In this

this is "not a trading corporation." country, municipal corporations are, by statute, invested with certain defined powers, and they are almost wholly dependent upon revenues derived from the authority given to levy taxes for the means of executing their municipal functions.

In the case before us, the defendant city had, inter alia, the usual power to erect and repair wharves, and to improve streets, and to make contracts and to incur debts therefor. It had the power to levy taxes to raise the means to pay debts thus created. The amount of taxes authorized to be laid in any one year was limited. It is entirely practicable for the city to execute its ordinary municipal power and discharge its ordinary municipal duties without resorting to borrowing money. If, in erecting wharves, or improving streets, it incurs a general debt, it seems to us plainly to have been the intention of the legislature, as shown by the charter, that it should be paid out of its ordinary revenue. It is not necessary to resort to the perilous expedient of borrowing money in advance, which may be lost, embezzled or misappropriated; much less to borrow it on a long credit, which inevitably leads to abuse and extravagance, and issue therefor, as the means of obtaining it, its negotiable securities. There is an obvious and essential difference in incurring a debt to be paid in the usual manner out of the ordinary revenues of the corporation, derived from taxation, and the raising of money in advance by a pledge of credit and the issue of coupon bonds, payable at a long-distant day, for sale in the money markets of the country.

What are the consequences of holding that there is, under these circumstances, an implied power to borrow money in this manner, and for this pur pose? The temptation to extravagance, and the danger of loss have been already mentioned, and the history of the workings of our municipal institutions shows that this temptation always operates to their injury, and that burdensome debts and oppressive taxation are its natural and almost inevitable results.

But this is not all. Legal consequences of a serious nature follow from the doctrine that there is an incidental power to borrow money to execute the ordinary powers of the municipality. If the power to thus borrow exists, it is without legal limit. Its only posssible limit is the credit of the corporation-the amount of bonds its officers can sell. Nor is this all. If the power to borrow money exists, then, under the view of the courts as almost universally held in this country, the power to borrow implies the further power to give, like any other borrower, a note, bill or bond, negotiable in form and effect for the sum borrowed; the time of payment and the discount to be such as may be agreed upon between the corporation and the proposed lender. The bonds may, as in the recent case of the city of Williamsport, be issued for an enormous amount and be sold as in that instance, for 67 per cent of their par value, or even less, and the corporation is bound. Williamsport v. Commonwealth, 84 Pa. St. 487.

Nor is this all. The Supreme Court of the

United States has firmly established the doctrine by a long series of well-known decisions upon municipal bonds, "that when a corporation has power, under any circumstances, to issue negotiable securities, the bona fide holder has the right to presume that they were issued under the circumstances which gave the requisite authority, and they are no more to be impeached in the hands of such a holder than any other commercial paper." Lexington v. Butler, 14 Wall. 282.

Such are the mischievous and alarming consequences of the unsound doctrine, that a municipality has, by virtue of its ordinary powers and merely as a means of executing its ordinary duties, the power to pledge its credit by the issue and sale of its commercial obligations. It is not the law. No such doctrine can permanently stand. Although it has taken, as yet, no deep root in our jurisprudence, it has nevertheless attained sufficient development to show its noxious character. The general, and, until a period comparatively recent, the universal practice of municipalities not to issue without express legislative authority bonds or commercial obligations as a means of raising loans demonstrates the non-existence of an implied power to do this, by demonstrating that no such power is necessary to enable a municipality to execute its usual powers and to discharge its ordinary duties.

We are required in this case only to determine the inherent or incidental power of the city to raise loans by a sale of its negotiable securities payable at a distant day. We deny any such power. Whether all borrowing to meet debts actually incurred, under an arrangement which contemplates repayment out of the regular revenue, and for which a mere voucher or certificate of indebtedness is issued is ultra vires unless the authority is expressly given, we need not now decide. What we decide on this point is that the power to erect wharves and to improve streets conferred by the defendant's charter does not carry with it the power to raise funds for this purpose by the issue and sale of negotiable securities, like those here in suit.

