Evening star. [volume] (Washington, D.C.) 1854-1972, 1904-05-11
REP UD|ATEO BONDS
Trying to Collect OldSouthern
Obligations.
SUPREME COURTRULING
OTHER STATES MAY FOLLOW
SOUTH DAKOTA.
Effort of New Workers. to Get Rid OF
paper" Now Worth
Little.

was ever handed down by the supreme
Court of the United States than the recent
one in which the state of South Dakota Is
given judgment against the state of North
Carolina for the sum of $27, 400, and 1t
is decreed that If North Carolina does not
pay shall be treated like any ordinary
debtor-certain property Of hers shall be
seized and sold by the marshal of the
United States "at the east front door of the
Capitol building in Washington"
There is long story behind this very
unusual judgment of a state against q
state 1t begins when Mr.. Simon Scha fer,
broker in Wall street, New York, ad-
dressed to the officials of the state Of
South Dakota a letter in which he said that
he wished to make present to the state
of ten bonds, issued by North Carolina.
The bonds were sent with the letter, and
the generous giver limited that if South
Dakota succeeded In collecting the money
on these bonds other gifts of the same KIND
might follow. The letter ended by saying
that 1.-The donors of these ten bonds would
be pleased If the legislature of South Da-
kota should apply the proceeds of these
bonds to the state university or to some or
its asylums or other charities"
Inasmuch as Wall street brokers are not
in the habit of giving bonds to states, IL
appeared there was something back OF TINS
letter. The secret is this: North Carolina
had issued these bonds thirty-hve years
ago to build a railroad; later the state
found itself poverty-stricken and refused
to pay Mr.. Schafer his money. When he
and other bondholders like him, tried 10
collect his money he found that the consul
tuition OF the United States iorblds an IN
dividual suing a state government. II
state government owes one money and does
not want to pay 1t one is In the slang
phrase of the day, up against II. But
the Constitution permits one state govern
hi 10
street broker gave his bonds to South Da-
kota While he would get no money out CT
the transaction himself. he would have the
satisfaction Of the ANGRY creditor VINO
saws to his lawyer, Collect this money ana
keep what you get" Then, too, while this
broker gave ten OF his bonds away, he Kept
back a great many more than ten' ana as
the Supreme Court pointed out In hanolng
down this decision, undoubtedly Mr. Scha,
fer hoped when he made the gift he would
profit in some indirect way by South Da-
kOta's suit.
The gift was so unusual that South Da-
kota was without the necessary law On re
statute books to accept it. Any other state
would find itself today In the same sltua-
ton, SO unusual are such gifts. But Soutn
Dakota passed IAN act to require the ac-
ceptance and collections Of grants, devlses
beQuests donations and assignments 10 'he
state of South Dakota"
With this statute it accepted the g1ft,
hired lawyers and brought suit against
North Carolina. North Carolina Defended
and the issue was heard some months ago
That it was a difficult case to decide is
proved by the long period the court TOOK
to consider it and by the fact that four JUS
tices dissented But finally the court did
hand down the decision quoted above
Millions in Outstanding Bonds.
Now, a very important phase of this case
is the fact that not only North Carolina,
but ten other southern states as we'll, have
millions and millions of dollars in similar
bonds outstanding. Shortly before the
civil war and, in some cases, Immediately
after the war the southern states wished
to build railroads and to make other public
improvements To do this they borrowed
money on an enormous scale. Then, in
many cases, the railroads turned out UNI
profitable Then, too, the states were i'm
poverished by the freeing of the slaves and
by the ravages of the war.
When this happened it became hard work
for the states to pay, so they simply and
fatty refused. This course made the small
investors in the north and in England who
had paid their money for these bonds in
good faith and in reliance upon the prom
Use of the southern states angry, and they
poured volumes of abuse at the states
which repudiated through the columns of
newspapers and on public platforms But
nothing could be done, for the constitu-
tional reason already stated. 1t is fully
twenty years since all this happened. The
bondholders have long regarded their
money as utterly lost; but the present de-
cision, which shows that some of these re-
pudiated bonds at least can be put to some
slight use, will undoubtedly revive the
whole question.
Just how many there are of these repu-
dated bonds 1t is doubtful if even the
states themselves know. When they re-
fused to pay, they ceased to keep any
books referring to the matter About
twenty years ago a broker estimated the
amounts issued by the various states, as
follows:
Arkansas ...........................$ $40 SO7 600
Florida ACKNOWLEDGEMENTS 81 go 600