WASHINGTON COUNTY, NEB., v. WILLIAMS; BLAIR et al. v. WASHINGTON COUNTY, NEB., et al., 111 F. 801

THAYER, Circuit Judge, after stating the case as above, delivered the opinion of the court. In behalf of Washington county it is claimed that the obligations executed by it on July I, 1869, one of which is set forth in full in the foregoing statement, were executed without authority of law, and are invalid in the hands of any holder thereof. It is urged, in substance, that the obligations in question were not authorized by the provisions of the “ninth

chapter of the Revised Statutes of the State of Nebraska,” which is referred to therein, and under which an election to authorize the issuance of the obligations was held, because that

chapter of the Revised Statutes (the same being

an act which was approved on January 11, 1861) did not contemplate or authorize the granting of county aid to railroads, and did not authorize the issuance of negotiable bonds, even if such aid was contemplated.

And with respect to the act of February 15, 1869, which did contemplate the issuance of railroad aid bonds, it is said that the obligations in suit cannot be supported under that act, because it required a popular vote before bonds could be lawfully issued, and that the obligations in suit show on their face that no such vote was taken under the act of February 15, 1869; the election specified in the recital being one which was held on June 9, 1868, pursuant to the act of January n, 1861, long before the act of February 15, 1869, was passed and approved.

These contentions present the principal questions to be discussed on appeal. Conceding it to be true that the twenty-fourth

section of the act of January 11, 1861, supra, did not authorize the county to make a donation of negotiable bonds in aid of the construction of railroads, or to issue such bonds for any purpose other than the construction of public buildings, and conceding for present purposes that the power to issue negotiable securities, when claimed by a municipal corporation, must be either expressly conferred, or derived by implication from an express power to borrow money or to purchase stock and pay for the same with bonds (Kelley v. Town of Milan, 127 U. S. 139, 150, 8 Sup. Ct. 1101, 32 L. Ed. 77; Merrill v.

Town of Monticello, 138 U. S. 673, 681, 11 Sup. Ct. 441, 34 L. Ed. 1069; Brenham v. Bank, 144 U. S. 173, 12 Sup. Ct. 559, 36 L. Ed. 390), yet we are of opinion that the obligations in suit are not negotiable bonds, within the rules of the law merchant, and that a purchaser of the same for value in the open market cannot invoke for his protection the doctrine of estoppel by recitals, as it is generally applied in actions upon negotiable municipal bonds.

To render a written promise to pay money negotiable in the sense of the law merchant, it is essential that it should be an unconditional promise to pay' a certain sum of money at some future time, which is sure to arrive, or, as is more frequently said, there must be “certainty as to the fact of payment.” If by the terms of the contract the sum promised to be paid, or a portion thereof, may never become payable, as where the sum promised is not to be paid unconditionally and at all events, but only out of a special fund derived from certain sources, which may not prove adequate to meet the demand in full, the instrument, according to the great weight of authority, cannot be deemed negotiable, and entitled, in the hands of a third party', to the immunities which belong to that class of instruments.

Husband v. Epling, 81 Ill. 172, 174, 25 Am. Rep. 273; Blackman v. Lehman, Durr & Co., 63 Ala. 547, 550, 35 Am. Rep. 57; Cota v. Buck, 7 Metc. (Mass.) 588, 41 Am. Dec. 464; Harriman v. Sanborn, 43 N. H. 128, 130; Bank v. Piollet, 126 Pa. 194, 198, 17 Atl. 603, 4 L. R. A. 190, 12 Am. St. Rep. 860; Chicago Ry. Co. v. Merchants’ Bank, 136 U. S. 268, 279, 10 Sup. Ct. 999, 34 L. Ed. 349; Daniel, Neg. Inst. §§ 41-43. We have no reason to suppose, and it has never been decided, that

section 2968 of the Consolidated Statutes of Nebraska, which defines negotiable instruments, was designed to modify the doctrine aforesaid in any respect, or to declare that an instrument might be negotiable even though it was uncertain as to the fact of payment. The statute, like many other statutes of a similar character, 'was designed to place bonds and promissory notes on the same plane of negotiability as foreign bills of exchange, provided they possess the requisite words of negotiability, and contain an unconditional promise to pay a certain sum of money at some future time, which is sure to arrive.

