State ex rel. Plock & Co. v. Cobb

64 Ala. 127 | Ala. | 1879

Lead Opinion

BBiICKELL, C. J.

It is a question not free from difficulty, and embarrassed by a conflict of authority, whether the governor, the head of the executive department of the government of the State, can be controlled by the judicial department, in the performance of duties devolved on him in his official capacity. The government of the State is divided into three distinct and independent departments, and the powers of each “ confided to a separate body of magistracy;” and it is declared that “ no person, or collection of persons, being of one of those departments, shall exercise any power properly belonging to either of the others,” except in the instances expressly directed or permitted by the constitution. — ’Const., Art. 3. In Tennessee & Coosa Railroad Company v. Moore, 36 Ala. 371, this court decided, that when, from the nature of the authority conferred on the governor, he was clothed with a discretion in its exercise, the courts were without jurisdiction to control or direct him; yet, in reference to mere ministerial duties imposed upon him by statute, which might have been devolved on another officer, if the legislature had seen fit, and on the performance of which some specific private right depends, he may be made amenable to the compulsory process of the proper court by mandamus. Whether this case falls within the principle thus announced, or whether the principle itself is sound, and can be safely acted on, are questions which have not been argued by counsel, and in reference to which we express no opinion. The present controversy, it is apparent, is wholly between the holders of bonds of the Alabama & Chattanooga Bailroad Company, indorsed by the State, of differing numbers ; and has been in fact conducted by them, the governor being a nominal party, with the sole purpose of ascertaining judicially their rights in the distribution of the new bonds of the State, the governor was authorized to issue to extinguish the liability of the State upon its indorsements. To this question we confine our decision, that litigation may not be protracted, and doubt continue, embarrassing a settlement of the public debt, which a plain legislative policy for several years past has intended tó expedite.

The proposition of the relators is, that the authority of the governor to indorse, in the name of the State, the bonds of the Alabama and Chattanooga Bailroad Company, was a special, statutory power, exhausted when bonds to the amount of sixteen thousand dollars per mile, of the length of the road, liad been indorsed; that any subsequent indorsement of bonds was unauthorized — was not in pursuance of, and in accordance with the terms, requirements and conditions, of the statutes referred to in the tenth section of the act of February 28, 1876; and that such bonds are not, of consequence, to be retired, exchanged, and extinguished, by the use and application of the new bonds of the State. Whether this proposition can be maintained, depends on the interpretation and construction of the act last referred to, when it is taken in connection with the several statutes to which it refers, and the report of the commissioners on which it is based, and to which it was intended to conform, ratifying and approving their action.

The State proposing an adjustment of its liabilities, and of claims and demands against it, the power of the General Assembly to declare that only particular liabilities, or special claims and demands, should be adjusted, was undoubted. Its power, in this respect, was no less, and was of the .same nature as, the power of an individual debtor, to provide for the adjustment, security, or- payment of particular debts, omitting others, though they may be of greater, or less, or of equal obligation. The State could not, as the individual debtor could not, by any act of its own, by any expression of the legislative will, by any agency it could employ, lessen, or change, or impair, or destroy the obligation of contracts into which it had entered. — Fletcher v. Peck, 6 Cranch, 87. The power it could rightfully exercise, was, if it deemed it right and proper, to adjust particular liabilities, on particular terms, with the creditors accepting the adjustment; and if the adjustment was limited to particular liabilities, creditors holding other claims could not participate in its benefits. The State had indorsed the bonds of other railroad companies than the Alabama and Chattanooga Railroad Company; but no adjustment of such liabilities was proposed by the sections of the act of February 23, 1876, under consideration, and no part of the bonds of the State authorized by these sections could be employed in the extinguishment of such liabilities. The adjustment proposed is of liability on bonds of the Alabama and Chattanooga Railroad Company, bearing date in 1869; and it could not be extended to such bonds, if there had been any, bearing date in any other year. To all bonds of that company, bearing date in that year, indorsed in the name of the State, “in pursuance of the terms, requirements and conditions of the several statutes referred to,” the adjustment extends; and to the retirement, exchange and extinguishment of all such bonds, it is the duty of the governor to apply the new bonds of the State.

