CHAPTER VI.

CALIFORNIA.

THE following are the provisions, of the Constitution of California, now in force, having reference to the obligation of municipalities. There is no restriction over the Legislature, except as to their wisdom and discretion.

SECTION 31, ARTICLE IV., Constitution of California.-Corporations may be formed under general laws, but shall not be created by special Act, except for municipal purposes. All general laws and special Acts passed pursuant to this section may be altered from time to time, or repealed.

SECTION 37, ARTICLE IV., Constitution of California.-It shall be the duty of the Legislature to provide for the organization of cities and incorporated villages, and to restrict their power of taxation, assessment, borrowing money, contracting debts, and loaning their credit, so as to prevent abuse in assessments and in contracting debts by such municipal corporations.

The following two cases, People v. Coon, and People v. Supervisors of San Francisco, will be of interest as to practice, as well as, to the rights of both parties, after a contract has once been made. After the city under the Act of the Legislature of April 22, 1853, had chosen to act, it was bound by its agreement, and a compromise under the Act of 1862, is also held valid.

The court by CURREY, J. remarks that "By the choice of the electors of the city an obligation onerous in its character was assumed for the purpose of prospective benefit. Yet the obligation must be discharged." These two cases with that of Stockton, &c. R. R. v. Stockton, will show fully the law of Municipal Bonds as held by the Supreme Court of California.

25th California Reports. People v. Coon et al.

By the court, CURREY, J.

The Legislature of this State, by an Act passed in 1863, authorized the Board of Supervisors of the city and county of San Francisco to take and subscribe one million dollars, in the aggregate, to the capital stock of "Western Pacific Railroad Company " " and "the Central Pacific Railroad Company of California," and to provide for the payment of the same. (Laws of 1863, p. 380.) By this Act, it was made the duty of the Board of Supervisors, to order a special election for the purpose of submitting to the electors of the city and county, the proposition for the board to take and subscribe four hundred thousand dollars to the capital stock of "The Western Pacific Railroad Company," and also, the proposition for the same board to take and subscribe six hundred thousand dollars to the capital stock of" The Central Pacific Railroad Company of California." It was provided by this Act, that if a majority of the electors voting, was in favor of the proposition to subscribe for the stock of said companies, then it should become the duty of the board to take and subscribe, in the name of the city and county of San Francisco, for its use, benefit and advantage, to the capital stock of each of said companies in the amounts specified, and therefor to pledge the faith of the city and county for the payment of the same, in the manner provided in the Act. The Act also provided that the subscription should be made conditioned to be paid in the bonds of the city and county, which should be issued in the sum of one thousand dollars each, from time to time, as the work should progress on the railroad, by a board consisting of the president of the Board of Supervisors, otherwise called the Mayor of the city and county of San Francisco, and the Auditor and Treasurer of said city and county, and styled the "Pacific Railroad Loan Commissioners." The special election was held, and the result of it was that a majority of the electors was in favor of the proposition submitted.

In April, 1864, an Act was passed by the Legislature, by which the same Board of Supervisors was authorized and

empowered "to compromise and settle all claims upon the part of the Western Pacific Railroad and the Central Pacific Railroad for cash or other security, in place of bonds claimed by said companies of said city and county, under an Act to authorize the Board of Supervisors of the city and county of San Francisco, to take and subscribe one million dollars to the capital stock of the Western Pacific Railroad Company and the Central Pacific Railroad Company of California, and to provide for the payment of the same, and other matters relating thereto, approved April 22, 1863; provided, that the power to make such compromises shall vest in said Board of Supervisors, only after and in case said Board of Supervisors shall be compelled, by final judgment of the Supreme Court, to execute and deliver the bonds specified in said Act.” (Laws, 1863-4, p. 388.)

