
    National Bank of Cleveland v. City of Iola.
    1. Legislative Power; Retrospective Raws. Where the legislature can" legally grant or confer authority to hold an election for a particular" purpose, it can ratify and confirm an election held for such purpose with-" out such legislative authority; but the legislature cannot do by a curative or retrospective act what it could not have previously authorized.
    2. Special Laws; Corporate Powers. An act limited in its application to1 a Single city, and a single election, and the issue of specific bonds, is1 manifestly a special act; and where such act undertakes to authorize' such city to issue its bonds in aid of a manufacturing enterprise, and to levy and collect taxes to pay such bonds, it undertakes to confer upon such city certain corporate powers. , Special acts conferring corporate powers are forbidden by $ 1 of article 12 of the constitution of Kansas, and are void. [Citing and following Atchison v. Rartholow, 4 Kas., 124, and Wyandotte v. Wood, 5 Kas., 603.]
    3. Private Enterprises; Taxation in aid of, void. The legislature cannot legally and constitutionally exercise the right of taxation in such manner and to such extent as to compel or coerce the citizen to aid in the establishment of purely private enterprises or objects, nor for the payment of municipal bonds issued in aid of such private enterprises; and statutes enacted for such purposes are unconstitutional and void.
    4. Taxation ; Object and Purposes. Taxation is a mode of raising revenue for public purposes. When it is prostituted to objects in no way connected with the public interests, it ceases to be taxation and becomes plunder; and the establishment of a bridge manufactory, or foundry, owned by private individuals, is essentially a private enterprise.
    5. Mumoipal Bosods; Want of Power to Issue, Notice of \ Presumed. Bonds issued by a municipality in aid of strictly private enterprises, are void— void from the beginning, and void into whosesoever hands they may have come. All persons must at their peril take notice of the power of municipal corporations or officers to issue securities, and especially is this so where the want of power results from constitutional prohibitions or provisions.
    Action brought by the Commercial National Bank of Cleveland, of Cleveland, Ohio, as plaintiff, against The City of lola, ns defendant, to recover the amount of certain matured coupons attached to bonds issued by the City, of lola, a city of the state of Kansas. The declaration (or petition) is in the usual form, (as are the coupons, copies of which are filed therewith,) and avers that such coupons “were issued in pursuance” of ch. 80 of the laws of Kansas passed in 1871, “which went into effect February 23, 1871.” This act is published in the volume of laws of 1871, p. 195; and as the preamble and,act together show that the election at which the bonds were' voted was, when held, known to be without legal authority, and show also that the particular purpose for which the bonds were to be voted, (and issued, if voted,) was to aid a private enterprise, said ch. 80 is here inserted in full, and is as follows:
    An Act to legalize a certain election for Bonds to aid in constructing and operating Foundry and Machine-Shops in the City of lola, Kansas, and authorizing the mayor and council of said city to issue bonds in accordance therewith.
    Whereas, The city of lola, in the county of Allen and state of Kansas, did, by its Ordinance No. 3.2, provide for holding a special election at the city hall in the said city of lola, for the purpose of submitting to the qualified electors of said city the proposition, “ Whether the mayor and common council of said city shall execute and deliver to Z. King, or Mills & Smith, bonds of the city of lola in an amount of $50,000, in consideration of said parties locating, constructing and operating foundry .and machine-shops, for the manufacture of King’s patent wrought-iron tubular and channel arch bridges, and of plows ■ and stoves, etc., Avithin one half-mile of the limits of said city,” and appointing a day for the holding of such, election, which said ordinance tras dated the nineteenth day of December, 1870; and
    Whereas, The said city, by its Ordinance No. 33, did amend the said Ordinance No. 32 in such manner as that the 9th day of January 1871 ivas appointed by the said mayor and common council as the time when such election should be held, which said ordinance was da^ed January 4th, 1871; and
    Whereas, Such election was held pursuant to public notice, given by publication of the time and place of holding the same, as fixed by the said Ordinance No. 32, in the Kansas State Register, a weekly newspaper published and of general circu- . .lation in said ..city, and by posting ten .printed copies of said . Ordinance No. 33, amendatory as aforesaid, together with the proclamation of tbe mayor of said city,, fixing the time on the 9th day of. January 1871, as aforesaid, in ten public places in said city; and
    Whereas, Such election .was held in'conformity with- such ■ notice, and the general election laws of the state of Kansas, . and at the same time ballots were prepared on which were written or printed, “ For the Bonds,” and “ Against the Bonds;” and
    Whereas, The result of such election, so held as aforesaid, was ■ unanimously in favor of the issuing of the said bonds for the . purpose aforesaid: Therefore
    