What are the terms, requirements and conditions of these statutes, upon which the authority of the governor to indorse the bonds of the Alabama and Chattanooga Bailroad Company depended? The governor is without general authority to contract in the name of, and bind the- State. Whenever he so contracts, the power must be conferred by law, or the contract is without validity as to the State; and when the power is conferred on him to enter into particular contracts, binding the State, in reference to all and each of such contracts, the power may be denominated as special, to distinguish it from the general power an individual may confer on an agent to take charge of, manage and control his affairs, entering into contracts relating thereto. The exercise of the power may depend upon the happening of contingencies, or of future events, or upon the doing of particular acts by others; and if these contingencies or events do not occur, or these acts are not done, the power may not be vitalized, and its exercise as to the State of no validity. The ascertainment of the fact whether these contingencies or events have happened, or these acts have been done, may be committed to the discretion of the governor; and if with good faith, and reasonable diligence, he determines that they have occurred, or have been done, the exercise of the power will be valid, binding the State, as to all dealing fairly in reliance on the power, though it should be subsequently ascertained that the governor was mistaken, or misled and deceived. Or, on proof in a mode prescribed by the statute conferring the power, the governor may be required to exercise it; if proof in the mode prescribed is made, the power will be legally exercised, and the State bound to all who in good faith rely upon it, though the proof may have been false, corruptly and intentionally, by those making it. Any person contracting in the name of another, without authority, or an agent exceeding his authority, incurs liability to those dealing with him, though the principal may not be bound. In no one of the instances we have stated, would the governor incur liability, either to the State, or to the persons dealing with him; and in no one of them could it be said the power was not exercised in conformity to the statute conferring it.

The act of November 17,1868, relating to the Wills Yalley Bailroad Company, and the North-east and South-west Alabama Bailroad Company, made it the duty of the governor to indorse the bonds of the company owning the franchises-of the North-east and South-west Bailroad Company, whenever it should appear to him, by satisfactory proof, that particular sections of the road had been finished, completed and equipped. The act of February 19, 1867, required him to indorse, on the affidavits of the president and chief engineer of a railroad company, and a resolution of its board of directors, showing and promising compliance with the conditions of the act. Now, if satisfactory proof was made to the governor, when the bonds were indorsed, that the road had been completed and equipped to a certain number of miles; if that proof consisted of the affidavit of the president, and of the chief engineer of the company; if it was accompanied by the affidavit of the president, and the resolution of the board of directory, that the bonds, when indorsed, should not be used otherwise than in the construction and equipment of the road, nor sold or disposed of for less than ninety cents on the dollar, can it be said the bonds, if in form and substance corresponding to the fourth section of the act of February 19,1867, as do all these bonds, were not issued and indorsed in pursuance of, and in accordance loith the terms, ■requirements, and conditions of the several statutes, which not only conferred authority, but made it the duty of the governor to indorse them in the name of the State ? Without a dereliction of duty — without a disobedience to the legislative will — in the absence of any fact tending to arouse suspicion that the proof before him was untrue, could the governor have withheld the indorsement ? It may be the proof was false, and that he was deceived as to the length of the road; and the falsity and deception may be easily exposed, when controversies arise between individual suitors in litigation before judicial tribunals; but it remains the proof on which the governor was required to exercise the power conferred on him, and on which he could not, without some good reason for suspecting its falsity, have abstained from acting.