Whatever doubt may be considered to exist as to the implied right to borrow, the want of authority in a municipal corporation as merely incidental to its usual municipal powers to issue negotiable securities which shall be invested with all the attributes of commercial paper, seems, on reason and principle, to be plain. Commercial paper had its origin in the conveniences or necessities of trade among merchants. Originally only merchants made such paper; afterwards the making of it was extended to all persons acting in their individual capacity. It extends to trading, commercial and other partnerships, but if the partnership is not a trading partnership, the question," says Mr. Lindley, "whether one partner has implied authority to bind his copartners by putting the name of the firm to a negotiable instrument depends upon whether the business of the partnership is such that dealings in negotiable instruments are necessary for its transactions, or are usual in partnerships of the same description." 1 Lindley on Part., Eng. Ed., 213, 214.

As to the power of corporations to issue commercial paper, the law of Engiand is settled. In England no corporation, whether municipal (Regina v. Litchfield, 4 Ad. & El., N. S., 891, 906) or private (Bateman v. Mid. Wales Railway Co., L. R., 1. C. P., 499, A. D. 1866), has the incidental right to make commercial paper, except the Bank of England which was incorporated for the very purpose, and trading corporations strictly, such as the East India Company. We state the foregoing propositions after a careful examination of the English books. Accordingly it is laid down by Mr. Justice Byles, in his work on Bills, that "without special authority, expressed or implied, a corporation has no power to make, indorse or accept bills or notes." Byles on Bills, Sth Eng. Ed., 62. Thus a waterworks company (Broughton v. Manchester Waterworks, 3 B. & Ald. 1), a gas joint-stock company (Bramah v. Roberts, 3 Bing. N. C., 963), or even trading companies unless such a power be essential to the purposes for which they are formed (Bateman v. Railway Co., supra) have no general or implied authority to make commercial paper. In Bateman's case just cited the question for the first time arose in England as late as 1866 as to the right of a railway company, with an authorized capital of £170,000, to make or accept bills of exchange, and it was unanimously decided by judges of great eminence (Erle, C. J., Byles Keating, and Montague Smith, J. J.) that the company had no such power. The acceptance was under seal. And it was a mistake to suppose that the decision rested on the technical ground that a corporation can only contract under seal. It was placed upon the broad ground that there was no act of Parliament, general or special, which conferred the power. It was admitted by all the judges that the railway company might incur debts in the construction or operation of the road. "But it is one thing," says Keating, J., "to say that they shall be liable to be sued for goods sold and delivered or for work done, and an entirely different thing to say that they may accept bills in payment." And to the same effect was the opinion of the other judges.

The principle of this case was approved in the Peruvian, &c., Railway Co. v. Thames, &c., Ins. Co. L. R., 2 Ch. App. 617 where a general incidental power to issue bills of exchange and negotiable instruments under the Companys' act of 1862 was denied, and the power held to depend upon the proper construction of the memorandum and articles of association. The companies organized under that act may communicate this power to their directors, but it must be given expressly or by fair intendment in the memorandum and articles of association of the company, or it will not exist.

We are aware that the American courts, as to private corporatious organized for pecuniary profit, have very generally held a different doctrine and affirmed their implied or incidental power to make commercial paper. Dillon Munic. Corp., sect. 81, 82, 407, and cases cited. But the powers of private corporations in this regard are not here material.

The American judgments which have affirmed the like power in municipal corporations have done so upon this course of reasoning. The corporation, they argue, has power to contract a debt, and it is assumed to be incident to that power to give a note or bill or bond in payment of it. Thus in Kelly v. Brooklyn, 4 Hill. (N. Y.) 263, Cowen, J., makes the basis of the judgment the erroneous proposition that independent of any statute provision all corporations, private and municipal, may issue negotiable paper for a debt contracted in the course of their business; and other courts have, without examination, adopted this mistaken view of the law. Galena v. Corinth, 48 Ill. 428; Clarke v. School Dist., 3 R. I. 199; Sheffield v. Andress, 56 Ind. 157; Tucker v. Raleigh, 75 N. C. 267; Ketchum v. Buffalo, 14 N. Y, 356; Douglas v. Virginia City, 5 Nev. 147; Sturtevants v. Alton, 8 McLean, 393. It sufficiently appears from the foregoing that it is a mistake to affirm that the power to issue negotiable paper necessarily or legally results from the corporate power to create debts.

