as locators, and caused the surface boundaries of the claim to be marked by posts, and afterwards filed a location certificate containing the name of the lode, the names of the locators, the date of the location, the number of feet in length claimed *on each side of the center of the discovery shaft, and the general course and direction of the claim as near as might be. The defendants therefore claimed the right to Occupy and possess the premises in full accordance with and by virtue of a full compliance with the requirements of the laws of the United States and of the state of Colorado; the said vein, lode, or depos it being a part and parcel of the unappropriated public mineral domain of the United States.

A demurrer to this answer was sustained by the circuit court, and, judgment being entered thereon, the case was brought here for review at October term, 1883. The demurrer was on the ground that the answer did not disclose any defense, because it showed that neither the defendants nor their grantors had discovered, located, or recorded a lode or vein such as is described in section 2320 of the Revised Statutes, at or before the application for the placer patent, but that the defendants located their lode claim within the boundaries of the patented ground after the issue of the patent; and because the applicants for the placer claim were not required to apply for the vein or lode claim unless it had been duly discovered, located, and recorded, and was owned by the applicants for the placer patent at the time of their application. This court reversed the judgment of the circuit court for the plaintiff on the demurrer, holding that it was sufficient, as a matter of pleading, to bring an alleged lode or vein within the exception of the patent, to aver that it was known to the patentee to exist at the time of his applying for a patent, and was not included in his application. 109 U. S. 550, 3 Sup. Ct. Rep. 339.

On the trial in the circuit court the plaintiff gave in evidence its patent, and, to show the date of the location of the lode claim by the defendants, produced the certificate of their location. This certificate is dated January 2, 1883, and alleges a location made on that day upon a discovery of the same date.

To establish the existence of the lode claimed by the defendants, the testimony of four witnesses was introduced. One of them, Leonhardy, was allowed to testify, against the objection of the plaintiff, as to the existence of various lodes in the vicinity of the placer claim of William Moyer and the placer claim of Wells and Moyer, and of the character of their underground workings. He was also permitted, under like objection, to give the statements of one Stevens, made to him years before, as to the latter's opinion then of the existence cf a large body of mineral wealth under the surface of the country "round about there," although his interest in the premises in controversy was only acquired by purchase with Leiter from the owners of the placer claim after they had applied for a patent, and the statements were not made in the hearing

of such owners. Testimony of this character was, in my judgment, clearly inadmissible. The testimony of Sullivan, one of the locators of the lode in suit, only went to the character of that lode, the extent to which a shaft had been sunk, its developments, and also as to the existence of other lodes in the vicinity of the placer claim. There was not a particle of evidence from any source showing that the vein or lode located by the defendants was known to exist at the date of the application for the placer patent, much less that its existence was brought to the knowledge of the patentee. Its location was nearly five years after the application for the placer patent, and nearly four years after the patent was issued. The existence of the Mike tunnel and its extension within the boundaries of the Moyer placer claim (not the placer claim involved in this case) can have no bearing upon the questions presented, even if there had been at any time discovered within that tunnel valuable mineral of sufficient extent to justify the expenditure of time and money for its development.

Upon the close of the testimony the court instructed the jury that the plaintiff was entitled to recover, the defendants' location not having been made until after the patent was issued, and directed them to find a verdict in its favor. They accordingly found such verdict, and the question before this court is as to the correctness of this instruction.

Exceptions to the operation of the patent are founded upon section 2333 of the Revised Statutes, which is as follows:

"Where the same person, association, or corporation is in possession of a placerǝ claim, and also a vein or lode included within the boundaries thereof, applica-' tion shall be made for a patent for the placer claim, with the statement that it includes such vein or lode, and in such case a patent shall issue for the placer claim, subject to the provisions of this chapter, including such vein or lode, upon the payment of five dollars per acre for such vein or lode claim, and twenty-five feet of surface on each side thereof. The remainder of the placer claim, or any placer claim not embracing any vein or lode claim, shall be paid for at the rate of two dollars and fifty cents per acre, together with all costs of proceedings; and where a vein or lode, such as is described in section twenty-three hundred twenty, is known to exist within the boundaries of a placer claim, and application for a patent for such placer claim which does not include an application for the vein or lode claim shall be construed as a conclusive declaration that the claimant of the placer claim has no right of possession of the vein or lode claim; but, where the existence of a vein or lode in a placer claim is not known, a patent for the placer claim shall convey all valuable min. eral and other deposits within the boundaries thereof.