The relation does not deny that, when the governor made the indorsements on the bonds, he had satisfactory proof that the number of miles of road finished and equipped entitled the company to an indorsement of eaoh and all the bonds. It does not aver that any proof was before the governor, when the bonds the relators hold were indorsed, other than that before him when the bonds exceeding in number forty-seven hundred and twenty were indorsed. It does not aver the bonds were numbered, when presented to the governor for indorsement, or were indorsed in the order of their number; nor does it aver that the proof before the governor showed that the road did not exceed two hundred and ninety-five miles in length. The averment is, that as two hundred and ninety-five miles is the actual length of the road, the indorsement of bonds for a greater number of miles was not in pursuance of the statutes referred to in the 10th section of the act under consideration.

It is certainly true, that these statutes contemplate the State’s indorsement of bonds of railroad companies, only to the amount of sixteen thousand dollars per mile of the road completed and equipped; and an indorsement for a road not completed and equipped would be in contravention of their purposes, and would impose no liability on the State, so long as the bonds had not passed to a bona fide holder. The excess of indorsement may be great or small; and the indorsement may have been obtained from mere error or mistake, innocently, or may have been obtained fraudulently; in either event, it would not involve the State in liability, until a bona fide holder had acquired the bond. But it is apparent that conformity of amount to the exact length of the road is not a term, condition, or requirement, on which the power and duty of the governor to make the indorsement depended. The affidavits of the president and chief engineer, as to the number of miles of road completed and equipped, was the evidence on which the governor was required to act, and on which he was bound to act, in the absence of all good reason to believe they were untrue. When he acts upon them, indorsing in the name of the State bonds of the company issued in conformity to the statute, the indorsément is in ■pursuance of, and in accordance luiih the terms, requirements, and conditions of the several statutes, which authorized him, by indorsing the bond, to bind the State.

That the indorsement might possibly be obtained fraudulently, or obtained, without fraud, in violation of the provisions of the statutes; or that, when indorsed, the bonds might be sold or disposed of for less than ninety cents on the dollar, was apprehended by the General Assembly, and provision made for the protection of the State in either event. Then, the attorney-general, on being notified by the governor, was required to institute suit against the railroad company; and on proof of the facts, a decree of sale of the road was to follow, and the proceeds of sale were to be paid into the State treasury, to form a fund for the payment of the bonds indorsed by the governor — as well those on which the indorsement was improperly, as those on which it was properly obtained. All are assumed to have been indorsed in accordance with the terms, conditions, and requirements of the statutes; the proper proof having been made at the time of the indorsement, though the proof was untrue in point of fact. We can not, therefore, adopt the proposition of the relator, that the power of the governor to indorse bonds depended on the actual length of the road, and that the indorsement of the bonds in excess of the length was necessarily without authority and void. The power depended upon the proof before the governor, at the time of the indorsement, as to the number of miles of road completed and equipped; that proof being made, though untrue, the power was legally and properly exercised.

The State has capacity to enter into contracts, incurring liability absolute or contingent, as a principal debtor or as indorser, guarantor, or surety, when appropriate to the just exercise of its powers, save so far as capacity may be restrained by constitutional limitation. When it enters into contracts, while it obtains all the rights, it incurs all the responsibilities of individuals, who are parties to like contracts.— United States v. Bank of Metropolis, 15.Pet. 342. Its contracts are of the same obligation, of the same incidents, measured and governed by the same principles of law, as are the contracts of individuals. The contract may be of the class known as negotiable, or commercial paper; and the State may be the drawer, acceptor, indorser, or guarantor of such paper. If such is the character of the contract, the State is bound in the relation it assumes.

