County, supra. Therefore it is that in favor of such improvements the state may put forth its right of eminent domain, and also, as now established by judicial decisions, unless the right be denied it in the constitution, its power to tax. That these acts may lawfully be done is because, and only because, the use is a public one, public in its nature, and hence these works are subject to public control and regulation, notwithstanding they may be constructed under legislative authority and be exclusively owned by private persons or corporations. Compulsory taxation in favor of railways and like public improvements owned by individuals or companies is an exercise of power going quite to the verge of legislative authority. Although it is a doctrine that must now be considered as judicially settled, still it is one which has encountered a vigorous opposition, both on the ground of expediency and of power, and the exercise of the authority has been so disastrous as already in some of the states to have led to constitutional provisions for the protection of the citizen. But it is obvious from the statement of the grounds upon which such legislation rests that it furnishes no support for the validity of taxation in favor of enterprises and objects essentially private; and such I consider to be the establishment of a bridge, manufactory or foundry owned by private individuals. Cases may be imagined giving rise to doubts whether the use be public or private, but the one in hand does not seem to be difficult to class. It is certainly not usual for the legislature to undertake to exercise the right of eminent domain to procure sites for hotels, banks, manufactories, stores and the like, and it may be safely said, unless extraordinary circumstances may occasionally furnish an exception, that private property cannot lawfully be condemned for such purposes; and the reason is that it

would not be a taking for public use, nor justified by any reasonable necessity.

§ 1175. Incidental benefits to the public do not constitute an enterprise a public one.

So taxation to aid ordinary manufactories or the establishment of private enterprises is a device until recently quite unheard of; and the power must be denied to exist unless all limits to the appropriation of private property and to the power to tax be disregarded. The question under discussion must be determined upon some principle, and I hold it to be sound doctrine that the mere incidental benefits to the public or the state which result from the pursuit by individuals of ordinary branches of business or industry do not constitute a public use in a sense which justifies the exercise of either the power of eminent domain or of taxation.

§ 1176. Boston "fire bonds" of 1872. Rule laid down in that case.

If this salutary principle be abandoned, we unsettle the foundations of private property, and unwisely open the door for frauds and abuses of the most alarming character. That these views are sound I entertain no doubt, but my conviction of their soundness has been much strengthened by the decision of the supreme judicial court of Massachusetts, declaring unconstitutional the act authorizing the issue of what is known as the "Summer street fire bonds." In November, 1872, a considerable portion of the city of Boston was destroyed by fire. In December following, the legislature empowered the city to issue bonds to the amount of $25,000,000, the proceeds of which three commissioners, appointed by the mayor, were authorized to loan in a safe and judicious manner, "in such sums as they shall determine, to the owners of land, the buildings upon which were burned by the fire in said Boston on the 9th and 10th days of November, 1872, upon the notes or bonds of said owners secured by first mortgages of said land; said mortgages to be conditioned that the rebuilding shall be commenced within one year from the 1st day of January, 1873; and said commissioners to have full power to apply the proceeds of said bonds in making said loans in such manner, and to make such further provisions, conditions and limitations in reference to said loans and securing the same as shall be best calculated, in their judgment, to insure the employment of the same in rebuilding upon said land burned over, and the payment thereof to the said city."

In the late case of Lowell v. Boston, the constitutionality of this act was the question to be decided. It will be seen that the object of the act, as shown by its provisions, was "to insure the speedy rebuilding on land the buildings upon which were burned" by the great fire; and the question was as to the right of the state to impose any taxes for this object, and this depended upon the further question whether this object was, in a legal sense, a public object. The court distinctly held, to use the language of the rescript sent down in the case, that taxes can only be laid "for some public service or some object which concerns the public welfare;" that "the preservation of the interests of individuals, either in respect of property or business, although it may result incidentally in the advancement of the public welfare, is, in its essential character, a private and not a public object." "That the incidental advantages to the public or to the state which result from the promotion of private interests, or the prosperity of private enterprises or business, do not justify their aid by taxation." "That as a judicial question the case is not changed by the magnitude of the calamity which has created the emergency." And, finally, the

court say: "The expenditure authorized by this statute being for private and not for public objects, in a legal sense it exceeds the constitutional power of the legislature, and the city cannot legally issue the bonds for the purposes named in the act." See, also, as to distinction between public and private use, Bloodgood v. Railroad Co., 18 Wend., 65; Jenkins v. Andover, 103 Mass., 94, holding invalid a statute authorizing taxation in favor of a private incorporated academy. Same principle, Curtis v. Whipple, 24 Wis., 350; People v. Salem, 20 Mich., 452.

1177. Purchaser of bonds must take notice of power to issue.

As the only authority for the issue of the bonds in question was an unconstitutional act of the legislature, they are void - void from the beginning, and void into whosesoever hands they may come. All persons must, at their peril, take notice of the power of municipal corporations or officers to issue securities, and especially is this so where the want of power results from constitutional prohibitions or provisions. The Floyd Acceptances, 7 Wall., 676 (BILLS AND NOTES, §§ 15-23); Marsh v. Fulton Co., 10 Wall., 676 (§§ 1186–89, infra); Clark 2. Des Moines, 19 Ia., 199; Steines v. Franklin Co., 48 Mo., 167.

The demurrer to the declaration is sustained, and, unless the plaintiff desires to amend, judgment will be entered for the defendant.

Judgment for defendant.

§ 1178. Donating land.- A power given to a city to issue bonds to provide for the construction of a city hall, markets and other structures of public necessity and utility, does not authorize it to issue bonds to purchase land to be given to a railroad company. Lewis v. City of Shreveport,* 3 Woods, 205. See § 1142.

