State Ex Rel. Lyon v. State Dispensary Commission

¡The opinion of the Court was delivered by

Mr. Justice Woods.

The General Assembly, by an act approved 24th February,' 1908, appropriated the sum of $15,000, to be paid by the State Dispensary Commission out of any funds in its hands into the State Treasury for the use of the Attorney-General, in the conduct of criminal prosecutions against persons charged with violations of law connected in any manner -with the State Dispensary. For the enforcement of his official rights, Honorable J. Fraser Lyon, Attorney-General, filed his petition for mandamus on 2d March, 1908, in this Court against W. J. Murray, John Mc-Slween, C. K. Henderson, Avery Patton and B. F. Arthur, as Ae State Dispensary Commission. The petition alleges custody by the Commission of State funds sufficient to make the payment of the sum appropriated, the demand for payment by the State Treasurer, and the refusal iby the Commission to comply with his demand. The petition further alleges the payment by the Commission of the suml appropriated to be a plain ministerial duty required by statute, and its prayer is for a writ of mandamus requiring -the performance of this duty. Upon this petition, the Chief Justice made an order, requiring the respondents, as the State Dispensary Commission, to show cause in this Court on 4th March, 1908, why .the mandamus- should not issue as prayed for.

The State Dispensary Commission in its return and answer admits the statute above recited requires of them the paymient of the sum therein mentioned- to the State Treasurer, 'and their custody of funds, sufficient to- meet the requirement, and the refusal- to make the payment. As justification of its refusal to comply -with the statute, the Commission alleges-: “That they are restrained and enjoined by orders of the United State 'Circuit Court for this circuit from! paying any funds into- the bands- of the State Treasurer, in two- cases, toi wit.: The case of the Wilson Distilling Co. v. W. J. Murray and others, a copy of their bill of complaint being hereto, attached and marked ‘Ekfaibit A,’ -along with the restrailring order in s-aid- case, and an amended bill that has just been filed. And further, that they are restrained by an order in the case of the Fleischmann Company v. W. J. Murray and others, a copy -of which ‘bill and restraining order and oral decision, as announced, is hereto attached and marked ‘Ekhiibit B.’ ”

The -answer sets- out that these orders of injunction were made by the Circuit 'Court of the United States, notwithstanding respondent’s plea on the following' grounds, to the j urisdietion of the Court:

1. “The funds in the hands of the ‘State Dispensary Commission,’ created by the Act of February 16, 190-7 (Acts of 1907, p. 835), belong to and are the property of the State, which has a right to control the same, ¡and which, through the said Commission, as its agent, is in possession thereof.

O. “The said ‘State Dispenary 'Commission’ is the mere agent or instrumentality of the State vested with! the ministerial function of winding up the State’s di-spensary business; selling the goods ¡and -property on- 'hand, collecting the debts due the State in connection with the said business, and hold ing the proceeds for the Sítate and subject to' its right of disposition thereof. And also vested with the ministerial function- of paying, with the funds held ¡by them for said State, such of the said dlaimis- as they may, upon said investigation, find and decide to -be just liabilities of the State.

3. “The pending action is- in effect an action against the State, because it seeks to lay hold of the funds belonging to the State and in the hands of the said- Oomlmiission' as its agent, and through' the said Commission in possession of the State, and further seeks to have such fund© applied to the payment of alleged liabilities of the State.

4. “The State -can not be held to have waived its- constitutional immunity from suit by the said act creating the 'State Dispensary Commission/ except to the -extent of the remedies therein provided for and allowed toi claimants for the -collection of such debts a's may be due them by the State in connection with its- dispensary business, and, therefore, such claimants are limited to the remedies therein provided for and allowed.

5. “The -said act -creating the ‘State Dispensary Commission’ having been passed and the remedies therein provided for having been allowed as a -purely voluntary matter on the part of the Legislature of the State, the said act is subject to be repealed and the allowance of -the remedies therein provided for is subject to -be recalled at any time at the pleasure of the Legislature, and in its discretion.”

The pleadings in the -causes- in the Federal Court will not be set out in detail. It is sufficient to say the actions were brought by -the plaintiffs therein named, claiming to be creditors for liquor sold to the State Dispensary against the respondents constituting the State Dispensary 'Commission; and in those actions, the Circuit Court of the United States has made orders enjoining the respondents from disposing of, except by order of that Court, the fund of $800,000, which came into their possession as the Oomlmisision appointed and organized under the statutes of the State to wind up the State Dispensary, and contemplating the adjudication by that Court of the claims of the plaintiffs and others and the compílete control of the entire fund for the satisfaction of such claims as the Court might adjudge to be just.

