
    JOHN L. WEISMER, Respondent, v. THE VILLAGE OF DOUGLAS, Appellant. ROBERT HALSEY v. THE SAME.
    
      Chapter 577, Laws of 1868 — town bonds — cannot be issued to aid corporation created for private purpose—payment of interest on — estoppel.
    
    In pursuance of chapter 577, of the Laws of 1868, bonds were issued by the village of Douglas in payment of stock of the Long Eddy Hydraulic and Manufacturing Company, a private corporation created for the purpose of improving a water privilege and of manufacturing lumber in the said village. In an action brought upon said bonds, held, that the purpose for which the company was created was a private one, and that the legislature could not authorize the village to issue bonds in aid thereof.
    After the bonds were issued, the interest due thereon was paid once, and the village once voted on its stock. Meld, that the village was not thereby estopped from setting up the invalidity of the bonds in this action.
    Appeal from a judgment in favor of the plaintiffs, entered upon the trial of these actions by the court, without a jury.
    These are actions to recover the amount due on certain 'coupons attached to bonds issued by the defendant. They were tried at Special Term, without a jury, and a decision was given for the plaintiff in each. The defendant appeals. The same questions arise in each action.
    The Long Eddy Hydraulic and Manufacturing Company was a corporation formed under the general laws of this State for the purpose of “constructing and improving a water privilege * * * and for the purpose of manufacturing lumber.” In other words, it was a saw-mill company. By chapter 837, Laws of 1867, the company was authorized to build a dam across the Delaware. By chapter 577, Laws of 1868, the village of Douglas was authorized to take stock, not to exceed $10,000, in this company. This was to be done by the usual system of commissioners and consents, which has been só notorious for the few last years.
    Three commissioners were to be appointed for the purpose of taking the stock. They were to issue scrip; this scrip was to be denominated on its face, “Internal Improvement Fund of the Village of Douglas.” Ho bonds were to be issued until the written consent had been obtained of a majority of tax-payers representing a majority of the taxable property. Ho subscription was to be made to the stock until at least $15,000 of the stock had been in good faith subscribed, and forty per cent thereon paid in. The bonds were to be negotiated at not less than par; the proceeds to be invested in securities, and the securities collected to meet the assessments on the stock of the company owned by the village. Taxes to pay the principal and interest due on the bonds were to be collected in the same manner as other village taxes.
    On the 1st of June, 1868, and at the time of the issue of the bonds, Dennis D. McKoon was president, Henry H. McKoon was treasurer, and Francis G. Barnes was clerk, of the village of Douglas. A meeting of the village trustees was held on that day, at which were present Dennis D. McKoon, U. S. Tyler, O. G. Armstrong and —— Peak. McKoon was then treasurer, and Peak and Tyler stockholders, in the Long Eddy Hydraulic and Manufacturing Company. On that day these trustees of the village appointed Dennis D. McKoon and Samuel Miller and George Potts, two other stockholders of the Long Eddy Hydraulic and Manufacturing Company, “ commissioners for internal improvement fund.” Prior to this time, however, and to the issue of the bonds, as heretofore stated, $15,000 of the stock of the company had not been in good faith subscribed for; nor had forty per cent thereon been paid in. But the stockholders had had a meeting in the spring, and Potts had agreed to assume $300, Parmenter $500, and McKoon $1,000; so as to have it appear that all of the stock was taken. Potts’ extra stock was paid for in work; Miller gave a note for the first fifteen per cent; and McKoon declined to pay his, on account of the understanding that he was not to pay. Peak paid for his stock by building a boarding-house for the company. Under the provisions of the act, consents to issue said bonds were obtained, proved and acknowledged, and certified by the village clerk. • These represent a majority of the taxable property, provided the signature of the president of the Hew York and Erie Railway Company is a sufficient signing to represent the company, without a resolution of the board of directors. There is no evidence that it was authorized by any resolution of the board.
    Said Dennis D. McKoon, as president, said Henry H. McKoon, as treasurer, Francis G. Barnes, as clerk, and said Dennis D. McKoon, Samuel Miller and George Potts, as commissioners, signed bonds to the amount of $10,000, denominated on the face, “Internal Improvement Fund of the Village of Douglas.” These bonds recite a statute passed April thirtieth. The statute was in fact passed May fifth. They are payable to Dennis D. McKoon, treasurer, or bearer. They were delivered to Dennis D. McKoon.
    On the 1st of July, 1868, a certificate of stock in the Long Eddy Hydraulic and Manufacturing Company for 100 shares, signed by Dennis D. McKoon, treasurer, and Cyrus Peak, president, was issued to the village. It states that fifteen per cent had been paid. A second installment, of same date, of twenty-five per cent; a third of thirty-five per cent, August twenty-seventh; and a fourth of twenty-five per cent, October first, are indorsed; all signed by Dennis D. McKoon, treasurer.
    The bonds’of the village were not sold, but were turned over to the company for the stock. The plaintiffs, in December, 1868, or January, 1869, and in a month or two after that, bought some of these bonds. They got them of Dennis D. McKoon, and paid him for them. The plaintiffs now sue on the unpaid coupons of these bonds.
    The trustees of the village of Douglas, since the issue of this stock, have voted thereon. And the taxable inhabitants of the village have once voted to raise, by special tax, the interest, $525, to become due on the bonds; and the same was raised and paid accordingly.
    