In England, as shown by Bateman's case, supra, it is held that inasmuch as the corporation has no power to accept bills, it cannot be made liable on its acceptance, though the bill was drawn for a valid and binding debt. On this point Erle, C. J., says: "The bill of exchange is a cause of action, a contract by itself, which binds the acceptor in the hands of an indorsee for value; and I conceive it would be altogether contrary to the principles of the law which regulates such instruments that they should be valid or not, according as the consideration between the original parties was good or bad, or whether in the case of a corporation, the consideration in respect of which the acceptance is given is sufficiently connected with the purpose for which the acceptors are incorporated. It would he inconvenient to the last degree if such an inquiry could be gone into. Some bills might be given for a consideration which was valid, as for work done for the company, and others as a security for money obtained on loan beyond their borrowing powers. It would be a pernicious thing to hold that, in respect to the former, the corporation might be sued by an indorsee, but in respect of the latter, not."

Whether we consider the question in the light of the nature and objects of the ordinary grants of municipal power, or in the light of the purposes which led to the invention, and which sustain the use of negotiable paper with the qualities attribu ted to it by the law merchant, we are alike led to the conclusion that the mere power to create a municipal liability for ordinary municipal purposes does not carry with it as an incident the authority to raise loans by the issue and sale of commercial obligations. The implied power to issue vouchers or evidences of indebtedness for authorized and valid municipal debts undoubtedly exists, and it may be true that such vouchers or evidences of indebtedness, though put in the form of negotiable paper, are not for that reason void, but if not void it is clear that they derive no additional force from that circumstance.

The only safe as well as sound doctrine is that

there is no power in a municipal corporation as incidental to the execution of its ordinary duties to invest its vouchers or notes or bonds with the character of commercial paper. By statute or usage they may be transferable, but the transferee always takes instruments thus issued whatever their form cum onere. We are not now referring to municipal bonds negotiable in form issued by express legislative authority; these possess, according to the settled law of this country, all of the incidents of commercial paper.

We have looked closely into the American cases against municipal and public corporatious, which hold that it is incidental to the power to create a debt to give a note or bond in payment of it, but we have found no judgment which holds that the note or bond thus issued partakes of that quality of commercial paper which protects an innocent holder for value from defences or equities to which it would be subject in the hands of the payee. What we wish distinctly to hold is that this surpreme and dangerous attribute of commercial paper can not be imparted to the issuer of municipal obligations, whatever their form, unless the power to do so is plainly conferred, either expressly or by implication by the legislature; and that no such implication exists in respect to debts or liabilities arising from the discharge of ordinary municipal duties.

The argument against a general implied power in municipalities to issue commercial paper with all of the incidents of negotiability, may be briefly summarized as follows:

For hundreds of years the original of our municipal corporations have existed in England without it ever being contended or held that they could, without express authority from Parliament, issue such paper. On the contrary, it is there alike conceded and decided that such authority is necessary as the basis of the power. And such has been the view always practised upon in this country from the earliest period until a very recent date. The soundness of this view is strengthened by the almost invariable practice of the legislature to confer, when it is deemed expedient, upon municipal and public corporations, in express terms, the power to borrow money and issue bonds or negotiable securities therefor.

It is a non sequitur, as applied to municipal and public corporations, to affirm that this power to create debts implies the power to give a negotiable bill, bond or note therefor, which shall be invested with all the incidents of negotiability. Such an implied power is denied in England, even as to private corporations organized for pecuniary profit (other than banking or trading corporations), and this demonstrates that the alleged implication of such power in municipal corporations is neither logically nor legally sound; but if it be conceded that, as respects private corporations, the American doctrine is otherwise, and that it is rightly so, still it does not follow that the same rule does apply or ought to apply to municipal corporations. They are not created for trading, commercial or business purposes. Private corporations are more vigilant of their interests than it is possible for municipal

corporations to be. The latter are in their nature governmental agencies, having in general but one resource with which to meet their liabilities, and that is by taxation, and it is upon this resource that creditors must be taken to rely. The frauds such a doctrine will enable unscrupulous officers successfully to practise ought to weigh with decisive force against its unnecessary judicial entertain

ment.

It is a power without assignable limits, intrinsically dangerous, and one which will not fail to prove baneful in the last degree. Courts, when called upon to establish a new doctrine, ought to consider not only its nature, but its consequences, and can not properly disregard the lessons of experience. A judge may well tremble when he contemplates, in the light of recent experience, the disasters which such a doctrine will bring upon our municipalities when it shall become generally known that such a tremendous power to schuylerize them is lodged in the hands of their temporary officers.