Replying to the return of the Commission made in this cause, the Attorney-General alleges, first: “That the petition in the case of Wilson Distilling Company et al. v. State Dispensary Commission, and the petition in the case of the Fleischmann Company v. State Dispensary Commission, together with the exhibits and orders therewith, show that the said proceeding's are suits against the State of South 'Carolina, and that the Circuit Court of the United States is- utterly without jurisdiction to, in any manner, (entertain the same, or to interfere with, or to in anjuvise restrain the action of the said Commission'and, second, “That the property and assets in the bands of the State Dispensary Commission aris - ing from the assets and property of tine late State Dispensary are the sole property of the State ¡of South Carolina, .and the affairs of the fete State Dispensary are now being concluded and Wound up under the terms, of an act of the General Assembly of the State of South Carolina, approved the 16th day ¡of February, 1907, and amended by an act approved the 24th day oif February, 1906; that the Comm|ission, in dealing with the said funds, can not be controlled, nor can the disbursement or use of said funds be directed by any court in equity or otherwise, in any suit in which the State o.f South Carolina is not a party, as the interests of the State would be necessarily affected directly by any decree or judgment rendered in such' suit.”

11 From this statement of the pleadings, it is evident no issue of fact arises. It is equally evident that if the Circuit Court of the United States had jurisdiction to enjoin the respondents as the State Dispensary Commission, their answer is a complete defense to the petition for mandamus, for no court would entertain for a moment an appllication to 'require parties to do that which they hiad been required and enjoined not to do by judicial authority. But a judgment by a court without jurisdiction of the .parties and subject-matter is a nullity and must be soi treated by other courts whenever and for whatever purpose it is presented and relied on. Elliot v. Piersol, 1 Pet., 828, 7 L. Ed., 164; Hickey’s Lessee v. Stewart, 44 U. S., 750, 11 L. Ed., 814; Ex parte Bradley, 74 U. S., 364, 19 L. Ed., 214; Fisher v. Harnden, 9 Fed. Cas., No. 4819; Gray v. Larrimore, 10 Fed. Cas., No. 5721; Devall v. Taylor, Cheves, 5; McCall v. Cohen, 13 S. C., 198; State v. Penny, 19 S. C., 218; Canady v. Black, 34 S. C., 194; Stanley v. Stanley, 35 S. C., 94, 14 S. E., 675; Paul v. Railway Co., 50 S. C., 23, 27 S. E., 526; Beaudrot v. Murphy, 53 S. C., 118, 30 S. E., 825.

This principle applies as well to an order of injunction made by a court without jurisdiction, interposed against an 'application, for mandamlus, as to any other order or judgment. Ell ingsworth v. Carlson (Neb.), 101 N. W., 1004; State v. Miller (Ohio), 39 N. E., 24; State v. Graves (Neb.), 92 N. W., 144. The exception is that a decree of the Supreme Court of the United States is. binding on all the courts, of the land, and the decisions of the appellate courts of each State and of the United States are binding upon ihe courts subordinate to them.

2 The consideration of the question whether that which purports to be the judgment of another court is void for lack of jurisdiction, is always to be entered on with deference 'by the court before which the question is made; 'and' the opinion of a court of exalted dignity and acknowledged ability in favor of its own jurisdiction, like its opinion on other subjects, should have a strong persuasive influence in favor of 'the conclusion it has reached. 'There is no rea'son for anxiety or asperity on account of differences between courts of the United States- and the State courts. These differences, must sometimes arise under our dual system of governmient, but they are consistent with cordial amity between the courts- and may be readily and finally settled by the Supreme -Oourt of the United States-, without hardship to the parties interested, and without sacrifice of their rights-.

With the greatest respect for the learned Judge who has made the orders of injunction relied on hy the respondents in this controversy, 'and after careful consideration of the opinion filed- in support of -those orders, this Count has reached the conclusion that the Circuit Court of the United States has undertaken toi assume jurisdiction of a matter in which the political rights and property interests of the Sítate of South Carolina are vitally involved, without the consent of the State. By those orders not only has the Court essayed to -take charge of and administer the property of the State without its consent, but it has also undertaken to- assume control of and wind up a distinct department of the government of a sovereign State, in disregard of -the plan, -which the State itsel'f had adopted and decreed hy the solemn enactment of its General Assembly. If these conclusions can be sustained hy a consideration of the Constitution and statutes of the State, then it will be conceded the proceedings in the Federal Court were attempts to sue the State of South Carolina without its consent, and the matters which that tribunal has undertaken to adjudge were beyond the jurisdiction of any court; and, therefore, its orders of injunction must he regarded as nullities affording no legal protection to the respondents.