and

This section, as this court has said on more than one occasion, makes provision for three distinct classes of cases:

(1) Where one applies for a placer patent, who is at the time in the possession

power carries with it authority to give a negotiable paper for money borrowed.

The

The case which seems to be much relied upon to support the present judgment is Merrill v. Monticello. But we submit that it does not sustain the broad doctrine that negotiable securities may not be issued in execution of an express power to borrow money. What could or could not be done, under such a power, was not a question involved in that case. The question was whether authority in the town of Monticello to issue negotiable bonds could be implied, not from an express, but from an implied, power to borrow money. After observing that, under the laws of Indiana, the proposition that a town has an implied authority to borrow money or contract a loan, under the conditions and in the manner expressly prescribed, was not to be controverted, the court, speaking by Mr. Justice LAMAR, said: "But this only brings us back to the question, does the implied power to borrow money or contract a loan carry with it a further implication of power to issue funding negotiable bonds, for that amount, and sell them in open market?" question in that case, as framed by the court, clearly shows that it was only considering whether an authority in a municipal corporation to issue negotiable securities could be implied from a power to borrow which was itself to be implied from other powers granted. This, also, appears from the following clause in the opinion: "It is admitted that the power to borrow money or to incur indebtedness carries with it the power to issue the usual evidences of indebtedness by the corporation to the lender or other creditor. Such evidences may be in the form of promissory notes, warrants, and, perhaps, most generally, in that of a bond." And it is further shown by the fact that the opinion, referring to the clause in Police Jury v. Britton, above quoted, which states that authority in a municipal corporation to issue negotiable securities may be implied from an express power to borrow money, states that it has no application to the case then before the court, in which the attempt was made to imply authority to issue negotiable bonds simply from an implied power to borrow money.

Another case in this court, not referred to, is very much in point. It is City of Savannah v. Kelly, 108 U. S. 184, 190, 2 Sup. Ct. Rep. 468. A railroad corporation, whose principal and beginning point was that city, issued its negotiable bonds upon which to raise money to pay debts for construction, and for future improvements. The city, owning some of the capital stock of the corporation, guarantied the payment of those bonds. The bonds, so guarantied, were put upon the market and sold. The question was as to the authority of the city to make this guaranty under the power conferred upon it by an act of the legislature," to obtain money on loan, on the faith and credit of said city, for the purposes of contributing to works of internal improvements." Mr. Justice MATTHEWS, speaking for the court, said that the fact that the money "was

not advanced directly to the city, but, upon its assurance of repayment, to the railroad company, is not a departure even from the letter of the law, much less from its meaning; nor does the fact that the money was advanced partly on the credit of the railroad company diminish the presumed reliance of the purchaser upon that of the city, with which it was joined. It is difficult to conceive of language more comprehensive than that employed, to embrace every form of security in which the faith and credit of the city might be embodied; and that in such cases it is not important to the character of the transaction that the money is obtained in the first instance by the railroad company, upon the credit of the city, was directly ruled in Rogers v. Burlington, 3 Wall. 654, and affirmed in Town of Venice v. Murdock, 92 U. S. 494. Of course, if the city of Savannah, having the power “to obtain money on loan," could guaranty negotiable bonds, issued by the railroad company for the purpose of raising money to be contributed to works of internal improvement in which the city was interested, the city could have made the loan directly upon its own negotiable bonds.

