MUNICIPAL BONDS

By Ira Chase Koehne, Banker of Dayton, Ohio.

The modern tendency for changes, and the habit of looking mainly for prima facie regularity of issues, and disregarding fundamentals, may tend to some instability and confusion on the municipal bond market, unless dealers exercise greater than pre-war care in purchasing bond issues.

There exist important exceptions to the law of prima facie regularity of issue of bonds, and of innocent purchasers without notice. It is the exceptions that require the greatest care, and hence consideration is asked for the following class of such exceptions, which otherwise may become current.

Due to the tendency for change, but mainly to Prussian pre-war propaganda in the United States, some American municipalities have changed their form of government from that of a republic,1 essentially having the three non-encroachable main branches of government -the legislative, the executive and the judicial2—to that of a limited monarchy in which the local, executive and legislative branches are exercised by one commingled, encroaching, usurping body, patterned after the form of government of the German cities and city-states3.

Since valid municipal bonds are amply secured by the power of taxation, it should be considered whether such power is inherent in the issue-authorizing and tax-levying body. Upon consideration, it will be found fundamentally that the consent of the governed, within the United States, runs only to that government of a republic having three main non-encroaching branches. When important powers of govern ment, such as issuing bonds, and levying taxation to secure and redeem such bonds, are pretended to be exercised by one body, of whatever name, which usurps and commingles material executive and legislative functions of a municipality, or any other sub-division of government within the United States, then it becomes of serious consideration whether such a body has even a de facto status, or possesses any constitutional power to authorize a bond issue, or to levy taxation; and whether such status and want of power precludes any innocent purchase

(1). Art. 4, sec. 4. Fed. Const.

(2). 168 N. Y. at 101; 103 U. S. 191.

(3). 149 Wis. 487; 45 Tex. Crim. Rep. 2.

of such securities.

Such an executive body seems to usurp material powers of the local legislative branch.

It has been invariably held that where the executive exercises the power of taxation, and controls the public purse-strings, there can be no liberty, since that is one of the most essential elements of a state of slavery1.

The Supreme Court of the United States has held unconstitutional a law authorizing a commingled usurping (executive-judicial) body; held that such body had not even a de facto status, and that its bond issue and tax levy were so void that the bonds had no validity even in the hands of innocent purchasers without actual notice5.

It seems clear that any such commingled usurping branches of government, even in municipalities, are wholly un-American; and that all of the republics that have heretofore fallen in the world have been honeycombed with subdivisions of government monarchical in form, which contributed to, or directly caused, their downfall, by the inherent antagonistic inconsistency of such repugnant forms.

Such commingled, usurping branches of government are prohibited to the States (geographical States as well as mere political communities) and municipalities, being agencies of the geographical States, are likewise prohibited, even if not expressly, since they are clothed with the State's power, and their acts are those of the States, as otherwise muncipalities would not be amenable to important prohibitions of the Federal Constitution, and they would have powers, as such agents, greater than, and prohibited to, their principals, and our republic subjected to the liability of similar ultimate downfall.

It would, therefore, seem that financial institutions, taxpayers and their counsel, as a part of their salutary duty of protecting and stabilizing securities, may exercise a potent patriotic influence in aiding to Americanize the municipalities which may have departed from the distinctive American form of government. While such un-American municipalities are comparatively few, yet patriotism and prudence seem

(4). 3 Heiskel, (Tenn.) at 696: 88, Ohio St. at 96; and Am. & E. Ency. Law (1890) vol. 13, p. 506, for the 17th among other of the 20 principal guarantees comprehended by "liberty" as given by Liebr on Civil Liberty and Self Gvt. (3rd Ed. by Theo. D. Woolsey).

(5). 118 U. S. 425; see also 98 Fed. Rep. at 345 & c, and 100 Minu. 499

(7). 7 Wall, at 721; and works of Webster, Jefferson &c.

(8). 100 U. S. at 345; 100 U. S. 339; 166 U. S. 226.

to prompt the foregoing considerations for the maintenance of the very high type of security universally enjoyed by municipal bonds.

While the un-American form of municipal government usurping and commingling two of said three main branches of government, unlawfully as the writer contends, are sometimes known by the names "Commission-Manager" and "City-Manager," yet the form and not the name is the true test for determining whether the foregoing considerations may be weighed in determining the essentials of bond issuing power.

THREATENING OUR SOVEREIGNTY.

Twenty-five years ago and more a President would have faced impeachment had he done what President Wilson has in the contemplated alliance with Great Britain, France and the United States. He has exceeded his authority and power.

The Constitution of the United States distinctly provides that "the Congress shall have power to declare war," and to take the necessary subsequent steps. But Mr. Wilson's proposition is that we shall submit to a super-sovereignty, an eight-ninths foreign body, the question of our making war against Germany at some time in the future, in conjunction with Great Britain and France. This would be in plain opposition to the Constitution's reservation to Congress of the war-declaring and war-making prerogative.

