# Clark v. City of Des Moines > Supreme Court of Iowa · October 6, 1865 · 19 Iowa 199 URL: https://www.frixlaw.com/law-library/cases/7093331 ## Case - **Full name:** Clark v. The City of Des Moines - **Court:** Supreme Court of Iowa - **Decided:** October 6, 1865 - **Citations:** 19 Iowa 199 - **Precedential status:** Published - **Opinion:** Opinion of the court by Dillon - **Judges:** Dillon - **Cited by:** 96 later opinions in the Frix Law Library ## Citator (automated) - No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases. - Full citator and citing cases: https://www.frixlaw.com/law-library/cases/7093331 ## Opinion text Dillon, J. i. municipkationsT power, I. The plaintiff is the assignee of the orders or warrants in the suit. It is not alleged in the answer, nor was it shown on the trial, that he was not a bona fide holder of these instruments for value, and -without notice of matters now pleaded, as defenses thereto. It is claimed by the plaintiff that the warrants being signed by the proper officers of the city, authenticated by its corporate seal, and negotiable in form, he, as the innocent holder thereof, stands, like a similar holder of ordinary mercantile paper, free from and unaffected by the equities and defenses which the city set up in bar of his recovery. This view of the law was the one adopted by the court below, in its rulings prior to and upon the trial. Thus, after stating the law applicable to the warrants issued for “ scrip surrendered ” — as to which more will presently be said — the court charged the jury as follows: “As to all the other warrants, they are negotiable, and there is no evidence tending to show that they were issued without authority or without consideration; all evidence of this kind having been excluded, because it was not shown or offered to be shown that the plaintiff had knowledge of such defenses; and if you believe, from the evidence, that the warrants were issued by the defendant and that plaintiff is the owner thereof, you will find for him as to all such warrants.” ■ So the bill of exceptions recites, that “ the defendant, on the trial, offered to show by the record of the proceedings of the city council, that all of said warrants were issued without any authority from the said city council, and without any vote of said council authorizing the same," but this evidence the court refused to receive* because the warrants were negotiable and there *209 was no offer to show that the plaintiff took them with notice of such defect or irregularity. This view of the law is, we think, erroneous. If my name be signed to a promissory note by a person representing himself to be my agent, but “without any authority ” from me, I am not bound; and I am no more bound because the obligation has been put in a negotiable form than if it has been put in a form not negotiable. And the same rule must and does apply to paper purporting to be issued by the agents or officers of public or municipal corporations. The general principle of law is well known and definitely settled, that the agents, officers, or even city council of a 'municipal corporation, cannot bind the corporation when they transcend their lawful and legitimate powers. 2"notice of power, s. — piea ofufflra vires, This doctrine rests upon this reasonable ground. The body corporate is constituted of all of the inhabitants the corporate limits. The inhabitants are the corporators. The officers of the corporation, including the legislative or governing body, are merely the public agents of the corporators. Their duties and their powers are prescribed by statute. Every one, therefore, may know the nature of these duties and the extent of these powers. These considerations, as well as the dangerous nature of the opposite doctrine, demonstrate the reasonableness and necessity of the rule; that the corporation is bound only when its agents, by whom, from the very necessities of its being, it must act, if it acts at all, keep within the limits of their authority. Not only so, but such & corporation may successfully interpose . . „ , , J ~ the plea ox ultra vires, that is, set up as a defense its own want of power under its charter, or constituent statute to enter