It is, perhaps, proper to say that our views find support in the admirable commentaries of Judge Dillon on the Law of Municipal Corporations. The court refers to sections 507 and 507a of those commentaries. But those sections do not, in any degree, support the conclusion reached in this case. The doctrine which the learned author declares, in those sections, to be alike unsound and dangerous, is "that a public or municipal corporation possesses the implied power to borrow money for its ordinary purposes, and as incidental thereto the power to issue commercial securities, that is, paper which cuts defenses when it is in the hands of a holder for value acquired before it is due." But Judge Dillon, while agreeing that the power to issue commercial paper, unimpeachable in the hands of a bona fide holder, is not among the ordinary incidental, powers of a public municipal corporation, and must be conferred expressly, or by fair implication, says, after a careful review of the authorities: "Express power to borrow money, perhaps, in all cases, but especially if conferred to effect objects for which large or unusual sums are required, as, for example, subscriptions to aid railways and other public improvements, will ordinarily be taken, if there be nothing in the legislation to negative the inference, to include the power (the same as if conferred upon a corporation organized for pecuniary profit) to issue negotiable paper with all the incidents of negotiability." 1 Dill. Mun. Corp. (4th Ed.) § 125. It is eminently just to apply that rule in the present case, because the act giving the city of Brenham authority to borrow, not exceeding $15,000, for general purposes, expressly provided that its bonds should not be subject to tax under that act. Such a provision could have had reference only to negotiable bonds, which would be put upon the market for the purpose of raising money.

*196

It seems to us that the court, in the present case, announces for the first time that an express power in a municipal corporation to borrow money for corporate or general purposes does not, under any circumstances, carry with it, by implication, authority to execute a negotiable promissory note or bond for the money so borrowed, and that any such note or bond is void in the hands of a bona fide holder for value. There are, perhaps, few municipal corporations anywhere that have not, under some circumstances, and within prescribed limits as to amount, express authority to borrow money for legitimate, corporate purposes. While this authority may be abused, it is often vital to the public interests that it be exercised. But if it may not be exercised by giving negotiable notes or bonds as evidence of the indebtedness so created,-which is the mode usually adopted in such cases,-the power to borrow, however urgent the necessity, will be of little practical value. Those who have money to lend will not lend it upon mere vouchers or certificates of indebtedness. The aggregate amount of negotiable notes and bonds, executed by municipal corporations, for legitimate purposes, under express power to borrow money simply, and now outstanding in every part of the country, must be enormous. A declaration by this court that such notes and bonds are void, because of the absence of express legislative authority to execute negotiable instruments for the money borrowed, will, we fear, produce incalculable mischief. Believing the doctrine announced by the court to be unsound, upon principle and authority, we do not feel at liberty to withhold an expression of our dissent from the opinion. (143 U. S. 553)

HOYT et al. v. LATHAM et al.

(February 29, 1892.)

TRUSTS-PURCHASE OF TRUST ESTATE BY TRUSTEE -RATIFICATION-LACHES.

L. died intestate, leaving as his next of kin and heirs at law nine brothers and sisters. His estate was all in personalty, save an undivided one thirty-seventh interest in a portion of a congressional land grant under a contract between a railroad company and a syndicate of nine persons, of which L. was a member. To save expense of administration, the estate being very large, it was agreed that B., who was a confidential friend of L., should distribute the estate. B. estimated L.'s interest in the land grant as worth $10,000, and undertook to dispose of it for that sum, and, after unsuccessful negotiations, bought it for the syndicate of which he was a member. He sent to each heir a statement of account, and a check for his or her share of the estate, including the proceeds of such sale, demanding a release from further liability. Shortly thereafter, in answer to letters from two of the heirs, B. expressed his willingness to give up the interest in the lands on payment of the amount paid to the heirs therefor, but demanded that they decide at once, as the lands were in litigation. Subsequently B. twice renewed his offer, but nothing was done for two years, when, the litigation having been successfully ended, and the lands risen in value, the heirs again opened the correspondence by asking further particulars, when B. declined to renew his offer, in view of the lapse of time, the formation of a new company, and the change of circumstances. B. at all times acted in good faith, and did not at any

time conceal the circumstances from the heirs, who knew of the condition of the lands and the litigation respecting them. Held that, while the sale was voidable, B. having purchased from himself as trustee, the heirs, by their unexplained delay in the circumstances, must be considered to have ratified the sale. Mr. Justice FIELD dissenting. 14 Fed. Rep. 433, reversed.

