Counsel for Defendant in Error.

plaintiff on the question of recitals or validity. German Savings Bank v. Franklin County, 128 U. S. 526; Dixon County v. Field, 111 U. S. 83; Crow v. Oxford, 119 U. S. 215.

VIII. The city is not chargeable with interest on the coupons after maturity in the absence of any agreement in the coupons to pay interest. The local laws of Illinois forbid such interest. Madison County v. Bartlett, 1 Scammon, 67; Pike County v. Hosford, 11 Illinois, 170; Pekin v. Reynolds, 31 Illinois, 529; S. C. 83 Am. Dec. 244; Chicago v. People, 56 Illinois, 334; South Park Commissioners v. Dunlevy, 91 Illinois, 49.

By the laws of Illinois, "cities and counties, unless specially authorized by legislative enactment, have no power to make their indebtedness payable at any other place than at their treasury"; and "the fact that a coupon is made payable in New York or elsewhere than at the treasury of the county issuing it, will not invalidate it; the objectionable words will be regarded as surplusage." People v. Tazewell County, 22 Illinois, 147; Pekin v. Reynolds, 31 Illinois, 529; Sherlock v. Winnetka, 68 Illinois, 530; Enfield v. Jordan, 119 U. S. 680.

Even if the bonds and coupons had been lawfully made payable in New York, such bonds and coupons must still be "deemed and considered as governed by the laws of the State of Illinois," and "not be affected by the laws of the State or country where the same shall be made payable," as specially provided by the laws of Illinois in force when said bonds were issued. Sess. Laws, 1857, p. 38.

By the "contract or loan" in this case, there was a contract concerning interest, viz.: 8 per cent on the amount of the bond and nothing on the interest coupons; and although the bond and interest coupons are made payable out of the State, yet the case is plainly within the said provision of the law of 1857, and must be "governed by the laws of the State of Illinois," and no interest allowed on coupons. To allow interest is to give bondholder something he knew the law did not give him when he purchased his bonds.

Mr. George A. Sanders for defendant in error.

Opinion of the Court.

MR. JUSTICE BREWER, after stating the case, delivered the opinion of the court.

It is insisted that these bonds were void because, issued after the restrictive provisions of the constitution of 1870 had come into effect, they were in fact a mere donation, and the only authority given by the people prior to the constitution of 1870 was to issue bonds in payment of a subscription. This contention cannot be sustained. There was a vote authorizing a subscription. The bonds were issued by the city, and received by the company in payment of a subscription, and stock for an equal amount was issued by the company to the city. It is true the stock thus received was immediately thereafter sold to the company for $5000 of the city bonds, a portion of the bonds thus issued, and that this sale was in pursuance of an agreement made by the city long prior to the execution of the bonds. And it is urged that the form of the transaction must be ignored; that the resultant fact is that the company has $95,000 of the city bonds, and the city nothing; and that thus substantially there was a donation of $95,000 of bonds. But the result does not determine the true nature of the transaction. The same result would have followed if the city had given away the stock to a third party. The fact is that the city issued its $100,000 of bonds, and received its $100,000 of stock; and the wrong, if any there were, on the part of the council, was not in carrying out the subscription as directed by the vote of the people, but in wrongfully disposing of the stock received. But surely a wrong in that matter does not affect the question of the validity of the bonds, nor can it be presented as a defence against one who has purchased in good faith the bonds thus issued. In the case of Anderson County Commissioners v. Beal, 113 U. S. 227, it appeared that after bonds had been voted by the county, at an election held on September 13, 1869, the county board, on November 5, passed an order directing a subscription in accordance with the terms of the vote, and also "that the stock above subscribed for by this board in behalf of Anderson County is hereby sold and transferred, for and in

Opinion of the Court.