Mr. Wilson will submit what he calls his "supplementary" agreement with Mr. Lloyd George and M. Clemenceau to the Senate, of course, not to Congress as a whole, because it is essentially a treaty. What will happen, then, when the Senate is asked to transfer the war-making power from Congress to the Council of the League of Nations? We can rely on the fact that every Senator has taken a solemn oath to uphold the Constitution.

One trouble with Mr. Wilson is that he is given to brash generalities which, on examination, are found to lack any substantial basis. He has now, it appears, entered into an agreement with the British Prime Minister and the French Premier which runs counter to the fundamental law of the United States-which he, as well as the Senate, has promised to maintain. How can he hope to persuade the Senate to join with him in establishing a triple alliance within the League of Nations which shall have the power of making war only when the Council of the League gives its august permission?

The Constitution of the United States is still in force, and our “idealistic" President will find soon or late that even he, with all his self-confidence and readiness to assume authority, cannot override it.

SOUTHERN STORIES

A noted speaker in addressing a large audience, said:

"The spirit of '76 must be reborn; we need a propaganda to aid family life." Hearing which several maiden ladies looked at each other curiously and nodded acquiescence.

"Ef ah had a millun dollars, it suah would worry me to deth," said a Shreveport negro.

"Dat's de kind uf trubble I'ze a-lookin' fur," replied the New Orleans culled gemmen.

HEADING HIM OFF.

"This law is a queer business."

"How so?"

"They swear a man to tell the truth."

"What then?"

"And every time he shows signs of doing it, some lawyer objects."

MADE QUICK TIME.

It was during the racing season in New Orleans. "What are those splendid silver cups there?" inquired a stranger as he entered a Canal street jeweler's store.

"Those, sir, are race cups-to go as prizes to-day," replied the jeweler. "Well, then, if that is the case," said the visitor from New York, as he took the largest, "suppose you race me for this one?"

THE WRONG WOMAN.

"How is it, Honey, you isn't married?"

"Wal. I'ze came powerful near it once. I'ze was sho' proposed to." "Well what about it."

"A man dat I'd been considerable intimate wid called up on the phone and he says "will you marry me" and I says whats dat you is talkin' about and he says excuse me ize gotten de wrong number."

STRICTLY BUSINESS.

"Whuh yo' been at for de last few days, sah?"

"Over to Bigville, sah, transactin' mat-imony."

"Yo' has? Why, yo' wife done died on'y a week ago. Don't yo' think yo's a little bit prior in de mattah, sah?"

"No, sah; not in dis case, sah. Muh wife is still dead, side-whiskered scoun'el pervadin' 'round dis yuh udder lady. how 'tis wid dese yallah gals wid a mouffle o' gold teef-yo' as dey flutter by, or dey're gwine fum yo'."

and dar was a And yo' knows gotter grab 'em

A darky living at the corner of Baronne and Terpsichore streets, New Orleans, was the creditor of another culled person in the amount of $4.00. After trying in vain to collect his $4.00, the colored man consulted a lawyer.

"What reason," asked the lawyer, "does the debtor give for not paying his debt?"

"Boss," said the colored gentleman anxiously, “he gimme a mighty good reason, sah."

"Well, what is it?"

"He done say, boss, dat he's been owin' me dat money so long dat de interest has et it all up."

GOOD ADVICE FOR ANY MAN.

A young man from New Orleans had joined the regular army and saw service in the Philippines. Through error he was reported dead and his estate was duly passed in succession and distributed to his sorrowing relatives.

On returning unexpectedly to what used to be the bosom of his family and being informed by her that he was legally deceased, he appealed to the Judge and was told

1st.

That he was dead;

2nd: That he was in contempt of court for coming back after the time for appeal had expired;

3rd: That he could not attack the decree collaterally, and

4th:

That his only chance to upset the judicial finding of his death was to go and live it down.

Dr. Marshall D. Ewell of Chicago, the famous handwriting expert, tells the following:

Chitty, in his monumental work on Pleading that "draws the students' tear," defines "certainty" as of three degrees, viz: Certainty to a common intent; certainty to a certain intent in general, and certainty to a certain intent in every particular." The following is an example of uncertainty to a common intent or of a negative pregnant; I leave the reader to determine which:

I was fishing in Florida with Joe as a general adviser and factotum, and was being pestered by a little fish called the "grunt," which persistently takes the bait from the hook before larger fish can take it. After this had continued some time, Joe ventured this statement by way of explanation and consolation:

"Doctor, the fac' is that the grunts pretty nearly always, generally bites fust, sometimes."