Appeal from circuit court of the United States for the district of Minnesota. Reversed.

STATEMENT BY MR. JUSTICE BROWN.

This was a bill filed by William H. and Edward P. Latham, who are heirs and owners of two-ninths of the estate of their brother Charles F. Latham, against Ashbel H. Barney and his associates, to compel an accounting for the proceeds of the sale of an undivided one thirty-seventh interest in certain lands belonging to the estate of the said Latham, and for a decree adjudging the plaintiffs to be the owners of two-ninths of his interest in the unsold lands, and for a conveyance of the same. The suit arose upon the following state of facts:

On the 31st day of October, 1867, a contract was executed between Alfred M. Hoyt, Danford N. Barney, Ashbel H. Barney, Charles F. Latham, and five other associates, of the first part, and the Winona & St. Peter Railroad Company of the second part, by which, after reciting that the parties of the first part had loaned and advanced to the corporation large sums of money, and had constructed and equipped 105 miles of its railroad in Minnesota, whereby the corporation had become indebted to them in a large sum of* money, it was provided that certain payments should be made upon that indebtedness by the issue to them of stock and bonds, and that a portion of a congressional land grant owned by the railroad company should be conveyed in satisfaction of the residue. The land so to be conveyed was as many acres theretofore granted by congress as the corporation should receive by reason of the construction of such road for a distance of 105 miles westerly from Winona, reserving the right of way and depot grounds. The lands were to be conveyed to the parties of the first part, as they should direct, whenever, and as soon as, the railroad company had obtained_title thereto under the acts of congress. Instead of taking a conveyance of the lands, the parties interested elected to take the proceeds of their sales, as they were permitted by the contract to do, and therefore, as they were sold by the railroad company, the proceeds were from time to time paid over to them. The number of acres to which the company was entitled was ascertained by judicial decree to be 514,266 and a fraction.

Charles F. Latham, one of the parties to this contract, and entitled to one thirty-seventh of these lands or their proceeds, died intestate, August 25, 1870, leaving as his only heirs or next of kin nine brothers and sisters, and the children of a deceased sister; and, up to the execution of the agreement hereinafter referred to, his share of such proceeds was deposited in bank to the credit of his estate. One of his sisters had received her share of his

of way over the streets of the city and the purchase of depot ground, to secure the construction of said railroad through the city; that $12.000 of the bonds were sold by the city, $5,000 to one Mensing, and $7,000 to two other persons, and Mensing also became the owner of those $7,000 of bonds, and he and the other two purchasers bought the bonds with actual knowledge of the purpose for which they were issued, as well as record notice of such illegal purpose, as disclosed by the public records and minutes of the city council; and that the plaintiff, if it became the owner of the bonds and coupons, pur. chased the coupons after their maturity, and with knowledge of all the facts attending their issue, well knowing that they were issued to raise money to enable the defendant to purchase the said right of way and depot ground for the said railroad company.

Afterwards the defendant put in an amended answer, amending its former demurrers and answer, but not varying the material allegations of fact contained in its former answer.

The plaintiff then filed a supplemental petition, demurring to the answers and excepting thereto by special allegations, and also alleging matters of fact in response to the answers, and averring that the defendant was authorized to issue the bonds in question, and that, if their proceeds were misappropriated by the city council or the agents of the city, such misappropriation ought not to affect the rights of the plaintiff; that the bonds were sold by the lawfully authorized agents of the city, and it received full value for them; that the parties from whom the plaintiff received the bonds were bona fide*purchasers of them before

passed by the legislature of Texas, (Sp. Laws Tex. 1873, c. 2, p. 2,) incorporating the city of Brenham. By article 3, § 2, of that act, (page 14,) it is provided as follows: "Sec. 2. That the city council shall have the power and authority to borrow for general purposes not exceeding ($15,000) fifteen thousand dollars on the credit of said city;" also by article 7, § 1, (page 23,) as follows: "Section 1. Bonds of the corporation of the city of Brenham shall not be subject to tax under this act."