Now, while the obligations in suit acknowledge an indebtedness on the part of the county' of Washington to a certain amount, yet the promise made to pay this indebtedness; is not a promise to pay it unconditionally and at all events,. but is a promise to pay it only out of a fund to be raised by a levy of one mill per dollar on the taxable property of the comity, which fund is to he apportioned pro rata among all of the obligations, and applied first to the interest, and next to the indebtedness.

It is obvious that the special fund out of which the acknowledged indebtedness is to be paid may never be adequate to pay it; and, as the record discloses, 28 years’ experience demonstrates that the fund is inadequate, and that the debt is yearly increasing, instead of diminishing. Under these circumstances, the obligations in suit cannot be regarded as negotiable bonds.

They are instruments which merely evidence an obligation on the part of the county to levy a tax of one mill annually on all the property situated within the comity, and to apply it to the indebtedness until the same has been fully paid oil and discharged. The original holders of the obligations, and all subsequent purchasers thereof, took them with full knowledge of the maimer in which the county undertook to pay them, ‘because the method of payment is stated in each obligation, and is an essential part of the contract.

The several holders must be regarded as having assumed the risk of the fund proving adequate to pay the debt. For the reason, therefore, that the obligations are not negotiable, the suggestion that the act of January r 1, 18ÓJ, conferred no authority to issue negotiable bonds, becomes immaterial. Passing to a consideration of the question whether the twenty-fourth

section of the act of January 11, 1861, conférred upon the county the power to aid in the construction of a railroad, we observe in the first place that a more liberal construction should be placed upon the act after this lapse of time, and in view7 of the conduct of the county for the past 28 years, than would have been permissible if the action of the board of county commissioners had been challenged when they took the first steps, under the act of January 11, i86t, to extend such aid, or if the action of the board had been called in question before the obligations were issued, or shortly thereafter.

If the power of the county under that act to extend aid to a railroad had been seasonably challenged, as it might have been, by any taxpayer or citizen of the county, it would have been the duty of any judicial tribunal before which such a proceeding was brought to have construed the act strictly, and to have denied the existence of the power in question unless it was clearly conferred. We conceive, however, that the same rule of

interpretation ought not to be applied at the present time. It is true that a municipal corporation cannot be estopped by its previous conduct or by acquiescence from denjfing the validity of obligations which it may have issued, if in point of fact they were issued without any authority. I11 other words, such corporations cannot acquire a power wdiich has not been conferred upon them by law, by the operation of the doctrine of estoppel. So much may be conceded.

It has been held frequently, however, both by the federal and state courts, that such corporations, by acquiescence in wdiat has been done, as by paying interest for a series of years on obligations which they have issued, and thereby giving them currency in the market, may be estopped from challenging their validity on the ground that they were issued irregularly,, or that some preliminary action which should have been taken was omitted, or not taken at the proper time or in the proper manner. Supervisors v. Schenck, 72 U. S. 772, 781, 782, 18 L. Ed. 556; Clay Co. v. Society for Savings, 104 U.

S. 579, 591, 26 L. Ed. 856; Shoemaker v. Goshen Tp., 14 Ohio St. 569, 587; Society for Savings v. City of New London, 29 Conn. 174, 193; Leavenworth, L. & G. R. Co. v. Douglas Co. Com’rs, 18 Kan. 169, 185, 186; Mills v. Gleason, 11 Wis. 470, 490, 78 Am. Dec. 721; President, etc., of Town of Keithsburg v. Frick, 34 Ill. 405. For like reasons, we are of opinion that the citizens and taxpayers of Washington county are not at this time entitled to the same strict construction of the power of the county .under

section 24 of the act of January 11, 1861, which they might have insisted upon had they objected to the issuance of the obligations in suit at any time before they were executed and delivered, or shortly thereafter.