The contract is negotiable, and the promise of the State is not only to the immediate payee, or the present holder, but to whoever becomes the holder in the usual course of trade. The bonds indorsed by the State, being made payable in Boston, where, as we must presume, the commercial law_ is unaffected by legislation (whatever would have been their character, if payable here), are negotiable instruments, capable of transfer by delivery; and the State, as indorser, became liable to the holder at the time of the maturity of the bond, as it became liable for the interest coupons as they matured, if the maker of the bond made default. The very object and purpose of the indorsement of the State was to improve the credit, and to facilitate the currency of the bonds. Upon the governor, at the time of indorsing, the statutes devolved the authority and duty of asceitaining whether the facts existed which required him to make the indorsement, binding the State. The indorsement on each of the bonds, of whatever number, recites on its face, that the Alabama and Chattanooga Railroad Company had “ complied ivith the conditions upon which the undersigned, governor of the Stale of Alabama, is required on the part of the State to give such indorsement,” and further recites, that it is made in pursuance of the acts of the General Assembly (referring to them by their respective titles) approved February 19th, 1867, September 22d, 1868, November 17th, 1868.

When the act of February 23,1876, was passed, prior to and at the time of the report of the commissioners, all these bonds, bearing this indorsement, were in the commercial markets, the subject of sale, barter, or exchange, capable of transfer by delivery; and there could be no distinguishing between such as were indorsed for the exact length of the road, and such as may have been in excess of it. The numbers on the bonds would not indicate when they were issued, or when indorsed; certainly not when negotiated by the railroad company. Until such negotiation, the indorsement of the State was without obligation. So long as the bonds remained in the possession of the railroad company, they were not debts, nor evidences of debt, binding the company; nor did the indorsement involve the State in liability to the company. The company was the principal debtor; the State its surety or indorser, whom the company was bound to indemnify and protect. As the bonds were negotiated by the company, the indorsement of the State became of obligation. If the State was liable only to an amount of the bonds equivalent to sixteen thousand dollars per mile for the exact length of the road, the liability would accrue in the order of negotiation of the bonds, and the number on the bonds would afford no indication of the time and order of negotiation: the bond numbered fifty-three hundred may have as well been first negotiated as the bond numbered one, the bonds and indorsements all having the same date. The statutes, unlike the act of February 23,1876, did not require that the bonds should be numbered; and such a requisition, if not impracticable, would not have been of value in giving notice to those dealing in them. The amount of a bond was not prescribed, but it was committed to the mere will- of the railroad company to fix the amount, as an individual may fix the amount for which he will make a promissory note, or draw a bill of exchange; and certainly his numbering of either would be immaterial, not affecting its tenor and effect, putting no party on inquiry, and affording no notice of the consideration, or of any infirmity attending it.

An error which seems to underlie the whole theory of the contention of the relators, and of the argument supporting it, is the importance attached to the numbers of the bonds. These numbers seem to be supposed integral parts of the bonds, affording unmistakable evidence of the time and order of issue, indorsement, and negotiation. Yet, there can be no question that the number was not a part of the bond, or, if a part, it was immaterial. The number could have been altered, without affecting the liability of the maker or indorser; and in pleading the bond or indorsement, whether the pleading was civil or criminal, the number would not so enter into its description or identification, that it must be averred. The contract of the parties, despite such alteration, would remain unaltered in its entirety. The amount of the bond, the time and place of its payment, the rate of interest it bears, and every essential of its terms and obligation, would remain unchanged, as would all the terms of the indorsement. The change or mutilation of the number would be a mere change or mutilation of a mark, placed upon the bond, it may be, by the maker, or the indorser, or it may be, by any holder, for the convenience and protection of the one or the other. — Com. v. Emig. Ind. Sav. Bank, 98 Mass. 12; Birdsall v. Russell, 29 N. Y. 220; City of Elizabeth v. Force, 29 N. J. Eq. 587; Spooner v. Holmes, 102 Mass. 503.

