§ 163 (108). Power to issue Bonds absolutely essential; Conditions precedent to its Exercise must be complied with. If the power to issue bonds in aid of railway and other like public enterprises does not exist, they are void into whosesoever hands they may come. The power, when it has been conferred, to aid or engage in extra-municipal enterprises, being extraordinary in its nature and burdensome to the citizen, must (except as modified by the doctrine of estoppel in favor of the bona fide holders of the securities) be strictly pursued according to the terms and conditions of the grant conferring it. Thus, under an act authorizing town officers to borrow money upon the credit of the town, and to pay it over to a railroad corporation, to be expended by it "in grading and constructing a railroad," taking in exchange its stock at par, it is not within the power of municipal officers to make a direct exchange of the bonds of the town, even for an equal nominal amount of stock, as this leaves it in the power of the railroad corporation to sell such bonds at a discount. So in a case where a county had by the legislative act no authority to issue its bonds to the railroad company unless upon the sanction of a previous vote after thirty days' notice of the election to be held for that purpose, the Supreme Court of Illinois

332, the Supreme Court of the United States held that a power to levy taxes, to pay debts, and for general expenses, not exceeding fifty cents on each hundred dollars, related only to debts and expenses for the ordinary purposes of the city, and not to such as were incurred under a special authority, as, a debt incurred by subscribing to the stock of a railroad under authority of a statute which was construed to confer authority to make a levy, for the payment of the debt, in excess of the limitation above recited. This case distinguished from United States v. Macon County, 99 U. S. 582; for a statement of which see post, sec. 851.

1 Marsh v. Fulton County, supra; Allen v. Louisiana, 103 U. S. 80; Com. Bank v. Iola, 2 Dillon, 353 (1873), affirmed in Supreme Court, 20 Wall. 655; Sav. Assoc. v. Topeka, 3 Dillon, 376 (1874); Weismer v. Village of Douglass, 64 N. Y. 91 (1876); Clay v. County, 4 Bush (Ky.), 154. See further, chapter xiv. on Contracts, post, where the rights of bona fide holders of such instruments are considered at length. Dunovan v. Green, 57 Ill. 63; Lynde v. Winnebago County,

16 Wall. 6 (1873); James v. Milwaukee, 16 Wall. 159 (1872); post, sec. 553; Police Jury v. Britton, 15 Wall. 566; Gould v. Paris, 68 Tex. 511.

2 Starin v. Genoa, 23 N. Y. 439; Gould v. Sterling, Ib. 439, 456. In the case last cited, Selden, J., p. 460, remarks: "In the present case the only authority given (to the town) by the act is to borrow upon the bonds of the town. No express power to sell the bonds is given, and no such power, can, I think, be implied. To borrow money, and give a bond or obligation for it, and to sell a bond or obligation for money, are by no means identical transactions. In the one case the money and the bond would, of course, be equal in amount; in the other they might or might not be equal." Whether such a defence would be available against a bona fide holder of the bonds was not determined. See post, sec. 526. As to these cases, see chapter xiv. on Contracts, post. See Woods v. Lawrence County, 1 Black, 386; Moran v. Miami County, 2 Black, 722. That such a defence is not available against a holder for value, see post, sec. 515 et seq.

held, in a direct proceeding against the county to enjoin it from issuing its bonds, that although there was an election at which a majority voted in favor of the subscription, yet the failure to give the thirty days' notice was a fatal defect, and the issue of the bonds was restrained.1

§ 164. Estoppel in favor of bona fide Holder of Negotiable Bonds. It may be observed in conclusion that the Supreme Court of the United States, in the municipal railway aid bond cases referred to in a subsequent chapter,2 have held the doctrine, in favor of the innocent holders for value of such securities, that the municipality may be estopped by recitals in the bonds, by the subsequent levy of taxes to pay interest thereon, and by retaining the stock which was received. in exchange for the bonds or purchased with their proceeds, to set up in defence a non-compliance with preliminary conditions. This is a doctrine, however, which is asserted for the protection of such holders, and has ordiuarily no place in controversies which arise before the issue of the bonds, between the taxpayers or municipality on the one hand, and the company on the other. In such cases the sound doctrine is that compliance with all substantial or material conditions is essential.4