      Re it enacted by the Legislature of the State of Kansas:
    
    
      ' Section 1. That the election held in the city of Iola, state of Kansas, on the 9th day of January 1871, and above more particularly referred to and described, and all proceedings had in • conformity therewith, be and the same are hereby legalized.
    Sec. 2. The city of Iola is hereby authorized and empowered, through and by its mayor and common council, to appropriate the sum of $50,000 to aid in the erection, completion, and equipment of buildings at or near the city of Iola, to be used for the purpose of manufacturing “ Z. King’s patent wrought-iron tubular and channel arch bridges,” and a foundry and iron-works, and to issue and deliver to the said Z. King, or Mills & Smith, or to their legal representatives, the bonds of said city to the amount of $50,000, in sums of not less than one hundred dollars each, payable fifteen years after date, and bearing interest at the rate of ten per cent, per annum, with interest coupons attached, payable semi-annually, on-the first days of January and July of each year, (except for the year 1871, for which year interest shall all be paid on the first day of January 1872,) and shall levy and collect such a per cent, on the taxable property of the said city as shall be sufficient to pay the interest on all bonds issued under the provisions of this act, as the same accrues, and to levy and collect such “other tax as shall constitute a sinking fund sufficient to pay said bonds at maturity.
    Sec. 3. Said bonds and interest coupons shall be signed by the mayor of said city; and countersigned by the clerk thereof.
    Sec. 4. This act to take effect and be in force from and after its publication,  etc.
    The constitution of .the state of Kansas contains the following provisions:
    Art. 2, § 17. “In all cases where a general law can be made applicable, no special law shall be enacted.”
    Art. 12, §1. “The legislature shall pass no special act conferring corporate powers. Corporations may be created under general laws; but all such laws may be amended or repealed.”
    Aet. 12, § 5. “Provision shall be made by general law for the organization of cities, towns, and villages, and their power of taxation, assessment, borrowing money, contracting debts and loaning their credit, shall be so restricted as to prevent the abuse of such power.” . . ■ , ,-
    Abt. 12, § 6, “The term corporation, as used in this article, shall include all associations and joint stock companies having powers and privileges not possessed by individuals and partnerships; and all corporations may sue and be sued in their corporate name.” ........... .
    The Oity of Iola demurred to the declaration on the ground that the above-mentioned act of February 23,1871, is unconstitutional; 11st, 'Becausé it is a special act conferring upon’thé city of Io'la corporate powers ’; 2d, Because it undertakes- to authorize the levy and collection of taxes by the city authorities for private as distinguished from public purposes or objects. The case was heard upon the demurrer at the June Term 1873, and was decided June 6th.
    
      Alfred Ennis, for plaintiff. .
    
      Me Comas & McKeighan, for defendant.
   The opinion of the court was delivered by

Dillon, Circuit Judge:

'Without express legislative authority the city of Iola would have no power to appropriate money or to loan its credit to aid private persons to establish manufactories either near to or within the corporate limits. This proposition admits of no dispute, and is well settled. Stetson v. Kempton, 13 Mass., 278; Cushing v. Newburyport,10 Met., 510; Cook v. Manufacturing Co., 1 Sneed, (Tenn.) 698; Penn. Pailroad Co. v. Philadelphia, 47 Penn. St., 189; Dillon’s Munic. Corp., § 106. No precedent authority, either by general or special act, was conferred upon the city to pass the ordinance to provide for the holding of the election to determine whether the citizens would extend the proposed aid to the Bridge Manufactory and Foundry. The adoption of the ordinance and the holding of the election were without color of law. But subsequently the legislature passed the act mentioned in the statement of the case, which undertook to legalize the election, and to authorize the issue of the bonds in question. The bonds were issued under the authority of this act, and so the declaration alleges. Their binding obligation upon the municipality depends upon the validity of this enactment, and the question of its validity is raised by the demurrer to the declaration.