Sound policy and sound legal principles are generally coincident, and so it is here. If the power to issue negotiable paper is needful or expedient for our municipalities, let it be given by the legislature that can prescribe the limits, purposes and conditions of its exercise, and provide for the payment of the liabilities which are thus authorized. And, finally, the argument against the existence of a general implied power in municipalities to issue commercial paper, becomes, as it seems to us, absolutely conclusive in view of the rule, wisely settled, that corporate powers, especially powers whose exercise looks to the creation of public burdens, are to be strictly construed; and that, however convenient at times such a power might be, it is one which is not necessary, as shown by universal experience and practice in England, and generally in this country, to enable the corporation to exercise its ordinary functions, or to carry into effect the purposes for which it was created. It is, therefore, a power which does not exist.

Our justification for this extended discussion is found in the fact that the doctrine here combatted is struggling for admission into our jurisprudence. It is one which, as we conceive, is founded in a radical misconception of sound legal principles, and one, moreover, whose consequences, if it shall be incorporated into the general law, can not be contemplated without anxiety.

It follows that, since the defendant city had no power to borrow money in the manner attempted, to erect the wharf or to improve the streets, the bonds issued therefor are not legally binding upon it, and there can be no recovery upon them. Bateman v. Mid-Wales Ry. Co., supra; Thomas v. Port Hudson, 27 Mich. 320; Hackettstown ads. Swackhamer, 37 N. J. L. 191; Regina v. Litchfield,4 Ad. & El. N. S. 891, 906; Mayor, &c., v. Ray, 19 Wall. 468, 480, per Bradley, J.

It will not validate these bonds so as to make them the basis of a recovery, even if it be shown that the money borrowed was in each instance used for the purpose which it is recited in the bonds

to have been borrowed. But the plaintiff may amend and add, in respect of these bonds, counts in the nature of counts for money had and received. Adhering to the decision of this court (Treat, J.) in Wood v. Louisiana, at the last term, the present holder of the bonds will then be treated as the assignee of the original holder or payee in respect of the money actually lent to the city; and if, after the city obtained it, the same was in fact expended for the erection and repair of wharves, or the improvement of streets, or possibly, if expended for other authorized municipal purposes, under the authority of the city council, the amount advanced, with lawful interest, less payments received on account thereof, may be recovered. Dillon Munic. Corp., sec. 730; Paul y. Kenosha, 22 Wis. 266; Shirk v. Pulaski County, 4 Dill., 208, 4 Cent. L. J.390; Oneida Bank v. Ontario Bank, 21 N. Y. 490; Mayor, &c., v. Ray, 19 Wall. 468, 484, per Hunt, J. The case might be different, even in this aspect of it, if the contract was one expressly prohibited by statute; but this is a question not unattended with difficulties, which it is not necessary to consider.

II. The other class of bonds, known as "Road mprovement bonds," were issued in renewal of bonds issued by the city in payment for stock subscribed to certain companies organized to build gravel roads from the defendant city to points in Missouri. Subscriptions to the stock of such companies was expressly authorized by the act of the legislature of February 24, 1857 (Acts 1857, p. 302), quoted at large in the statement of the case.

Under the true construction of this act, in view of the general legislation of the State of Missouri at this period, on the subject of municipal aid to railway and other companies; the almost universal practice, under such legislation, to issue bonds for debts of this kind; the practical construction put upon this act by the city; the special nature of the authority given; the limited amount of tax authorized by the charter to be laid for the ordinary uses of the municipality, and the decisions of the Supreme Court of the United States as to the implication of the power to issue bonds to pay for stock subscriptions in railways, and the general tenor of the judgments of the Supreme Court of the United States on the subject, (Lynde v. Winnebago Co., 16 Wall. 6, 12; Police Jury v. Britton, 15 Wall., 572; Dillon Munic. Corp., secs. 106, 107, 407, and notes), and that the inference of the power to issue bonds is in no way inconsistent with the provisions of the act, my judgment is (Treat, J., dissenting on this point), that the city was authorized to issue bonds in payment for the stock subscribed in those companies; that it would be liable to a general judgment on such bonds, and that on those bonds falling due they might be renewed by other bonds.