      H. & W. J. Welsh, for the appellants.
    The bonds, being issued without the consents required by statute, are void in the hands of loonafide holders or purchasers for value. (Starin v. The Town of Genoa, 23 N. Y., 449, 450; Gould v. Town of Sterling, id., 462, 465 ; The People v. Mead, 36 id., 224; Town of Venice v. Breed, 1 N. Y. S. C., 130.) The act of the legislature, passed May 5, 1868, was and is unconstitutional, null and void. The liability was created without providing any judicial forum, in which the legality of the proceeding may be questioned by the parties interested. (Wynehamer v. The People, 13 N. Y., 395 ; Taylor v. Porter, 4 Hill, 140 ; 5 N. Y., 511; 12 id., 209; 35 id., 302; referred to and commented on in The Town of Rochester v. Deyo, 2 N. Y. S. C., 148.) The act of the legislature above referred to, and under which those bonds are alleged to have been issued, is void, for the reason that it authorized the taking of private property for a private purpose. (Gerard’s Titles to Real Estate, 736; The People v. The Mayor of Brooklyn, 4 N. Y., 422; The People v. Holbert, 46 id., 113; Beekman v. Sar. and Schen. R. R. Co., 3 Paige, 45 ; Varick v. Smith and the Attorney-General, 5 id., 137; Bloodgood v. Mohawk and Hud. Riv. R. R. Co., 18 Wend., 9; People v. Norris, 13 id., 328; 2 Kent’s Com. [10th ed.], 227; Taylor 
      v. Porter, 4 Hill, 143 ; In the Matter of Albany Street, 11 Wend., 149, 151; Embury v. Conner, 3 N. Y., 511; Sedg. on Stat. and Const. Law, 177; The People v. Flagg, 46 N. Y., 405 ; Gordon v. Cornes, 47 id., 612; Cooley on Const. Lim., 494; People v. Batchellor, 53 N. Y., 143; Sweet v. Hulbert, 51 Barb., 312.)
    