Against the act two objections are urged in argument: 1st, That it contravenes certain special provisions of the constitution of the state. 2d, That it authorizes the levy and collection of taxes for objects or uses not within the scope of the taxing power. The act whose constitutionality we have to determine purports to legalize the prior election in Iola and to authorize the issue of bonds pursuant to that election. It the legislature might have passed such an act prior to the election, it will not be disputed that it can ratify and confirm an election held without it; but the legislature, it is clear, cannot do by a curative or retrospective act what it could not have previously authorized. (Cooley, Cons. Lim., 281.) The act, Avhich Avas passed and Avhich Avent into effect February 23, 1871, after reciting the election and legalizing it, authorizes the city to appropriate $50,000 to aid in the erection and equipment of buildings at or near Iola, to be used for the purpose of manufacturing bridges, ploAvs and stoves, and to issue and deliver the bqnds of the city, Avith coupons attached, payable in fifteen years, and enjoins that it shall levy and collect taxes to pay the principal and interest of the bonds. It is objected that this act violates § 1 of article 12 of the constitution of the state, Avhich provides that the legislature shall pass no special act conferring corporate poAA'ers. That the act in question is a special act is so plain as not to justify extended discussion. 'It is not only limited in its application to the city of Iola, but to a single election, and the issue of specific bonds. Never Avas an act more manifestly special. It seems to me to be almost equally clear that it is an act Avhich undertakes to confer upon the city corporate powers. It ratifies an election held by the city, and authorizes it to do AAdiat, Avithout an express grant, no municipality can do, namely: to issue bonds in aid of a manufacturing enterprise, and to levy and collect taxes to pay such bonds. If the power to create a debt binding upon the municipality, and to lay burdens upon all the property Avithin it to pay the debt created, is not a corporate power, it is difficult to conceive Avhat could justly be regarded as such. The powers given by the terms of the act under discussion are the most important of any which can be conferred upon municipal corporations. They are, indeed, precisely the powers the exercise of which is most to be feared, and which were particularly liable to be unwisely conferred by special legislation. If this prohibition in the ■constitution (§ 1, article 12) applies to municipal corporations, .the special act in question plainly contravenes it. Whether the ,12th article of the constitution of Kansas quoted in the statement of the case was designed to apply to municipal corporations might admit of some discussion if the question were res ■.nova. This article is taken from the constitution of Ohio. And the supreme courts,, not only of that state, but of Kansas, .have, upon full consideration, repeatedly decided that it did .include municipal corporations. Atchison v. Bartholow, 4 Kas., 124; Wyandotte City v. Wood, 5 Kas., 603; The State v. Cincinnati, 20 Ohio St., 18, following Atkinson v. Railroad Co., 15. Ohio St., 21. In the case-first- cited, the-supreme court of rthe state of Kansas held that the constitution compelled the legislature to regulate the grant of powers to municipal corporations by general laws; and hence a special act, or an .act specially amending the charter of the city of Atchison, in respect to making local improvements and local assessment, was void. In the case next’cited (Wyandotte v. Wood,).the same court adhered to this view, and accordingly held that an act of the legislature specially extending the limits of the city of Wyandotte was unconstitutional, because it contravened both sections one and five of article 12 of the constitution.So, in the case of The State v. Cincinnati, above cited, the supreme court of Ohio, under the same constitutional provisions, held that the legislature cannot by special act create a .corporation; nor by special act confer additional powers on a -corporation already existing, and that in these respects there was no difference between private and municipal corporations, .since the constitution equally embraced and equally applies to both classes; and therefore the act of April 16, 1870, “to prescribe the corporate limits of Cincinnati,” being considerecl a special'act, was adjudged void. See also Atkinson v. Railroad Company, supra. In this last case, Ranneyy J., thus expounds the constitution: “ These provisions of the constitution áre too' explicit to admit of the '-least doubt that they were intended to disable the general assembly from either creating corporations, or conferring upon them corporate powers, by special acts of legislation. It was intended to correct an existing evil, and to inaugurate the policy of placing all corporations of the same kind upon a perfect equality as to all future grants of power; of making such law applicable to all parts of the state, and thereby securing the vigilance and attention of its whole representation; and finally, of making all judicial construction of their powers, or the restrictions imposed upon them, equally applicable to all corporations of the same class. We must give such a construction to the constitution as will preserve its leading objects intact.” One of these objects in 'Kansas, as well as in Ohio, was to cut up by the roots the mischief of special legislation, particularly in respect to corporations, both public and private.' The object would be defeated if the special act relating to the city of Iola could stand. If under the doctrine of Butz v. Muscatine, 8 Wall., 575, this court is not absolutely bound, in this class of cases, to follow the interpretation of the state constitution given by its highest court, yet it seems that it ought to follow it where it appears to rest upon solid grounds, and was made in cases and in respect to questions where there was nothing to warp the judgment of its judges, and where the interpretation was settled or had been declared at the time the act in controversy was passed. In the latest case on this subject, decided by the supreme court of the United States, it is not denied that the supreme court of a state is the appointed expositor of its constitution and laws, and that the federal courts will adopt as rules for their own judgments the decisions of the highest courts of the state “respecting local questions peculiar to itself, or respecting the construction of its own constitution and laws.” It only denies the binding force of state adjudications which rest upon the general prin-