into a given contract or to do a given act in violation or excess of its corporate power and authority. The cases asserting these principles are numerous and *210 uniform; some of the more important and striking ones need only be cited: Mayor of Albany v. Cunliff (city not liable for negligently building bridge under an unconstitutional statute) 2 Comst. (N. Y.), 165, 1849; reversing S. C., 2 Barb., 190 ; Cuyler. v. Trustees of Rochester (laying out street contrary to charter), 12 Wend., 165, 1834 ; Hodges v. Buffalo (4th July appropriation), 2 Denio, 110, 1846 ; Halstead v. The Mayor, 3 Comst., 430, 1850; Martin v. The Mayor, 1 Hill, 545 ; Boone v. Utica, 2 Barb., 104 ; Cornell v. Guilford, 1 Denio, 510 ; Boyland v. The Mayor and Aldermen of New York, 1 Sandf. (N. Y.), 27, 1847; Dill v. Wareham, 7 Metc., 438 , 1844; Vincent v. Nantucket, 12 Cush., 103 ,105,1858, per Merrick, J.; Stetson v. Kempton, 13 Mass., 272 ; Parsons v. Inhabitants of Goshen, 11 Pick., 396; Wood v. Inhabitants of Lynn, 1 Allen (Mass.), 108, 1861; Spalding v. Lowell, 23 Pick., 71 ; Mitchell v. Rockland, 45 Me., 496, 1858; S. C., 41 Id., 363; Anthony v. Adams, 1 Metc. (Mass.), 284, 1840; Western College v. Cleveland, 12 Ohio, 375, 1861; Commissioners v. Cox, 6 Ind., 403, 1855 ; The Inhabitants v. Weir, 9 Id., 224, 1857; Sinead v. The Indianapolis, Pittsburgh and Cleveland Railroad Co., 11 Id., 104, 1858; Brady v. The Mayor, 20 N. Y. (6 Smith), 312; Appleby v. The Mayor, &c., 15 How. Pr., 428 ; Estep v. Keokuk County, 18 Iowa, 199 , and cases cited by Cole, J.; Clark v. Polk County, infra. 4. conTgot™ Negotiability will not validate obligations which are not binding, because of a want of power to issue th em. v. Sterling (action on loan bonds), 23 (N. Y.), 464;. S. C.,1 Am. Law Peg. (N. S.), 290; and note of Prof. Dwight thereon, a portion of whose remarks are so strikingly in,point that we quote them: “It seems entirely clear "he observes (Id., p. -297), “that no representtation by an agent can even establish the fact of agency. If a person, who is not in fact authorized, represents that he has po.wer to execute a promissory note for another, *211 the instrument, so far as the supposed principal is concerned, is utterly void.. The negotiability of the note will have no effect upon the question, as the inquiry turns upon the existence of the note itself. The term “ negotiability ’’ pre-supposes the existence of an instrument made by a person having capacity or power to contract in that particular manner.” (S. P. Hull & Argalls v. Marshall Co., 12 Iowa, 142, 162 , per Lowe, J.) In Starin v. Genoa, and Gould v. Sterling, 23 N. Y., 452 , 464, the plaintiffs were Iona fide holders, for value, of negotiable bonds, and the Court of Appeals of New York held that they were bound to inquire into the power to issue them. “ One who takes a negotiable note or bill of exchange purporting to be made by an agent,” says Mr. Justice Selden (Id., 464), “is bound to inquire as to the power -of the agent.” Analyzing in the case at bar, the view of the court below, it will be found to involve three several distinct propositions: 1st. That the warrants in suit are negotiable paper. 2d. 5 munici Nation?' warrants, ^bat officers of the city (mayor and recorder) or a^ events the city council, has power to crea^e ancj ¿ssue negotiable paper, and, 3d. That warrants, like the ones in question, are valid in the hands of an innocent holder, even if issued without authority or without consideration. With reference to this, as well as other portions of the record, it is necessary to examine these propositions: (a.) The orders in suit are not bills of exchange, as a bill of exchange proper involves the idea of at least two distinct parties, drawer and drawee. The instruments in suit are orders by the city on itself — mere directions to its treasurer to pay the amount to thé bearer. In legal effect they are the promissory notes of the city. (Miller v. Thomson, 3 Man. & Gr., 576; followed, Fairchild v. The Ogdensburgh, Clayton and Rome Railroad Company, 15 N. Y., 337 ; Bull v. Sims, 23 Id., 570, 572; Clark v. Polls *212 County, infra) And by usage and statute (Rev., ch. 73) they pass by delivery, and the holder, as