The principle that one of -the States of the United States can not without its consent 'be sued in any court by a private citizen was thus expressed and- crystallized in the Eleventh Amendment of the Constitution of the United States: “The judicial power of the United States- shall not he construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States 'by -citizen's of another State, or by citizens or subjects of any foreign Sítate.” It is now generally held that exemption from such a suit is an incident of sovereignty not dependent on the constitutional provision. Kawananakoa v. Polyblank, 205 U. S., 349, 51 L. Ed., 834.

The claims of the alleged creditors, whose rights the Federal Court undertakes to adjudicate, are for alleged debts contracted: in .the operation of the State Dispensary; and the funds out of which that Court is attempting to satisfy them were derived from) .the assets of the State Dispensary. Therefore, in determining whether the suits in the Federal Court are for the adjudication of the State’s liabilities, and the disposition of the State’s property, 'and so not cognizable by any court, it is essential! to ascertain 'and state the relation the State Dispensary bore to the State of South 'Carolina.

In the year 1892, this State, by act of the General Assembly, entered upon an interesting experiment in the management of the liquor traffic by taking entire .charge of the business and making it a State monopoly. 'State officers were designated to manage the enterprise and the funds necessary for its conduct -were drawn from the State Treasury. The Board of Control, consisting of the Governor, the Comptroller-General and the Attorney-General, was clothed with the power to make rules and regulations for -its m'anagemlent. Subject to these rules, the .purchase of liquors and the distribution of them to the subordinate dispensaries was intrusted to an' 'officer called a Commissioner. The business was made by -the statute as essentially a part of the government as the management of its taxes or its- public schools, and all the assets became as touch the property of the State as its asylums and other public institutions, or the funds in the vaults of the treasury. The act was vigorously attacked in the courts as unconstitutional on the ground that the conduct of such a business was not within the police power -of the State and was entirety without the sphere of governmental function. The constitutionality of the act .is so far as it provided for the State to own all 'the liquor brought into the State for sale ¡and to monopolize the sale of liquor within the State, was finally established by the judgmlent of 'this Court in State v. Aiken, 42 S. C., 222, 20 S. E., 221, 26 L. R. A., 345, and subsequently by the judgment of this Supreme Court of the United States in Vandercook v. Vance, 170 U. S., 443.

'Subsequently, the following provision was incorporated into the Constitution of 18-9'5 : “The General Assembly may license persons or corporations to manufacture and sell and retail alcoholic liquors or beverages, within the State under such rules and restrictions as it deemlsi proper; or the General Assembly may prohibit the manufacture and sale and retail of alcoholic liquors and beverages within the State and miay authorize 'and empower State, county and municipal officers, all or either, under the authority and in the name of the State, to buy in any market and retail within the State liquors and.beverages in snoh. packages, and quantities, under such rules and regulations as. it deems expedient.” Under this provision of the Constitution, a new Dispensary Statute was enacted (S'o- Stat., 12.3) 'changing in some particulars the details of the original Dispensary Daw, but retaining in its entirety the scheme of State ownership' and control. The State Dispensary and all its assets acquired under this statute are to be regarded the property of the State, and the debts contracted in its. lawful management are to be regarded the debts of the State, nót only by virtue of the judgments of the highest courts of the land', but also by virtue of the express declarations' of the Constitution of the State. With these lights before it, this Court held, in State v. Farnum, 73 S. C., 165, 53 S. E., 83, that the State Dispensary was as much a part of the State government and subject to as full legislative investigation and control as the State Treasury.

It is nothing to the purpose to say the liquor trade should not have been made an integral part of the State government. The fact is, it was SO' made. Whether as such part of the State government it was a success, or a disastrous: failure, is a question for political! discussion, quite apart from this controversy as to its legal status.

In the next place, it is to be observed the statutes nowhere give any legal remedy whatever to toóse who sold liquor to the directors of the State Dispensary and thereby became creditor's of the State. Such creditors were dependent en tirely upon the good faith of the State to discharge its obligations.

