The news & observer. [volume] (Raleigh, N.C.) 1894-current, 1903-04-15
Hon. George Rountree Fol-
lowed Judge Peckham.
JURISDICTION is DENIED
Contentious Of Second Mortgage BondhoIders,
Represented by Dan Russell and
Marion Butler, Smack Little
of Ginger.
(By the Associated Press.)

Washington April 14.-The United
States Supreme Court heard argument in
the case of the State of South Dakota
VS.. the State of North Carolina involving
the legality of bonds issued by the lat
ter State In 1866 to aid the construction
of the North Carolina Railroad Origi-
gate to s2,50O,OOO, but all but $250, 900 of
them, which were owned by New York
parties, weer compromised. OF the bonds
which were not thus settled $4,000 north
were presented to the Educational Fund
OF South Dakota for the purpose, it is
claimed by the legal representatives of
North Carolina, of giving the Federal Su-
preme Court original jurisdiction. The
case was argued for South Dakota by
Wheeler III. Peckham, and for North
Carolina by George Rountree, j. II. ,Mer-
rimon and James E. Shepherd. North
Carolina contests the suit on the ground
that the bonds were not legally issued
and also challenges the jurisdiction of the
court.
RUSSELL BUTLER ARGUMENT.
The argument of the second mortgage
bondholders. as set forth in the brief OF
their counsel. Alfred Russell, Marion But
Ter and Daniel l.. Russell, is first upon
the right OF second mortgages to redeem
On this point the brief says:
annqarc that Tho dnfopdant
at the time of making the mortgage. was
the owner of 10000 shares of stock of the
par value OF $4,000, 900, and that the
mortgage was of such an amount of
stock as should equal at par the par of
bonds to be issued in aid of the Western
North Carolina Railroad. 1t also appears
that at the time of this mortgage the
States 10000 shares was subject to a /
first mortgage to secure per cent. thirty
year bonds for $3,000,000, which are
known as first mortgage bonds so that
the bond issue some of which is owned |
by the plaintiff State, Is secured by a |
second mortgage upon the stock
The first mortgage bonds matured in |
1872 some years subsequent to the issue
or the second mortgage bonds, and, OF |
course, the second mortgage bond hold |
ers had right to redeem the first mort
gage.
Under those circumstances, the de- |
fendant State, in 1879, passed an act to |
renew the first mortgage bonds by the
issuance of a forty year bond at per |
cent, to stand in the place of the
original first mortgage bonds; it being
provided that the new bonds were not an |
extinguishment OF the old bonds, but a |
renewal and extension of the same. and
without prejudice to the old bonds 1t |
further appears that, nevertheless, the |
old bonds we're surrendered by their hold |
ers and delivered up to the State. an6
were destroyed and cancelled so that
the forty year bonds were in fact new
bonds; so that there was surrender and |
cancellation of the whole issue of the
old bonds by their holders and an ac-
eeptance by them OF new bonds for a diff |
ferent amount.
The holders of the second mortgagel
bonds were not parties to and did not
consent to the alleged extension of the
nrst mortgage bonds; and So if the
hrst mortgage bonds were not actualiyi
extlnguished. but were, as is claimed hyi
the holders and by the defendant STATE,
simply extended as respects the time of
thelr maturity, then the extension as re-
spects the holders OF the second mort
gage bonds was ineffective. The maturi-
" OF the first mortgage could not bel
postponed without the consent of the
second mortgages, who possessed a vested
rlght to pay off and discharge the first |
mortgage, according to its terms con-
corning maturity. But if the first mort
gage bonds were not extended. but were
actually extingushed, then the second
mortgage, held by the plaintiff State and
the other holders of the same issue of
bonds. is a first mortgage"
On the subject of parties to the suit |
ii is contended that "In any aspect of the
case, the first and second mortgage bond
holders, upon the general principles of
equity. being interested in the funds |
must be made parties to the suit"
The brief says further on this point
This bill necessarily makes the seniorl
mortgages parties. as it seeks a sale of |
the stock free from membranes: lnd
1t is in effect bill to foreclose the sec
ond mortgage and to redeem the first
mortgage
The plaintiff State, bringing all per-
sons in interest before the Court and
both mortgages being overdue and all
bondholders being proportionally interest
ed. seeks a sale OF the mortgaged prop
erty. This. under the rules of equity. II
is required to do for the purpose of col
lecting its own debt
Another contention is that the second
mortgage is in solido and not a sepa arate
and independent mortgage after shares
for each bond that this mortgage In
equity, stands as security for all the
bonds, and that the bonds. being sold to
different persons. the mortgage stllt
stands for all the bonds. pro rata. Act