The Board of Supervisors having declined, after request, to take and subscribe to the capital stock of the Central Pacific Railroad Company, an application was made to this court for a peremptory writ of mandamus, to compel said board to proceed to make the subscription and issue the bonds therefor as provided in the Act of 1863. The respective parties to that proceeding, appeared by counsel and argued the questions involved therein, after which this court rendered a judgment granting the writ, which was issued in June, 1864, commanding said Board of Supervisors to take and subscribe in the name of the city and county of San Francisco, for its use, benefit, and advantage, to the capital stock of the Central Pacific Railroad Company of California, to the amount of six hundred thousand dollars, and for the payment of the same to pledge the faith of said city and county in the manner provided in the Act of 1863; and also commanding the Board of Supervisors to make an order directing the Board of Commissioners, styled "The Pacific Railroad Loan Commissioners," to issue the bonds of the said city and county to the Central Pacific Railroad Company, upon the conditions as required and specified in and by the provisions of the Act. This writ was served on the Board of Supervisors.

Pending the application for a writ of mandamus, the

Board of Supervisors, on behalf of the city and county, and the Central Pacific Railroad Company, by its president, were engaged in an effort to effect a compromise of the matter in difference between them, which resulted, after the writ had been issued and served, in an agreement upon the terms thereof; and to carry the compromise agreed upon into effect, the Board of Supervisors, on the 20th of June, 1864, duly passed an ordinance entitled, "Providing for issuing bonds to Central Railroad Company." By this ordinance, after reciting the Act of 1863, and the election under that Act, and the judgment of this court granting the peremptory writ of mandamus, and the Act of 1864, authorizing and empowering the Board of Supervisors to compromise and settle all claims upon the part of the Central Pacific Railroad Company of California, the people of the city and county ordained as follows:

"SECTION 1. Four hundred bonds of said city and county, each for one thousand dollars, with interest coupons attached, dated July 1st, A. D. 1864, in all other respects, in form, substance, and execution, such as are required by said Act first above mentioned, shall be forthwith made, executed, and delivered to said Central Pacific Railroad Company of California.

"SECTION 2. The payment of said bonds and coupons shall be provided for, and made in all respects as is provided in said Act of April 22, 1863, and for such payment the full faith and credit of said city and county are hereby pledged.

"SECTION 3. Said bonds and coupons shall be delivered to said Central Pacific Railroad Company of California, upon the condition that the board of trustees or directors of said company, at a regularly called meeting of the same, shall, by a vote duly recorded, accept said bonds and coupons in full discharge of all obligations on the part of said city and county, to make any subscription to the capital stock of said company, and for all claims, debts, dues, bonds, and coupons whatsoever. Upon the issuing and acceptance of said bonds and coupons, they shall be deemed to have been so received and accepted, in place of the bonds and coupons mentioned

and provided to be given in the Act of April 22, 1863, before mentioned."

This ordinance was duly approved by the Mayor, on the 21st of June, and became a law on that day. Immediately, thereafter, the Central Pacific Railroad Company accepted the propositions contained in said ordinance, in accordance with the terms and conditions thereof, and signified the same to the Board of Supervisors. But the Mayor, Auditor, and Treasurer, constituting the "Pacific Railroad Loan Commissioners," refused to issue the bonds, as provided in said ordinance, after demand duly made therefor, on behalf of the Central Pacific Railroad Company.

The relator has applied by petition to this court for a peremptory writ of mandamus, commanding and requiring the respondents to issue to the Central Pacific Railroad Company of California the four hundred bonds specified in said ordinance. To the relator's petition, setting forth the facts, in substance as hereinbefore stated, the respondents have demurred. The grounds of the demurrer are in substance as follows:

First. It does not appear in or by said affidavit and petition that the respondents have any legal authority or power to execute or deliver to said Central Pacific Railroad Company the bonds referred to in said petition, or any part thereof.

Second. It does not appear in said affidavit and petition that the Board of Supervisors of said city and county of San Francisco, or any officers of said corporation, had any lawful authority to issue, or cause to be issued, to said Central Pacific Railroad Company, bonds to said amount of four hundred thousand dollars, or any other amount, in the manner or for the causes or considerations alleged in said affidavit and petition.

Third. That said ordinance was passed without any lawful authority, and is wholly illegal and void.

Fourth. That the Act of the Legislature of this State, approved April 4, 1864, so far as the same authorizes or attempts to authorize the issuing of bonds by the said city