Opinion of the Court. authorized the issuing of the bonds payable twenty years after the date thereof, and to be redeemable, at the option of the defendant, at any time after five years from their date; that § 4 of article 11 of the constitution provided that no municipal corporation should become a subscriber to the capital stock of any private corporation or association, or make any appropriation or donation to the same, or in anywise loan its credit; that $3000 of the $15,000 of the bonds were for the benefit of the fire department of the city, and the remaining $12,000 were in aid of the Gulf, Colorado and Santa Fé Railroad Company, in providing for the purchase of the right of way over the streets of the city and the purchase of depot ground, to secure the construction of said railroad through the city; that $12,000 of the bonds were sold by the city, $5000 to one Mensing, and $7000 to two other persons, and Mensing also became the owner of those $7000 of bonds, and he and the other two purchasers bought the bonds with actual knowledge of the purpose for which they were issued, as well as record notice of such illegal purpose, as disclosed by the public records and minutes of the city council; and that the plaintiff, if it became the owner of the bonds and coupons, purchased the coupons after their maturity and with knowledge of all the facts attending their issue, well knowing that they were issued to raise money to enable the defendant to purchase the said right of way and depot ground for the said railroad company. Afterwards, the defendant put in an amended answer, amending its former demurrers and answer, but not varying the material allegations of fact contained in its former answer. The plaintiff then filed a supplemental petition, demurring to the answers and excepting thereto by special allegations, and also alleging matters of fact in response to the answers, and averring that the defendant was authorized to issue the bonds in question, and that, if their proceeds were misappropriated by the city council or the agents of the city, such misappropriation ought not to affect the rights of the plaintiff; that the bonds were sold by the lawfully authorized agents of the city, and it received full value for them; that the parties from whom the plaintiff received the bonds were bona fide VOL. CXLIV-12 Opinion of the Court. purchasers of them before maturity, having paid a valuable consideration therefor; and that the defendant was estopped by the fact that it paid interest on the bonds without objection for three years after they were issued, and in 1884 published a statement of its financial condition, in which it included said $15,000 of bonds as part of its legal liabilities, all of which was made known to the plaintiff before it became the owner of the bonds. The defendant then filed a supplemental answer, demurring to the supplemental petition and specially excepting to parts of it, and raising an issue of fact as to its allegations. The plea in abatement, or to the jurisdiction of the court, was tried by a jury, which found for the plaintiff; and afterwards the issues of fact on the pleadings were tried by a jury, which found a verdict for the plaintiff for $5510.10, and the court entered a judgment overruling the general and special demurrers and exceptions of the defendant, and the general demurrer and exceptions of the plaintiff, and the special exceptions and demurrers of the defendant to the plaintiff's supplemental petition; and a judgment for the plaintiff was entered for $5510.10 with interest and costs. To review this judgment the defendant has brought a writ of error. On the 4th of February, 1873, an act was passed by the legislature of Texas, (Special Laws of Texas of 1873, c. 2, p. 2,) incorporating the city of Brenham. By article 3, § 2, of that act, (p. 14,) it is provided as follows: "Sec. 2. That the city council shall have the power and authority to borrow for general purposes not exceeding ($15,000) fifteen thousand dollars on the credit of said city;" also, by article 7, § 1, (p. 23,) as follows: "Sec. 1. Bonds of the corporation of the city of Brenham shall not be subject to tax under this act." At the date of the incorporation of the city and of the passage of the ordinance in question, the city had a population of over 4000 and less than 10,000 inhabitants. On the 28th of March, 1881, one Dwyer instituted the suit in the District Court of Washington County, Texas, against one Hackworth, assessor and collector of taxes of the city of Brenham, to enjoin the collection of certain taxes levied by Opinion of the Court. the city council of the city and assessed against Dwyer, including as a part thereof one-eighth of one per cent to pay interest and provide a sinking fund on the bonds of the city, the bonds so referred to being the identical bonds which are involved in this suit. That case went to the Supreme Court of Texas, and is reported as Dwyer v. Hackworth, 57 Texas, 245. Various points are taken by the defendant as assignments of error; but we consider it necessary to discuss only one of them, the decision of which will dispose of the case. The court charged the jury, among other things, (35 Fed. Rep. 185,) that the power in the city to borrow money carried with it the authority to issue the bonds, and that the defendant had capacity to issue the bonds in question as commercial paper, and bind itself to pay them and the coupons. The defendant, by its demurrer to the plaintiff's petition, stated as ground of demurrer that it did not appear from the petition. that the defendant was authorized by the constitution and laws of Texas to