Town of Weyauwega v. Ayling, 99 U.S. 112

The power of the town to issue its bonds to aid in the construction of this road being derived entirely from an act of e egislature which declares that they shall be issued by the airman of the board of supervisors and the town clerk, the e Presciibed is essential to the validity of the bonds, — th eGf * ^ere /s no Power to issue them in any other way, — ere ore, having been in fact signed by Verke, after he had th k and removed his residence to Peshtigo, ine bonds are invalid and do not bind the town. offic 'n ^is record to show that the town or its is o chairman of the board of supervisors, who bond. ° wrong'doers, ever knew of the execution of these recei 8U^ WaS nor to show that the town any stock or any other consideration for the bonds. It p. 116would seem that they were given to the company as a gratuity. What has the town done or said that should estop it from telling the truth ? There is a class of cases in which it has been held that when a power is given to be exercised by certain persons upon conditions precedent, the existence of which they are authorized to ascertain and declare, and they exercise the power, a holder for value of negotiable securities issued thereunder need not go behind the authority; but in all of them, there was express legislative authority to issue the bonds upon those conditions. Of this class are the following cases: Commissioners of Knox County v. Aspinwall et al., 21 How. 539 ; Bissell et al. v. City of Jeffersonville, 24 id. 287 ; Moran v. Commissioners of Miami County, 2 Black, 722; Mercer Countys. Hackett, 1 Wall. 83; Gelpcke v. City of Dubuque, id. 175; Von Hostrop v. Madison City, id. 291; Rogers v. Burlington, 3 id. 654; Supervisors v. Schenck, 5 id. 772; Lee County v. Rogers, 7 id. 181.

he fii st question certified in this case is answered in the imative. The legal voters of the town, by a vote duly th PUlsuan^ statutory authority for that purpose, directed e issue of the negotiable bonds in controversy. As soon as s vote was given, it became the duty of the chairman of the b, ° supervisors and the clerk of the town to cause the s to e made out and delivered to the railroad company, of tl le9uirement the statute under which the vote fin $ ^'Vn WaS takeu* The designated officers had no discretion in the premises. was Ftl Vo^e’ an appropriate form of bond ahd coupons 8ignat an<^ printed, with blanks in the bond for the os of the chairman and clerk. As printed, thè bonds p. 118bore date June 1, 1871. At that time Fenelon was chairman and Verke clerk. The signatures of these officers were lithographed and printed on the coupons. Before the bonds were actually signed by Verke, he had resigned his office and moved out of the town. Another clerk had been appointed and qualified in his place. Apparently to save the expense of a new lithograph and another printing of the bonds, Verke, after going out of office, affixed his signature to those which had been printed. These bonds so signed’by Verke and by Fenelon, who actually was chairman at the time, were taken by Fenelon and delivered to the railroad company. This having been done, Ayling, the defendant in error, purchased the bonds to which the coupons sued on were attached, and paid their full value without notice of any claim of defence to their due execution. Under these circumstances, we think the town is estopped from proving that Verke in fact signed the bonds after he went out of office. If Ayling had put himself on inquiry when he made his purchase he would have found, 1, that the town had authority to vote the bonds;<2, that the necessary vote had been given; 3, that at the date of the bonds Verke was clerk and Fenelon chairman; 4, that their signatures were genuine; and, 5, that the bonds had actually been delivered to the railroad company by Fenelon, who was at the time chairman. If a bank puts out a note for circulation bearing the signature of one who was in fact president of the bank when the note bore date, no one will pretend that it could be shown as a defence to the note when sued upon by a bona fide holder, that the signature of the person purporting to be president was affixed after he went out of office, o if one puts out a note purporting to be signed by himsel, u which was in fact signed by another having at the time authority from him, he cannot prove the forgery or authority in the signer as against a bona fide holder. reason is obvious. The bank by issuing the note, an individual by delivering the paper which purported to e obligation, adopted what they thus put out as their own, became bound accordingly. .

The same principle applies in this case. There isi no tence that the obligation of these bonds is other or dittei p. 119from that authorized by the voters. So far as the record shows, the town has received and retains the consideration for which they were voted. No bad faith is imputed to any one. It is true the chairman alone made the actual delivery to the railroad company; but the presumption is, that what he did was assented to by the clerk in office at the time. Certainly it could not have been contemplated that, to make a binding obligation, both the chairman and clerk must have been present when the delivery to the railroad company was made; and as the presumption always is, in the absence of any thing to the contrary, that a public officer while acting in his official capacity is performing his duty, it must be assumed for all the purposes of this case that the bonds were delivered to the railroad company by the chairman with the assent of the clerk, and, therefore, that they were issued as negotiable instruments by the proper officers of the town. If the fact was otherwise, it was incumbent on the town to make the necessary proof.

