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HACKETT V. OTTAWA, 99 U. S. 86 (1878)
U.S. Supreme Court
Hackett v. Ottawa, 99 U.S. 86 (1878)
Hackett v. Ottawa
99 U.S. 86
1. Semble that the borrowing of money by a city for the development of its natural resources for manufacturing purposes is within the provision of the Illinois Constitution of 1848 that corporate authorities may be empowered "to assess and collect taxes for corporate purposes," as interpreted by the supreme court of the state.
2. If a city issues bonds under its corporate seal and in accordance with its charter, which empowers the council, with the sanction of a majority of voters attending an election for the purpose, to borrow money generally and to issue bonds therefor, and the bonds recite upon their face that they are issued in accordance with certain ordinances of the city, the titles of which, being quoted alone in the bonds, characterize the ordinances as providing for a loan for municipal purposes, the city is estopped, in a suit upon the bonds by an innocent purchaser for value, to set up that the ordinances appropriated the money to other purposes, and that the bonds were therefore void.
This action is upon certain bonds issued by the City of Ottawa, Ill., in the year 1869, and of which the testator of plaintiffs in error became the holder and owner for value before maturity. They are in the usual form of municipal bonds, and besides pledging the faith of the city irrevocably for their payment, contain these recitals:
"This is one of one hundred and twenty bonds of like amount and even date herewith, numbered one to one hundred and twenty respectively, issued by the city of Ottawa by virtue of the charter of said city, wherein it is provided that the city council shall have power to borrow money on the credit of the city and to issue bonds therefor, and pledge the revenue of the city for the payment thereof, provided that no sum or sums of money shall be borrowed at a greater interest than ten percent per annum. Art. 5, sec. 3."
"No money shall be borrowed by the city council until the ordinance passed therefor shall be submitted to and voted for by a majority of the voters of said city attending an election for that purpose. Art. 10, sec. 20. And also in accordance with a certain ordinance passed by the city council of said city on the fifteenth day of June, A.D. 1869, entitled 'An ordinance to provide for a loan for municipal purposes,' which ordinance was ratified by a majority of all the
qualified voters of said city at an election holden on the twentieth day of July, A.D. 1869, and in conformity with an ordinance passed by the city council of said city on the thirtieth day of July, 1869, entitled 'An ordinance to carry into effect the ordinance of June 15, 1869, entitled an ordinance to provide for a loan for municipal purposes.'"
"Witness the signatures of the mayor and clerk of said city and the corporate seal thereof this twentieth day of August in the year of our Lord one thousand eight hundred and sixty-nine."
"HENRY A. SCHULER, Mayor"
"R. N. WATERMAN, Clerk"
The defendant below filed two special pleas. The first, after setting forth the ordinance of June 15, 1869, and also that of July 30, 1869, and what is alleged to be the substantial privileges granted to the Ottawa Manufacturing Company by an act of the General Assembly of Feb. 15, 1851, and an act amendatory thereof passed Feb. 16, 1865, avers that the first act and the amendatory act were the same franchises and powers referred to in the ordinance passed July 30, 1869, as having been granted for that purpose by the Legislature of the State of Illinois, under which one Cushman was authorized and directed to expend the proceeds of the bonds aforesaid; that the manufacturing company was a private corporation, not connected with or controlled by the city, and that the bonds were issued and delivered to Cushman as a donation to him, or to the company, to aid in the prosecution of a private enterprise, and were not issued for any municipal purpose whatever; that their issue was without authority of law, and that they are void.
The second plea is in all respects like the first except it avers that Cushman has failed to comply with his contract, as provided by the ordinance of July 30, 1869.
To each of these pleas a general demurrer was filed by the plaintiffs, which was overruled by the court below, and they having elected to stand by the demurrer, judgment was rendered for the city. The plaintiffs then sued out this writ of error.
The ordinances of the city and the acts of the General Assembly of Illinois referred to in the pleas are substantially set forth in the opinion of the Court.
The Illinois Constitution of 1848 declares that
authorities of counties, townships, school districts, cities, towns, and villages may be vested with power to assess and collect taxes for corporate purposes."
Art. 9, sec. 5.
The charter of the City of Ottawa, granted in 1853, confers upon its council the power to establish hospitals; provide the city with water; open, widen, extend, and otherwise improve and repair streets and other public highways; establish, erect, and keep in repair bridges; erect market houses; provide all needful public buildings for the use of the city, and grants various other municipal powers the exercise of which necessarily involves the raising and disbursement of large sums of money. Laws of Ill., 1853, p. 296.
Among the powers expressly delegated to the council is the power "to appropriate money and provide for the payment of the debts and expenses of the city," and, with the sanction of a majority of voters attending at an election for that purpose, "to borrow money on the credit of the city, and to issue bonds therefor, and pledge the revenue of the city for the payment thereof."