      Youmans & Niles, for the respondents.
    Delegation of the authority to the village of Douglas to issue bonds, and provide for their payment by tax on its inhabitants, was an exertion of the power of taxation on the part of the legislature, as distinguished from the right of eminent domain. (Duanesburgh v. Jenkins, in Com. Appeals, 1873, not reported, MS. opinion by Johnson, C.; People v. Mayor, etc., 4 Comst., 419; Guilford v. Supervisors of Chenango County, 3 Kern., 143; Olcott v. Supervisors, 16 Wall., 678.) The constitutional inhibitions against depriving a person of property without due process of law, and taking private property for private purposes, have repeatedly been held not to apply to the case of property or money exacted by the power of taxation. (People v. Mayor, etc., and Guilford v. Supervisors, etc., above cited; Darlington v. Mayor, etc., 31 N. Y., at pp. 189, 190; Davidson v. Mayor, etc., 27 How., 342; People v. Mitchell, 45 Barb., 308; S. C., affirmed, 35 N. Y., 551; Bank of Rome v. Village of Rome, 18 id., 38; Thomas v. Leland, 24 Wend., 65 ; 2 Dillon’s Munic. Corp., 686, and cases.) The right of eminent domain can only be exercised for a public use, in the strict sense of the term, and then only to an extent necessary for the purposes of that use (Taylor v. Porter, 4 Hill, 140; Matter of Albany Street, 11 Wend., 148; Embury v. Conner, 3 Comst., 511; Guilford v. Supervisors, supra ; 2 Dillon’s Munic. Corp., 556 et seq.); while the taxing power may be exerted whenever public interests may be thereby promoted, without reference to a user by the public. (Darlington v. Mayor, etc., 31 N. Y., 164; Brewster v. Syracuse, 19 id., 118; Bank of Rome v. Village of Rome, 18 id., 43 ; Clark v. Rochester, 24 Barb., 489; Olcott v. Supervisors, 16 Wall., 678; and cases before cited.) The powers of the legislature within its sphere of action are absolute and supreme, subject only to the restrictions contained in the federal and State Constitutions, and it is the sole and exclusive judge of the expediency or necessity of exercising those powers. (Cowen, J., in People v. Morrell, 21 Wend., 576 ; Butler v. Palmer, 1 Hill, 330 ; Leggett v. Hunter, 19 N. Y., 463 ; Clark v. Rochester, 24 Barb., 446.) The taxing power and right of eminent domain, being among those inherent to the legislature, are unlimited, while exercised within their legitimate spheres. (People v. Lawrence, 41 N. Y., 141, and numerous cases cited; Howell v. Buffalo, 37 N. Y., 270 ; Matter of Peter Townsend and other cases, supra ; Clark v. Rochester, 24 Barb., 446 ; Bloomfield, etc., Natural Gas-light Company v. Richardson, 63 id., 437; Talbot v. Hudson, 24 L. R., 228; Hasbrouck v. Milwaukee, 13 Wis., 37; Brodhead v. Milwaukee, 19 id., 37; Olcott v. Supervisors, etc., 16 Wall., 678; Bloodgood v. Mohawk, etc., R. R. Co., 18 Wend., 9; S. C., 14 id., 57; Buffalo, etc., R. R. Co. v. Brainard, 5 Seld., 109; People v. Nearing, 27 N. Y., 306 ; Duanesburgh v. Jenkins, supra ; Miller, J., In re Townsend, 39 N. Y., 181.) The following results would have flown from an accomplishment of the objects of the company. As to the public use: 1. The improvement of the navigation of the river by cleaning out the channel and'construction of docking and piers for the benefit of the public. 2. The creation of a slack water for the convenience and security of raftsmen. 3. The introduction of pure and wholesome water into the village for public and domestic purposes. This is clearly a public use. (Wayland v. County Commissioners, 4 Gray, 500, per Thomas, J.; Gardner v. Newburgh, 2 Johns. Ch., 162; Mayor, etc., v. Bailey, 4 Denio, 443, 446; 2 Dillon’s Munic. Corp., 561.) 4. The improvement of the mill site. The question as to whether the improvement of a mill site is a public use, has never been expressly adjudicated in this State, so far as the reported cases show, but the subject has received judicial discussion in other States with Constitutions similar to our own, where this question has been uniformly answered in the affirmative. This is the case in Massachusetts. (Boston, etc., Corp. v. Newman, 12 Pick., 467; Hazen v. Essex County, 12 Cush., 478; Commonwealth v. Essex County, 13 Gray, 249.) In Connecticut. (Olmstead v. Camp, 33 Conn., 532 ; Bradley v. N. Y. and N. H. R. R. Co., 21 id., 305; Nicholson v. N. Y. and N. H. R. R. Co., 22 id., 86.) In Wisconsin. (Newcomb v. Smith, 1 Chand., 71; Pratt v. Brown, 3 Wis., 603; Fisher v. Horicon, etc., Co., 10 id., 351.) In Virginia. (See Crenshaw v. Slate River Co., 6 Rand., 245.) In Tennessee. (Harding v. Goodlett, 3 Yerger, 41.) And doubtless many others. Our own courts, in referring to this particular object, evidently regard it as of the same nature as others of a public character. (See remarks of Smith, J., in Clark v. Rochester, 24 Barb., 482, in respect to the erection and operation of a flouring mill; Bloomfield, etc., Gas Company v. Richardson, 63 id., 449.) By proceeding under the act in question, and seeking and accepting the benefits thereby conferred, the defendant has waived the right to question its constitutionality. (Houston v. Wheeler, memorandum, 52 N. Y., 641, MS. opinion by Folger, J.; Sherman v. McKeon, 38 id., 266; Embury v. Conner, 3 Comst., 511; Baker v. Braman, 6 Hill, 47; Vose v. Cockroft, 44 N. Y., 415; Vanhook v. Whitlock, 26 Wend., 43; The People ex rel. N. Y. and H. R. R. Co. v. Havemeyer, 4 N. Y. S. C. [T. & C.], 365.) Where a corporation issues and puts into circulation obligations purporting on their face to have been issued within the scope of its corporate powers, it is precluded as against a bona fide holder from asserting their invalidity, although they were in fact issued for a purpose not authorized by law. (F. and M. Bank v. B. and D. Bank, 16 N. Y., 125 ; Stoney v. American Life Insurance Company, 11 Paige, 635 ; Supervisors v. Schenck, 5 Wall., 784; Morford v. Farmers' Bank, 26 Barb., 568; State of Indiana v. Woram, 6 Hill, 33; Moss v. The Rossie Lead Mining Co., 5 id., 137.) To this class of cases the defense of ultra vires does not apply. (5 Am. Law Rev., 272; 2 Dillon’s Munic. Corp., 855.) That any fraud or irregularity in the issue of the bonds does not constitute a defense against a bona fide holder for value, is too well settled to admit of question. (Bank of Rome v. Village of Rome, 18 N. Y., 38; Grand Chute v. Winegar, 15 Wall., 355 ; Lexington v. Butler, 14 id., 282; Mercer Co. v. Hackett, 1 id., 83; Gelpecke v. Dubuque, id., 175; Myers v. Muscatine, id., 384.)
   Learned, P. J.:

