The Pacific commercial advertiser. [volume] (Honolulu, Hawaiian Islands) 1856-1888, 1876-04-22
HOTEL BONDS.


The question as to interest payable on these
Bonds came up in the Supreme Court last week
on a submission upon a statement of facts. Mr..
Justice Harris stated that he was a holder of
Hotel Bonds himself and therefore disqualified
from hearing the case. 1t will therefore be post
poned until the return of the Chief Justice, who,
with Mr.. Justice Judd, will then hear it.
The following is the written opinion of A. S.
Hartwell, Esq, furnished at the request of a com
mittee of the Bond Holders
Honolulu, HI.
March Bird. 1876.
To c. GLADE, Henry .M0y and John H. Pafy,
Committee for certain Bondholders;
GENTLEMEN In answer to your enquiry as to
the proper disposition to be made of the Hotel profits,
L have the honor to inform you, that I think that
the holders of those bonds, the interest of which by
their express terms is made to depend on these
profits, and which L win therefore term, if you please
contingent bonds, are legally entitled to receive nine
per cent. per annum payable semiannually at the
Hawaiian Treasury from the profits of the Hotel when
soever they are enough for that purpose, and to all
the profits pro rata if they fall below such percentage.
In thus advising, | am not unmindful of the view
which | understand has been expressed by the Min
lister OF Finance, that the contingent bonds are TO
receive as interest, only such part of those profits as
the entire amount Of those bonds or $42, 900 bears
to the entire amount of Hotel bonds, SIG. 600
There can be no doubt of that Minister'S desire TO
decide this matter justly, and Of his duty to decide
in favor of retaining in the Treasury, rather than
paying out, when there are serious doubts which is
correct. But the fullest examination of the law
upon the subject, and of the terms of the bonds, of
the act authorizing them and of matters in point
which are part of the public record, convince me
that no part of the profits under nine per cent inter
est on the 81, 600, can legally be withheld from the
holders of the contingent bonds.
The action of Ministers Harris and Smith, in
building this Hotel, calling for subscriptions, Dor
N N Tnnnnr nnI f1.-.-- L = n
ISL, signed by DR.. Smith as Minister of Finance,
however public spirited and promotive of public adj
vantage, was nevertheless of a private nature. in the
sense that the outlay of money, the loan, and bonds
were unauthorized by law. Evidently, and properly,
to secure themselves from consequent personal liabi-
lItIes, the conveyance of the land purchased for the
Hotel was made to them in their private capacity,
dated March Is and Is, 1871, and recorded in the
registry IN Book 81, pages 118 and 120. DR.. Smith
having as Minister of Finance obtained a loan of
$4,000 to aid in building the Hotel, issued bonds
to the lenders, Oct. 16, 1871, payable in five years
with the promise to pay YEARLY in lieu of interest,
such proportion Of the rent received from The Hotel
as The ADORE sum ($42,000) bears 10 its tchCle COST
sic, 000.)
The act approved July 30, 1872, to authorize the
Hotel loan indicated in its preamble. that the action
concerning the Hotel loan and bonds had been of the
nature [ have above indicated, in declaring, that
81 appears proper, just and advisable. that the
construction of the Hotel shall be assumed as a pub
nc enterprise, and the ground purchased for the
purpose, as well as the buildings thereon situated,
shall be public property This act provides as
follows Section 1. That the Minister Of Finance
be and he hereby is authorized to issue the Bonds of
the Hawaiian Government TO be known as Hotel
Bonds, to an amount not exceeding One Hundred
and Sixteen Thousand Dollars, Seventy-four Thou
sand Dollars of which shall bear interest not to ex-
coed nine per cent per annum; the remaining Forty
two Thousand Dollars to be devoted to the cancella-
ton of the Bonds issued by the Minister of Finance,
dated October 10th, 1871, and known as g Hotel
Bonds" and to bear interest payable only from the
n Of H. Taa,.s,. IIy
coed nine per cent per annum; the interest to be
payable half yearly, and the said Bonds to be re-
deemable at such time within the next twenty years
as the Minister of Finance shall deem expedient,
and to be made due and payable at the Hawaiian
Treasury The rest of the Act provides for the
purchase of the Hawaiian Hotel property by the
Minister of the Interior, ''upon the issuing of the
Bonds" The Bonds were issued, and December 5,
1877, the Hotel property was conveyed to the Minis
ter of the Interior by Messrs. Harris and Smith by
deed recorded in the Registry in Book 81, page "a.
The following is a specimen of the $74, 900 issue,
viz;
eD" $500 IHaWaiia1 coat Of A Sf1Shj $500 No. lt
This is to certify that the Hawaiian Government owes to
in Ten Years from this date with interest payable semiannually
annum.
Honolulu, October l, 1872.
Registrar Public Accounts. Minister of Finance"
approved the 29th day Of July, 1921
Coupons payable semiannually of $22.5O each are
attached to the above Bond.
The following is a specimen of the $42, 900 issue:
$4,000. Hawaiian Government Hotel Bond. No. "a.
This to certify that the Hawaiian Goyernment is indebted
lars, payable in Five Years from October 16. 1871. with inter
nna y a. at f The HAWAIIAN AHA + treasury ssai PG the s"i interest Pty beng semi1fR,
from the profits of The Hawaiian Hotel
'(signedl CHAs. A; c AsrLE, csigned5 RoBERT srIRLExo,
Registrar Public Accounts. Minister of Finance
The coupons on the $74, 900 have been regularly
- II IL. 80 0N%
in 1872. and 100000 in 1874, for 9 payment of
interest on the National Debt has fully provided
for paying these coupons, until the next biennial
session. No interest meanwhile has been paid on
the contingent Bonds, and the Hotel profits having
now accumulated to about 81, 900, the Registrar
Of Public Accounts advertises ga dividend of 81 per
on Hotel Bonds the $4,000 Bonds being by
him regarded as entitled only to that proportion of
he profits which $4,000 bears to SIG 900, the
total amount of both issues. If these profits are
only partially devoted to the interest on the
Bonds, the Coupon Bonds do not get the
benefit of the remainder of the profits, which go into
The Hawaiian Treasury as unappropriated money.
partial appropriation of the profits is based on
he theory, that the original Bonds being replaced
" the Contingent Bonds, the latter are on the same
as the former in respect of receiving only
part of the profits for interest as they bear to the
,ntire amount Of the issues of Hotel Bonds. I think
his theory is erroneous, for the reasons, that the
xpress clause in the earlier Bonds to that effect
5 not repeated in the latter, as it ought to be if
Intended; that in giving up the first Bonds, the
gave up their personal security, and also the.
ecurity against the Hotel, and accepted in lieu
hereof the pledge of the Government, losing by such
the benefit of all profits over nine per cent
0 which they are limited by the latter, but not by
he former; and particularly, because the cancelling
{ the first Bonds was an annulment of the first con-
ract, and 4 substitution in place thereof of an en-
rely new and distinct contract with the Govern
tent. The provision of the first contract as TO inter t
st vas not incorporated in the second, and therefore
rms no part Of it. ! Bond, if its terms are intelli-
ible, must explain itself, and its terms are not to be
nlarged or narrowed in their effect by parole, prior
r cortemporaneous evidence. All these Bonds it
i'll be observed, are negotiable, and holders are re-
uired to look no further than to see that they are {
The Government in buying up the first
onds, neither gave the same securities with the first
ouds, nor left the uncertainty attendant upon pri-
lte securities.
The interest on Bonds is not a dividend" nor, 1
cLo,lJ NV part Of tho f1p1 approp-ia tad 70 Il