ciples of law, and not upon tlic meaning of special constitutional or legislative provisions. Olcutt v. Supervisors, U. S. Supreme Court, Dec. Term 187-2. I think the present case is* one in which it is the duty of this court to follow the decisions-of the state supreme court; and so far as my decision rests-1 upon the special provisions' of the constitution above referred'to, I place it upon the state adjudications without'ah inquiry' into their soundness.

But suppose the enactment under which the bonds in question were issued is not “a special act conferring corporate;powers,” within the meaning of the constitutional prohibition, the other objection made to the validity of'the bonds-remains to be considered. The act authorizes the creation of a debt by the municipality to raise money by the issue of bonds-to be given as a donation' or bonus “ to aid in the-erection and completion of buildings at or near tire-' Qpy 0f j0ia to be used for the purpose'of manufacturing Z. King’s pátent bridges, and as a foundry, and ironworks ;” and the act also authorizes and requires the levy and collection of such taxes as maybe necessary to- pay the interest and principal of these bonds. It is important to be observed, that this is undeniably a private enterprise. These -buildings - and works are the private property of the owners. No public- or municipal control over this property or the enterprise aided. is specially reserved or provided for, and none exists different, from that which exists as to all other property owned by private-; persons and devoted to private uses. The proprietors of these-works are under no obligation, by reason of the aid extended.,, and the burden of taxation thereby imposed upon the municipality, to render it or the state any duty or service whatever" —not even to repay the loan, or to maintain for any specified time the contemplated manufacturing enterprise. The state.- or city could not compel them to complete or operate the-works, or prevent their removal at pleasure to some other ■ locality. And thus we have presented the inquiry, than, which no question concerning the property-rights of the citizen is of more transcendent moment, viz.: Whether the-legislature may thus compel or coerce the citizen to aid in the -establishment of purely private enterprises or objects, because these will or may incidentally promote the general good of 'the community or locality. I think it safe to affirm that no ,-such principle has yet received judicial sanction. On the ■contrary, the principle has been declared unsound by courts of the highest respectability. The general subject of the .extent of the taxing power in connection.with municipal aid •to railways has been thoroughly discussed in a majority of the .states of the Union, and recently by the supreme court of the United States. (Olcutt v. Supervisors, and Railroad Co. v. Otoe County, December Term 1872.) The courts everywhere .have agreed that taxes can lawfully be inrposed for public purposes only; and therefore, in .the language, of Chief Justice-Black, “The legislature has no ■ constitutional right to ■create a public debt or authorize any municipal corporation to do it, in order to raise funds for a mere private purpose. su°k authority passed to the assembly by the general grant of legislative power. This would not be legislation. Taxation is a mode of raising-revenue for public purposes. . When it is prostituted to' objects in no way connected with the public interests or welfare, it ceases to be taxation and becomes plunder. Transferring-money from the owners of it into the possession of those who .have no title to it, though it be done under the name and form ■of a tax, is unconstitutional, for all the reasons which forbid the legislature to usurp any other power not granted to them. * * * An act of the legislature authorizing contributions to be levied for a mere private purpose, or for a purpose which though it be public is one in which the people ;from whom they are exacted have no interest, would not be a law, but a sentence commanding the periodical payment of a -certain sum by one portion or class of people to another. 'The power to make such order is not legislative but judicial, .and was not given to the assembly by the general grant of legislative authority.” Sharpless v. Philadelphia, 21 Penn. St., 147. Similar language is held by Mr. Justice Strong in delivering the opinion of the supreme court of the United States in the recent case of Olcutt v. Supervisors of Fond du Lac County, December Term 1872. The learned Justice there says, that “The taxing power of the state extends no further-than to raise money for a public use, as distinguished from private, or to accomplish some end public in its nature.” Again, he says: “No one contends that the power of a state-to tax, or to authorize taxation, is not limited .to the uses to-which the proceeds maj'- be devoted. Undoubtedly taxes may not be laid for a private use.” (See Freeland v. Hastings, 10 Allen, 570; Tyson v. School Directors, 51 Penn. St., 9.)