This brings us to the pivotal question: Has the State in dosing out this department of the government in the form in which it formerly existed, conferred by statute upon creditors the right to sue for the establishment and collection of these debts due from! the State, and. by statute set apart the public funds derived from 'the disposition of its Dispensary assets to be subject to seizure and final disposition under judicial older?

It seems hardly necessary to say there is no legal requirement that the State shall manage its financial affairs or any branch of them through one general fiscal agent called its Treasurer, or that its funds or any portion of them should be kept in one office called its Treasury. The State Treasurer is a constitutional officer, but his duties and powers depend entirely upon the will of the General Assembly of the State. Presumably, the State funds are in his hands, but the General Assembly may require the public funds, or any part of them, to be put in any place or with any person it sees fit; and there is no limit to its power in imposing conditions and conferring discretion on its fiscal agent as to the disbursements of these funds to its creditors. When a discretion is conferred by the State, no court can supplant the agent of the State and substitute for his discretion its own judgment. In the case of Buchannan v. Alexander, 4th Howard, 20, certain boarding-house keepers attempted to attach wages due to seamlen from funds in the bands of the purser of the United States Frigate “Constitution,” The Goitrt said: “The important question is, whether the money in the ’hands of the purser, though due to the seamen for wages, was attachable. A purser, it would seem, can not, in this respect, be distinguished from any other disbursing agent of the government. If the creditors of these seamen, by process of attachment, divert the public money from its legitimate and appropriate object, the same thing may be done as regards the pay of our officers and mien of the army and navy; and also in every other ease where the public funds may be placed' in the hands of an agent for disbursement. To state such a principle is to refute it. No government can sanction it. At all times it would be found embarrassing, and under some circumstances it might be fatal to the public service.

The funds of the government are specifically appropriated to certain national objects, and if such appropriations may be diverted and defeated by State process or otherwise, the functions of the government may be suspended. So long as money remains in the hands of a disbursing officer, it is' as much the money of the United States as if it had not been drawn from the treasury. Until paid over by the agent of the government to Hue person entitled to it, the fund can not, in any legal sense, be considered a part of his effects. The purser is not the debtor of the seamen.” Tibe same principle was involved and decided in Oregon v. Hitchcock, 202 U. S., 60, 50 L. Ed., 934; Naganab v. Hitchcock, 202 U. S., 473, 50 L. Ed., 113; Lowry v. Thompson, 25 S. C., 424, 1 S. E., 141; Hopkins v. Clemson College, 77 S. C., 12.

By the statute of 16th February, 1907 (25 S'tat., 1), the State Dispensary was abolished and the County Dispensary system, for the sale of liquor under State authority, was established in its stead. On the s-ame date, an act was •passed, -entitled: “An Act to provide for the disposition of all property connected with the State Dispensary and to wind up its affairs.” The act provides for the appointment by the Governor of a Commission composed of five members. The powers and duties- of this Commission, stated in short form, were: To close out the entire business and property of tine State Dispensary, -except the real estate, by selling th-eir -assets-, collecting, debts due and paying- from the sales and collections all just liabilities at the earliest date practicable; to sell the liquors on hand to the county dispensaries, if it saw proper, but to no other person in- the State; to- return liquors illegally bought and to determine the legality of said “purchases” by investigating fully the circumstances surrounding all contracts for liquor; “and to employ such assistant counsel as may be approved by the Attorney-General, andi such' expert accountants and stenographers and any other person or persons the Commission may deem necessary fo-r the ascertainment of any fact or facts connected with said State Dispensary and its management or control at any time in the past, and to take testimony, either within or without the State;” to pay to' 'the State Treasurer, after deducting expenses, “ all surplus funds, after paying all liabilities;” to “submit to the Governor at the earliest day practicable, a complete inventory of 'all property received by them., with a statement of the liabilities of 'the State Dispensary, and as soon as the affairs are liquidated, a report in full of their actions' and doings.” By the last section of the act, it was provided “that the said 'Commission shall have full power and authority to investigate the past conduct of the affairs of the Dispensary, and all the power and authority conferred upon the committee appointed to investigate the affairs of the Dispensary, as prescribed by an act to provide for the investigation of the Dispensary, approved 21st of January, A. D. 190b, be, and hereby is, conferred upon the Commission provided for under this act: Pro vided, That for the purpose of investigation of the affairs of the Dispensary as herein provided, each and every member of said Commission be, and hereby is, authorized and empowered, separately and individually, or collectively, to exercise the power and authority herein conferred upon the whole Commlission.”

