Source: https://supreme.justia.com/cases/federal/us/114/663/
Timestamp: 2019-04-23 04:33:23+00:00

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Justia › US Law › US Case Law › US Supreme Court › Volume 114 › Stevens v. Memphis & Charleston R. Co.
The Legislature of the State of Tennessee, on the 11th of February, 1852, enacted a law "to establish a system of internal improvements," in which it was provided that the state should issue to certain railroad companies therein named its negotiable coupon bonds, and that when the respective roads should be completed, the state should be invested with a lien upon each road and its superstructure and equipment, "for the payment of all of said bonds issued to the company as provided in this act, and for the interest accruing on said bonds." Held, in view of other provisions in the act and of the practical construction put upon it, that the lien thereby created was created to secure payment to the amount of indebtedness it thus undertook to incur, and not payment to the holders of the state bonds thus agreed to be issued, and that the state could accept payment in other mode or modes than those pointed out by the act or acts creating the lien, and could cause the property to be released from it, either by legislation or by foreclosure under the statute, while the bonds issued to the company for the construction of the road released or foreclosed were still outstanding and unpaid.
Hand v. Savannah & Charleston Railroad Co., 13 S.C. 314, distinguished from this case.
Sinking Fund Cases, 99 U. S. 700, distinguished from this case.
The relation of principal debtor and creditor at no time existed under the acts of the Legislature of Tennessee referred to in the opinion of the Court between the railroad companies and the holders of the state bonds issued under the act, nor did the state at any time under those acts hold the relation of surety toward such holders; the state was at the outset and remained the sole debtor bound on the bonds.
the Governor of the state that said subscriptions are good and solvent, and whenever said company shall have graded, bridged, and shall have ready to put down the necessary timbers for the reception of rails, and fully prepared a section of thirty miles of said road at either terminus, in a good and substantial manner with good materials, for putting on the iron rails and equipments, and the Governor shall be notified of these facts, and that said section, or any part thereof, is not subject to any lien whatever other than those created in favor of the state by the acts of 1851-1852, by the written affidavit of the chief engineers and president of said company, together with the written affidavit of a competent engineer by him appointed at the cost of the company, to examine said section, then said Governor shall issue to said company coupon bonds of the State of Tennessee, to an amount not exceeding eight thousand dollars per mile on said section, and on no other condition, which bonds shall be payable at such place in the United States as the president of the company may designate, bearing an interest of six percent per annum, payable semiannually, and not having more than forty nor less than thirty years to mature."
"SEC. 2. Be it enacted that the bonds before specified shall not be used by said company for any other purpose than for procuring the iron rails, chairs, spikes, and equipments for said section of said road and for putting down said iron rails, and the Governor shall not issue the same unless upon the affidavit of said president and a resolution of a majority of the board of directors, for the time being, that said bonds shall not be used for any other purpose than for procuring the said iron rails, chairs, spikes, and equipments for said section and for putting down said iron rails, and the Governor shall have power to appoint a commissioner to act under oath in conjunction with said president in negotiating said bonds for the purposes aforesaid and to act in any other matters pertaining to said company where the interest of the state, in the opinion of the Governor, may require it."
aforesaid, they shall constitute a lien upon said section so prepared as aforesaid, including the roadbed, right of way, grading, bridges, and masonry, upon all the stock subscribed for in said company and upon said iron rails, chairs, spikes, and equipments when purchased and delivered, and the State of Tennessee, upon the issuance of said bonds and by virtue of the same, shall be invested with said lien or mortgage without a deed from the company for the payment by said company of said bonds, with the interest thereon as the same becomes due."
rails, spikes, chairs, and the whole superstructure and equipments, and all the property owned by the company as incident to or necessary for its business, and all depots and depot stations, for the payment of all of said bonds issued to the company as provided in this act and for the interest accruing on said bonds. And after the Governor shall have issued bonds for the first section of the road, it shall not be lawful for the said company to give, create, or convey to any person or persons or body corporate whatever any lien, encumbrance, or mortgage of any kind which shall have priority over or come in conflict with the lien of the state herein secured, and any such lien, encumbrance, or mortgage shall be null and void as against said lien or mortgage of the state, and the said lien or mortgage of the state shall have priority over all other claims existing or to exist against said company."
through which said road shall run, commanding them to take possession of said road, fixtures, and equipments and everything pertaining thereto and place the said receiver in full and complete possession of the same, and said receiver so appointed shall continue in the possession of said road, fixtures, and equipments and run the same and manage the entire road until a sufficient sum shall be realized, exclusive of the costs and expenses incident to said proceedings, to pay off and discharge the interest as aforesaid due on said bonds, which being done, the receiver shall surrender said road and fixtures and equipments to said company. The Comptroller shall from time to time settle the accounts with the receiver, and the balance shall be deposited in the Treasury of the state. The Comptroller is authorized, and it is made his duty, upon his warrant to draw from the Treasury any sum of money necessary to meet the interest on such bonds as may not be provided for by the company as provided for in this act, and the Comptroller shall report thereof to the General Assembly from time to time."
