#### Daniel B. Bush, School Commissioner of Pike County, v. Stephen Shipman et al.

appeal from Pike.

1. Corporation — legislative control. The doctrine is undoubtedly correct, that the legislature has no power to direct that any portion of the debts due a private corporation shall be received in anything but gold and silver coin, as the act of incorporation is regarded as a contract between the government and the corporators, which the legislature cannot repeal or impair, so long as the latter keeps within the limits of their charter. But it is equally as well settled, in respects to public corporations, created for public purposes, that the legislature has the exclusive right, as trustee of the public interest to regulate, control, and direct the corporation, and its funds and franchises, (a)

2. Municipal corporation — same. An incorporated township for common school purposes, under the law? of Illinois, is a quasi public corporation; and the legislature has an unquestionable right to change, modify, enlarge, restrain, or destroy such corporation and may exercise a superintending control over all its money and other property, securing, however, as a matter of good faith, the effects of the corporation, for the use of those for whom they were donated or purchased. (b)

3. Legislative power — school fund. The legislature has the power to direct in what manner the school funds shall be loaned, upon what security, at what rate of interest, in what currency they shall be received and by whom they shall be applied. (c)

'4. Tender — state bank bills. A tender of the bills of the State Bank of Illinois, in payment of a debt due the school fund of a township, made before the issuing of the proclamation of the governor, auditor, and treasurer, forbidding .their reception, is good, and such tender may be pleaded in bar of an action for the recovery of the same, (d)

This cause was heard in the court below, at the September term, 1842, before the Hon. Samuel D. Lockwood.

A. Williams, E. D. Baker, and A. T. Bledsoe, for the appellant:

The act of 1886, authorizing the receipt of bank notes in payment of state and county revenue, and in payment of college, seminary, and school debts and interest, does not apply to this case. See Gale’s Stat. 580, 633 § 1, 624 § 3, 627 § § 9, 10, 12, 14; or if it does, it is so far void, being repugnant to the .constitution of the United States, Art. I. § 10. Gale’s Stat, 16, 339 § 8, 624 §§ 5, 8. 626 § 5, 633 § 1, 636 § 6, 627 § 7, 641 § 4, 642 § 5. These statutes authorize the legal and corporate ■ existence of school districts, and the inhabitants of townships and ; show the different sources from which they may acquire money :and property, viz. donations, taxes, rents, and sales of school lands. As the legislature givés the power 'to impose taxes, it *195may direct in what kind of money the taxes shail be paid, but it has no such power over the money due the inhabitants[*187] of townships upon contracts. The town of Pawlett v\ Clark, 3 Peters’ Cond. R. 408, 418-9,421-4; Terrett et al. v. Taylor et al. 3 Peters’ Cond. R. 254, 260-2; Dartmouth College v. Woodward, 4 Peters’ Cond. R. 526, 559, 562, 564, 577, 579; Society for jthe Propagation of the Gospel v. New Haven, 5 Peters’ Cond. R. 500, 503-4.

Wm. Thomas, 7with whom was D. A. Smith and B. S. Edwards,) for the appellees, contended:

1. That the appellant is an officer of the law, his rights, powers, and actions are prescribed bylaw ; he has no powers, except those granted by the law of his creation.

2. That the inhabitants of townships have no powers or rights, except such as are granted or conferred by the legislature. They have no capacity to act, except that which is imparted by legislative authority.

3. It does not appear, from the record, what was the consideration of the notes declared on, but admitting for the sake of argument, that they were given for the sixteenth section, or for the loan of money, what rights have the inhabitants in any respect to the matter? The authority to contract is conferred by the legislature, and their rights growing out of contracts, being derived from the same source, how can they claim any exemption from the binding efficacy of the action of that department. Will they be permitted to claim rights under the laws of the state, and still deny the power of the legislature to regulate and control those rights,

4. It cannot be contended, that the inhabitants of a township, in this state, can assert or claim any rights in court, without having imparted to them, by the legislature, the power to do so. Whenever, therefore, a question arises, in regard to the rights of the inhabitants of a township, the enquiry is, what has been the action of the legislature upon that question ? What powers have been conferred, and what capacity has been imparted?