The only question therefore is, whether the use for which, taxation in the present ease is authorized is a public or a private-use. The supreme court of the United States in sustaining the-validity of legislative acts authorizing municipal aid to railways*, place it upon the distinct ground that highways, turnpikes*, canals, and railways, although owned by individuals under-public grants, or by private corporations, are pvblici juris; that they have always been regarded as governmental affairs*, and their establishment and maintenance recognized as among" the most important duties of the state, in order to facilitate^ transportation and easy communication among its different parts. Rogers v. Burlington, 3 Wall., 654; Mitchell v. Burlington, 4 Wall., 270; Railroad Company v. Otoe County, supra. Therefore it is, that in favor of such improvements the state may put forth its right of eminent domain, and also-as now established by judicial decisions, unless the right be denied in the constitution, its power to tax. That these acts may lawfully be done is, because, and only because, the uséis a public one, public in its nature, and hence these works are subject to public control and regulation, notwithstanding they may be constructed under legislative authority, and exclusively owned by private persons or corporations. Compulsory taxation in favor of railways, and like public improvements owned.by individuals or companies, is an exercise of power going quite to the verge of legislative authority-Although it is a doctrine that must now be considered as-Judicially settled, still it is one which has encountered a vigorous opposition, both on the ground of expediency and of power, and the exercise of the authority has been so disastrous as already, in some of the states, to have led to constitutional ■provisions for the protection of the citizen. But it is obvious, -from the statement of the grounds upon which such legislation •rasts, that it furnishes no support for the validity of taxation m. favor of enterprises and objects essentially private; and ¡such I consider to be the establishment of a bridge manu•feetory or foundry owned by private individuals. Cases may 'foe imagined giving rise to doubts, whether the use be public <or’private; but the one - in hand does not seem to be difficult •to class. It is certainly not- usual for the legislature to un-dertake to exercise the right of eminent domain to procure ..sites for hotels, banks, manufactories, stores and the like, and It may be safely said, unless extraordinary circumstances may occasionally furnish an exception, that private prop■•eiiy cannot lawfully be condemned for such purposes; and the reason is, that it would not be a taking for public use, nor justified by any reasonable necessity. So taxation to said ordinary manufactories, or the establishment of private enterprises, is a thing until recently quite unheard of; and the power must be denied to exist, unless all limits to the .-appropriation of private property, and to the power to tax, be -disregarded. The question under discussion must be determined upon some principle, and I hold it to be sound doctrine -that the mere incidental benefits to the public or the state, which result from the pursuit by individuals of ordinary "¡branches of business or industry, do not constitute a public -sise in the sense which justifies the exercise of either the power -of eminent domain or of taxation. If this salutary principle be abandoned, we unsettle the foundations of private property, .•¿and unwisely open the door for frauds and abuses of the most •¡alarming character.

