Court of the United States that the power to borrow money is not an incidental and necessary power of a municipal corporation; 15 and that to create a valid indebtedness for money borrowed by a municipality there must exist either express authority, or the same must be clearly implied from granted. powers.16 To this view has been added the great weight of the opinion of Judge Dillon,17 and the concurrence of some of the state Supreme Courts, 18 and it is probable that the preponderance of judicial opinion is against the inherent power of a municipality to borrow money. There are certain contrary decisions, however, which are irreconcilable with this view; 19 but many of the cases supposed to favor the inherent power of a corporation to borrow money will be found on close scrutiny, and limitation of the language to the facts of the cases, to be authority only for the doctrine that this power may be implied as necessary and proper to carry out the express powers conferred upon the municipality.20 It is believed, therefore, that the great majority of the adjudged cases can

15 Opinion of Bradley, J., in MAYOR OF NASHVILLE v. RAY, 19 Wall. (U. S.) 479, 22 L. Ed. 164.

16 MAYOR OF NASHVILLE v. RAY, 19 Wall. (U. S.) 468, 22 L. Ed. 164. See, also, Watson v. Huron, 97 Fed. 449, 38 C. C. A. 264.

17 1 Dill. Mun. Corp. § 125.

18 Swackhamer v. Hackettstown, 37 N. J. Law, 191; Robertson v. Breedlove, 61 Tex. 316; Allen v. Lafayette, 89 Ala. 641, 8 South. 30, 9 L. R. A. 497.

The power to borrow money, incur indebtedness, and issue bonds on behalf of the people of the state or any subdivision thereof is the function of the legislature to exercise itself, or to delegate to municipal or quasi municipal corporations. Board of Com'rs of Seward County v. Insurance Co., 90 Fed. 222, 32 C. C. A. 585.

19 Miller v. Board, 66 Ind. 162; City of Williamsport v. Com., 84 Pa. 487, 24 Am. Rep. 208; Com. v. Pittsburgh, 41 Pa. 278; BANK OF CHILLICOTHE v. CHILLICOTHE, 7 Ohio St. 31, pt. 2, 30 Am. Dec.

185.

20 MILLS v. GLEASON, 11 Wis. 470, 78 Am. Dec. 721; Clarke v. School Dist., 3 R. I. 199; State v. Babcock, 22 Neb. 614, 35 N. W. 941; Curtis v. Leavitt, 15 N. Y. 9; City of Richmond v. McGirr, 78 Ind. 192; Wells v. Salina, 119 N. Y. 280, 23 N. E. 870, 7 L. R. A. 759.

STANFORD LAW LIDRANT

be reconciled upon the basis of the sound and safe doctrines stated in the heading of this section.

EXPRESS AND IMPLIED POWER TO ISSUE.

151. Authority to issue municipal bonds is not inherent in a municipality, but may be expressly conferred by the legislature, or may be implied as necessary to the exercise of the express powers.

This subject, like the preceding one, has undergone much judicial examination, and there are cases holding that the power to issue bonds is inherent in the municipality; 21 but most of these cases on examination will be found as sustaining rather the implied than the inherent power of a municipality to issue bonds, and it is believed that the great majority of the apparently conflicting decisions on this subject, as well as on the subject of borrowing money, may be reconciled upon the foregoing statement.22 This power to issue negotiable paper will be implied from the express power to borrow money; 23 but the courts have been generally averse to any such implication where the bonds are to be used as municipal aid to the construction of a railroad, either by subscription to stock or purchase of bonds. Usually the statute authorizing the

24

21 Com. v. Pittsburgh, 41 Pa. 278; Clark v. Janesville, 10 Wis. 136. 22 An inherent power exists in the municipality as an essential function of its corporate existence, and independent of its granted powers. Smith v. Newbern, 70 N. C. 14, 16 Am. Rep. 766.

23 City of Galena 'v. Corwith, 48 Ill. 423, 95 Am. Dec. 557; De Voss v. Richmond, 18 Grat. (Va.) 338, 98 Am. Dec. 647; Merrill v. Monticello, 138 U. S. 673, 11 Sup. Ct. 441, 34 L. Ed. 1069.