Any citizen or taxpayer of the county had the right to have stayed the execution and delivery of these obligations until the power of the county under the act of 1861 to aid in the construction of a railroad was judicially determined, but the power to extend such aid was not called in question, although nearly one-third of the popular vote at the election held on June 9, 1868, appears to have been cast against the proposition when it was submitted.

It is obvious, therefore, that at that time the county officials and the public generally construed the act of 1861 as being broad enough in its provisions to authorize the county to aid in the construction of a railroad.

Moreover, the road to which the people of the county •voted to extend aid was substantially constructed between June 8, • 1868, and the spring of 1869, probably in reliance upon such promised aid; and for more than 28 years taxes were regularly levied by the county authorities, without any protest, so far as these records disclose, upon the assumption, no doubt, that the board of county commissioners had acted within the law, and that the obligations were valid.

In view of these facts, we think that the present holders of the obligations in suit are entitled to invoke a liberal construction of the power of the county under the act of 1861. If the intent of the legislature, as manifested by that act, is not altogether clear, and if the act is so worded that different views may fairly be taken of its meaning, or concerning the power intended to be conferred, that view should be adopted which will sustain the obligations in suit, rather than destroy them. Turning to

section 24 of the act of January 11, 1861, it will be seen that it authorized the board of county commissioners of Washington county to submit to the people of the county, at any regular 01-special election, the question whether the county should aid in the construction of “any road or bridge,” and to extend such aid if a majority of the people were in favor of the proposition.

In view of other provisions of the act, it is also clear that the legislature contemplated that such aid might consist of a tax to be levied on all the property of the county for a period of years, or until a certain sum had been raised, provided the annual rate of taxation for that purpose did not exceed one mill on the dollar of valuation.

The word “road,” which was used in that act, is a generic term, and is sufficiently comprehensive to include all highways, of whatsoever kind, over which people ordinarily travel, whether they are dirt roads, macadam roads, plank roads, or railroads; and, as if to make the language as comprehensive as possible, the phrase “any road” was employed. It must also be borne in mind that in ordinary conversation a railroad is sometimes termed a “road.” Indeed, this use of the word is very common when no occasion exists for specifying the particular kind of road to which reference is made.

Aside from this view of the case, showing that the language used was broad enough to include railroads, it is to be observed that the

section of the act in question; bears internal evidence that the legislature intended to authorize the people of the county to extend public aid to “any enterprise designed for the benefit of the county”; and in view of this fact it may be. fairly argued that the word “road,” as employed in the act, compre-, hends railroads, and that they fall within the legislative intent, because the construction of such roads within or through the county would be fully as beneficial to the county, and tend as much to its speedy development and to increase its wealth and population, as the construction of other highways, such as plank roads, macadam roads, or dirt roads.

The authorities which have been cited as bearing upon the question whether the phrase “any road” includes a railroad are not in harmony, and none of them, in our judgment, should be deemed of controlling weight in the case at bar. In Van Hostrup v. City of Madison, 68 U. S. 291, 17 L. Ed. 538, it was held that authority conferred upon a city to take stock “in any chartered company for making a road or roads to said city” empowered such city to take stock in a railroad company which was organized to build a branch road from a point on another railroad already constructed, which latter road entered the city.

In the case of Evansville, I, & C. S. L. R. Co. v. City of Evansville, 15 Ind. 395, and in the case of City of Aurora v. West, 9 Ind. 74, 86, it was likewise decided that a power given to a city “to take stock in any chartered company for making roads to said city” conferred adequate authority to take stock in a railroad. And in the case of Dubuque Co. v. Dubuque & P. R. Co., 4 G.

Greene, 1, 4, it was decided that an authority given by-statute to counties in the state of Iowa to aid in the construction of “any road or bridge” conferred power to aid in the construction of railroads, these being included in the phrase “any road.” This view obtained and was followed by the supreme court of Iowa in several later decisions, but it was eventually overruled by a divided court in the case of Stokes v. Scott Co., 10 Iowa, 166.