The act incorporating the village of Douglas, authorizes it to sue and to be sued. Probably, this relieves the cases from the question whether an action is the proper remedy for the plaintiffs, Without passing on that question, we come .to the merits.

It should be noticed, in the outset, that the forming of a corporation does not make the purpose of the corporation a public one. Therefore, the purposes of the Long Eddy Hydraulic and Manufacturing Company are no more public than those of a single individual would be, if he were engaged in the same business. We are to treat this case just as if it were not a corporation, but a few partners who were to engage in the business of improving a water privilege and manufacturing lumber, and the village of Douglas was to be one of the partners.

What then was the business of the company ? The certificate distinctly states that it is the constructing and improving a water privilege, and the manufacturing of lumber, etc., thereon. Some facts are found by the court below, 'in this connection, which should be noticed. It was found that the construction of the dam would have caused slack water, which would be of advantage to lumbermen, by enabling them to construct piers; that lumber, logs and timber are the principal products of the surrounding country; that the material growth and prosperity of the village would have been increased by the accomplishment of the objects of the company; that the public might have been benefited by the clearing out of the channel of the river; that by the use of proper appliances the water could have been conducted through the village from the dam.

So far as I can see, there is no evidence on these points in the case. Presumptively, it would seem that the forcing of water by some proper appliances, up ten feet into the village, would not aid the water privilege, or the manufacture of lumber. But, at any •rate, these purposes are problematical, and are not connected with the objects of the company. When a company shall be formed for the purpose of docking the river, of clearing its channel, or of conveying water into the village, it will be time to decide whether such purposes are of a public character. We have now to do only with a company incorporated to improve a water privilege, and to manufacture lumber, etc.; useful purposes, but are they publio?

In some States, the legislature may authorize the taking of land for mill sites in invitum. Statutes giving such power, and called flowage acts, are recognized as valid in Massachusetts, Connecticut, and in some other States. They have not been so recognized in this State that I am aware of; and the expression of opinion on the subject has been unfavorable.

The taking of land, in invitum, has been principally done by railroads, etc. Its ground is necessity, and that is its limit,

But the question here is not on the right of taking land in i/mitum, although it may have some analogy with that subject. And the numerous cases showing that, on making compensation, land may be taken for.railroads, water-works, and the like, have not much to do with this case. The question here is, whether a municipal corporation can tax the persons and property under its government, in order to turn over the money so raised, to individuals, for the purpose of building a saw-mill.