consideration of the sum of one dollar, the receipt whereof is hereby acknowledged, to James F. Joy, president of said railroad company, and the chairman of this board is authorized to sign a transfer of said stock to said James F. Joy, and to assign the certificate for said stock issued to Anderson County by said railroad company, and to authorize in such assignment the necessary transfer of said stock on the books of said company." And it was averred that this transfer thus ordered was for the benefit of the railroad company. In reference to this, Mr. Justice Blatchford, speaking for the court, observed (p. 240): "When the bonds were delivered to the company the transaction was complete, and the bonds, as they afterwards passed to bona fide holders, passed free from any impairment by reason of any dealing by the board with the stock subscribed for to which the county became entitled by the issuing and delivery of the bonds. The board may have committed an improper act in parting with the stock, but that is no concern of a bona fide holder of the bonds or coupons." And in Maxey v. Williamson County, 72 Illinois, 207, it appeared, as here, that after an election authorizing a subscription of $100,000 to the stock of a railroad company the county court entered into an agreement to sell the $100,000 of stock to the railroad company for $5000, a transaction, it will be perceived, precisely like the one before us. The validity of the bonds thus issued in payment of this subscription was thereafter challenged in a suit by taxpayers to restrain the collection of taxes levied to pay the interest thereon. Their validity was sustained, and in respect to this transfer of the stock the court, on p. 212, says: "We fail to perceive how the sale of the certificate of stock to the company for $5000 can in any manner affect the rights of the holders of the bonds of the county. It surely is not intended to be insisted that because the county has, by any means, lost the consideration it received for the bonds, innocent holders, who had nothing whatever to do with the sale of the certificate, must lose their bonds."

It is said that a different rule has since been established in Illinois, and the cases of Choisser v. The People, 140 Illinois, 21, and of Post v. Pulaski County, decided by the Circuit

Opinion of the Court.

Court of Appeals for the Seventh Circuit, 9 U. S. App. 1, are cited. But even if this were so, it was not established until long after the plaintiff had purchased these bonds, and he would doubtless be entitled to claim the benefit of the rule existing when he made his purchase; and the facts as they appear in these two cases are substantially unlike those in the case before us. Thus, in Choisser v. The People, the vote to subscribe $100,000 of stock was on October 5, 1867, and on November 28 following, an agreement was entered into between the company and the county court, acting on behalf of the county, that $100,000 in stock should be issued, but that the stock should be returned back to the company for the sum of $5000, payable on the redelivery to the city of that amount of county bonds. When the bonds came to be issued, the record made by the county court recited that the $100,000 of the capital stock should be sold back to the company for $5000 of county bonds, "thereby making a payment of $95,000 of Saline County bonds to said company as a donation." And no stock was in fact issued by the company, or received by the county, and only $95,000 of bonds were issued by the county, or delivered to the company. In short, the parties to the transaction treated it as though it was a donation of $95,000 of bonds, and it was this transaction which was condemned as unauthorized by a vote prior to the constitution. Yet, even in that case, the court was careful to limit its decision to a case in which only the rights of the railroad company, the party receiving this $95,000 of bonds, were concerned, for it says: "The only presumption arising from these facts is that said bonds are still in the hands of the railroad company, and no question, therefore, is presented as to how far the alleged invalidity of said bonds would be affected by those conclusive presumptions which the law raises for the protection of bona fide holders of commercial paper.

Nothing is before us except the mere question of the legality of these bonds, as between the county and the railroad company, the original parties thereto." And the case in the Circuit Court of Appeals is simply a counterpart of the case in the Supreme Court.

Opinion of the Court.

But the case before us is entirely different. The parties did not treat it as a donation. The city issued the full amount of $100,000 in bonds, and the company issued a certificate for $100,000 of stock, and until the receipt of this certificate, no sale had been made of it. All that the record shows was an agreement on the part of the city to sell at a named price. Nowhere is it shown that the company agreed absolutely to purchase. It was, until after the receipt of the stock, an unaccepted offer on the part of the city. No contract was signed by the company. All we have are the recitals of the record of the city. Of course, such recitals do not bind the company. Thus, on November 5, 1867, it is said that a proposition was received from the company to purchase the stock. What that proposition was is not disclosed. It is stated that it is accompanied by a contract, tendered to the city for consideration, which contract also recites that the company proposes to purchase. That contract nowhere binds the company to purchase, but does bind the city to sell on payment of $5000 in Cairo city bonds. So in the proceedings of July 21, 1871, while there is a recital of the making of an agreement for the sale of the stock, yet such recital did not bind the company; and if the contract referred to was that copied into the record of November, 1867, it contained nothing binding the company. And the second section of the ordinance then passed (the first section having provided for placing the bonds in escrow) made it the duty of the trustee holding these bonds in escrow to deliver them to the company upon its issuing to the city, and delivering to him, $100,000 of its paid-up stock, and then authorized and directed him to sell such stock to the company for $5000 of Cairo city bonds. But nowhere in this or any other of the ordinances or agreements in evidence is there any promise on the part of the company to take $95,000 in city bonds, and release the city from all obligations growing out of the subscription. On the contrary, so far as is disclosed, when the trustee delivered the $100,000 in bonds and received the $100,000 in stock, there was nothing casting any obligation on the company to repurchase its stock, or to return to the city any portion of