1 Harding v. Rockford, &c. Railroad &c., 27 Ill. 307; Force v. Batavia, 61 Ill. Co., 65 Ill. 90 (1873).

In delivering the opinion of the court, Thornton, J., remarks: "Such municipalities were not created with the view to engage in commerce, or to aid in the construction of railways, but for governmental purposes only. When they exercise the functions given by the statutes under consideration, the powers granted must not only be clearly conferred, but strictly pursued. If the mode prescribed for carrying into effect the right to issue bonds is not complied with in all material matters, then the bonds should not be issued, and thus the taxpayer will be exempt from the imposition of illegal taxes, and a grievous burden upon his property. These principles have been so elaborately discussed and fully settled by this court, that we need only refer to some of the cases. The People v. Tazwell County, 22 Ill. 147; Fulton County v. The Mississippi & Wabash Railroad Co., 21 Ill. 338; Middleport v. Etna Life Ins. Co., 82 Ill. 562; People v. Logan Co., 63 Ill. 384; Williams v. Roberts, 88 Ill. 11; People v. Oldtown, 88 Ill. 202; Clarke v. Board,

99; Harding v. R. R. I. & St. L. R. R. Co., 65 Ill. 90; Lippincott v. Pana, 92 Ill. 24; Gaddis v. Richland Co., 92 Ill. 119; Supervisors of Schuyler Co. v. The People, 25 Ill. 181; Supervisors of Hancock County v. Clark, 27 Ill. 305; Marshall County v. Cook, 38 Ill. 44; Wiley v. The Town of Brimfield, 59 Ill. 306; People v. Cass Co., 77 Ill. 438 (1875)."

If aid has been conditionally voted, the condition must be complied with before the company can demand the aid. Railroad Co. v. Hartford, 58 Me. 23; Cowdrey v. Town of Canadea, 16 Fed. Rep. 532; Rich v. Town of Mentz, 19 Fed. Rep. 725.

2 Post, chap. xiv. on Contracts, sec. 511 et seq.

8 Post, sec. 519 et seq.

4 Jackson Co. v. Brush, 77 Ill. 59 (1875).

The Supreme Court of Connecticut, under peculiar circumstances, held the town voting aid to a railroad company estopped to show, as against the railroad company (equitable rights of material-men and contractors having intervened), that

CHAPTER VII.

DISSOLUTION OF MUNICIPAL CORPORATIONS AND REPEAL OF CHARTERS.

In England.

§ 165 (109). How dissolved. In England, a municipal corporation may be dissolved,

1. By an act of parliament, this power being a necessary consequence of the omnipotence of that body in all matters of political institution. The king may, by his prerogative, create, but cannot dissolve or destroy a corporation; may grant privileges, but when vested, cannot take them away.3

It has there often been declared that a municipal corporation may also be dissolved,

2. By the loss of an integral part, or the loss of all or of the majority of the members of any integral part, without which it cannot transact its business, unless the parts that remain have the right to act or to restore the corporate succession.3

1 Co. Litt. 176, note; 2 Kyd, 447; Rex v. Amery, 2 Term R. 515; Glover, 408; Angell & Ames, chap. xxii. sec. 767; 2 Kent Com. 305; County Comm'rs v. Cox, 6 Ind. 403; State v. Trustees, &c., 5 Ind. 77; ante, sec. 32, as to distinction between Royal and Parliamentary Corpo

rations.

2 Ante, secs. 32, 35; Rex v. Amery, supra; Regents of University v. Williams, 9 Gill & Johns. 365, 409 (1838). In this case, Buchanan, J., in substance, observes: The crown may create, but cannot, at pleasure, dissolve a corporation, or, without its consent, alter or amend its charter. Parliament may do this; but, restrained by public opinion, it has not undertaken to dissolve any private corporation since the time of Henry VIII., so that the power to do so rests wholly in theory. In 1783 a bill was proposed to remodel the East India Company. Lord Thurlow opposed it as subversive of the law and constitution, and, in strong, nervous language, VOL. I. 16

declared it to be "an atrocious violation of private property, which cut every Englishman to the bone."