That their views are sound, I entertain no doubt, but my -conviction of their soundness has been much strengthened by -the recent decision of the supreme judicial court of Massachusetts, declaring unconstitutional the act authorizing the issue of what is known as the “Summer Street Fire Bonds.” In November 1872 a considerable portion of the city of Boston was destroyed by fire. In December following the legislature empowered the city to issue bonds to the amount of twenty-five millions of dollars, the proceeds of which three commissioners appointed by the mayor were authorized to loan in a safe and judicious manner, “in such sums as they shall determine to the owners of land, the buildings upon which were burned by the fire in said.Boston, on the 9th and 10th days of November. 1872, upon-the notes or bonds of said owners secured by first mortgages of said land; said mort-. gages to be conditioned that the rebuilding shall be commenced within one year from the first .-day of January 1873, and said commissioners to have full, power to apply the proceeds of said bonds in making said loans in such manner, and to make such further provisions, conditions and limitations in reference to said loans and securing the same, as shall be best calculated, in their judgment, to insure the employment of the same in rebuilding upon said land burned over, and the payment thereof to the said city.” In the late case of Loibell, •et al., v. Boston, the constitutionality of this act was the question to be decided. It will be seen that the object of this act, as shown by its provisions, was “to insure the speedy rebuilding on land the buildings upon which were burned” by the great fire; and the question was, as to the right of a ■state to impose any taxes for this object, and this depended upon the further question whether this object was, in a legal ■sense, a public object. The court distinctly held, to use the language of the rescript sent down in the case, that taxes can ■only be laid “for some public service, or some object which concerns the public welfare;” that “the preservation of the interests of individuals, either in respect of property or business, although it may result incidentally in the advancement ■of the public welfare, is in its essential character a private .and not a public object;” “that the incidental advantages to the public or to the state which result from the promotion of private interests, or the prosperity of private enterprises or1 business, does not justify their aid by taxation;” “that as a judicial question the case is not changed by the magnitude-of the calamity which has created the emergency.” And finally the court say, “The expenditure authorized by this-statute, being for private and not for public objects, in a legal sense, it exceeds the constitutional power of the legislature,, and the city cannot legally issue the bonds for the purposesnamcd in the act.” See also as to distinction between public and private use: Bloodgood v. Railroad Co., 38 Wend., 65; Allen v. Inhab. of Jay, Maine Sup. Court, July Term 1871; Jenkins v. Andover, 103 Mass., 94, holding invalid a statute-authorizing taxation in favor of a private incorporated academy. Same principle: Curtis v. Whipple, 24 Wis., 350; People v. Salem, 20 Mich., 452.

As the only authority for the issue of the bonds in question was an unconstitutional act of the legislature, they are void —void from the beginning, and void into whosesoever hands-they may have come. All persons must at their peril take notice of the power of municipal corporations or officers to-issue securities, and especially is this so where the want of power results from constitutional prohibitions or provisions.. The Floyd Acceptances, 7 Wall., 676; Marsh v. Fulton Co., 10 Wall., 676; Clark v. Des Moines, 19 Iowa, 199; Steines v. Franklin Co., 48 Mo., 167.

The demurrer to the declaration is sustained; and unless-the plaintiff desires to amend, judgment will be entered for-the defendant.

And judgment final was entered for defendant. 
      
      [* Sections 1 ancl 2 of article 13 of tlie constitution of Oliio is tlie same as ¿ 1, article 12, of the constitution of Kansas. Sec. 6, article 13, of the Ohio Constitution, is the same .as £5, article 12, of the Kansrs Constitution.]
     