Statement of the Case.

power of the legislature, at any time, to declare it to be a corporation, and to confer upon it such corporate powers, appropriate to be vested in a territorial corporation for the benefit of its inhabitants, as the legislature may think fit. Notwithstanding the decision of the Supreme Court of South Carolina in Floyd v. Perrin, 30 So. Car. 1, the statute of South Carolina of December 24, 1885, which authorized townships (already defined by names and boundaries) to subscribe for stock in a railroad company, and county officials to issue bonds accordingly in their behalf, and to assess and levy taxes upon the property in the township for the payment thereof, and declared the townships to be bodies politic and corporate for the purposes of this act, with the necessary powers to carry out its provisions, and with rights and liabilities in respect to any causes of action growing out of its provisions, must be held by the courts of the United States, as to bonds issued and purchased in good faith before that decision, to be consistent with art. 9, sect. 8, of the constitution of South Carolina, authorizing the corporate authorities of townships to be vested with power to assess and collect taxes" for corporate purposes."

THIS was an action, brought in the Circuit Court of the United States for the District of South Carolina, by George W. Folsom, against Township Ninety Six in the county of Abbeville and State of South Carolina, to recover the sum of $5100, the amount of coupons attached to bonds issued in behalf of that township in aid of the construction of a railroad; and to compel the levy of a tax upon the property in the township to pay these coupons. The complaint contained the following allegations:

That the plaintiff was a citizen of the State of Tennessee; that the defendant was a corporation, duly chartered under and by virtue of an act of the general assembly of South Carolina of December 23, 1882, chartering the railroad company by the name of the Greenville and Port Royal Railroad Company, and of an act of December 24, 1885, amending its charter, and changing its name to the Atlantic, Greenville and Western Railroad Company; and that the defendant was a citizen and resident of the State of South Carolina.

"That the said acts authorized and empowered the counties and townships, interested in the construction of said railroad, to subscribe to the capital stock thereof, and to issue bonds in aid thereof; and declared the boards of county commissioners of the several counties to be the corporate agents of the town

Statement of the Case.

ships within their limits of said counties, respectively; and authorized and empowered said boards, respectively, to execute and issue bonds of said townships in aid of said railroad; as will more fully appear by reference to said acts, which are by their terms declared to be public acts."

That Township Ninety Six lay in Abbeville County, in the State of South Carolina, along the line of said railroad; that, in pursuance of said acts, an election was duly held in the said township, and resulted in favor of a subscription to said railroad company to the amount of $20,800; and that, in pursuance of said acts, the board of county commissioners of Abbeville County, on March 25, 1886, duly executed and issued bonds of the township, numbered on their face, and aggregating $20,800, as authorized by those acts, with interest coupons attached at the yearly rate of seven per cent; the bonds and coupons payable at the First National Bank of Charleston, S. C.; and the bonds containing a recital that the township by virtue of those acts had subscribed for $20,800 of the common stock of the railroad company.

That the plaintiff, in 1886, relying upon the recitals contained in the bonds, and upon their being legal and valid obligations of the township, became the purchaser of certain of the bonds, with the coupons attached, and was now the legal owner and holder thereof.

"That at the time of the issue of said bonds, and of the purchase thereof by the plaintiff, the said bonds and coupons, and other bonds and coupons issued as obligations of other townships under said acts and similar acts enacted in 1872 and 1875, when the bonds were also issued, were regarded and treated as valid securities by the corporate authorities of said township, by the public, the legal profession, and by the legislative, executive and judicial departments of the State of South Carolina; and that they circulated freely in the market, and large sums of money were invested in them by citizens of South Carolina, as well as other States, believing them to be valid and valuable securities."

That by an act of the general assembly of South Carolina of December 19, 1887, the validity of the bonds issued under

Statement of the Case.

the former acts was distinctly recognized, and provision was made for their payment in the same manner as provided for coupons by the act of 1885.

That the plaintiff was now the owner and holder of unpaid coupons to the amount of $5100 upon his bonds; and that the defendant had failed and refused to assess and collect taxes, or to place money in the First National Bank of Charleston, for the payment of these coupons.

The defendant demurred to the complaint. The Circuit Court held the questions raised to be controlled by the case of Floyd v. Perrin, 30 So. Car. 1, which the Circuit Court was bound to follow; and therefore sustained the demurrer, and dismissed the complaint. 59 Fed. Rep. 67.