This last section is of prime importance, because the act conferred upon the Commission the same authority as was conferred on the investigating committee acting under the statute of the 24th of January, 1906'; and by that statute was conferred on the committee this power: “The committee be, and they are hereby, authorized and directed to order the Cbmmissioners of the State Dispensary to withhold the payment of any claims against the State Dispensary or any officer thereof, or the claims of any creditor against the said State Dispensary or any of its officers, -which they may deem advisable, until same is duly proved by the production of the books of original entry and all documente and correspondence relating- to all- their transactions with the State Dispensary, and to require the person- or persons in custody or possession- of said books, documents, papers and correspondence to produce the same before the said Cbmmittee in person, and when such proof has been submitted to and -approved by the said Committee, and the State Treasurer is 'hereby forbidden to pay such claims upon 'Written- notice from the Chairman of said Committee.” Comparing this statute with the previous Dispensary legislation, it is perfectly obvious- this Commission -liad conferred on it a discretion in the ascertainment and payment of claims -against the State from funds- in their -hands- for liquor sold and accounts collected in winding up the State Dispensary at least equal to- that -which had been conferred on the directors- of the State Dispensary -when the State’s liquor business was in operation. The previous Dispensary statutes clearly contemplated that the directors should buy liquor and pay just claims for its price from the proceeds of its sale. Yet we venture to think no-court would have entertained for a moment a suit by creditors looking to judicial interference with the discretion of these directors in determining' the just debts of the State for purchases- of liquor and to the judicial- administration by injunction or receivership of the funds in their hands.

There is not the slightest suggestion in- this statute of consent to the submission or the justness of -the claims against the State to the adjudication of any court or to the transference of those public funds to a court for administration. On the contrary, the only method pro vided in the statute for the separation of the just from the unjust claims was ¡the investigation into! them 'by the Commission itself. The language of the statute plainly contemplates the appointment of a .commission of discreet business men for the pur pose of representing to the fullest extent the State, as its officers, in closing out its liquor business, in taking charge of its funds, in investigating the 'conduct of its 'business With a view to ascertaining and deciding for the State what were just claims and paying theml from the funds realized from the business. The extent of the investigation and the degree of proof required were left to the discretion of the Oommiission. -That this Was the scope and meaning of the statute is made still more manifest when' it is considered that charges of outrageous fraud, not only against the State's officers having 'charge of its liquor 'business, but also against those who had sold liquor to 'the State and were making claims against it, were receiving most anxious consideration by the General Assembly.

The statutes and resolutions passed by 'the General Assembly, which immediately preceded the act providing for the appointment of this Cbmmiissian, shows the persistent purpose and well-defined public policy to use to the utmost the sovereign power of the State in the investigation of these charges’ and in separating just from fraudulllent claims. The presumlption is exceedingly Strong against the legislative intention to suddenly abandon this purpose and policy and strip the State of its sovereign right to decide for itself what in justice and good faith it was called on to do in respect to the claims against it.

The statute seems -plain in itself, but when viewed in the light of these conditions, we do not see how a doubt can remain that 'it is to 'be construed as providing a method* of safeguarding thie rights of the State, uncovering frauds against it, and providing for the ascertainment, determination and paymlent of the true debt of the State in the premises-, by -the Commission which was invested with full responsibility and discretion ta the accomplishment of these ends, subject to no interference except that of the General Assembly itself. With this discretion lodged in the Oommiission, it became the representative of the State with respect to the matter in its 'charge, and a suit brought against it for any purpose ayes, in effect, a suit against the State. This principle is thus stated in Board of Liquidation v. McComb, 93 U. S., 531, 23 L. Ed., 623: “The objections to pro’ceeding against State officers iby mandamus or injunction are: First, that it is in effect proceeding against the State itself; and, secondly, that it interferes with the official discretion vested in the officers. It is. conceded that neither of these things can be done. A State, without its consent, can not be sued by an individual; and a court can not substitute its own discretion for that of executive officers, in matters belonging to' the proper jurisdiction of the “latter. But it has 'been well settled .that when a plain official! duty requiring no exercise of discretion is. to be performed, and performance is refused, any person who- will sustain personal injury by such refusal may have a mandamus, to compel its performance; and when such duty is threatened to be violated by some positive official act, any person who will sustain personal injury thereby, for which adequate compensation can not be had at law, may have an injunction to prevent it.” After quoting this ¡[language with approval, in Cunningham v. Macon, etc., R. R. Co., 109 U. S., 446, 27 L. Ed., 995, Justice Miller said: “It is believed that this is as far as this 'Cburt has gone in granting relief in this class oif cases.” In re Ayres, 123 U. S., 443, 31 L. Ed., 216; Wilson v. Exposition Commission (Iowa), 110 N. W., 1045; Davis v. Hortensen (Neb.), 95 N. W., 831; Court v. Hastings (Pa.), 38 A., 717; Chemical Company v. State Board of Agriculture (N. C.), 15 S. E., 1032.

