114 U.S. 663 | SCOTUS | 1885
Lead Opinion
delivered the opinion of the court. After stating the facts as above recited, he continued:
The question which lies at the foundation of all these suits is, whether the statutory lien with which the • State of Tennessee was invested, upon the.issue of its bonds to railroad companies under the internal improvement act of Eebruary 11, 185-2, and the several.acts amendatory thereof, bound the property of the company to which the issue was made for the payment of the bonds so issued, and the interest thereon, to the several holders thereof, or only to the State; for, if to the State alone, it is conceded the lien has been discharged, and is no longer operative. The precise point of the inquiry is, for whose benefit was the lien created? Was’it the State, or the bondholders, or both the State and the bondholders ?
The lien which was vested in the State was as security for the payment by the company of “ all of said bonds issued to the company, as provided in this act, and for the interest accruing on said bonds.” This is the language of the provision for the final lien which was to attach on the completion of the whole road, to “ all the property owned by the company, as incident to, or necessary for, its business.” § 4. To whom this payment was to be made is nowhere stated in express terms. .In the absence of anything to the contrary, the implication would undoubtedly be that it must be to the holder of the bond, as be was the person to whom the bond, as a bond, was payable ; but if, on an examination of the whole statute in the ■light of surrounding circumstances, and interpreting it with reference to the subject matter of the legislation, it appears that' the intention was to secure only a payment to the State of the debt incurred by the company on the loan of the bonds, there is nothing in the language employed to express the legis-
The liability of the companies to the bondholders, if any there be, rests alone on the statute, which contemplated loans by the State of its own bonds to the several companies in aid of the public works they were respectively engaged in constructing. The bonds were to be “coupon bonds of the State of Tennessee.” This implies State bonds with coupons for interest attached, in the ordinary form then in use, whereby the faith of a State of the United States was pledged for their payment. Such must have been the understanding of all parties at the time, for the bonds actually issued were of that kind, and on their face bound only the State. The law made no provision for naming, either in or upon a ’bond, the particular company in whose favor it was'issued. Neither did the bonds themselves, as issued, contain, by indorsement or otherwise, any obligation whatever on the part of the companies. They were State bonds, pure and simple, “issued in pursuance and by authority of an act of the General Assembly of said State, passed February 11th, 1852.” They were not even made payable to the companies to which they were respectively issued, but went on the market as coupon bonds of the State of Tennessee, payable to the bearer thereof, and apparently nothing else. In this form they were bought and sold by dealers and investors in public securities. So that the point to be determined from an examination of the statute, is, whether a State, when lending its own bonds and taking back security for their payment, intended to protect those who might afterwards become the holders of the bonds against the consequences of its own repudiation or inability to pay, or only to indemnify .itself . against loss by reason of the loan of its credit' to those who were engaged in constructing its great works of internal improvement. To say the least, the strong presumption is that, in such a transaction, the purpose of a State would be to pro
Such being the subject matter of the legislation, we proceed to inquire what the payment was which the State intended to secure by the statutory lien with which it was to be invested. It was to be a payment. This implies a debt from him -who pays to him who is to receive, and that when the payment is complete the debt will be discharged. It is not claimed that a borrowing company was to incur two debts by accepting a loan under the statute, one to the State and the other' to those who might become the purchasers or holders of the borrowed bonds. The obligation was to pay the bonds once, not twice, and the payment was to be made at the time and in the'. way provided by the law. "Who then became the creditor of the borrowing company when it incurred its debt for the borrowed bonds? "Was it the State or the bondholders?