n from the Circuit Court of the United States for the District of Louisiana. rec ’ 8Uit WaS ,brought July 10’ 1869, by Frank F. Case, Gusta^ T National Bank of New Orleans, against ve. Beauregard, Thomas P. May, Augustus C. Graham, p. 120George Binder, Alexander Bonneval, Joseph Hernandez, the New Orleans and Carrollton Railroad Company, and the Fourth National Bank of New York, to recover a debt of $237,000.89, which he claimed was due from, and had been contracted by, Beauregard, May, and Graham, while they were partners, and carrying on business as such ; and to have certain transfers of partnership property set aside and subjected to the payment of the debt. Beauregard leased, April 12,1866, from that company its railroad tracks, its rolling-stock, and corporate privileges for twenty-five years. The lease, although made to him individually, was entered into on his part in view of a partnership to conduct the enterprise, which on the first of that month was formed between him, May, and Graham, for operating under that lease the road. By the terms of the partnership, which was to continue for twenty-five years from the date of the lease, he was charged with the management of the road, was to receive only a salary for his services, and when the capital furnished by May and Graham was reimbursed to them with eight per cent interest, the partners were to share the profits equally, and all losses were to be equally borne by them. On their part, May and Graham were to furnish the requisite capital, fixed at $300,000. Locomotives had been used on the road, but after the date of the lease the tracks were adapted to horse-cars, important changes effected, and large purchases of property made, for the uses and better equipment of the road, all of which involved a heavy expenditure of money.

The complainant charges that the First National Bank, en & the creditor of the partnership, had a lien or privilege on i s effects, and was entitled to be paid therefrom to the exc usi of the creditors of any member of the partnership, t a partnership was insolvent; that none of its members was a to pay his individual debts, or authorized to dispose of t ie p nership property for the payment of such debts, that t e to the United States, its deed to Binder, Bonneval, and Merna - p. 123dez, and the deed of the latter parties and Beauregard to the railroad company, are in fraud of the rights of the bank as a creditor of the partnership, and that the same should be cancelled and the partnership property sold to satisfy the prior and privileged claim of the bank. He prays that Binder, Bonneval, Hernandez, and Beauregard be enjoined from transferring or incumbering their stock in the company, and that the latter be enjoined from recognizing or permitting such transfer, and for general relief.

the time of the transfer by May of the property in p. 124question, in part payment of his individual indebtedness, his creditor knew that the partnership was indebted to the bank. All subsequent purchasers, when they acquired their respective interests, were cognizant of the same fact. The partnership and all of its members are insolvent, and its only creditor is the bank. The partnership property being largely in esse, and in possession of one of the defendants, is accessible only by the aid of a court of chancery. The bank has no remedy at law, and it is not necessary that the claim be established by judgment. The complainant is, therefore, entitled to * relief in equity. Russell n. Clark's Executors, 7. Cranch, 69; Thurmond v. Reese, 3 Ga. 449.; Croone v. Bivens, 2 Head (Tenn.), 339; Cornell v. Radway, 22 Wis. 260; Sanderson v. Stockdale, 11 Md. 563; Innes v. Lansing, 7 Paige (N. Y.), 583; O'Brien et al. v. Coulter et al., 2 Blackf. (Ind.) 421.

No doubt the effects of a partnership belong to it so long as it continues in existence, and not to the individuals who com pose it. The right of each partner extends only to a share of what may remain after payment of the debts of the firm and the settlement of its accounts. Growing out of this ng or rather included in it, is the right to have the partneis p property applied to the payment of the partnership de ts in preference to those of any individual partner. This is equity the partners have as between themselves, and m tain circumstances it inures to the benefit of the cie itoi the firm. The latter are said to.have a privilege or preferenc, p. 125sometimes loosely denominated a lien, to have the debts due to them paid out of the assets of a firm in course of liquidation, to the exclusion of the creditors of its several members. Their equity, however, is a derivative one. It is not held or enforceable in their own right. It is practically a subrogation to the equity of the individual partner, to be made effective only through him. Hence, if he is not in a condition to enforce it, the creditors of the firm cannot be. Rice v. Barnard et al., 20 Vt. 479; Appeal of the York County Bank, 32 Pa. St. 446. But so long as the equity of the partner remains in him, so long as he retains an interest in the firm assets, as a partner, a court of equity will allow the creditors of the firm to avail themselves of his equity, and enforce, through it, the application of those assets primarily to payment of the debts due them, whenever the property comes under its administration.

ies of the partners, yet where the property is parted p. 128with by sale severally made, and neither partner has dominion or possession, there is nothing through which the equities of the creditors can work, and, therefore, there is no case for the application of the rule. See also Coover's Appeal, 29 id. 9. Unless, therefore, the conveyances of the partners in this case and the act of fusion were fraudulent, the bank of which the complainant is receiver has no claim upon the property now held by the New Orleans and Carrollton Railroad Company, arising out of the facts that it is a creditor of the partnership, and was such a creditor when the property belonged to the firm.

Thus far we have considered the case without reference the provisions of the Louisiana Code, upon which the appe relies. Art. 2823 of the Code is as follows: “The partnership property is liable to the creditors of the Panner8 *P preference to those of the individual partner. We p. 129perceive that this provision differs materially from the general rule of equity we have stated. It creates no specific lien upon partnership property, which continues after the property has ceased to belong to the partnership. It does not forbid bona fide conversion by the partners of the joint property into rights in severalty, held by third persons. It relates to partnership property alone, and gives a rule for marshalling such property between creditors. Concede that it gives to joint creditors a privilege while the property belongs to the partnership, there is no subject upon which it can act when the joint ownership of the partners has ceased. Art. 3244 of the Code declares that privileges become extinct “ by the extinction of the thing subject to the privilege.”