The bonds having been issued and indorsed, in circulation as negotiable paper, those who acquired them were bound only to inquire whether there was authority of law for their issue and indorsement. Irregularity, fraud, or misconduct may have intervened; misrepresentations may have been made to the governor, by which a larger amount of indorsements were obtained than the company was entitled to receive; these could not affect the title of an innocent holder, or, as against him, be made the subject of inquiry. On the governor was devolved the duty of making the indorsements, when satisfactory proof was made that the company was entitled to it, for a number of miles of road completed and equipped; and his certificate, in the indorsement, that the company had complied with the conditions of the statutes, was sufficient evidence to all bona, fide holders, and conclusive in their favor against the State. The dishonor of the unpaid coupons for interest did not infect with dishonor the bond or other coupons, putting on inquiry those who in the usual course of trade, in good faith, and upon a valuable consideration, should acquire them. — Jones on Railroad Securities, §§ 287-295; 2 Dan. Neg. Ins. §§ 1537-1511.

It is to be presumed the General Assembly, in the enactment of the statute under consideration, was not unmindful of these propositions, established by a long line of decision in the Federal Supreme Court;' and was not unmindful of the legal attitude in which the State was placed by the indorsements. Whether the then holders of the bonds were bona fide holders, who could not claim protection against any defenses the State could urge, was of but little importance. The bonds were commercial, and at any time could have been passed to innocent holders, against whom the defenses could not be made available. The defenses now insisted on, as rendering some of the indorsements void of obligation, eonld in no event be made available against any other of the indorsements, than such as were negotiated after there had been a negotiation of the full amount to which the company was entitled. It must, therefore, have been apparent to the General Assembly, that it was impossible to distinguish which of the indorsements, if any, could be repudiated as excessive, and which were of undoubted obligation. The exclusion by the governor in 1871, in the payment of interest, of all beyond the number of forty-seven hundred and twenty, was not conclusive; and could not, indeed, operate as evidence for the State as against theholders of the bonds bearing a higher number. It may have been the act of the State, but it was strictly ex parte — the act only of one party, and the party to be charged, not affecting the other party, the holder of the bonds.

It is in view of these principles of law, which fix the legal attitude of the State, that the statute under consideration must be read and interpreted, when taken in consideration with the report of the commissioners, whose action and plan or scheme of adjustment it ratifies and confirms. A patent object of the act, expressed in the preamble, is the adjustment of claims alleged against the State, by reason of the indorsements of the bonds of the Alabama and Chattanooga Bailroad _Oompany, so that no question of dispute would thereafter exist between the State and the holders of such bonds. Such questions would exist, if the theory of the relators prevailed, and five hundred and eighty thousand dollar's of these bonds were left unretired and unextinguished. It is not of importance that the State can not be sued-, and could not, by any other legal remedy than petition to the General Assembly, be required to satisfy its liabilities. The statute was not enacted with a view to the freedom of the State from being pursued, as an individual may be, by legal remedies in judicial tribunals; but with a view7 to an adjustment, corresponding to its ability to pay, of all the indorsements of the bonds of this company, preferred as claims against it. Nor did the General Assembly intend to assume to determine that some of the claims were of legal obligation, and others were not. That was a question upon which the holders of the claims must be heard, and which could only be determined by future dispute, the statute intended to avoid. All these indorsements are, in the statute* designated as alleged claims; and there seems to have been a careful avoidance of making any distinction between them.

The commissioners report, as contingent liabilities of the State, the indorsements of the bonds of the Alabama and Chattanooga Railroad Company, four millions seven hundred and twenty thousand dollars ; and over issue, five hundred and eighty thousand dollars. The plan, or scheme, of adjustment of the liability of the State they propose, is that embodied in the act under consideration; and as they report, it is in full satisfaction of all liability on account of indorsements for that company. They make no distinction, and could make none, between the indorsements, though it was then a well-known fact, recognized in the report, that the indorsements exceeded, by five hundred and eighty thousand dollars, the length of the road, finished, completed and equipped. It is this adjustment of liabilities, growing out of the indorsements of these bonds, the preamble of the act recites tbe State may wisely accept. The legislative intention, that the new bonds of the State should be employed in full payment and discharge of all claim, demand or liability, for or on account of any indorsement by any officer or agent of, the State, or any person actiny in its name, on or upon any, every and all bonds made or issued by the said Alabama and Chattanooga Railroad Company, bearing the indorsement thereon if this State, or in its name, is too clearly expressed in tbe 12th section of the act, to leave any room for doubt or construction, if the words of tbe 10th section, so much relied on, were of doubtful import.