While in Pennoyer v. McConnaughy, 140 U. S., 1, 35 L. Ed., 363, it was held the Court had jurisdiction to enjoin State 'officers from sacrificing private rights under an unconstitutional act of a State Legislature, yet the Court recognized the rule laid down in Board of Liquidation v. McComb, supra, that a court has no jurisdiction to. entertain a suit to override the discretion vested in the State officers by a valid statute.

The Supreme Court of the United States has laid down in a number of cases these propositions, in substance, namely: That a suit may be maintained; (1) to protect private rights by requiring State officers ton perform a plain ministerial duty imposed by law; (2) to protect private rights against the wrong of State officers undertaking to- act under statutes void because unconstitutional; and (3) to protect private rights against wrong which State officers may inflict in going beyond the duty imposed on them, or right granted to them by valid State 'legislation. In all of these cases the view taken by the Court is that the officer can not claim the protection of State authority because his violation of private rights is due either to hi© action without any authority of State law, or to¡ his refusal to obey and recognize the State law, and, therefore, in such cases the State is not behind him. The authorities on this subj ect are collated in Reagan v. Farmers’ L. & T. Co., 154 U. S., 363, 38 L. Ed., 1020; in Tindall v. Wesley, 167 U. S., 204, 42 L. Ed., 137, and other cases.

Under these cases, if the State by statute places a definite sum of money or other property in the hands of an officer with the discretion to pay or deliver it to particular persons upon their doing a particular thing, lodging noi discretion in the officer, the officer is a naked trustee of the money or other property, and upon the designated persons doing the particular thing required by statute, the duty of the offieer to pay over the money or deliver the property is purely ministerial. In failing to discharge the trust by payment or delivery, he does not represent the State, and can claim no protection through it. On the contrary, in such failure he acts in defiance of the State authority, and compliance with the State’s mandate may always be enforced by judicial process. Such cases were McGee v. Lamar, 159 U. S., 313, 40 L. Ed., 165, and Rolston v. Crittenden, 120 U. S., 390, 30 L. Ed., 721.

The latter case is mainly relied on to support ’the jurisdiction of the Eed'eral Oourt in this matter, but it is entirely different. 'A statute of Missouri required certain State officers therein named to assign certain liens on the Hannibal & St. Joseph Ralroad Company to- certain trustees upon their payment into the 'State treasury of a sunn of money equal in amlounlt “to ali indebtedness due or owing by said company to the State, and ah liabilities, incurred by the State by reason of having issued her bonds, and loan the * same to said company as a loan of the credit of the State, together with all interest that has 'and may .alt the time when such payment shall be made have accrued and remain unpaid by saidi company, and such fact shall have been certified to the Governor of the State by the Treasurer.” In making and receiving payment, the trustees and flue State officers differed) as to the amount of interest which the statute required to be paid. The dispute was not as to what the officers had the discretion to receive in satisfaction of the obligation to the State, — for they had no discretion,— but as to what under the true construction of the statute they were required! to receive as a pure ministerial- duty. On this ground, as will clearly appear from the report of the case, the Court entertained a suit fo¡ enjoin the 'enforcement by the officers of what they alleged to be an unpaid debt of the State, which the trustees alleged had been paid as required by statute. The jurisdiction rested on the ground that the State officers could not protect themselves behind the State from being required to perform the ministerial duty which the State by its Statute had required of them and which they had refused to perform in opposition to the State’s command Chief Justice Waite thus tersely States the ground of the decision: “It is next -contended that this suit can not be maintained because it is in its effect a suit aga-inst the State, which is prohibited) by the Eleventh Amiendmfent of 'the Cbnstitutiton of the United States, and Louisiana v. Jumel, 107 U. S., 711 (27 L. Ed., 448), is cited in support of this position. But this case is entirely different from that. There the effort was -to compel a State officer to do what a statute prohibited him from doing. Here the suit is. .to get a Sítate officer to ’do what a statute requires of him.. The litigation is with the officer,'not the State. The law makes it his duty to. assign, the liens in question to the -trustees -when they make a certain payment. The trustees -claim they have made the payment, the officer says they have not, and there is no controversy about his -duty if they have. The only inquiry is, therefore, as to the fact of a paym|ent according to the requirements- of the Haw-. If it ha-s been made, the trustees are entitled to-their decree.”

