The news & observer. [volume] (Raleigh, N.C.) 1894-current, 1902-12-19
Governor Russell's Message.

Certain holders of State bonds. claim
ing second mortgage in the States stock
in the North Carolina Railroad Company.
have presented to the Governor a memo
rial, with the request that he will COM
municate it to the General Assembly
These parties have the right of petition
which they can exercise by a direct me-
mortal addressed to your Honorable
Body.
The contention of these bondholders
seems to be substantially as follows
That they own bonds amounting in round
numbers to $250,0O0 principal and $500 900
interest; that these bonds were issued
to the Western North Carolina Railroad
Company under the Act of February. 1856,
as amended by the Act of December 1866;
that by the Act of 1866 these bonds were
secured by statutory mortgage on the
States stock in the North Carolina Rail-
road Company to the extent of an amount
of the par of the States stock equal to
the par of said bonds; that by the Acts
of 1849 and of 1856 the 10000 shares of
stock owned by the State (three millions
par and now worth at market prices about
five millions of dollars) were mortgaged
to secure the Construction of First Mort
gage Bonds; that the amount Of these
mortgage bonds now outstanding is 81
100000 that these bonds, issued under
the Acts of 1S49 and 1855, fell due in or
about the years 1880 to 1885; that In
1880 the State entered into an agreement
with the holders of the first mortgage
bonds by which new per cent bonds
We're to be issued to mature in 1919, such
new bonds to be an extension of the
old bonds, and to hold on the States
stock the same lien or security as that
which appertained to the old bonds:
that the holders of the second mortgage
bonds acquired them before the maturity
of the first mortgage bonds, and thereby
took the right to pay off the first mort
gage bonds at their maturity. and that
the mortgagor, the State, and the first
mortgages, could not lawfully enter into
an agreement for the extension of the
first mortgage bonds without the consent
of the second mortgages: that the hold
ers of the second mortgage bonds were
not parties to the agreement for the ex-
tension of the first mortgage bonds and
that they now have the right in law to
pay off the first mortgage bonds and en-
force their own lien against the States
stock for the payment of their own Sec
State to waive its sovereign immunity
from suit and submit itself to the courts.
to the end that the rights of the parties
may be determined. and they seek to
show that if the courts hold in their
favor the State would not only paw off
what they claim is an honest debt, but
would also save very large amount
of money by being released from the
0I,1 20
s2.720,000 for nineteen years, when it
can and does borrow money for much
less than 4 per cent a year.
In the State Compromise Debt Law CT
1879 the second mortgage bonds are
scheduled at twenty-five cents on the
dollar of the principal, and they are now
fundable in new per cents at this rate.
If the State should submit this matter
to the courts, and the courts should hold
in favor of the views OF the second mort
gage bondholders, and if these second
mortgage bondholders should agree that
in case the courts should decree in theI
favor, they would surrender their bonds
by taking not more than 100000 out of
the proceeds of the sale of the States
stock, it would require in round num-
hers about three millions of dollars to
pay off the two mortgages This would
leave the State still holding unincumber-
cd stock worth about two millions on the
market. Our State. by purchasing at the
judicial sale, could retain all its stock
and borrow the three millions by the
issue of bonds at very low rate of in
terest. probably Sk per cent.
1t is to be remembered that these first