Another point which should be noticed is, that this question is not affected by the fact (assuming it to be a fact) that a majority of the tax-payers consented. In private corporations, within the scope of the corporate powers, the majority properly govern. But the village is not organized for manufacturing purposes. The majority have no necessary right, therefore, to compel the minority to enter into speculations of this kind. A village is a subordinate branch of the civil government. The legislature may give the management of its municipal affairs to the majority, or to such other authority as may be constitutionally designated. What right has any village authority, whether supported by the majority of taxpayers or not, to take by tax the private property of their citizens in order to give it to others? The mere fact that parties live .within the same corporate limits, does not authorize the majority to make bargains for the minority in matters not pertaining to the corporate body. While, again, if such a power can be derived from an act of the legislature, then it would follow that no consent of a majority of tax-payers would be needed, in case the legislature chose to dispense with it.

The legislature, without the consent of the majority of the taxpayers, could authorize the municipal authorities to levy taxes for such purposes as these, if they could give such authority with the consent of such majority. Courts have already seen the evil of. such a doctrine; and they have held that a corporation cannot he compelled to embark in private business — not even in a railroad.

Without regard, therefore, to the fact thát few of the tax-payers, or many, consented to the issue of these bonds, we return .to the question whether the legislature has any power to authorize a municipal corporation to raise by tax money for the purpose of paying it to private individuals to use in their manufacturing enterprises. The right to tax is necessarily involved in the right to issue bonds, because it is by taxation only that the bonds must be paid. There is no other resource for payment.

It is too late now to dispute that acts similar to the present are constitutional when the enterprise is the construction of a railroad. This is upon the ground that the railroad is a public highway. As it is the duty of a municipality to take care of the roads and highways within its limits, it was held that “ a railroad terminating at a village .or city was not so foreign to its public interests ” that the municipality might not subscribe to its stock. And from that position the doctrine has finally gone to the extent of allowing a county to give aid to a railroad out of the State.

But even as to railroads, it seems to be thought that the doctrine has been carried too far; for, while a railroad constructed by a private corporation is a public highway, and while the legislature may compel a town, without the consent of its citizens, to issue bonds for the construction of highways, yet, with happy inconsistency, the courts of this State have recently held that the legislature cannot compel a town to issue bonds to aid in the construction of a railroad by a company. In the language of that decision, a railroad is “ a work, public in some respects, but private in others.” How, decisions which have sustained the so-called “bonding statutes,” have always recognized the fact that railroad companies are private corporations. But they have sustained these statutes on the ground that the purposes or objects of the companies were public improvements; “ that the railroad had not lost this character because constructed by individual enterprise.”

Since, therefore, the case last cited holds that the railroad—that is, the thing constructed — is “a work public in some respects, but private in others,” we may safely understand that this case shows at least a modification of former decisions. So, too, in the case of Loan Association v. Topeka, it is remarked “ that few courts have decided in favor of these so-called bonding statutes,’ without a division among the judges, and others have decided against them altogether.” And the court adds: “ Of the disastrous consequences which have followed its recognition [the constitutionality of such statutes] by the courts, and which were predicted when it was first established, there can be no doubt.” The tone of that decision indicates a doubt of the soundness of the principle which has been decided— even as to railroads.

But when we get beyond the influence of those powerful corporations, and inquire whether a legislature can authorize a city or town to levy a tax for the support of a manufacturing establishment, there can be no doubt, on principle, or from the decisions. No tax can be levied by a city, which is not for a public purpose. And the probable benefit which may come to a city or village from a successful manufacture, is not a public purpose. If a tax may be levied by a city to aid a manufacturer, it would follow that a tax might be laid to aid a merchant; or, in other words, a city, under the form of taxation, might take away the property of some of its citizens to enrich others. This would be confiscation rather than legislation. It is contrary to sound constitutional law — unless, perhaps, in the case of a protective tariff.

A State cannot order a city to raise money by taxation, to establish one of its citizens in business, The legislature cannot, in the form of a tax, take the money of a citizen and give it to an individual, A municipal bond, issued under legislative authority to secure the location, or aid in the erection of a manufacture, is void, in the hands of a bona fide holder.

The legislature of Maine authorized the town of Jay to loan its credit to persons who were about to put up a steam saw-mill. There was to- be a run of stones for grist, so that it might have been urged that one object was the grinding of grain, and that this was a public purpose. The town voted to loan $10,000 on this consideration. .On the suit of some of the inhabitants, it was held that this was not a public purpose, and that the legislature could grant no such power.