The present case falls clearly -within the principle laid down in Louisiana v. Jumel, 107 U. S., 711, 27 L. Ed., 448. and other authorities above cited, and is not embraced in the distinction made in the Rolston case. Neither in the latter cas-e nor any other i-s the principle questioned that -where discretion is conferred, on the officer to act for the State in the ascertainment of its. debt or in any other manner within its sphere of action, he is responsible te» the State alone and a suit -against 'him. with respect to such, discretion is- a suit against the State.

We are not careful to inquire whether the discretion lodged in the Commission is- the -discretion of judicial or executive officers, for the Supreme -Court of the United States rests its conclusion that no court can disturb the discretion with which the State has invested its officers or agents up-on no such 'distinction. But, if the distinction be essential, it -has been hd-d in numerous, -cases in this State, from Richland v. Miller, 16 S. C., 236, to Lockwood v. Adams, 63 S. C., 191, 41 S. E., 82, that -the -county b-o-ard of commissioners, a board -whose statutory duty is to investigate and approve claims against the county, in performing this- duty exercises a judicial- function. 'This Dispensary Commission, though having only a temporary -existence, is charged by statute with precisely the same duty with respect to claims against the State on -account of the Dispensary; and by parity of reasoning their discretion is, a judicial discretion and their action with respect to the validity of the claims, judicial action; and we so hold.

The State has a right too lay down any condition, however hard or arbitrary, it may choose, with which its creditors must comply as to a condition of payment of their demands. Noi court has a right toi abate one jot or tittle of such condition. There is no ground' to say that the condition that the creditor shall abide the finding of any person designated by the State to act for it in ascertaining the validity of his claim is an 'exception to: this principle.

. Not only was 'discretion imposed on the Commission in ascertaining the fraudulent and bona fide claims against the State, but the Sítate itsdllf has a very large interest in the $800,000' in its hands. The doctrine recognized and applied by the Supreme Court of the United States, and all courts, is thus stated by Justice Uamar in Pennoyer v. McConnaughy, supra: “The Court will look behind and through the nominal parties toi the record toi ascertain who are the real parties to the suit.” In re Ayers, 123 U. S., 443, 31 L. Ed., 216; New Hampshire v. Louisiana, 108 U. S., 76, 27 L. Ed., 656. In this case it is not necessary toi look behind the record, for the record in the Federall Court and this Court shows beyond dispute the State’s interest to be vitally involved in the suits brought in the Federal Court. That interest is not only its obligation as a government to protect itself ag-ainst fraudulent claim, but the surplus over just debts is to be paid by the Commission into the treasury of the State for the use of the State. That the State is a necessary party to any suit affecting the funds is self-evident, for surely if is entitled to be heard in the adjudication of what are fraudulent claims against it and how much surplus is to remiain for its use.

It is noi answer to say the State will not be bound by the proceedings and judgment in the Federal Court, for that Court is undertaking to mntroll and dispose of the public funds in the hand® of the State officers, and when the funds leave the hand® of the State officers and are disposed of under the order of that Court, there will 'be nothing to which any right of the State can attach’.

