Public ledger. [volume] (Memphis, Tenn.) 1865-1893, 1883-01-02
IMPORTANT DECISION
Arkansaw Not Liable for Railroad
Aid Bonds.
Decision of Judge Caldwell OF
the Y. y. Circnit Court.
Little Rock Democrat. 30.

lAiLtte ROCK Anu II Oft Dmtbn Railroad
Company, pending in the United
States Court, has been watched with
no little interest, because it is test
case Of the real liability produced By
what is known as the Railroad Aid
Bonds issued by the State to help
build certain railroads.
The opinion rendered by Judge
Caldwell aud cOneurred in By Judge
McCrary, is very explicit, giving full
discussion OF all the points of law
bearing on the case.
First. The court holds that the act
Of the Legislature under which the
bonds we're issued to the railroad
company, created statutory mortgage
or lien upon the railroad and its earn
ings and income to secure the payment
Of the principal aud Interest Of the
State bonds
Secoud That this statutory lien to
secure the payment of principal and
interest Of the State bonds is prior in
part Of time and superior TO the mort.
gage under which tie present defend.
ant acquires title TO the road and that
the statutory lien to secure the State
bonds took effect at the date of the
award o. State aid to the company by
the Board Of Railroad Commission
eTs.
Following is the language of the
Court regarding tbe point most vital
70 the interests OF the State.
The State issued bonds and deliy.
cred them to the company in accord
ance with the statutory contract to an
amount oegregeting ore million of
dollars. These bonds we're put upon
the market and sold by the company
tor money which was used to build its
road as contemplated BY the act. After
wards,and in 1877, tho Supreme Court
Of the State decided that the provis
ious Of the act OF 1868. providing
tor holding an election TO take the
sense Of the people on the question OF
lOaning the credit Of the State as
therein provided, we're not in force
when the election was held; and that
the consent Of the psople to suoh loan
not having been expressed through
the ballot box" as required BY section
g OF article 10 of the constitution, at
an e lection held in pursuance Of law,
the bonds we're void and imposed no
obligation on the State.-State VS..
Little Rock, Mississippi River aud
Texas Railway Company, 81 Ark,
70l. =
Assuming, but not deciding, that
he ruling OF the Supreme Court of
the State 10 the case last cited is a
sound exposition of the law, or that
whe her so or not, it is bindlug on
this court; We will proceed TO ip
quire int9 the relative rights and
obligations OF the bona fde holders
Of the State bonds and the railroad
company ander the acts, in the light
Of that decision, The holders of the
bends NeFe not in the case anl the
question Of their rights and the effect
df tie decision on the statutory lien
Tor the payment of the bonds vac not
discu sed or decided. The ceurt at
the conclusion Of the opinion in that
case, are careful "a say The question
Of lieG upon the road and its effects,
need not be considered" P"
We are spared the necessity Of
extended discusalen or indeed Of any
discussion at all. Of the remaining
questions in this case. They have all
been decided by the Supreme Court
OF :he United States in RaiIroad com
panies, VS.. Schultz, l03, U, s. lis.
The State Of Florida, like the
State OF Arkansaw, conceived the idea
Of aiding In the construction of rail
roads within the State By loaning its
negotiable bonds to railroad compan. +.
les. In the Florida case, like the case
at the bar, the railroad companies
we're to pay the interest and principal
OF the State bends, and performance
Of this obligation was secured by a
statutory lien on the roads. After the
bonds had been issued and negotiated
| by tho companies receiving them, thC
lSlpreme Court of that State decided
| they were unconstitutional and void
| and imposed no obligation on the State
| but the court also decided that this die
not relieve the railroad companies
from their obligations to pay tn.
bonds, and that the statutory lien wal
good and could be enforced agains
the company by tho bona fide holder
of the State bonds State of Blorid,
VS.. Florida Central Railroad Company
10 Florida, $50; Trustees of the I'm
, provement Fund VS.. jacksonville
Pensacola and Mobile Railroad Com
pany, IS Ib. 7OS.
subsequently a suit brought BY tn
holders OF State bonds against tn
} railroad companies to compel paymen
! Of the bonds and foreclose the statu
tory lien created to secure their pay
ment, came before the Supreme Cour
Of the United States railroad com
panies VS., Schultz supra and tina
Court held that the bona fide holde
: Of the State bonds could recover Ii
, amount OF the same from the railroa
companies which negotiated them. an
: we're entitled to have enforced in the
! favor the statutory lien given for the.
D security.
n The court then proceeded to sho
the Florida cases are on all iours wit
!, the case at bar, and establish ii
y proposition that the fact that Il
I, bonds are not binding obligations
|, the State, does not excuse the railros
4 company from paying them to the ho
: der, according to the terms of its col
. tract with the State. That the con
;, pany having received and negotiate
y the bonds which contained recitaIs
the ~effect that they were lawful
issued in pursuance Of an act of Il
legislature, approved by a vote of Il
/ people, it is bound By sueh reeita
I, aud is stopped in suit between Il
!. company and the bondholder, fro
deayiDg that the act created a val
= lien on Us road, to secure the paymeI
e Of tn bonds, that .he debt repr
. 1 A ~ =.