the real owner, may bring suit upon them in his own name. (Steel v. Davis County, 2 G. Greene, 469; Brown v. Johnso n County, 1 Id., 486; Campbell v. Polk County, 3 Iowa, 467 .) The debtor corporation may give a written# acknowledgment of the debt. It may make this run to order or bearer without invalidating it; but it does not follow, as we shall show, that there is an implied power to invest these with all the qualities of commercial paper. _ ow ^ndfc53 plied' (b) There is further involved, in the view of the District Court, the proposition that it is competent for the city officers (mayor and recorder) to issue its obligations a negotiable form, and endow them with all of the attributes of negotiable, mercantile securities. Upon examining the charter under which these warrants were issued (Laws 1857, ch. 185, p. 281), no express power to issue promissory notes or other negotiable paper is conferred. If the power exists to make paper, which, in the hands of a bona fide holder, cuts off equities, it must be an implied power. It is a familiar and elementary principle that municipal corporations have and can exercise such powers, and such only, as are expressly granted, and such incidental ones as are necessary to make those powers available and essential to effectuate the purposes of the corporation; and these powers are strictly construed. (2 Kent Com., 298; Mayor v. Cunliff, supra, and the authorities cited in connection therewith.) It is held that banking and trading corporations have the implied or incidental power to make negotiable paper. (McCullough v. Moss, 5 Denio, 567 ; Straus v. Eagle Insurance Company, 5 Ohio, 59, 1855; Mott v. Hicks, 1 Cow., 513 ; Attorney-General v. Life and Fire Insurance Company, 9 Paige, 470 ; 2 Kent Com., 299; 1 Pars. N. and B., 165.) *213 And the same rule has in some cases been applied, without much consideration, by way of analogy, to municipal and public corporations; but not so as to cut off inquiry into the validity of the paper or just defenses. (Kelley v. The Mayor, &c., 4 Hill, 263 ; see Chemung Canal Bank v. Supervisors, Jo., 5 Denio, 517 ; Carne v. Brigham, 39 Maine, 39; Clarke v. School District, 3 R. I., 199.) To this doctrine, as .applied to commercial corporations, we see no objection; but we do see many and serious objections to treating the ordinary warrants of counties and cities, as possessing all of the incidents and qualities of commercial paper. These warrants are unlike bonds issued on time, negotiable in form, and for sale in the market, as, for example, those issued by towns, cities and counties to railroad companies, under express act of the legislature (for they cannot be issued without express legislative authorization), in payment for stock subscribed. This class of securities are made and issued for the express purpose of raising money by their sale; and the attainment of this object would be embarrassed or defeated if they were subject to equities in the hands of Iona fide purchasers. They are, therefore, held to be negotiable, with all the incidents.of negotiability. (Clapp v. Cedar County, 5 Iowa, 15 ; Morris Canal Company v. Fisher, 1 Stock. Ch., 667, 1855; S. C., 3 Am. Law Reg. (O. S.), 423; Gelpecke v. Dubuque, 1 Wal. (U. S.), 175; Craig v. Vicksburg, 31 Miss., 216 ; Jackson v. Railroad, Company, 2 Am. Law Reg. (N. S.), 585 ; S. C., Id., 748, and note of Judge Redfield ; Chapin v. Vermont and Massachusetts Railroad Company, 8 Gray, 575 ; Clark v. Janesville, 10 Wis., 136 ; Maddox v. Graham, 2 Metc. (Ky.), 56; Gould v. Sterling, supra ; White v. Railroad Company, 21 How., 575 ; Id., 539; Bank v. The New York and New Haven Railroad Company, 3 Kern., 599; S. C., 4 Duer, 480 .) *214 But with warrants like those iu suit, it is entirely different. Under the charter of the city (§ 18), it is made “ the duty of the city council to liquidate and settle all claims and demands against the city.” And by the same section it is provided that no money shall be drawn from the city treasury “ except by order under the authority of the city council.” The city council audit and allow claims and demands, and their action in this regard is to be entered of record. (Charter, § 3.) Upon a certified copy of these proceedings, the treasurer of the city would be authorized to pay the claimant. But by usage, or perhaps under a by-la,w, orders like those before us are drawn upon the treasurer. This mode is adopted for convenience, and these instruments are not to' be assimilated, in all respects, to ordinary commercial paper. 