Dastly, let it ibe assumed for the moment, contrary to our conclusion, that the State iby the Statute of 24th of February, 1907, creating the Commission, did consent “that those who held claimls against it on account of the Dispensary should have their claims adjudicated by the courts and the State Dispensary assets administered by the courts and applied to the claims- soi adjudicated. This would not alter the result, for it is obvious, if 'any such consent w'as ever given, it was withdrawn by the amendment of i?4th of February, 1908, wherein it is provided: “that said Commission is hereby declared to possess full powers to -pass upon, fix and determine all claims against the State growing out of dealings with- the Dispensary. And -to pay for the State any and all just claims which have been submitted ton and determined by it, 'and no -other, out of the -assets- of the Dispensary which have or may hereafter be collected by said Dispensary Oom|mission: Provided, That each and every person, firm or corporation- presenting a claim or claims to said Commission, shall have the right to appeal to» the Supreme Court, as in cases at law: Provided, further, That notice of intention to appeal! shall be served upon sa-i-d Commission within ten days of rendition of judgment by the said Commission, and the practice in taking all steps in- perfecting the appeal shall conform ¡to the practice in other appeals to the Supreme Court. That no- funds arising from the sale of the assets oif the former State Dispensary, or from the collection of debts due the Dispensary or moneys delivered by the State Treasurer to said Commission shall be paid out for any purpose or to -any person whatsoever, except upon the check of the chairman of said Commission, countersigned by the Treasurer of the State of South 'Carolina. And the Treasurer of the State of South Carolina shall countersign such' checks as may be presented by the chairman of said 'Commission only upon presentation of the same, together with a certificate of said Commission or a majority tihlereof, which certificate shall show: that the said check is issued in payment of some expense provided for by stat ute, or necessary incident for closing up the affairs of the Dispensary, or for 'services rendered said 'Cbmmiss-ion in closing up the affairs of said Dispensary, or 'contracted for in accordance with law by said State Dispensary Oomimission, or that it is in payment of a claim of a creditor which has been adjudged by said Commission to be due, and upon such adjudication ordered paid.”

This amiendement in the clearest terms- provides an- exclusive -condition to the recognition and payment of claims against the State on account of the operation of the State Dispensary, namely, that su'ch claims shall be judicially examined and adjudicated by the 'Oommission. Consent of a State that it m|ay be sued is not a contract and can be repealed or modified at any time at the discretion of the State, even- after suit has been commenced; and when the consent to the adjustment of claims! against it by s-uit is withdrawn by the State, the jurisdiction o-f the court in Which the 'case is pending is at an end and the suit falls to the ground. Beers v. Ark., 61 U. S., 527, 15 L. Ed., 991; In re Ayers, 123 U. S., 443, 31 L. Ed., 216; Hans v. Louisiana, 134 U. S., 1, 33 L. Ed., 842. It follows-, therefore, if the Federal 'Court had jurisdiction under the original statute, -it came to an end upon the enactment of the Statute of the 31th February, 1908.

The -cases -where States have fael-d -stock in banks along with others or as sole stockholders are so far apart from this case that only one remark may be made as to them. In such case the bank is- not a department of the State government, as the Dispensary was, but a corporate entity entirely apart from the State. The State has no: right whatever to the bank’s funds until the bank’s- debts- are paid, and it can confer no more right to convert them than can any other stockholder. Therefore, any officer of the State undertaking to hold the funds- of a bank against the bank or its- creditors does so, not in accordance with the law but in defiance of law. He can not derive authority from the State for such conversion, because the State can have no such authority to confer. Banks v. Dabney, 19 Wall., 1; State v. Bank of the State, 1 S. C., 63; Curren v. State Bank of Arkansas, 15 How., 304. It may be under the principles which we ’have stated, after the Oommiission has performed the duty imposed and exercised with discretion conferred by the State by examining into and deciding on the validity of a particular claim', the payment of that cllaim froml the funds in its hands would be a ministerial act Which it could be compelled to perform by a mandamus or other appropriate remedy. That point is not 'before us. Wie hold that the State has not consented that any court shall adjudicate the debt set up- against it for liquor sold to it, nor has it consented that $800', 000 of its public funds, held by its fiscal officers shall he administered by any court; and hence the Federal Court had no jurisdiction' to .pas's the order restraining the respondents from paying out such funds. The order of injunction of the Federal Court, therefore, affords no legal protection to- the defendants and 'their return is. adjudged insufficient.

3 The judgment „of this Court is that the petitioners are entitled to a writ of mandamus froml this Court requiring the respondents constituting the State Dispensary Commission to pay fro'm the funds in their 'hands to the State Treasurer, the sum of $15,000' for the use of the Attorney-General, as provided, by the Statutes of the State, approved 24th of February, 1908. It is a well-recognized principle, however, that the United States Supreme Court itself follows the decision of the State Supreme Court in the construction of State Constitutions and statutes, and of course this rule is binding upon the Circuit Court of the United States.

This Court Will not therefore assume that the construction' which it has placed upon the Sítate Constitution and the statutes in question will he disregarded by the. Federal Court.

The issuing of the peremptory writ of mandamus; is, therefore, left in abeyance until the further order of this Court.

Case Details

Case Name: State Ex Rel. Lyon v. State Dispensary Commission

Court Name: Supreme Court of South Carolina

Date Published: Mar 14, 1908

Citation: 60 S.E. 928

Docket Number: 6799

Court Abbreviation: S.C.