We are of the opinion, that the new bonds of the State must, without inquiry as to the number on the bonds of tbe Alabama and Chattanooga Railroad Company, or as to whether there was or not an excessive indorsement of such bonds, be applied in exchange, retirement and extinguishment of all such bonds bearing the indorsement of the State.

This conclusion compels an affirmance of the judgment of the City Court.

MANNING, J.

The petition for a mandamus in this cause, as I understand the matter, was filed to obtain a judgment declaring it the duty of the governor, under the acts of the legislature concerning the settlement of the railroad debts of the State, to distribute and deliver the bonds for the amount of one million of dollars, with which it proposed to discharge itself of liability for its indorsements of bonds of the Alabama and Chattanooga Railroad Company, to and among the holders of, and in exchange for, those only of said bonds which are numbered respectively from one to é,720, both inclusive; upon the ground that, under the law, the railroad company was entitled to ask for the State’s indorsement for no more than the $4,720,000, for which those bonds were given; that being the amount produced by $16,000 multiplied by the entire number of miles of the company’s railroad. All the bonds bearing numbers above 4,720, the petitioners insist, should be regarded as having been repudiated by the State, for the fraud by which the indorsement of them in its name had been obtained.

The question involved was very ably and elaborately argued. But we all agree in the conclusion, for reasons set forth in the opinion of the Chief-Justice, that no distinction can be made, in respect of their validity, between the bonds bearing the indorsement of the State, merely for the reason that some are numbered over, and some under 4,720. We hold, that the indorsement of the State must, for the purpose of this settlement, be held to have been as validly made on those over, as on those under the number specified.

There is no other question, it seems to me, which, upon this petition, and between these parties, we are entitled to decide, — except one, which it is now not necessary to consider ; and that is, whether, if we concurred in the views of counsel for petitioners on other matters, we would have authority to coerce the governor by writ of mandamus, or otherwise, to distribute and deliver the new bonds according to the prayer of the petitioners.

I concur in. the opinion that the judgment appealed from should be affirmed.

---

Concurrence Opinion

STONE, J.

I fully concur in the conclusion, that bona fide holders of the bonds indorsed by the State in excess of the proper amount, have the same legal and equitable right to share in the million of bonds issued for the purpose of liquidation, as the holders of the indorsed bonds that were not in excess. I hold, that purchasers of such bonds need only look to the indorsements and their recitals, and to the statutes under which they were indorsed. They were not expected to know the length of the road, nor the progress or extent of its completion. The ascertainment of these facts is, by the statutes, confided to the governor; and the certificate by him, embodied in the indorsement, that the requisite proof had been made, is the only evidence a bona fide purchaser need make of the due completion of the road, authorizing the indorsement. I think, also, that no importance is to be attached to the numbers on the bonds. On these questions, I fully concur with the Chief-Justice.

I think the present relators failed to make a case authorizing mandamus, for the following reasons. First: I do not think the legislature intended to cast on the governor, or on the State, the imperative duty of conducting litigation, or incurring expense, in determining who are, and who are not, bona fide holders of such indorsed bonds. Second : The relators in the present case do not aver, nor show, that they are bona fide holders of the bonds described in their petition, and they thus fail to show they have a clear legal right to the remedy they invoke. Third: I concur with Judge Manning that, in this form of proceeding, in which only Plock & Co. and the governor are parties to the record, the claims of other bondholders, not parties to this suit, can not be pronounced Upon.

My individual opinion, however, is, that only bona fide holders of the bonds indorsed for the Alabama and Chattanooga Railroad Company, have any right to share in the million of new issue. I intimaté no opinion as to how the conflicting claims of the several bondholders are to be adjusted.