5. Suppose the inhabitants of a township should assemble en masse, and appoint an agent to sell the school lands, or should require the school commissioner of the county to cancel all the evidences of indebtedness to the township ; would this proceeding be recognised in court ? Would it bind the successors, or would it be obligatory upon the actors ?

6. The argument here is, that the inhabitants have an interest, or have rights, which cannot be interfered with by the legislature. The answer to this is, first, it assumes what is not true; the inhabitants, as such, have no interests or rights, either collectively or individually ; their interests and rights are altogether of a corporate or public character. They are a part of the body pol-[*188] *196ifcic, a part of the government, and they are not capable of taking or enjoying any interest or right not given by legislative authority. Second, the attempt to assert or claim rights before this court, is an admission on the part of the inhabitants, that they act by the authority of the legislature, and this admission places them entirely under legislative control.

7. It is admitted by the appellant, that the decision of the circuit court was correct, if the legislature had the power to pass the law requiring notes of the State Bank to be received in payment of the notes declared on; and the question is made to time exclusively, upon the question of power in the legislature. It has been attempted to be shown that the rights, powers and duties of school commissioners, and of the inhabitants of a township, depend exclusively upon the legislature of the state. If the court is satisfied upon this point, then the case must be decided for the appellees. The decisions and cases referred to by the appellant have no application to the case or the question now before the court. The decisions in Peters’ Reports prove that the legislature has the power to provide for selling the sixteenth sections, with the consent of the inhabitants of townships ; but the question as to the power of the legislature to require payment for those lands in State bonds, or bank notes, is not decided.

8. It will be seen by reference to the declaration, that the notes declared on were all executed subsequently to the passage of the law requiring notes of the State Bank to be received in payment. Two of the notes are dated May 3,1837, and three of them March 6, 1838; the constitutional provisions therefore are not applicable to th® case.

9. Admitting that the inhabitants of a township have rights which cannot be impaired or interfered with by legislation, still this case must be decided for the appellees, because the contract was made with an eye to the law in force at the time of its execution. The inhabitants have acted under the law, and are bound by that action. The appellees have rights secured by the constitution, as well as the appellant, and if they were required to pay gold and silver, where they contracted to pay bank notes, they might rightfully complain, and ask for protection under the constitutional provision.

10. The counsel for the appellees does not contend for, or admit the rights of the legislature to pass laws impairing the obligation of contracts, nor to repeal charters, or annul or disregard contracts, nor to interfere with corporate rights, acquired by act of the legislature; but public corporations, such as counties, cities, and towns, incorporated for public convenience, and made to form part of the body politic, or police of the state, may be changed or modified, or abolished by act of the legislature.

(a)

Cases Citing Text. Charter of private corporation is contract which binds legislature. Braffett v. G. W. R. Co. 25 Ill. 353, 355.

Legislature has power to commit inspection of grain to board created for, the purpose. People v. Harper, 91 Ill. 357, 368.

(b)

School trustees are a public corporation, and legislature, at its pleasure, may resume a ferry franchise granted to them. Trustees of Schools v. Tatman, 13 Ill. 27, 31.

(c)

See Hamilton v. Cook County, post, 519, 524.

(d)

See Keyes v. Jaster, post, 305.

YouNG, Justice,

[*189] delivered the opinion of the court; *197This was an action of debt, commenced in the Pike circuit court, by David B. Bush, school commissioner of Pike county, for the use of the inhabitants of township five [5] south, range six [6] west of the fourth principal meridian, against the defendants, Stephen Shipman, James Shipman, and Charles T. Brewster, on five several bonds for the payment of money, which are described in the declaration as follows : the three first are dated March 6, 1838, one for the sum of $64,604, and the other two for the sum of $47.43-4 each, payable on or before the 3rd day of May, 1839, with interest at the rate of twelve per cent, per annum, from the 3rd day of May, 1838, until paid; and the remaining two dated May 3rd, T837, each for the sum of $88.33, payable one year after date, with twelve per cent, interest per annum, payable semi-annually in advance, from the date of said bonds until paid —making together, exclusive of interest, the gross sum of $336.13.