The demurrer to counts one to ten of the petition is sustained, to counts twelve, to seventeen overruled, with leave to amend, if the plaintiff is so advised. Judgment accordingly.

TREAT, District Judge:

I dissent as to the last class of bonds named, but fully concur as to the other bonds. True, the dicta of the Supreme Court justify the conclusion in that

respect reached in the opinion just delivered; yet a rigid analysis might possibly show distinguishing features. If the power conferred on a municipal corporation to do certain work or make specifiled improvements is not accompanied with the power to borrow money or issue bonds-especially where a limit on the power to tax for such purposes is made it seems untenable, as a legal proposition, that such a corporation may proceed beyond the limits of taxation permitted, not only to incur a debt therefor, but to borrow money and issue negotiable securities, cutting off all the equities between the original parties. The various legislative enactments whereby municipal corporations are created grant different powers. Some are framed on a non-debt-creating policy, so that those who insist upon immediate expenditures shall pay for the same at once, and not create obligations for another generation, or subsequent voters or property-holders to pay. Other charters are framed so as to allow borrowing; looking to prospective benefits from present improvements and, therefore, permitting the payment therefor to be postponed. Restrictions on taxation would be useless if unlimited borrowing were permitted. It is for the legislative power to determine when borrowing is permissible, and for what purposes, and to what extent and in what form, evidences of indebtedness may be issued. The rulings of the United States Supreme Court concerning municipal bonds, whereby the equities of the original transaction are not open to inquiry when the bonds are held bona fide and for value by other than the original holder, make it the more important to look closely into the powers under which such bonds are issued.

I can detect no controlling reason for the distinction between bonds issued for improvements made directly by the city and bonds issued in payment of subscriptions to the stock of a company empowered to make road or other improvements, unless the broad doctrine is to prevail that the power to subscribe for such stock is to be held to carry with it the power to issue bonds in payment thereof, while the power to make improvements directly does not imply the power to issue bonds to pay therefor.

If there were in the city charter or in the charter of the railroad corporation any authority for the city to borrow or issue bonds in payment of a subscription to shares of stock, then another proposition would be presented. In the absence of any authority beyond that to subscribe for such shares, it seems to me that the equities of the original transaction cannot be cut off by issue of negotiable securities for the payment thereof. The argument ab inconvenienti, always a dangerous one, cannot help out the absence of authority to borrow and issue negotiable securities. The holders of bonds under such a state of legislative enactments must rely for recovery on the doctrines announced in the opinion delivered and stated in the case of Wood v. The City of Louisiana.

Hence my view is, that the last class of bonds stand in the same position as the other bonds sued on, and the rulings with respect thereto should be

the same, viz. That the equities are fully open for consideration with respect to all of said bonds, so that the money really advanced for legitimate purposes may be recovered as in assumpsit, and not formally on the bonds which were issued without authority.

were intra vires, the bond would constitute such a charge. Decision of Hall, V. C., following the decision of Jessel, M. R., in Norton v. Florence Land and Public Works Co., 26 W. R. 123, L. R. 7 Ch. D. 332, reversed.

ABSTRACTS OF RECENT DECISIONS.

SOME RECENT FOREIGN DECISIONS.

-

HUSBAND And Wife- SEPARATION BY MUTUAL CONSENT LIABILITY OF HUSBAND FOR WIFE'S DEBTS.-Eastland v. Burchell. English High Court Q. B. Div. 27 W. R. 290. Where a husband and wife separate by mutual consent, the terms on which the separation is made are binding on them as long as it lasts; and if one of the terms fixes the amount of the wife's income, she has no authority to pledge her husband's credit for necessaries in the event of such income proving insufficient.