At the date of the incorporation of the city and of the passage of the ordinance in question the city had a population of over 4,000, and less than 10,000, inhabitants.

On the 28th of March, 1881, one Dwyer instituted a suit in the district court of Washington county. Tex., against one Hackworth, assessor and collector of taxes of the city of Brenham, to enjoins the collection of certain taxes levied by "the city council of the city, and assessed against Dwyer, including as a part thereof one-eighth of one per cent. to pay interest and provide a sinking fund on the bonds of the city, the bonds so referred to being the identical bonds which are involved in this suit. That case went to the supreme court of Texas, and is reported as Dwyer v. Hackworth, 57 Tex. 245.

Various points are taken by the defendant as assignments of error; but we consider it necessary to discuss only one of them, the decision of which will dispose of the case.

The court charged the jury, among other things, (35 Fed. Rep. 185,) that the power in the city to borrow money carried with it the authority to issue the bonds, and that the defendant had capacity to issue the bonds in question as com

The defendant then filed a supplemental answer, demurring to the supplemental petition, and specially excepting to parts of it, and raising an issue of fact as to its allegations.

The plea in abatement, or to the jurisdiction of the court, was tried by a jury, which found for the plaintiff; and afterwards the issues of fact on the pleadings were tried by a jury, which found a verdict for the plaintiff for $5,510.10, and the court entered a judgment overruling the general and special demurrers and exceptions of the defendant, and the general demurrer and exceptions of the plaintiff, and the special exceptions and demurrers of the defendant to the plaintiff's supplemental petition; and a judgment for the plaintiff was entered for $5,510.10, with interest and costs. To review this judgment the defendant has brought a writ of

error.

On the 4th of February, 1873, an act was v.12s.c.-36

and the coupons. The defendant, by its demurrer to the plaintiff's petition, stated as ground of demurrer that it did not appear from the petition that the defendant was authorized by the constitution and laws of Texas to issue the bonds and coupons. The court overruled such demurrer, and by a bill of exceptions it appears that the defendant excepted to such ruling. The defendant demurred also to the plaintiff's supplemental petition, on the ground that that petition failed to show any authority in the defendant to issue the bonds and coupons. This demurrer was overruled, and it appears by a bill of exceptions that the defendant excepted to the ruling. It also appears by a bill of exceptions that the defendant excepted to the charge that the power of the city to borrow money carried with it authority to issue the bonds, and that the city had the capacity to issue the bonds as commercial paper, the ground of the exception being stated to be that under the constitution of Texas the expense of carrying out the general governmental purposes of the defendant was to be defrayed by the levying of a tax, and not by issuing bonds, and that the bonds issued were not authorized to be clothed with the incidents of commercial paper.

The principal contention on the part of

the defendant is that it was without authority to issue the bonds, and that they were void for all purposes and in the hands of all persons. This point is presented with reference to the charter of 1873, considered apart from the provisions of the constitution of 1876, and also with reference to the effect which the constitution had upon the power claimed under the charter.

Article 11, §§ 3-7, inclusive, of the constitution of Texas of 1876, provided as follows:

"Sec. 3. No county, city, or other municipal corporation shall hereafter become a subscriber to the capital of any private corporation or association, or make any appropriation or donation to the same, or in any wise loan its credit; but this shall not be construed to in any way affect any obligation heretofore undertaken pursuant to law.

"Sec. 4. Cities and towns having a population of ten thousand inhabitants or less may be chartered alone by general law. They may levy, assess, and collect an annual tax to defray the current expenses of their local government, but such tax shall never exceed for any one year one-fourth of one per cent., and shall be collectible only in current money. And all license and occupation tax levied, and all fines, forfeitures, penalties, and other dues accruing to cities and towns, shall be collectible only in current money.