These adjudications demonstrate very clearly that the language employed by the legislature of the state of Nebraska in the act of January 11, 1861, may be interpreted differently, with much reason to support either view, and that it is fairly susceptible of the

interpretation which was placed upon it by the county officials of Washington county and by the public generally when the obligations in suit were voted and contracted; and inasmuch as no voice was raised at that time, nor for 28 years thereafter, against an

interpretation of the act which made it include railroads, and inasmuch as the road to which aid was voted was built, and the obligations have been in the market, and circulating from hand to hand, for more than a quarter of a century, in reliance on their validity, no court, in our judgment, should now adopt a different construction of the act, in a controversy between the holders of these obligations and the county.

We accordingly conclude that the obligations in suit were authorized by the act of 1861, and in that view of the case it becomes unnecessary to determine whether they were also authorized by the subsequent act of February 15, 1869. Three other questions are presented by the records, which remain to be considered. The first of these is whether the holders of the obligations in suit at the time the actions were brought could rightfully demand judgment against the county for the full amount of the several obligations and accrued interest.

The second is whether the •lower court had jurisdiction of-the law case, in the event that the last question is answered in the negative. And the third question is whether the. holders of the obligations in suit can collectively maintain a bill in equity against Washington county to have the validity of the obligations established, and to obtain a decree against the county for the sum now due thereon and unpaid.

The 'trial court held, and in the law case rendered its judgment upon the theory, that the refusal of the county on September 14, 1899, to levy further-taxes for the purpose of making payments on the obligations in suit, rendered the entire amount of the acknowledged indebtedness immediately payable, notwithstanding- the agreement that it should be paid only in annual installments, each installment to-be such a sum as might be realized by an annual levy of one mill on the dollar.

In so deciding, the trial judge seems to have applied a doctrine which has been applied frequently in actions for the breach of a certain class of contracts, but, in our judgment, is not applicable to a case like the one in hand. The doctrine in question, as stated by the supreme court in Roehm v. Horst, 178 U. S. 1, 20 Sup. Ct. 780, 44 L.

Ed. 953, is, in substance, that where one party to an agreement which is mutually executory, before the time for performance on his part arrives, gives notice that he will not perform it, the opposite part}" is at liberty to consider himself absolved from all obligations to perform the agreement, and may sue at once for -all damages occasioned by the anticipatory breach, or, if he so elects, may wait for the time of performance to arrive, treating the contract in the meantime as prospectively binding for the exercise of this option.

In the case last cited, where the subject was elaborately considered and all of the authorities were reviewed, it was held that the doctrine in question has its limitations; that it is only applicable to contracts that are mutually executory, such as contracts for marriage, for the rendition of services, or for the transportation or the sale and delivery of property; and that it has no application to mo'ney contracts, pure and simple, where one party has fully performed' his undertaking, and all that remains for the opposite party to do is -to pay a certain sum of money at a certain time or times. Roehm v.

Horst, 178 U. S. 1, 17-19, 20 Sup. Ct. 780, 44 L. Ed. 953. See, also, Nichols v. Steel Co., 137 N. Y. 471, 487, 33 N. E. 561. It has never been held, so far as we have been able to discover, that the holder of a promissory note, or other written agreement to pay a sum of money at a designated time, can maintain an action thereon, in advance of its maturity, because the maker thereof has announced his intention not to pay it.

Now, the obligations in suit can be regarded in no other light than a contract on the part of the county to pay a given sum of money annually until such time as the amount of its donation to the railroad company, and accrued interest thereon, was fully discharged. It was not stipulated in the agreement evidenced by the obligations that a failure to pay one of the annual installments should render the entire amount of the obligation immediately payable, nor can it be successfully claimed that the notice given by the county that it would make no further payments had that effect.