7. — power to tlabiepaper: ¿unary debts On this question the argument may be thus condensed;. There is no express authority to the officers of this city to issue negotiable paper which shall be free from ... 1 1 equities in the hands of purchasers. And the existence ox such a power is not necessary as an incident to those granted, or to carry out the purposes and objects of the corporation, and would be attended with abuse and fraught with danger. It should not, therefore, be held to exist as an implied power. (Smith v. Cheshire, 13 Gray [Mass.] 318, 1859; Inhab. &c. v. Weir, 9 Ind., 224, 1857 ; Halstead v. The Mayor, &c., and other cases cited, supra.) Whether the corporation defendant could specially confer power upon its officers to bind it to negotiable paper, which should be free from equities, is a question which the record does not require to be decided. . *215 8l rants?1 notice. *214 (c.) It is further involved in the view of the District Court, that an innocent holder of one of these warrants *215 may recover thereon, though it be issued without consideration or without authority. The unsound- ^ , ness of this view we' have already pointed out." The warrants purport to be issued by the agents of the city. The plaintiff, in taking these warrants, was bound, at his peril, to ascertain the nature and extent of the power of these officers and of the city corporation. (Delafield v. State of Illinois, 2 Hill, 159 , 174; 26 Wend., 192 ; S. C., 8 Paige, 53 ; Hodges v. Buffalo , 2 Denio; 110; Supervisors v. Bates, 17 N. Y., 242 ; Overseers v. Overseers of Pharsalia, 15 Id., 341 ; Butterfield v. Inhabitants of Melrose, 6 Allen, 187 ; Rossire v. City of Boston, 4 Id., 57; Zabriskie v. Cleveland, Columbus and Cincinnati R. R. Co., 23 How., 381, 398 .) By examination, he may find that these warrants cannot lawfully be issued without the order of the city council. This must be entered of record “ on the journals of the city, which shall be open ” (so the charter declares), “ to the inspection and examination of every citizen.” A warrant issued by the mayor and recorder without the previous order of the couucil, warrants are in the nature of notes, and are within the provisions of the statute. (Acts 1862, ch. 28, p. 30.) The signatures thereto and seal of the corporation being thus admitted to be genuine, we are of the opinion that it is not necessary, in this State, that the plaintiff shall show, as a condition of being allowed to read the warrants in evidence, that these officers had the authority from the council to sign and issue them. It is not necessary to inquire, whether proof aliunde of the city treasurer’s indorsement of the “ presentation ” of the warrants is necessary, or whether the indorsement of that fact by the treasurer is an “ indorsement thereon,” within the meaning of the statute last cited, because the fact of presentation was, by being alleged and not denied, ádmitted on the record. (See, however, Clark v. Polk County, infra.) The ruling of the District Court on these points is affirmed. *228 »Because the court below, on the trial, refused to allow the city to show that the warrants, respecting which a jury trial was had, were issued without authority, the judgment of that court on the verdict for $1,789.30 is reversed, and as to these warrants, and the warrants issued to Keyes and Crawford, and issued to Turner, a trial de novo is ordered. .The judgment of the District Court in the plaintiff’s fa-vor, on demurrer, for $2,632 is affirmed, less the amount of the Keyes and Crawford and Turner warrants. The District Court will ascertain the amount thus to be deducted and credit the same on the judgment for $2,632, or set it-aside and render a new judgment for the sum that remains after making the deduction above directed. --- Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/7093331. Public record. Not legal advice.