MUNICIPAL BONDS. Evidences of in debtedness issued by a municipality.
In the ordinary commercial sense, they are negotiable bonds. Austin v. Nalle, 85 Tex. 520, 22 S. W. 668, 960.
This class of securities is issued for sale in the market, with the object of raising money, under the express authority of the legislature. As to the power of municipal corporations to issue and sell bonds and bor row money, see MUNICIPAL CORPORATIONS. Notwithstanding they are under seal, they are clothed with all the attributes of nego tiable or commercial paper, pass by delivery or indorsement, and are not subject to prior equities (where the power to issue them ex ists) in the hands of holders for value, who took before maturity and without notice. Payment of interest on such bonds for a number of years will estop the corporation from setting up a mere irregularity in their issue, as against bona fide holders for value ; Dudley v. Board, 80 Fed. 672, 26 C. C. A. 82. The coupons usually attached to such bonds are likewise negotiable, and may be detached and held separately from the bond, and may be sued on by the holder in his own name without his being the owner of the bonds to which they were originally attach ed ; 1 Dill. Mun. Corp. § 486 ; Thompson v. Lee Co., 3 Wall. (1J. S.) 327, 18 L. Ed. 177; Chicago, B. & Q. R. Co. v. Otoe Co., 1 Dill. 338, Fed. Cas. No. 2667 ; whether he has giv en consideration for them or not ; Dudley v. Board, 80 Fed. 672, 26 C. C. A. 82.
Coupons when severed from the bonds cease to be incidents of the bonds, and be come independent claims, and do not lose their validity, if for any cause the bonds are cancelled or paid before maturity ; Clark v. Iowa City, 20 Wall. (U. S.) 583, 22 L. Ed. 427. See as to coupons as distinct and sepa rate instruments, 6 L. R. A. 562, note ; COU PONS.
The fact that such bonds are payable out of a special fund, known as a "sinking fund," does not prevent the holder from suing at law to enforce collection ; Waite v. Santa
Cruz, 75 Fed. 967.
As to the rule in Gelpcke v. Dubuque, 1 Wall. (U. S.) 175, 17 L. Ed. 520, that bonds valid under a state decision when issued will be sustained, although the state court had subsequently overruled its earlier deci sion, see IMPAIRING THE OBLIGATION OF. CON TRACTS.
Purchasers of the bonds of a municipality issued to aid the building of a railway, which recite a compliance with the law authorizing their issue, are not required to ascertain con ditions imposed by the proposition voted on, which do not appear in the bonds ; Chilton v. Gratton, 82 Fed. 873 ; they have a right to assume that the conditions have been com plied with ; Evansville v. Dennett, 73 Fed. 966, 20 C. C. A. 142.
See as to power to subscribe ; 12 Am. & Eng. R. R. Cas. 689 ; 15 id. 621, 655 ; ratifica tion ; 12 Am. & Eng. R. R. Cas. 651; effect of recitals ; 12 id. 524; 15 id. 584, 675 ; 2 Am. & Eng. Corp. Cas. 291, 320. See also an extend ed discussion of cases in the United States Supreme Court on municipal bonds in aid of railroads ; 17 Am. L. Reg. N. s. 209, 609.
See, generally, as to municipal bonds for public purposes ; 1 L. R. A. 787, note ; 15 Am. & Eng. Corp. Cas. 356 ; as to an election for issue; 40 id. 543; negotiability; 5 id. 593 ; over issue ; 40 id. 535 ; limit of indebtedness ; id. 584; 26 id. 473 ; fraudulent circulation; 2 id. 263 ; estoppel to deny validity ; 2 Am. Ry. Corp. Cas. 525; power to issue ; 5 L. R. A. 728, note bona fide holder ; 23 Am. L. Reg. N. s. 310 ; 29 id. N. s. 380 ; mandamus, to en force subscription ; 12 Am. & Eng. Ry. Cas. 609 ; or to enforce' payment ; 15 id. 629.