The Charleston daily news. [volume] (Charleston, S.C.) 1865-1873, 1869-02-13

OeISSsANHS
Governor in the case of the Greenville and Co
lumbia Railroad bill apply to this bill. In.
decd, its leading features are said to have orr
ginated with the Governor himself. The fol
lowing is the opinion of Attorney-Genera
Chamberlain in regard to the bill:
OFFICE OF THE ATToRNEY-GESERAL,
COLUMBIA, S. c., February 6, 1869.
r. B. Elliott, Chairman Committee on Rail
roads, House Of Representatives.:
LEAR STR have the honor to submit my
opinion, as called for by your communication
the Comptroller-General to endorse the grar-
antee Of the State upon bonds OF tho Charles
| ton and Savannah Railroad Company to an
amount not exceeding five thousand dollars
per mile.
The third section of the act provides that as
soon as any such bonds shall have been Gu
dorsed, as aforesaid, they shall constitute a
lien upon road-bcd and stock and equipment oi
the road, and the State OF South CaloIiua shall
be invested with said lien or mortgage for the
payment OF said bonds, with interest thereon.
The provisions OF the act were complied
with, the bonds of the company issued, and
the. guarantee of the State endorsed thereon.
subsequently, the company issued other
bonds, and to secure them executed first
mortgage Geed, which was thus the second
lien on The road and property of the company.
Again, in April, 1861, the company issued
other bonds, and secured them by q second
mortgage deed, in reality the third lien.-
! In February, 1867, the bondholdcrs under the
first mortgage deed foreclosed their mortgage
and sold the property. It was purchased by
the bondhoders under first mortgage deed,
who were subsequently incorporated as the
Savannah and Charleston Railroad Company.
1t is assumed that the proceedings in FORE
closure were regular aud legal, and that oil
proper parties were made.
If this IS correct, then, by the sale and pur-
| chase, the Savannah and Charleston Gallroad
Company took the property OF the Charleston
and Savannah Railroad Company free from all
| lien or membranes, except the statutory lien
| or mortgage to the State to secure 1t az alnSt
| its euaran. .ce of the bonds.
The Savannah and Charleston Railroad Com
| pany have now mcmJrialzcd the Legislature
| for permission TO issue new bonds for the COM
pletion OF the road, and for the postponement
by the Stale of Its statutory lieu on the road,
| so that the same shall work hereafter az
second in lieu Of first lien.
The question submitted to me for coasidera.
ton is: Can the State legally effect such post
ponement of it's lien without the assent OF the
parties holding the bonds guaranteed ty the
State?
The statutory lien which the State holds is
its indemnity against the liability incurred.
The contract OF indemnity is one made be-
tween the State-the surety and the debtor
the corporations; and it ID clear that those who
are competent to make contract are compe-
tent, by mutual consent, to altel or vary the
terms of it.
Conceding the equitable doctrine which al
lows the creditor to be subrogate.i to- and to
avail himself Of all tho securities held by the
surety, (Dearing vs. Earl Of Winchelsea; Lead
ing Cases in Equity, 81; Wright vs.. Marley, II
Wesey, 21) the doctrine goes no further than
to entitle the creditor to The benefit Of the Sc
curities which the surety holds. It is an equity
growing ont Of the relation of tho parties, not
right derived from contract.
But the contract for indemnity is a contract
between the surety and the debtor, to which
they alone are parties; and as the surety Is the
party to be protected, 1t ls for him alone to de-
eide upon tho terms and measures OF his IN
demnlty. Although tho creditor may derive
benefit from the indemnity, it IS only iuciden-
tally. and through the sur ,ty. that he derives
it. He cannot stipulate for himself or his in
terests, but must accept that winch the surety
has accepted AS sufficient identity. He Is en-
titled, in word, to the securities which the
surety holds, but not to determine what those
securities shall be. Any other construction
would make the Indemnity of the surety de-
pend, not upon his own Judgment or his own
contract, but upon the assent OF one 1.-THE credl-
tor) who was net party to the contract.
The considerations above stated become
much stronger when applied to State:
10 aid work OF great public utility, the State
Indorses tho bonds Of the corporation. To
secure the bondholder, she pledges the faith
and credit OF the State for tho punctual pay
ment of the bond. The Endorsement of the
State is the security, upon the faith of which
the bond is taken.
TO secure herself from loss by the indorse-
ment, the State imposes statutory lien upon
the property Of the corporation. But 1t Is
competent for the State, with tho assent OF the
corporation, TO alter the terms OF tho con-
tract; or it may repeal altogether the law
creating the lien. Tne considerations oipohcy
under which the lien was enacted may have
ceased to exist. A due regard to the pubic
benefit, the protection Of the State and the
interest OF the corporation may require that
the law enachne the lien should be repealed.
These are matters Of public policy. and the
consideration and determination OF them be-
long solely to the Legislature, and. il they
deem it proper, the law creating tue lien may
be repealed or modified. The only limitation
imposed upon the power of the Legislature to
repeal existing laws is that the repeal shall not
divest vested rights, and shall not impair the
obligation Of the contract.
Does the postpoucmen! OF the lien IN this
case do either!
Az has been already stated, the creditor has
ty holds. He has merely au equity to be sub
rosated to them if they exist and as they exist:
aud change of security which the surety re-
CARDS as beneficial and aflorEng additional
indemnity cannot, in u Y sense. bo regarded as
lmpairing any right wh!cn the creditor has;
aud st,ll less caIl IL be considered o vested
right.
Neither does postponement impair the Oh
legation OF the contract; for tho only contract
OF the bondholder is in the bond, AND the obii-
CATION of that is not imIaile cd, but IS rccos-
nized. and additional protection is sought TO
be given TO 1t.
Tic practice Of the State has also boen in
conformity to the views here expressed.
In 1885, when guaranteeing the bonds OF the
| Louisville and Cincinnati Railroad Company,
the State imposed o statutory mortgage as IN
demnity, aud to that lien pos'poned oil other
debts which the company then owed.
And when, iu 1865, the State authorized the
Charleston and Savannah Railroad Company
| to issue new bonds for the repair and con-
| etruction of the road. she postponed her llenr
and made it "a second incumbrance, aud this
! without tie assent Of the bonlholders being
My opinion is that tho State has tho right to
postpone her hen and subordinate it 10 the
mortgage to be executed to secure the bonds
authorized by te act now proposed by the
present Legislature.
Very respectfully. your obedent servant,
d. II. CHAMBERLAIN, Attorney General.
Charleston, S. G., February 8, 1859.
The RAGE FOR BLONDE EAR at the NcW York
theatre, having elected some lnvidious CON-