issue the bonds and coupons. The court overruled such demurrer, and by a bill of exceptions it appears that the defendant excepted to such ruling. The defendant demurred also to the plaintiff's supplemental petition, on the ground that that petition failed to show any authority in the defendant to issue the bonds and coupons. This demurrer was overruled, and it appears by a bill of exceptions that the defendant excepted to the ruling. It also appears by a bill of exceptions that the defendant excepted to the charge that the power of the city to borrow money carried with it authority to issue the bonds, and that the city had the capacity to issue the bonds as commercial paper, the ground of the exception being stated to be that, under the constitution of Texas, the expense of carrying out the general governmental purposes of the defendant was to be defrayed by the levying of a tax and not by issuing bonds, and that the bonds issued were not authorized to be clothed with the incidents of commercial paper. The principal contention on the part of the defendant is that it was without authority to issue the bonds, and that they were void for all purposes and in the hands of all persons. Opinion of the Court. This point is presented with reference to the charter of 1873, considered apart from the provisions of the constitution of 1876, and also with reference to the effect which the constitution had upon the power claimed under the charter. Article 11, sections 3 to 7 inclusive, of the constitution of Texas of 1876, provided as follows: "SEC. 3. No county, city or other municipal corporation shall hereafter become a subscriber to the capital of any private corporation or association, or make any appropriation or donation to the same, or in anywise loan its credit; but this shall not be construed to in any way affect any obligation heretofore undertaken pursuant to law. "SEC. 4. Cities and towns having a population of ten thousand inhabitants or less, may be chartered alone by general law. They may levy, assess and collect an annual tax to defray the current expenses of their local government, but such tax shall never exceed, for any one year, one-fourth of one per cent, and shall be collectible only in current money. And all license and occupation tax levied, and all fines, forfeitures, penalties, and other dues accruing to cities and towns, shall be collectible only in current money. "SEC. 5. Cities having more than ten thousand inhabitants may have their charters granted or amended by special act of the legislature, and may levy, assess and collect such taxes as may be authorized by law, but no tax for any purpose shall ever be lawful, for any one year, which shall exceed two and one-half per cent of the taxable property of such city; and no debt shall ever be created by any city, unless at the same time provision be made to assess and collect annually a sufficient sum to pay the interest thereon and create a sinking fund of at least two per cent thereon. "SEC. 6. Counties, cities and towns are authorized, in such mode as may now or may hereafter be provided by law, to levy, assess and collect the taxes necessary to pay the interest and provide a sinking fund to satisfy any indebtedness heretofore legally made and undertaken; but all such taxes shall be assessed and collected separately from that levied, assessed and collected for current expenses of municipal government, Opinion of the Court. and shall when levied specify in the act of levying the purpose therefor, and such taxes may be paid in the coupons, bonds or other indebtedness for the payment of which such tax may have been levied. "SEC. 7. All counties and cities bordering on the coast of the Gulf of Mexico are hereby authorized, upon a vote of twothirds of the tax-payers therein, (to be ascertained as may be provided by law,) to levy and collect such tax for construction of sea-walls, breakwaters or sanitary purposes, as may be authorized by law, and may create a debt for such works and issue bonds in evidence thereof. But no debt for any purpose shall ever be incurred in any manner by any city or county, unless provision is made, at the time of creating the same, for levying and collecting a sufficient tax to pay the interest thereon and provide at least two per cent as a sinking fund, and the condemnation of the right of way for the erection of such works shall be fully provided for." There is nothing in the charter of the defendant which gives it any power to issue negotiable, interest-bearing bonds of the character of those involved in the present case. The only authority in the charter that is relied upon is the power given to borrow, for general purposes, not exceeding $15,000 on the credit of the city. The power given to the defendant by 8 4 of article 11 of the constitution, the defendant having a population of less than 10,000 inhabitants at the date of its charter and at the date of the ordinance, was only the power to levy, assess and collect an annual tax to defray the current expenses of its local government, not exceeding, for any one year, one-fourth of one per cent. That in exercising its power to borrow not exceeding $15,000 on its credit, for general purposes, the city could give to the lender, as a voucher for the repayment of the money, evidence of indebtedness in the shape of non-negotiable paper, is quite clear; but that does not cover the right to issue negotiable paper or bonds, unimpeachable in the hands of a bona fide holder. In the present case, it appears that Mensing bought from the defendant $5000 of the bonds at 95 cents on the dollar, and that other $7000 of the bonds were sold by |