Much stress was laid in the argument on the provision in § 3, “ that so soon as the bonds of the State shall be issued . . . they shall constitute a lien,” etc.; and it was insisted that, as the bond constitutes the lien, and the lien is but an incident of the debt, the lien must continue and follow the bond in the hands of the holder thereof, until it is finally paid and taken up by the company. From this it was argued that the bondholder must be the creditor, within the meaning of the statute, and that a payment would not be complete so as to discharge the debt of the company, until it was made to' him. ;
Similar language was used in a statute of South Carolina-,passed December 20, 1856, to aid in the construction of the Charleston and Savannah Eailroad, under which the State guaranteed, by indorsement, the bonds of the railroad company, and it was provided “ that so soon as any such bonds shall have been indorsed as aforesaid . . . they shall con,-stitute a lien,” etc. This, it was held by the Supreme Court of that State in Hand v. Savannah & Charleston Railroad Co., 12 S. C. 314, vested in the State a lien, not merely for its own protection against the guaranty, but also for the
The fact which establishes the lien is the issue of bonds by the State to a company, that is to say, the delivery of bonds by the State to a company under the contract of loan. The lien attaches as soon as -the delivery is complete, and when there is no obligation on the part of the .company to the holders for the payment of the bonds, because the company is itself the holder, and there can be no obligation of payment by itself to itself. But, the delivery of the bonds by the State to, and their acceptance by, a company, created at once an obligation
The lien was to be “ for the payment of all of said bonds issued to the company as provided for in this act, and for the interest accruing on said bonds.” It was, as has been seen, to begin as soon as the bonds were put into the hands of the company, for it was then and by that act that the liability of the company under the statute was created. At that time no one but the State could be interested in the security, and at that time clearly the lien operated only as security for the payment of the loan of the bonds. This could be made by a return of the bonds themselves, or in any other -way provided in the statute. A return of the bonds to the State would not technically pay the bonds, but it would pay the loan, and thus cancel the obligation of the company to the State and discharge the lien. This brings us to the inquiry whether provision ivas made in the statute for payment by the company in some other way than'by taking up the bonds from the several Is Iders thereof, and if so, to whom and how.
The obligation under the statute is to pay the bonds and the interest accruing thereon. This clearly means payment of the bonds and the interest in 'the way provided by the statute, if there be any. As the liability of the company to pay at all grows out of the statute, it follows that if a particular mode of payment is provided for in the statute, payment in that mode is all the company can be required to make. Looking then to the statute, we find that provision is made in one part for the payment of interest and the enforcement of that obligation of the company, and in other parts for the payment of principal.
1. As to interest. § 5 makes it the duty of a company to deposit in the Bank of Tennessee, at least fifteen days before coupons for interest on any of the bonds issued to that company fall due, an amount of money sufficient to pay such interest, including exchange and necessary commissions, or satisfactory evidence that it has been paid or provided .for. The Bank of Tennessee was- established by the act of January 19, 1838, “in the name and for the benefit of the State,” and “the faith and credit of the State ” were “ pledged ” for its support.
In the books of the treasurer of State there was an account-headed “ Bank of Tennessee,” the reverse of that kept by the bank in the name of the treasurer. There was also an account headed “ Interest on Capitol Bonds,” in which was shown the interest paid on bonds issued for the State house. Besides this there was an account headed “ Interest on Internal Improvement Bonds,” showing the gross amount paid out on such
Under these circumstances it is difficult to see how a deposit in the bank by a company of the money to pay interest can be treated otherwise than as, within the meaning of the statute, the payment by the company of the accruing interest on the bonds, which the company had bound itself to make. The deposit was made to enable the State to meet its own obligations. It was not placed, neither by the statute was it required to be jtlaced, to the credit of the company, but of the 'State. The bank did not take the money for the company, but for the State, and consequently the deposit was accepted and kept as and for State funds. Neither the bank nor the State was bound, either to the companies or to the bondholders, to use the deposits made by a particular company to pay the interest on bonds issued to that.company. The bank is nowhere made by the law the agent of the company. It was to take, keep, and pay out .according to law, for the State, all moneys deposited or set apart for the liquidation of accruing interest. If the deposits made by the various companies were not enough' for that purpose, it was the duty of the comptroller to draw from the treasury, on his own official warrant, a sufficient amount to make- up the deficiency. No special provision was made in the statute as to the way in which coupon-holders -were to be paid. That was all-left to be determined by such regulations as might from time to time be adopted for the government of State officer's and State agencies in the payment of State debts. The money when deposited became at once the money of the State, and was in noway thereafter subject to the control of the depositor. When used to pay maturing interest, it was
But the correctness of this view of the statute is made still more apparent by another important provision of the same § 5, to the effect that if a company failed to deposit the interest at the time required, or furnish the «necessary evidence that payment of the interest had been made or otherwise provided for, the governor should appoint a receiver to take possession, and run and manage the railroad of the company until a sufficient
2. As to the principal. This is provided for in three ways 1, by the establishment of a sinking fund; 2, by foreclosure if the company failed to pay the bonds at maturity; and 3, by foreclosure and proceedings against guilty stockholders, before maturity, if an issue of the bonds was obtained by fraud, or contrary to the provision of the act.