24 Fisk v. Kenosha, 26 Wis. 23; Williamson v. Keokuk, 44 Iowa, 88; Pitzman v. Freeburg, 92 Ill. 111; Coloma v. Eaves, 92 U. S. 484, 23 L. Ed. 579; Mississippi, O. & R. R. R. Co. v. Camden, 23 Ark. 300; Pennsylvania R. Co. v. Philadelphia, 47 Pa. 189; Young v. Clarendon Tp., 132 U. S. 340, 10 Sup. Ct. 107, 33 L. Ed. 356.

But in Jennings Banking & Trust Co. v. Jefferson, 30 Tex. Civ. App. 534, 70 S. W. 1005, it was held that where a city charter authorizes the issuance of bonds to aid in the construction of rail

issuance of such bonds provides for a submission of the ques-
tion to popular vote, and authorizes their issuance only when
favored by a majority of the electors or taxpayers of the mu-
nicipality.
Validity.

Municipal bonds, being generally issued for the purpose of obtaining a loan of money on favorable terms, are made payable to bearer and passed by delivery. They are therefore held free from all equities which might exist in favor of the corporation,25 and the only defense open to the municipality is want of authority for their issuance.28 Upon this subject the same considerations are pertinent and rules applicable as have been heretofore set forth in regard to county bonds:27

roads to and from the city, the authority to issue bonds for the purchase of lands for depots would be implied. See Wetzell v. Paducah (C. C.) 117 Fed. 647.

25 Citizens' Sav. Bank v. Greenburgh, 173 N. Y. 215, 65 N. E. 978. 26 Ante, § 24. Clarke v. Northampton, 120 Fed. 661, 57 C. C. A. 123; City of Parkersburg v. Brown, 106 U. S. 487, 1 Sup. Ct. 442, 27 L. Ed. 238; Katzenberger v. Aberdeen, 121 U. S. 172, 7 Sup. Ct. 947, 950, 30 L. Ed. 911; Debnam v. Chitty, 131 N. C. 657, 43 S. E. 3; Everett v. School Dist. (C. C.) 109 Fed. 697; Clifton Forge v. Bank, 92 Va. 283, 23 S. E. 284.

Where a municipality issues bonds which it had no authority to issue under its charter, it cannot subsequently validate its bonds by ratification. Uncas Nat. Bank v. Superior, 115 Wis. 340, 91 N. W. 1004.

27 Ante, § 24. Fernald v. Gilman (C. C.) 123 Fed. 797; City of Defiance v. Schmidt, 123 Fed. 1, 59 C. C. A. 159; Rondot v. Rogers Tp., 99 Fed. 202, 39 C. C. A. 462; Edwards v. Bates County (C. C.) 117 Fed. 526; City of Beatrice v. Edminson, 117 Fed. 427, 54 C. C. A. 601; King v. Superior, 117 Fed. 113, 54 C. C. A. 499; Glenn v. Wray, 126 N. C. 730, 36 S. E. 167; Brenham v. Bank, 144 U. S. 173, 12 Sup. Ct. 559, 36 L. Ed. 390.

ING.CORP.-29

MUNICIPAL WARRANTS.

152. The current indebtedness of a municipality is usually evidenced by warrants or orders, which the municipal

ity has inherent power to issue through its officers.

Municipal orders or warrants are informal checks or drafts by one municipal officer upon another for the payment of a certain sum of money.28 They do not constitute municipal securities, but are merely conveniences in municipal administration of its finances.29 These warrants are usually not negotiable, and do not bear interest.31 They are not intended to be used as currency, though they are assignable; 32 but in the hands of any person the city is entitled to all equities against the original payee.33 It is expected that they will be

80

28 CLARK v. DES MOINES, 19 Iowa, 199, 87 Am. Dec. 423; Bull v. Sims, 23 N. Y. 570.

29 School Dist. Tp. v. Lombard, 2 Dill. (U. S.) 493, Fed. Cas. No. 12,478; Dana v. San Francisco, 19 Cal. 486.

30 Hubbell v. Custer City, 15 S. D. 55, 87 N. W. 520; First Nat. Bank v. Gates, 66 Kan. 505, 72 Pac. 207, 97 Am. St. Rep. 383; City of Hammond v. Evans, 23 Ind. App. 501, 55 N. E. 784; Goodwin v. East Hartford, 70 Conn. 18, 38 Atl. 876; Bardsley v. Sternberg, 17 Wash. 243, 49 Pac. 499; Watson v. Huron, 97 Fed. 449, 38 C. C. A. 264; CLARK v. DES MOINES, 19 Iowa, 199, 87 Am. Dec. 423.

