APPEAL FROM THE CIRCUIT COURT OF THE UNITED STATES FOR THE EASTERN DISTRICT OF MICHIGAN.
MR. JUSTICE LAMAR, after stating the facts in the foregoing language, delivered the opinion of the court.
We consider the decisive question in this case to be that of the laches in pursuit of the railroad company's right against the township. In this view the controversy must be narrowed to a single issue. The township, which is the defendant below, and which defends separately, claims that the cause of action accrued either 13 or 14 years before this bill was filed -- 13 years if the conversion of the bonds by the township and the treasurer be considered the gravamen, and 14 years if it be the governor's refusal to issue his official certificate; that since the statutes of limitation in Michigan, touching these question, vary from 6 to 10 years, the cause of action is long since barred at law as to the railroad company; that it is, therefore, barred also in equity and lost by laches in its
assertion; and that since the appellant by this bill is prosecuting a demand in the nature of a garnishment, and the railroad company's right is barred both at law and in equity, therefore that of the appellant is also barred. The appellant seeks to avoid the force of this position by claiming that the bonds had been so far perfected by the dealings between the parties that the railroad company was entitled to have them from the state treasurer; that such being the case, the tort of the township and of the treasurer is converting them could not impair the rights of the company; that, therefore, the company was and is entitled to waive the tort and sue directly on the bonds, as in the case of lost or stolen bonds; that only a few of such bonds, if delivered, would have been barred at the time of the filing of the bill, since most of them were so drawn as to mature within 10 years of that time; and, finally, that as the company was thus still in possession of an enforcible demand, the appellant could avail himself of it by this bill.
The controlling question presented, therefore, is this: Were the bonds in question so dealt with by the parties as at any time to vest in the railroad company a right to sue directly on the bonds themselves, as distinguished from a right to sue for their non-delivery or because of their cancellation? That question cannot be satisfactorily or properly answered without constant reference to the exceptional character of the circumstances by which these bonds were deprived of their value. It is not the case of a common negotiable instrument put forth by a natural person as obligor; but it is that of a railroad aid bond sought to be put forth by the municipality. In such case the nature of the bonds, their force and effect, their value and character while in the hands of the state treasurer, the rightfulness and sufficiency of their issue, and all kindred questions, must be referred to the statute authorizing them. In this case the statute is the act of 1869. It is the touch-stone. Whatever might be the rule in ordinary cases, so far as the act goes, it controls here, being the enabling act; outside of it there was no power, whatever, to issue these bonds. By an unbroken current of decisions by this court and by all other courts, too numerous to mention, it is settled law that a municipality has
no power to make a contract of this character, except by legislative permission. It is manifest that, such being the case, the legislature in granting such permission can impose such conditions as it may choose; and even where there is authority to aid a railroad and incur a debt in extending such aid, it is also settled that such power does not carry with it any authority to execute negotiable bonds except subject to the restrictions and directions of the enabling act. Wells v. Supervisors, 102 U.S. 625; Claiborne County v. Brooks, 111 U.S. 400; Kelley v. Milan, 127 U.S. 139.
The analogy offered between the case at bar and a lost bond is misleading. There is, in fact, no analogy. There is no doubt about the right of the owner of a bond lost or stolen to sue on it, and in the absence of it to give secondary evidence of its contents; but the very statement of the principle assumes the existence of the instrument. A bond lost or a bond stolen is out of the personal possession and control of the owner, it is true; but it is also an instrument that has become executed -- to which those things have been done that were needed to give it legal existence as an actionable obligation.
But here the very question to be determined is, whether there ever were any bonds. It is a question, in substance, of the very existence of the instruments themselves. As before remarked, the act of 1869 fixes the rights of parties in this case. All the questions concerning the execution of the bonds in controversy must be referred to that statute, tested by it, and decided in strict conformity with its terms. It is an enabling act, conferring a power not before existent, and any departure from its requirements cannot be allowed. Harshman v. Bates County, 92 U.S. 569.
In the case of Sheboygan, Co. v. Parker, 3 Wall. 93, 96, this court said:
"The commissioners or board of supervisors of a county, in the exercise of their general powers as such, have no-authority to subscribe stock to railroads, and bind the people of the county to pay bonds issued for that purpose without special authority conferred upon them by the legislature. But when special authority is given to the people of a county to do these
acts, and bind themselves by the issue of such bonds, the legislature may properly direct the mode in which it shall be effected. The persons specially appointed to act as agents for the people have a ministerial duty to perform in issuing the bonds, after the people, ...