Public ledger. [volume] (Memphis, Tenn.) 1865-1893, 1880-09-13
JUDGE HOADLEY's OPINION
And the Act Of Is6O-Mighty In
teresIing Reading.
Iemnhis Aynlnnche, July Sth. 1s7g.l


Memphis Avalanche, July 9Th. 1871
Judge Hoadley, in arguing the
question Of the liability of the rail
roads to the holders of their bonds,
contends that:
First. The bonds are charged on
the property thereof, not secured by a
separate instrument, but they are the
security as well as the evidence of
debt.
Secondly. The declared object is to
secure payment.
Thirdly. Payment by the company.
Fourthly. Payment when due.
These denote that the surety has
required the party who, at least as be-
tween themselves, is the real prinei-
pal to create a fund to secure the pay
ment of the debt by such principal to
the creditor, when his right to demand
1t shall mature.
If the company fail or refuse to pay
any of said bonds when they fall due
(of course to the holders), the attorney
general is to file a bill against the
company in the name of the state. OBJ
serve that no provision whatever is
made that the state shall then pay and
file her bill. The state is a surety
holding a trust mortgage; she makes
no provision whatever for payment by
herself-but at least as a trustee
should, she does not omit to enforce
the trust. And the court is directed
to perform, not the Office Of requiring
the company to furnish indemnity
merely, but its function is twofold,
to make all such. orders aud DEGREES
az may be deemed necessary Ito re-
ceive the payment of said bonds, with
the interest thereon, and to indemnify
the state Of Tennessee against any loss
on account of the issuance of said
bonds" by ordering the sale Of said
railroad, etc. Receive" from whom?
Obviously from the company. From
funds, how supplied? Evidently, by
the sale Of the road. Receive" what?
Payment and indemnity. Payment of
the bonds-paymentf for the holder
indemnity for the state for whatever
costs and loss or damages such pay
menRdoes not provide for. Receive,
for whom2 Obviously for the cred
itor.
If there were any doubt left as to
the meaning of these parties, section
7 removes il. A sinking fund Is pro.
vided, of money Of the company to be
expended in the r~e-puFohase Of Ten
nessee state bonds--sueh as have been
issued to the re-purchasing company,
to be a credit on the bonds issued to
that company, and cancelled; the
others to be likewise "a credit as be.
tween the state and said company
and they, and "the interest accruine
thereon, from time to time, shall be
held and used by the state as a sinking
fund, for the payment Of the bonds
issued to the company"
Why this distinction between bonds
issued to the particular company re.
purchasing for sinking fund purposes
and bonds Of other c~lasses-othel
state bonds, bonds issued to Other
companies2 Manifestly, BECAUSE o.
this sinking fund, as Of the lien, tn,
/, state is a trustee for the benefit o.
/, the bondholders, How else could il
be a sinking fund at alp
1t Is very pertinent to this discus
sion to say that under the act of 1852
the railroad companies were required
| TO pay one per cent Of the bonds is
/. sued 20 them, to a sinking fund TO re
tire the bonds. This one per cen
was to be paid five years after tn,
= completion Of the railroad receiving
: the bonds, But in 1860 the legisla
ture passed a law requiring q pc
cent, and for the information Of tn.
= public, we subjoin the act in full.
| dissection i. Be it enacted by tn.
general assembly Of the state Of Ten
9 nessee: That the money or the bond
1 that have heretofore or may be pal,
: by cities and railroad companies i
9 this state'to the sinking fund commits
: %sioner, by the first day Of January
e 1860, together with the Accruing in