To this action the defendants pleaded specially, that the bonds declared on were given for the payment of money due to the school fund of township five [5] south, of range six [6] west, in Pike county aforesaid, and that on the 11th day of June, 1842, and before the commencement of the suit, one of the defendants (Shipman) tendered and offered to pay to Joseph Jackson, treasurer of the township aforesaid, the sum of $333, of the notes of the State Bank of Illinois, in discharge of the said debts and interest due thereon, which the said treasurer refused to receive. The defendants also brought the like amount of the notes of the State Bank of Illinois into court, and offered by their said plea to pay the same to the plaintiff, or to Jackson, as treasurer, if either of them would receive the same; and concluded by praying judgment of the court as in cases of tender, etc.

To this plea there was a general demurrer and joinder. The circuit court overruled the demurrer, and the plaintiff refusing to reply further to the defendants’ plea, judgment was given against him in bar of his said action, and also for the costs of the suit; and an order made, requiring the defendants to deposit the bank notes, which had been tendered by their plea with the clerk of that court, for the use of the plaintiff, or the treasurer of the township; which was done. From which judgment, and the judgment of the court overruling the demurrer, the plaintiff took an appeal to this court.

The only question presented by the pleadings in the court below, and the errors assigned in this court is in reference to the defendants’ right to discharge their said several liabilities, by a payment or tender in the notes of the State Bank of Illinois.

It is provided by the act concerning the payment of revenue, and for other purposes, approved January 1'6, 1836, “that the bills of the State Bank of Illinois and branches shall [* 190] be received in payment of the revenue of this state, and *198the different counties in the state : and in payment of college, school and seminary debts and interest: with the condition, “that if at any time hereafter, the governor, auditor, and treasurer shall be of opinion, that there will be danger of loss, by receiving the bills of the State Bank as aforesaid, they are hereby authorized arid required to' cause a notice to be published in the newspaper printed by the public printer, and all other newspapers in the State, prohibiting any further reception of said bills, after the day named in such notice, for the uses and purposes aforesaid; and after the day named in such notice, the said bills shall not be received, until otherwise directed by. law.”

The facts set forth in the plea, which are not denied, show that the bonds in question were given for the payment of money due to the school fund of township five [5] south, of range six [6] west, in Pike county, after the passage of the act of 1836, authorizing payment to be made in the notes of the State Bank of Illinois, and that the original tender was made after the bonds became due, and before the proclamation of the governor forbidding the receipt of such notes by the plaintiff as commissioner, or by Jackson, as treasurer of the township.

As a ground for the refusal to receive State Bank paper, the plaintiff’s counsel insisted that since the incorporation of this township for school purposes, with its due proportion of property and funds, confided to the management of trustees, according to the provisions of the several acts on that subject, the legislature has no power to direct that any portion of such school funds shall be received in anything but gold or silver coin; and that, consequently, so much of the act of 1836, under which the tender was made, as authorizes payment in the notes of the State Bank, is repugnant to the constitution of the United States, and void. This doctrine, when applied to private corporations, is unquestionably correct; the act of incorporation in such cases being regarded as a contract between the government and the corporators, which the legislature may not repeal orimpair, so long as the latter keep within the limits of their charter. Dartmouth College v. Woodward, 4 Wheat. 318 ; while on the other hand, the doctrine is equally well settled, in respect to public corporations, created for public purposes, that the legislature has the exclusive right, as trustee of the public interest, to regulate, control, and direct the corporation, and its funds and franchises, for the reason that the whole interest and franchises are given by the act of incorporation, for the public use and advantage. We consider an incor- ■ porated township, for common school purposes, under our system, as a public corporation, or rather as a quasi corporation. Thus in the state of New York, each county and the supervisors [* 191] of a county, the town officers, and commissioners of loans, each town and the supervisors of towns, the overseers of *199tbepoor, and the superintendents of the poor, the commissioners of common schools, the commissioners of highways, and trustees of school districts are all invested with corporate attributes sub modo. The supervisors of the county can take and hold land for the county ; and all the several bodies are made capable of suing and of being sued, in their corporate capacity. So that every county and town is a body politic for certain purposes. So also, at common law, every parish or town was a corporation for lo.cal necessities; and the inhabitants of a county or hundred might equally be incorporated for special ends. 2 Kent’s Com. 278, and the English authorities there cited. In 2 Kent’s Com. 278, the learned commentator says, “ besides the proper aggregate corporations, there are others which are sometimes called quasi corporations ; as where the inhabitants of any district, such as counties, towns and school districts, are incorporated by statute, with only particular powers and all these corporations are considered and treated as subject to legislative action and control.