The plaintiff took the case by writ of error to the Circuit Court of Appeals for the Fourth Circuit, which, desiring the instructions of this court upon certain questions or propositions of law, certified them to this court as follows:

"First. Whether, upon the averments of the complaint, the Circuit Court was bound, in passing upon this case, by the decision of the Supreme Court of South Carolina in Floyd v. Perrin, 30 S. C. 1?

"Second. Whether, if the bonds and coupons in question were issued, put in circulation, and came to the hands of plaintiff in error, in due course of trade, for valuable consideration and without notice, there having been at the time no decision of the Supreme Court of South Carolina adverse to these bonds, or identical bonds issued under similar statutes, the plaintiff in error was entitled to recover on the coupons mentioned in said complaint?

"Third. Whether the acts of December 23, 1882, and of December 24, 1885, were constitutional, and the township bonds issued thereunder, if in compliance with the acts, or in the hands of bona fide holders for value, constituted valid indebtedness of the township issuing the same?

"Fourth. Whether the act of December 19, 1887, had the effect to validate the bonds and coupons in question, and make them binding upon the township of Ninety Six?"

Argument for Defendant in Error.

Mr. John K. Shields, (with whom were Mr. James T. Shields, Mr. H. J. Haynesworth, and Mr. L. W. Parker,) submitted on his brief for plaintiff in error.

Mr. W. C. Miller submitted on his brief for defendant in

error.

I. The bonds sued on in this case were declared, in Floyd v. Perrin, 30 So. Car. 1, to be void. The train of reasoning by which the court reached its conclusion in that case may be briefly stated thus:

Section 8, Article IX, of the constitution of the State provides: "The corporate authorities of counties, townships, school districts, cities, towns and villages may be vested with power to assess and collect taxes for corporate purposes," etc.

Is Ninety Six township a corporation, and if so, are the corporate purposes of Ninety Six township of such a nature as will enable said township under the constitutional limitation, to assess and collect taxes in aid of a railroad?

At the time of the passage of the act creating the Greenville and Port Royal Railroad Company, and attempting to authorize the township subscriptions to its bonds, the township of Ninety Six did not exist in South Carolina as a corporate organization.

"It will be conceded," the court said, " that at the time of the passage of the act chartering the Greenville and Port Royal Railroad Company, Ninety Six township was not a corporate body. It is true that under the act of the legislature passed in 1868, the counties of the State were divided into townships, which were declared to be corporate bodies, with corporate purposes, and to be organized with various officials, moderators, town clerks, selectmen, constables, etc., and with all the machinery of a regular corporation; but this act was repealed in 1870 by an Act to repeal an act entitled "an act to organize townships and to define their powers and privileges," excepting however that portion of said act fixing the number, names and boundaries of the respective townships in the respective counties, which were left as territorial divisions but with no corporate powers, privileges or purposes."

Argument for Defendant in Error.

Exception has been taken to the ruling of the Circuit Judge upon the ground "that the case of Floyd v. Perrin was not controlling because it is not a well settled decision of the said court, but is in effect overruled by the later cases of State v. Whitesides, 30 So. Car. 579, and State v. Neely, 30 So. Car. 587."

Floyd v. Perrin is on the contrary followed and reaffirmed by the cases above mentioned as well as by others.

And in these cases the court held the act of 1888 to be constitutional, but not, however, as an act validating the act of 1885. On the contrary, it was held that the act of 1888 had no such effect and was not so intended. The court founded the constitutionality of the act upon the ground that while, under the constitutional limitations, the legislature could not authorize the levy of a tax by a township to meet a railroad subscription, which is not a corporate purpose so far as such township is concerned, the building of a railroad, which is regarded as an improved highway, is a public purpose from the standpoint of the State; and that for such purpose the legislature may not authorize the levy of a tax by, but directly impose a tax upon, the townships created under the act of 1885. And thus these cases also reaffirm the doctrine of Floyd v. Perrin.

The question raised in these cases involves the meaning of "township," as used in the constitution of South Carolina, the corporate purpose of the township under that constitution, and the constitutional restrictions upon the power of the legislature of South Carolina to vest in such township the right of taxation.

The decisions of the state Supreme Court are not based upon general principles of law governing all commercial paper and applicable alike to all the States.

Admitting the existence in South Carolina of "townships" similarly constituted to municipal or political bodies of like name in other States, the power of subscription and taxation by such bodies might be determinable under the general law of the subject. But as will hereinafter appear, the pivotal inquiry is whether Ninety Six exists as a township within the