31 City of Pekin v. Reynolds, 31 Ill. 529, 83 Am. Dec. 244; South Park Com'rs v. Dunlevy, 91 Ill. 49.

They may, however, draw interest after presentation, demand for payment, and refusal. Fernandez v. New Orleans, 42 La. Ann. 1, 7 South. 57.

But see Kenyon v. Spokane, 17 Wash. 57, 48 Pac. 783; City of Quincy v. Wartield, 25 Ill. 317, 79 Am. Dec. 330.

32 Grayson v. Latham, 84 Ala. 546, 4 South. 200; Clark v. Polk County, 19 Iowa, 248; Brown v. Jacobs, 77 Wis. 27, 45 N. W. 679.

33 Gilman v. Gilby, 8 N. D. 627, 80 N. W. 889, 73 Am. St. Rep. 791; Casey v. Pilkington, 83 App. Div. 91, 82 N. Y. Supp. 525; Hubbell v. Custer City, 15 S. D. 55, 87 N. W. 520; Speer v. Board, 88 Fed. 749, 32 C. C. A. 101; Matthis v. Cameron, 62 Mo. 504.

A holder of city warrants has only the rights of the original payee,

34

paid out of current taxes, and therefore they rarely exceed them in amount. They may be the basis of action against the municipality, but not until after presentation for payment and refusal.35

FUNDS.

153. Municipal revenues are usually divided into funds which represent the various sums of money appropriated by the council for the payment of specified kinds of indebtedness; e. g., a school fund, interest fund, street fund, sinking fund, and the like.

36

The warrants of the municipality are usually drawn upon some special fund, and are to be paid out of that fund in the order in which they are presented and accepted by the disbursing officer. If the fund be exhausted, such warrant is not then payable out of other money in the municipal treasury, but may be payable out of the same fund the following year.

38

since the rules pertaining to negotiable instruments do not apply. West Philadelphia Title & Trust Co. v. Olympia, 19 Wash, 150, 52 Pac. 1015.

34 MAYOR OF NASHVILLE v. RAY, 19 Wall. (U. S.) 477, 22 L. Ed. 164; Shannon v. Huron, 9 S. D. 356, 69 N. W. 598.

35 Freeman v. Huron, 10 S. D. 368, 73 N. W. 260; Travelers' Ins. Co. v. Denver, 11 Colo. 434, 18 Pac. 556; Quaker City Nat. Bank v. Tacoma, 27 Wash. 259, 67 Pac. 710; International Bank v. Franklin County, 65 Mo. 105, 27 Am. Rep. 261; Varner v. Nobleborough, 2 Greenl. (Me.) 126, 11 Am. Dec. 48; City of Pekin v. Reynolds, 31 Ill. 529, 28 Am. Dec. 244.

36 Bardsley v. Sternberg, 18 Wash. 612, 52 Pac. 251; La France Fire Engine Co. v. Davis, 9 Wash. 600, 38 Pac. 154; Hubbell v. Custer City, 15 S. D. 55, 87 N. W. 520; Quaker City Nat. Bank v. Tacoma, supra; Northwestern Lumber Co. v. Aberdeen, 22 Wash. 404, 60 Pac. 1115; Shannon v. Huron, 9 S. D. 356, 69 N. W. 598; Benson V. Carmel, 8 Greenl. (Me.) 112.

37 McCullough v. Mayor, 23 Wend. (N. Y.) 458.

Warrants issued by a city for street improvements, to be paid out

38 Western Town Lot Co. v. Lane, 7 S. D. 1, 62 N. W. 982; Phillips v. Reed, 107 Iowa, 331, 76 N. W. 850.