3 Willc. on Corp. 325, chap. vii. This chapter contains an interesting discussion of the question of dissolution, and it would seem that the author, notwithstanding the occasional judgments and the many and broad dicta in the books, doubts whether there can be an actual and total dissolution of a municipal corporation, either by the loss of an integral part, or by surrender, or by forfeiture. But see 2 Kyd, chap. v.; Glover, chap. xx.; Angell & Ames, sec. 769; and particularly Rex v. Morris and Rex v. Stewart, 3 East, 213; 4 East, 17. Integral parts defined. Ante, sec. 35. In Rex v. Passmore, 3 Term R. 241, where the subject was much considered, Lord Kenyon observed, "When an integral part of a corporation is gone, without whose existence the functions of the corporation cannot be exercised, and the corporation has no manner of supplying the integral

3. By a surrender of the franchise of being a corporation to the crown, whose acceptance is necessary; and to be effectual the surrender must be enrolled in chancery. The power to surrender has been much questioned; the argument in favor of it being, that since by royal grant and acceptance a corporation may be created, so by surrender and acceptance it may be annulled. It is admitted, however, that a corporation created or confirmed by parliament or statute cannot dissolve itself by a surrender of its charter or franchise.1

4. By forfeiture of its charter, through negligence or abuse of its franchise, judicially ascertained by proceedings in quo warranto or scire facias. This mode of dissolution proceeds upon the doctrine, well settled as to private corporations, both in England and in this country, and perhaps settled in that country, also, as respects the old municipal corporations when created by royal charter, that there is a tacit or implied condition annexed to the grant of every act or charter of incorporation that the grantees shall not neglect to use and shall not misapply the powers granted, and that if they do, the condition is broken upon which the corporation was created, and the corporation thereupon ceases to exist. And in the cases in the time. of Charles II. it was held that the corporation might forfeit its franchise by reason of the neglect or misconduct of its officers."

part, the corporation is dissolved as to certain purposes. But the king may renovate either with the old or new corporators."

The leading authorities respecting the effect of the loss of an integral part are, 1 Rol. Abr. 514; Regina v. Bewdley, 1 P. Wms. 207; Banbury's Case, 10 Mod. 346; Rex v. Tregony, 8 Mod. 129; Colchester v. Seaber, 3 Burr. 1870; s. c. 1 Wm. Bl. 591, which, however, is said not to be a case of the loss of an integral part, but of magistrates. Grant Corp. 305, note; Rex r. Passmore, 3 Term R. 241. The foregoing cases are succinctly stated by Mr. Kyd, 2 Corp. chap. v. See, also, Mayor, etc. of Colchester v. Brooke, 7 Queen's B. 383, and Mr. Justice Campbell's learned opinion in Bacon v. Robertson, 18 How. (U. S.) 480 (1855); infra, sec. 169, note; People v. Wren, 4 Seam. (5 Ill.) 275, citing and relying on Colchester v. Seaber, supra: Smith's Case, 4 Mod. 53; Smith v. Smith, 3 Desaus. (S. C.) 557; Welch v. Ste. Genevieve, 1 Dillon C. C. 130; chapters on Corporate Officers and Corporate Meetings, post.

1 Rex v. Osbourne, 4 East, 326; Rex v. Miller, 6 Term R. 277; Willc. 332, pl. 861; Howard's Case, Hutt. 87; Grant on Corp. 306, 308; Thicknesse v. Canal Co., 4 M. & W. 472.

2 Black. Com. 485; 2 Kyd, 447; Wille. chap. vii. 325 et seq.; Taylors of Ipswich, 1 Rol. 5; Rex v. Grosvenor, 7 Mod. 199; Smith's Case, 4 Mod. 55, 58; s. c. 12 Mod. 17; Skin. 311; 1 Show. 278; Rex v. Saunders, 3 East, 119; Mayor, &c. of Lyme v. Henley, 2 Cl. & F. 331; Rex v. Kent, 13 East, 220; Priestly v. Foulds, 2 Scott N. R. 205, 225; AttorneyGeneral v. Shrewsbury, 6 Beav. 220. See reference arguendo to subject of forfeiture of municipal charter, in Whalen v. Macomb, 76 Ill. 49 (1875). The earlier American cases relating to the dissolution of private corporations by forfeiture of their charters; what will constitute sufficient ground of forfeiture; and the mode of proceeding to ascertain and enforce the forfeiture, are collected, and the result very clearly and satisfactorily stated, in Angell & Ames on Corporations, chap. xxii. See, also, 2 Kent Com. 305.