§ 1179. Bonds issued by a town, for the purchase of land, for the purpose of inducing a railroad company to build its machine shops there, are held to be issued for a public purpose, and therefore valid, in Missouri, where it is settled law that this kind of aid may be lawfully given to railroad companies. Jarrolt v. Moberly,* 5 Dill., 253.

§ 1180. Manufacturing.- Bonds issued under the act of December 15, 1868, of West Virginia, authorizing the city of Parkersburg to issue bonds in aid of a private manufacturing interest, are void, inasmuch as the power to issue the bonds, no other means being provided, implies that they are to be paid by taxation, and such taxation is not taxation for a public object; and inasmuch as there is no authority in the constitution of Virginia for levying taxes to be used in private enterprises. Parkersburg v. Brown,* 16 Otto, 487. See §§ 898, 1145-1150.

V. WHETHER BONDS ISSUED TO PROPER COMPANY.

SUMMARY- Company divided into three, and bonds issued to one division. § 1181.- Subscription transferred to another company, § 1182.- Bonds issued to consolidated company, § 1183.- Authority to subscribe to any road running to the city, § 1184.- Law applies to railroads constructed after its passage, § 1185.

§ 1181. A statute of Illinois authorizing the issue of county bonds in aid of railroads provided that no subscription should be made and no bonds issued without the consent of a majority of the voters of the county, and that the notices of election should specify the company in which stock is proposed to be subscribed. Under this law stock was voted to the Mississippi & Wabash Railroad, proposed to be built across the state of Illinois from east to west. After the commissioners had ordered the clerk to make the subscription on the books of this company, it was divided by act of the legislature into three companies, each becoming a distinct corporation. The clerk made the subscription on the books of the central division and issued the bonds to that company, which owned about one-fourth of the original road. The bonds were held invalid, even in the hands of holders in good faith. No acts of the supervisors could ratify the issue of the bonds, as they were the agents and not the principals with reference to that act. Marsh v. Fulton County, SS 1186-1189.

1182. Ray county, in Missouri, voted subscription to railroad company A., to be paid in bonds. Company A. was bought by company B., under authority of the legislature and the

consent of the stockholders, including Ray county. The county court, under express authority to take proper steps to protect the interest of the county, made a subscription in company B. The latter company failing to build a road through the county, under an agreement between the county court and company B., and company C., the stock was transferred to C., and county bonds issued to that company, since it proposed to construct a road along the same line intended by the original companies. It did construct such a road, and received the bonds at different stages of completion of the road, according to agreement. The bonds being in the hands of holders in good faith, the road being in operation, the county having paid interest on the bonds and now holding the stock, repudiates the bonds. It is held that on the above facts the county must pay the bonds, and that the constitution of Missouri of 1865, passed after the vote and before the subscription to B., or the transfer of stock, requiring the consent of voters to subscriptions to any railroad company, does not affect the transfer to C. nor the subscription to B. County of Ray v. Vansycle, §§ 1190-1193.

§ 1183. The county court of the county of Bates, in pursuance of a petition from certain tax-payers, ordered an election in one of its townships to determine whether they would subscribe stock to a certain railroad company to be paid in bonds. The vote being favorable, the county court passed a resolution that a certain sum be, and is hereby, subscribed to the stock of the company, and that the agent be authorized to make the subscription on the books of the company. The agent being dissatisfied with the condition of the company reported to the court that "the bonds of the township are not subscribed," and the court approved of his acts. Some time afterwards the county court made another order reciting that the subscription had been made to the company intended, and, this company having become consolidated with another, forming a new company, directed that the bonds be issued to the new company in payment of the original subscription. The bonds were accordingly issued. The court held, in an action on the bonds, that there had been no subscription to the stock of the old company, and, as the bonds were issued and subscription made to a company other than the one for which the vote was cast, the bonds were void. County of Bates v. Winters, §§ 1194, 1195.

§ 1184. The city of Madison had authority "to take stock in any chartered company for making a road or roads to said city." A railroad was in existence from Madison to Indianapolis through Columbus. Held, that it had the power under such law to subscribe and issue bonds for the capital stock of a railroad from Shelbyville to Columbus. Van Hostrup v. Madison City, SS 1196, 1197.

§ 1185. A statute authorized a city to lend its credit to certain railways named and to "any other railroad company duly incorporated and organized for the purpose of constructing a road leading from the city," etc. Held, that this act applied to any railroad which might be incorporated and organized after its passage, and was not limited to railroads then in existence, and that an issue of bonds, in aid of such a company subsequently organized, was valid. James v. Milwaukee, § 1198.

[NOTES.-See SS 1199-1203.]

MARSH v. FULTON COUNTY.

(10 Wallace, 676-684. 1870.)

ERROR to U. S. Circuit Court, Southern District of Illinois.

STATEMENT OF FACTS.- The law of Illinois authorized counties to subscribe for railroad stock upon a vote of the people, the notice of the election to specify the company to whose stock the subscription was to be made. The law also provided that the powers of a county could only be exercised by a board of supervisors. The people of Fulton county having authorized a subscription to the Mississippi & Wabash R. R. Co., whose road was to run from the Mississippi river to the east line of the state, the board of the county ordered its clerk to enter its subscription on the books of the company. Before the subscription was made the act incorporating the road was amended so as to divide the road into three divisions, and the clerk subscribed in the name of the county on the books of one of the divisions and issued therefor the bonds here sued on. The board of supervisors paid some of the interest coupons and did other acts recognizing the bonds as county obligations.