The sinking fund was first established by § 7 of the original act, which required each company, at the end of five years after the completion of its road, to set apart annua-lty one per centum of the amount of bonds issued to such company, and use it in the purcháse of bonds of the State of Tennessee, which
By the act of 1860 other changes were made, which increased the amount of annual payments to two and one-half per cent, on the original issues, and allowed them to be made in money, or in bonds of a like character with those issued to the company, at their faee value. If paid in money, the sinking fund commissioners were to invest it immediately in bonds of a like character with those issued to the company, and have them cancelled. By this act also the company was released from the obligation under the act of 1852 to provide for the. interest on the whole issue of bonds, and required to deposit only for that which would accrue on the amount of bonds “ unpaid ” at the time the interest 'fell due. 'What was here
While it is true, that neither the'act of 1856 nor that of 1860 can change any contracts the companies may have made with bondholders under the act of 1852 before their passage, they may be resorted to in aid of construction to show what had been the legislative understanding, for a long series of years, of the meaning of the words “ payment of said bonds and the accruing interest thereon,” as used in the original act.
The provision of § J is that the company shall pay the bonds purchased into the State treasury, and that' for the purchased bonds so paid in a receipt shall be given and a credit allowed, as between the State and the company, on the bonds issued. Thus the company was required to make a payment to the State, and for this payment the State was to give a credit on the bonds. This clearly implies that the loan of the bonds was to create a debt on .the bonds by the company to the State, and that this debt was to be discharged pro tanto on the payment annually into the State treasury of the amount required by the sinking fund.section. If there were nothing else in the statute, no one would doubt that the payment of the bonds which the company was required to make was a pay
It is contended, however, that, as the credit to be secured by these payments was only “ as between the State and said company,” the liability of the company to the bondholders is not affected by what may be done by and with the State. This would be true if there were any such liability to the bondholders, but the very point to which our inquiries are now directed is as to whether or not that liability exists. The phrase relied on and quoted above is undoubtedly suggestive of some other liability of the company on the bonds than one to the State, but it does not of itself create such a liability. If it exists at all, it must- be by virtue of some other provision of the statute. As has already been seen, there is but one debt, and whatever pays that debt, cancels the obligations of the company upon the bonds. Whenever, therefore, it appears that payment of the bonds must be made to one, the idea of a debt on the bonds to another is excluded. Here a payment to the State is absolutely required. This obligation to pay is express, and has not been left to implication. The provision is that the sinking-fund bonds must be bought and paid in at the appointed times and to the prescribed amount. If this is not done, the payment is to be enforced by putting the railroad of the company into the hands of a receiver, and running and managing it until the requisite amount of money is realized by the State from the earnings. Under the act of 1856 the payments were required to be made in money, and in case of default proceedings for foreclosure and sale were to be instituted to collect the amount to be paid, \as in cases of non-payment of bonds at maturity. If the statutes of. 1852' and 1856 stood alone, it would be clear to our minds that payments into, the sinking fund were to be treated as a release pro tcmto of all the liability of the company on, or on account of, the bonds. But the act of 1860 shows, beyond áll question, that such was the legislative- understanding at that time of the operation of this provision of the original act. It is there declared in positive language that by the loan of the bonds a debt was incurred by the company to the State,- and
It is argued, however, that as these payments under all the statutes were to be held and used by the State as a sinking fund for the ultimate redemption of the issued bonds themselves from the several holders thereof, the obligation of the company to pay the bonds would not be discharged -in that way; and some remarks of this court in the Sinking Fund Gases, 99 U. S. 100, 725, are cited as authority to that effect. The decision in that case was that the contributions to the sinking fund then under consideration did not pay the debts of the several companies by which the contributions were made, because that fund was established, not to secure the payment of the bonds of the United States which had been lent to the companies, but the repayment to the United States, in the manner and at the time required by law, of “ the amount of said bonds so issued and delivered to said company, together with the interest thereon which shall have been paid by the United States.” But here the sinking fund is to be held and used by the. State, not to discharge the debt of the company to the State, but that of the State to its bondholders. It was established hot to secure the State, but to enable the State to pay its own debts at maturity. In this way all payments made by the companies to the State on account of the principal of the bonds were set apart and laid by under investment, so that at the appointed time they might be used by the State to redeem its own obligations. The fund in the treasury belonged to the State, and was not in any manner subject to the control of the company, or to be used to pay its debt. That debt was discharged by the . payments which under the law were put into the fund. All payments out of the sinking fund were to be made by the State on its own debts and not on the debt of the company. A sinking fund may be, and generally is, intended as a cumulative security for the payment of the debt with which it is connected. In this case the debt to which it belongs is that of the State, and not that of the company, which was paid so as to furnish the State with the means to create such a fund.
