This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
Closely connected with the foregoing question is that of the implied power of a public corporation to issue negotiable instruments as evidences of a lawful debt. There is a divergence of authority as to whether an implied power to issue negotiable instruments exists if power to do so is not given by statute. Some authorities hold that this power is implied,1 others that it exists only when expressly given by the legislature.2 Where this view is entertained power to improve a street, raising the money therefor by a special assessment, is not power to issue bonds.3 A city incorporated after the passage of a statute authorizing cities then incorporated to issue bonds cannot issue them.4 Even an express power to borrow does not include power to issue negotiable bonds.5 Under power to borrow for municipal purposes a city may issue bonds to retire the floating debt,6 or to refund prior bonds.7 In opposition to this view it has been held that power to issue bonds does not include power to issue new negotiable bonds to take up the old bonds.8 A statute which violates a mandatory provision of the constitution cannot authorize an issue of bonds,9 nor can the legislature make bonds payable elsewhere than at the city treasury.10 If a negotiable instrument is issued by a corporation having authority to issue only non-negotiable instruments it is void.11 According to the divergence of views already expressed some authorities treat municipal bonds as non-negotiable,12 while others treat both the bonds13 and the coupons thereon14 as negotiable. A statute giving authority to issue municipal bonds for certain purposes only excludes power to issue bonds for any other purpose.15 If power to issue bonds exists, they may be issued where no prior debt exists, as where they are issued to buy waterworks.16
1 Carter County v. Sinton, 120 U. S. 517; Holmes v. Shreveport, 31 Fed. 113; Commonwealth v. Wil-liamstown, 156 Mass. 70; 30 X. E. 472; Hubbard v. Sadler, 104 N. Y. 223; 10 N. E. 426; Smathers v. Madison County, 125 N. C. 480; 34 S. E. 554; Murry v. Fay, 2 Wash. 352; 26 Pac. 533.
2 Barnett v. Denison, 145 U. S. 135 (citing Claiborne County v. Brooks, 111 U. S. 400; Kelley v. Milan, 127 U. S. 139). To the same effect are Brenham v. Bank, 144 U. S. 173; Hopper v. Covington, 8 Fed. 777; Dudley v. Lake County, 80 Fed. 672; Coffin v. Indianapolis, 59 Fed. 221; Watson v. Huron, 97 Fed. 449; 38 C. C. A. 264; Coquard V. Oquawka, 192 111. 355; 61 N. E. 660; Neugass v. New Orleans, 42 La. Ann. 163; 21 Am. St. Rep. 368; 7 So. 565; Brinkworth v. Gra-ble, 45 Neb. 647; 63 N. W. 952; State v. Newark, 54 N. J. L. 624; 23
Atl. 129; Johnson City v. R. R., 100 Tenn. 138; 44 S. W. 670; Richardson v. Marshall County, 100 Tenn. 346; 45 S. W. 440; Waxahachie v. Brown, 67 Tex. 519; 4 S. W. 207; Thornburgh v. Tyler, 16 Tex. Civ. App. 439; 43 S. W. 1054.
3 Redondo Beach v. Cate, 136 Cal. 146; 68 Pac. 586.
4 Oquawka v. Graves, 82 Fed. 568; 27 C. C. A. 327.
5 Brenham v. Bank, 144 U. S. 173; Merrill v. Monticello, 138 U. S. 673; German Ins. Co. v. Manning, 95 Fed. 597; Lehman v. San Diego, 27 C. C. A. 668; 83 Fed. 669; Ashuelot National Bank v. School District, 56 Fed. 197; Dodge v. Memphis, 51 Fed. 165; Heins v. Lincoln, 102 Ia. 69; 71 N. W. 189 (criticising Sioux City v. Weare, 59 Ia. 95; 12 N. W. 786). Contra, Commonwealth v. Williamstown, 156 Mass. 70; 30 N. E. 472.