If the plaintiff’s view is maintained, that the refusal of the county to pay rendered the entire debt immediately payable, and the obligations are enforced accordingly, the county would be compelled to do that which it never promised to do. Such conduct on the part of the county merely rendered it amenable to an action for such part of the indebtedness as was then due according to the terms of the donation. It results from this view that the trial court erred in the law case in rendering a judgment for the full amount of the five obligations, and the accrued interest, which were sued upon in that case.

The recovery should have been limited to such annual installments as were then due. Passing to the second question above stated, we observe that <dt does not- follow from the views last expressed that the trial court was without jurisdiction of the law' case because the sum recoverable rherein was less than $2,000, exclusive of interest and costs.

The amount claimed in the declaration or complaint, not the amount of the recovery, is the test of jurisdiction; and the fact that a sum in excess of $2,000, exclusive of interest and costs, was claimed, gave the trial court jurisdiction to render a judgment for a less amount, unless this court is able to find that a demand for a sum in excess of $2,000 was interposed in bad faith, for no other purpose than to give the federal court jurisdiction. Bank of Arapahoe v. David Bradley & Co., 19 C. C. A. 206, 72 Fed. 867 36 U. S. App. 519.

After a careful examination of the records, we fail to discover any evidence which would warrant this court in holding that the plaintiff in the law case demanded a judgment for the full amount of the five obligations by him held, either knowing or believing that he was not entitled to recover the sum claimed, and for the sole purpose of investing the federal court with jurisdiction.

Besides, the fact that the learned judge of the trial court sustained the plaintiff’s view', and rendered a judgment for the full amount of his claim, should be regarded as sufficient evidence that the claim as made was preferred in good faith, under an honest belief that it was tenable. It follows, therefore, that the contention on the part of the county that the trial court had no jurisdiction of the law case must be overruled.

The third question above mentioned concerns the right of the complainants in the equity case to sue in equity, and with respect to that question it is to be first observed that the causes of action sued upon are clearly of legal cognizance. The actions are founded upon a promise by the county to pay a certain sum annually out of a fund to be raised by the levy of a tax of one mill on the dollar on all property situated within the county which is subject to taxation.

This promise, however, does not run to the holders of the obligations jointly, so as to compel them to unite in a suit to enforce it; for by issuing 149 obligations, each payable to bearer, and by reciting therein, in substance, that the sum raised annually would be apportioned pro rata among all the obligations, the county, in effect, promised to pay to each holder such a portion of the fund as he was entitled to receive.

No reason is perceived why each holder of one or more of .the obligations in suit may not sue at law, as one of them has already done, and obtain a judgment for the sum due to himself, by proving at the trial what sum would have been raised, and what part thereof would have been payable to him, had the tax been levied. Nor do we perceive that the remedy in equity is any more efficacious than at law. All that a court of equity can do is to determine the validity of the obligations, and render a money decree for the amount of the annual installments then due and unpaid.

As much can be done by a court of law, and with equal facility. Moreover, after the validity of the obligations has been established, and a judgment obtained, resort must then be had to a legal remedy, to wit, a writ of mandamus, to compel the levy of a tax to pay the judgment, whether it be recovered at law or in equity, since it is a well-settled doctrine in the 'federal courts that a court of equity cannot command the levy of a tax; that being a duty which the legislature must impose; the sole function of the courts being to enforce its performance by mandamus when it has been imposed. Heine v.

Levee Com’rs, 86 U. S. 655, 22 L. Ed. 223; Rees v. City of Watertown, 86 U. S. 107, 22 L. Ed. 72; Stryker v. Board, 23 C. C. A. 286, 292, 77 Fed. 567.

The argument in support of the right of the bondholders to unite and sue in equity on all of the obligations, in its last analysis, results in this proposition: That whenever several persons have distinct or several demands against the same person or corporation, growing out of contract, they may, for the purpose of avoiding a multiplicity of suits, ■ unite and sue in equity to enforce the payment thereof, provided their several demands were incurred by the defendant at the same time and in the same manner, and provided that the defendant interposes or threatens to interpose the same defense thereto.