CONSTRUCTION OF CONTRACT TO MANUFACTURE AN ARTICLE "AS SOON AS POSSIBLE" DAMAGES FOR BREACH OF CONTRACT NOTICE OF SPECIAL PURPOSE-LOSS OF PROFIT. — Hydraulic Engineering Co. v. McHaffie. English Court of Appeal, 27 W. R. 221. The plaintiff contracted with J to manufacture a pile driving machine within two months. Shortly afterwards, the defendant contracted with the plaintiff to make a certain portion of that machine "as soon as possible." The terms of the plaintiff's contract with J were known to the defendant. The defendant did not fulfil his contract with the plaintiff until after the expiration of the time specified in the contract between the plaintiff and J, and J refused to accept the machine. Held, that the ontract between the plaintiff and the defendant was to be performed "within a reasonable time," to be measured, not by the particular existing staff and appliances of the defendant's business, but by the time in which a reasonably diligent manufacturer of the same class as the defendant would take in carrying out the contract. Held, also, that the defendant was liable for the damages and loss of profit flowing to the plaintiff from the breach of his contract with J. Attwood v. Emery, 5 W. R. 19, 1 C. B. N. S. 110.

DEBENTURES-BOND OR MORTGAGE-CHARGE ON "ESTATE PROPERTY AND EFFECTS" OF COMPANY.Moor's Case. English Court of Appeal, 27 W. R. 236. A company, with an office in London, incorporated for the purpose of acquiring land in Florence, building thereon, and selling, mortgaging or leasing such property, gave power by its articles of association to its directors, in order to the management of the company, to borrow money by mortgage of any part of the property of the company, or by "bonds, debentures or mortgage debentures," such bonds, etc., to entitle the holders to be paid out of the "moneys, property and effects" of the company. The company, in pursuance of these powers, issued "obligations" in the year 1868, by each of which they purported to "bind themselves, their successors, and assigns, and all their estate, property and effects," to repay the sum of £100 in the year 1875, with power to the company to redeem a certain part of the obligations in each of the intermediate years. The bonds were payable to bearer, and carried interest till payment. Held, that construed in the light of the articles of association, the bonds constituted a charge on the property of the company for the time being, subject to the power of the directors to dispose of such property in the ordinary course of the business for which the company was constituted. Per JAMES, L. J., that, taken per se, without any reference to the articles except to see that they

SUPREME JUDICIAL COURT OF MASSA

CHUSETTS.

January-March, 1875.

CITY LIABILITY OF, for Defective Sewer.— In an action against a city for damages for injury to plaintiff's goods and premises by the overflowing of a common sewer into plaintiff's shop, it appeared that the sewer was the property of the city; but land-owners, according to an ordinance of the city, in order to connect their private drains with the sewer were required to obtain the written consent of the mayor and aldermen, to pay their assessments, and in the materials and construction of the drain to comply with the directions and conditions that the mayor and aldermen might prescribe. The ancestor of the plaintiff's landlord laid a private drain from the cellar of the premises occupied by the plaintiff, and entered the same into the common sewer, but there was no evidence that he had any authority to do so from the city or from its officers, or from its mayor or aldermen. The plaintiff offered evidence tending to show that the overflow was caused by obstructions existing in the sewer through want of due care and attention on the part of the defendant. Held, that there was nothing unreasonable in any of the provisions of the ordinance. and that the former owner of the land, through whom the plaintiff derives title, was a mere trespasser, to whom the plaintiff owed no duty whatever. Opinion by AMES, J.-Ranlett v. Lowell.

WILL-LEGACY--CONSTRUCTION.-A testator left a widow, three married daughters, three sons, and the plaintiff, an unmarried daughter, sixteen years of age- To the plaintiff he gave "a home and maintenance during the time she remained unmarried." To his widow he gave the use and income of all his real and personal estate during life, which estate included the homestead where the testator had always lived with his family. To two of his sons he gave the remainder of all his property, real and personal, in equal shares, upon the decease of his wife, "they and each of them giving their personal services during my life, and the life of their mother, in cultivating the premises where I live to the best of their ability." Held, that it was clear that the testator intended that the homestead should continue to be the home of the family; and that it being non-occupied and owned by one of the plaintiff's brothers, and it appearing that he is ready and willing to provide for her a home and maintenance there, he is not bound to provide her a home and maintenance at another place at her election. Opinion by ENDICOTT, J.-Parker v. Parker.

VERDICT-AMBIGUITY.-In an action upon a promisory note, it appeared that it had been secured by a mortgage of a piano and other chattels, containing a power of sale. The defendant testified to several cash payments to the plaintiff on the note, and that the plaintiff had taken from him the piano on the mortgage, but had not reported a sale or accounted for the proceeds or value thereof. The jury were directed to find the amount of the cash payments, and if such amount was not sufficient to extinguish the note, they