The first ordinance of congress for ascertaining the mode of disposing of the public lands in the north western territory, passed May 20, 1785, declared, “ that lot numbered sixteen should be reserved in each township, for the maintainance of public schools within said township.” And the fifth section of the act of congress entitled “an act making provision for the disposal of the public lands in the Indian territory, and for other purposes,” passed March 26, 1804, provides, “ that section sixteen shall be reserved in each township for the support of common schools within the same.” At that time Illinois was a part of the Indian territory, as the separation did not take place until. 1809. By the compact between the United States and the state of Illinois, upon the admission of the latter into the Union, it is agreed, among other things, that section sixteen in every township shall be granted to the state for the use of the inhabitants of such township, for the use of schools; and that three-fifths of the net proceeds of the sales of the public lands lying within the same, shall be appropriated by the legislature of the state, for the encouragement of learning, of which one-sixth shall be exclusively bestowed on a college or university, etc. Besides these, other means have also been added for the support of the common school system generally in the state, which need not be mentioned, to settle the principles involved in the present controversy.

In the case of Bradley v. Case, 3 Scam. 603, this court has already decided, that the legislature has full power to authorize a sale of the sixteenth or school sections of land in this state, and that a promissory note given to a commissioner of school lands, for the purchase money of the same, is founded upon a good and valuable consideration, and obligatory upon the maker of the note; and that the true construction to be given to the [* 192] *200compact between the United States and this state, in relation to the sixteenth sections, is, that they may be leased or sold, as the legislature shall think most beneficial to the people. The same principle was subsequently recognized in the case of Barger et al. v. Jones, Commissioner, etc., 3 Scam. 613.

The grant of the sixteenth section is made directly to the state, for the use of the inhabitants of the township, for the use of schools. It is indeed a sacred trust, and the state, as trustee, should, by proper legislation, see that it is faithfully executed. We think, therefore, in respect to such quasi corporations, as exist only for public purposes, as in the present instance, that the legislature has an unquestionable right to change, modify, enlarge, restrain, or destroy; and may exercise a superintending control over all their money and other property; securing, however, as a matter of good faith, the effects of the corporation, for the use of those for whom it was donated or purchased. If this position be correct, it follows, as a necessary consequence, that the legislature may also, from time to time, direct in- what manner the school fund shall be loaned, upon what security, at what rate of interest, in what currency they shall be received, and by whom they shall be applied.

It is the opinion of the court, therefore, that the tender in this case, in the notes of the State Bank of Illinois, was authorized by law, and that the plaintiff is bound to receive the same in payment. The judgment is affirmed.

Shields, Justice, delivered the following dissenting opinion:. Without admitting or denying the absolute power of the legislature over the school fund, I conceive that the obligors, having the election of paying in money or specific articles, must have paid or tendered the specific articles, at the time the notes became due, and by neglecting to do so, the power of election was gone, and the debt could only be discharged in money. Morris v. Edwards, 1 Hammond 189.

Again: although debts due the school fund were dischargeable in bank notes, yet it must be bank notes at their value, according to the legal and constitutional standard, and not according to their stamp. Debts receivable in wheat could only be discharged by the delivery of wheat, according to its value in money, and bank notes have no legal exemption from the operation of the same rule.

I think the judgment should be reversed.

Catón, Justice, said he concurred in the views expressed by Justice Shields.

Judgment affirmed.