So, even where, under the authority of the legislature, a town voted to exempt manufacturing establishments from taxation for ten years, it was held that this was indirectly taxing others to give money to the manufacturers, and that it could not be done.

The legislature of Massachusetts passed a law, authorizing the city of Boston to raise money by the issue of bonds, for the purpose of lending it to owners whose buildings had been destroyed by the great fire. In the case of Lowell v. City of Boston, this law was declared to be unconstitutional. It authorized taxation merely for the benefit of private individuals. Yet in that instance it might have been said with great force, in the language of the decision in the present case, the material growth and prosperity of the village (city) would have been largely increased by the accomplishment of the objects of the company (owners), as it would have added a large tax-paying element thereto, and increased the value of the adjacent property.”

This question has been carefully examined in the case of Loan Association v. Topeka. The city of Topeka had been authorized by the legislature to issue bonds to aid a bridge manufacturing and iron-works company. The only defense considered was, whether such a statute was constitutional. Mo question was made as to the regularity of the issue, and the plaintiff was a purchaser for value. The city had raised by taxation, and paid the coupons first due. This action was on other coupons. The court held that the bonds were void; that a statute which authorized a town to issue bonds in aid of the manufacturing enterprise of individuals, is void, because the taxes necessary to pay the bonds would, if collected, be a transfer of the property of individuals to aid in the gain of others, and not for a public use. That case, decided by a court which has manifested ño reluctance to sustain the rights of holders of municipal bonds, seems to be sound and decisive.

Some remarks of the court are applicable also on the point which is urged upon us : That the village of Douglas has once paid interest on these bonds, and has voted on the stock. “ Such a payment works no estoppel.” The legislature had no authority to authorize the village to take, this stock, or to issue these bonds. All the acts were void, and nothing which has been done can authorize a future levy of taxes for this purpose.

Such is the course of decisions on this question. Others still might be cited. They show that the holding of bonds issued by municipalities to aid railroad companies to be valid was an exception to the general rule; an exception unfortunate, if not unsound. That it rested on the ground that the work was public; and that later decisions hold that such work is public only in some respects.” And they further show that, with this exception, courts have refused to sustain laws which authorize municipalities to tax their citizens for the benefit of private enterprise.

The judgment should be reversed, and judgment ordered for defendant in each case.

Present—Learned, P. J., Boardman and James, JJ.

Ordered accordingly. 
      
      Laws of 1867, chap. 449.
     
      
       Brady v. Supervisors, 10 N. Y., 260; Martin v. Supervisors, 29 id., 645; Bell v. Esopus, 49 Barb., 506.
     
      
      Hay v. Cohoes Company, 3 Barb., 42; Cooley’s Const. Lim., 534.
     
      
       N. Y. and C. R. R. Co. v. Gunnison, 8 S. C. (1 Hun), 496; R. and S. R. R. Co. v. Davis, 43 N. Y., 137.
     
      
       People v. Mayor of Brooklyn, 4 N. Y., 419.
     
      
       Taylor v. Porter, 4 Hill, 143.
     
      
       People v. Batchellor, 53 N. Y., 128.
     
      
       Olcott v. Supervisors, 16 Wall., 678, at 696; Clarke v. Rochester, 24 Barb., 446; Bank of Rome v. Village of Rome, 18 N. Y., 38.
     
      
       Railroad Company v. Otoe, 16 Wall., 667.
     
      
       Bank of Rome v. Village of Rome, ut supra.
      
     
      
       People v. Flagg, 46 N. Y., 401.
     
      
       People v. Batchellor, 53 N. Y., 128.
     
      
       20 Wall., 655.
     
      
       Cooley’s Const. Dims., 494.
     
      
      
         Brodhead v. City of Milwaukee, 19 Wis., 658
     
      
       Commercial Bank v. Iola, 2 Dillon, 358.
     
      
       Allen v. Inhabitants of Jay, 60 Maine, 124.
     
      
       Brewer Brick Company v. Brewer, 13 Am. Law Reg. (N. S.), 735; see, also, the same principle in Weeks v. Milwaukee, 10 Wis., 242.
     
      
       20 Wall., 655.
     