"Sec. 5. Cities having more than ten thousand inhabitants may have their charters granted or amended by special act of the legislature, and may levy, assess, and collect such taxes as may be authorized by law, but no tax for any pur pose shall ever be lawful, for any one year, which shall exceed two and one-half per cent. of the taxable property of such city; and no debt shall ever be created by any city, unless at the same time provision be made to assess and collect annually a sufficient sum to pay the interest thereon and create a sinking fund of at least two per cent. thereon.

"Sec. 6. Counties, cities, and towns are authorized, in such mode as may now or may hereafter be provided by law, to levy, assess, and collect the taxes necessary to pay the interest and provide a sinking fund to satisfy any indebtedness heretofore legally made and undertaken; but all such taxes shall be assessed and collected separately from that levied, assessed, and collected for current expenses of municipal government, and shall when levied specify in the act of levying the purpose therefor, and such taxes may be paid in the coupons, bonds, or other indebtedness for the payment of which such tax may have been levied.

"Sec. 7. All counties and cities bordering on the coast of the Gulf of Mexico are hereby authorized, upon a vote of twothirds of the tax-payers therein, (to be ascertained as may be provided by law,) to levy and collect such tax for construction of sea-walls, break waters, or sanitary purposes, as may be authorized by law, and may create a debt for such works, and issue bonds in evidence thereof. But no debt for any purpose shall ever be in

curred in any manner by any city or county, unless provision is made, at the time of creating the same, for levying and collecting a sufficient tax to pay the interest thereon, and provide at least two per cent. as a sinking fund, and the condemnation of the right of way for the erection of such works shall be fully provided for."

There is nothing in the charter of the defendant which gives it any power to issue negotiable, interest-bearing bonds of the character of those involved in the present case. The only authority in the charter that is relied upon is the power given to borrow, for general purposes, not exceeding $15,000 on the credit of the city. The power given to the defendant by section 4 of article 11 of the constitution, the defendant having a population of less than 10,000 inhabitants at the date of its charter and at the date of the ordinance, was only the power to levy, assess, and collect an annual tax to defray the current expenses of its local government, not exceeding, for any one year, one-fourth of 1 per cent.

That in exercising its power to borrow not exceeding $15,000 on its credit, for general purposes, the city could give to the lender, as a voucher for the repayment of the money, evidence of indebtedness in the shape of non-negotiable paper, is quite clear; but that does not cover the right to issue negotiable paper or bonds, unimpeachable in the hands of a bona fide holder. In the present case, it appears that Mensing bought from the defendant $5,000 of the bonds, at 95 cents on the dollar, and that other $7,000 of the bonds were sold by the city for the same price, it thus receiving only $11,400 for $12,000 of the bonds, and suffering a discount on them of $600. The city thus agreed to pay $12,000, and interest thereon, for $11,400 borrowed. This shows the evil working of the issue of bonds for more than the amount of money borrowed.

It appears by the record that the depot grounds in, and the right of way through, the city of Brenham were bought for the Gulf, Colorado & Sante Fe Railroad Company with money realized from the sale of bonds issued under the ordinance of June 7, 1879, and that $3,000 of such bonds were used by the city for fire department pur.

poses.

The power to borrow the $11,400 would not have been nugatory, unaccompanied by the power to issue negotiable bonds therefor. Merrill v. Monticello, 138 U. S. 673, 687, 11 Sup. Ct. Rep. 441; Williams v. Davidson, 43 Tex. 1, 33, 34; City of Cleburne v. Railroad Co., 66 Tex. 461, 1 S. W. Rep. 342: 1 Dill. Mun. Corp. (4th Ed.) § 89, and notes; Id. § 91, note 2; Id. § 126, note 1; Id. §§ 507, 507a.

The confining of the power in the present case to a borrowing of money for general purposes, on the credit of the city, limits it to the power to borrow money for ordinary governmental purposes, such as are generally carried out with revenues derived from taxation; and the presumption is that the grant of the power was intended to confer the right to borrow money in anticipation of the receipt of revenue taxes, and not to plunge the mu