This proposition, in our judgment, is not sustained by any well-considered decision. In the case of Osborne v. Railroad Co. (C. C.) 43 Fed. 824, it ap•i peared that the title of numerous owners of land, who held the same in severalty, and who were also in possession of their respective tracts, was clouded by a claim to all the land which was preferred by a railway company under its land grant; and it was held by Mr. Justice Harlan, on the circuit, that the several landowners might unite in a bill against the railroad company to remove the common cloud, .and have the claim adjudged to. be invalid.

It will be noted that in .this case equity had jurisdiction for other reasons than to avoid a multiplicity of actions; this latter ground having been adverted to not as the sole reason for affording relief in equity, but merely to uphold the right of the complainants to file a joint bill, and to avoid the charge that the bill was multifarious. 'On the other hand, in the case of Heine v. Levee Com’rs, 86 U. S. 655, 22 L.

Ed. 223, several bondholders, whose bonds had been issued at the same time and under the same circumstances by a board of levee commissioners, united in filing a bill in chancery to obtain a decree for the amount of the bonds, and to compel a levy of taxes to satisfy the decree.

It was held that a court of chancery had no jurisdiction of the case unless there was some obstruction in the way of the common-law remedy, and it was not even suggested by court or counsel that, because a suit in chancery would lessen the number of actions, such a proceeding could for that reason alone be maintained, although the bonds sued upon did originate in the same transaction, and although the defenses thereto were the same, and the same questions of law and fact would be involved in the trial.

It was said, in substance, that the appropriate remedy was in a court of law, the causes of action being of legal cognizance. It is obvious that, if the proposition contended for by the complainants in the equity case is tenable, then the holders of municipal bonds may always unite and sue in equity if the municipality repudiates its obligations, on the pretense that by so doing a multiplicity of suits will be avoided.

Such a practice, however, has never obtained or been attempted, although actions upon such bonds have been very numerous, except in the instance above cited, where the jurisdiction in equity was emphatically denied.

As bearing incidentally on the point now under consideration, it may be further observed that in several cases before the supreme court where the question of jurisdiction, in view of the amount in controversy, was involved, that court has inferentially recognized the right of several persons having distinct interests to unite in an appeal on grounds of convenience, provided their rights or liabilities grow out of the same transaction and give rise to the same questions.

But in such cases litigants have never been permitted to aggregate their claims for the purpose of making up the amount necessary to confer jurisdiction unless they were able to show a common and undivided interest in the subject-matter of the litigation. Clay v. Field, 138 U. S. 464, 11 Sup. Ct. 419, 34 L. Ed. 1044; Hawley v. Fairbanks, 108 U. S. 543, 548, 2 Sup. Ct. 846, 27 L. Ed. 820; Ex parte Baltimore & O. R. Co., 106 U. S. 5, 1 Sup. Ct. 35, 27 L. Ed. 78. See, also, a late case, Wheless v. City of St. Louis, 180 U. S. 379, 21 Sup. Ct. 402, 45 L.

Ed. 583, affirming the carefully considered decision of the circuit court in the same case. Vide 96 Fed. 865. Persons holding distinct claims arising out of contract, which may be reduced to judgment at law without difficulty, should not be allowed to aggregate them and sue in equity, even if they do grow out of the same transaction and involve the same questions, and even though a multiplicity of actions would thereby be avoided. If such a practice was tolerated, the boundaries of the jurisdiction of courts of law and equity would soon become confused or obliterated.

The result is that the bill in the equity case was properly dismissed for want of jurisdiction in equity, but such dismissal should have been without prejudice to the complainants’ right to sue at law. For the reasons already stated, the judgment in the law case, although -it was for the right party, cannot be sustained, because the recovery was excessive..

It is accordingly ordered that the judgment in the law case be reversed, and the cause remanded for a new trial, and that the decree in the equity case be modified by adding thereto a clause that the dismissal is without prejudice to the complainants’ right to sue at law, and that as thus modified, the decree be affirmed.