The provision for a foreclosure in case of a failure off the company to pay at maturity the bonds issued to it is found in § 6, which makes it the duty of the governor, when such a default occurs, to notify the attorney general, who must thereupon file a bill, against the company in the name of the State of Tennessee in the Chancery or Cffcuit Court of- the proper county. Upon the filing of this bill, the court is authorized to make such judicial orders, including the appointment of a receiver, and a sale of the road and all the property of the company, as may be necessary and proper to secure the payment of the bonds, with the interest thereon, and to indemnify the State against loss by their issue. 'We see no special significance, so far as the' present question is .concerned, in the direction of the attorney general to file the bill nrthe name of the State. Without such a direction there might be doubt whether the suit to be instituted should be in the name of the attorney general or of the State. It was probably unimportant whether the one form or the other was adopted, for, in any event, the object would be to enforce the obligation of the
Proceedings for foreclosure before the maturity of the bonds, and the liability of guilty stockholders in case of issues of bonds obtained by fraud, or contrary to the provisions of the act, are provided for in § 13. This section makes it the duty-of the governor, as soon as he receives reliable information of such fraud or irregularity, to notify the attorney-general, who must at once institute a suit in the Circuit or Chancery Court of the proper county. In such a suit the court is given authority to order a sale of the road, and the property and assets of the company, or so much thereof as may be necessary. "When such a sale is made, the proceeds are to be paid into the
By § 14 it was made the duty of the governor to appoint an agent for the State, to attend all sales, made either under § 6 or § 13, to protect the interest of the State, and, if necessary for that purpose, to buy the road or property in the name of the State. If bought, it was to be put in the hands of a
Having thus gone over the other séctions, we are prepared to consider § 12 in its bearing on the question which is now under discussion. This section reserves to the State in express terms the right to enact “ all such laws as may be deemed necessary to protect the interest of the State, and to secure the State against all loss in consequence of the issuance of bonds under the provisions of this act, but .in such manner as not to impair the vested rights of the stockholders of the companies.” This reservation includes, and was undoubtedly intended to include, full power in the State, as against every one except stockholders, to do whatever might be deemed necessary by the legislature, with the lien reserved for the security of the obligations assumed by the companies. Nothing is said about bondholders. It will, of course, be con'ceded that if bondholders actually had any vested right or interest as against the State in the security created by the statute, nothing could be done under this section by the State to impair that right. But the same was probably true of stockholders, and the special care taken to preserve the rights of stockholders, without referring to bondholders at all, raises a strong presumption that it was never intended to vest in them any right which would interfere in the remotest degree with the free exercise of all the power of the State to deal with the borrowing companies in reference to
. This disposes of all the cases; for the State, in the exercise of its legislative discretion, has released each of the companies
Some reliance was placed, in the argument for the bondholders, upon the legislative history of the passage of the act of 1852, which showed an offer and rejection of certain proposed amendments, and also upon the construction which had been put on the act by certain State officers of high authority in the administration of the public affairs, but we have deemed it unnecessary to add to the length of this opinion by particular reference to that branch of the argument, because, as we think, the statute contains, within itself, unmistakable evidence of its meaning. The same is true of the reference which has been made to other statutes of Tennessee, and to statutes of the States and of the United States upon the same general subject. This statute differs in its phraseology from some, and perhaps all, of the others, but its own language furnishes all the aid which is required for its true interpretation.
The decree in each of the cases is affirmed.
Dissenting Opinion
dissenting.
I am of opinion, that while the object of the statutes in question was to protect- the State against liability, they were, also, designed to create a lien for the payment of the bonds themselves, by whomsoever held. That lien, so far as the holders of bonds were concerned, could not be discharged, except by payment of the interest and principal, according to the terms of the bonds, and in the mode prescribed by the statute under which they were issued. For these reasons, I am compelled to withhold my assent to the opinion and judgment.