"SEC. 6. Be it enacted that if said company shall fail or refuse to pay any of said bonds when they fall due, it shall be the duty of the Governor to notify the Attorney General of the district in which is situated the place of business of said company of the fact, and thereupon said Attorney General shall forthwith file a bill against said company, in the name of the State of Tennessee, in the chancery or circuit court of the county in which is situated said place of business, setting forth the facts, and thereupon said court shall make all such orders and decrees in said cause as may be deemed necessary by the court to secure 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 said railroad to be placed in the hands of a receiver, ordering the sale of said road and all the property and assets attached thereto or belonging to said company, or in such other manner as the court may deem best for the interest of the state."
percent per annum upon the amount of bonds issued to the company, and shall use the same in the purchase of bonds of the State of Tennessee, which bonds the company shall pay into the Treasury of the state, after assigning them to the Governor, and for which the Governor shall give said company a receipt, and, as between the state and said company, the bonds so paid in shall be a credit on the bonds issued to the company, and bonds so paid in, and the interest accruing 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, and should said company repurchase any of the bonds issued to it under the provisions of this act, they shall be a credit as aforesaid and cancelled. And should said company fail to comply with the provisions of this section, it shall be proceeded against as provided in the fifth section of this act."
"SEC. 10. Be it enacted that the provisions of this act shall extend to and embrace the Chattanooga, Harrison, Georgetown and Charlestown Railroad Company, the Nashville and Northwestern Railroad Company, the Louisville and Nashville Railroad Company, the Southwestern Railroad Company, the McMinnville and Manchester Railroad Company, the Memphis and Charleston Railroad Company, the Nashville and Southern Railroad Company, the Mobile and Ohio Railroad Company, the Nashville and Memphis Railroad Company, the Nashville and Cincinnati Railroad Company, the East Tennessee and Georgia Railroad Company, the Memphis, Clarksville, and Louisville Railroad Company, and the Winchester and Alabama Railroad Company, so far as the main trunk roads to be constructed by said companies lie with the limits of this state, and not otherwise, and said companies shall have all the powers and privileges and be subject to all the restrictions and liabilities contained in this act. . . ."
of this act, but in such manner as not to impair the vested rights of the stockholders of the companies."
"SEC. 13. Be it enacted that it shall be the duty of the Governor from time to time, when there shall be reliable information given to him that any railroad company shall have fraudulently obtained the issuance of bonds of the state or shall have obtained any of said bonds contrary to the provisions of this act, he shall notify the Attorney General of this state, whose duty it shall be forthwith to institute, in the name of the state, a suit in the circuit or chancery court of the county of the place of business of the company setting forth the facts. And when the fact shall satisfactorily appear to the court that any of said bonds shall have been fraudulently obtained or obtained contrary to the true intent, meaning, and provisions of this act, then and in such case the court shall order, adjudge, and decree that said road, lying in the state, with all the property and assets of said company or a sufficiency thereof, shall be sold and the proceeds shall be paid into the Treasury, and it shall be the duty of the Comptroller immediately to vest the same in stocks, creating a sinking fund, as provided for in the seventh section of this act. And said company shall forfeit all rights and privileges under the provisions of this act, and the stockholders thereof shall be individually liable for the payment of the bonds so fraudulently obtained by such company, and for all other losses that may fall upon the state in consequence of the commission of any other fraud by such company, excepting such stockholders as may show to the said court that they were ignorant of or opposed to the perpetration of such frauds by the company."
and use the same as provided for in the fifth section of this act, and said receiver shall settle with the Comptroller semiannually until the next meeting of the General Assembly."
"SEC. 7. Be it further enacted that the different internal improvement companies to whom the bonds of the state may be lent under the different acts of the present legislature shall pay the expenses of engraving and preparing the same."
"SEC. 8. Be it enacted that the Governor of the state shall cause to be engraved and printed the bonds which may be issued under the acts of the present General Assembly as a loan made to internal improvement companies, and the said bonds shall bear date on the first day of January prior to their issuance, and the coupons thereto shall be payable on the first days of January and July of each year."
"SEC. 9. Be it enacted that the coupons shall be signed and numbered by the Comptroller, and the bonds shall be countersigned, sealed, and numbered by the Secretary of State, and upon delivering said bonds to the company authorized to receive the same, the Secretary of State shall take a receipt, reciting the number, date, and amount of said bonds, in a well bound book to be deposited in his office, and the Comptroller and Secretary of State shall each be entitled to receive twenty-five cents for each bond so prepared, to be paid by the party receiving the said bond."
state two percent per annum upon all bonds which have been or may hereafter be issued or endorsed as aforesaid as a sinking fund for the ultimate redemption of the bonds issued or endorsed as aforesaid, which sinking fund, when paid over, the Governor, Comptroller of the Treasury, and president of the Bank of Tennessee shall invest in the bonds of the state, and reinvest all accruing interest in like securities, and they are hereby constituted a Board of Commissioners for the management, government, and control of said sinking fund."
"SEC. 6. Be it further enacted that should any of said railroad companies fail or refuse to comply with the provisions of the fifth section of this act, it shall be the duty of the Governor forthwith to notify the Attorney General of the district in which is situated the place of business of said company failing or refusing as aforesaid, of the fact, and thereupon the Attorney General shall immediately proceed against said company to collect said sinking fund in the manner prescribed in the sixth section of an act entitled 'An act to establish a system of internal improvements in this state,' passed February 11, 1852."
"SEC. 1. Be it enacted by the General Assembly of Tennessee that the money or bonds that have heretofore or may be paid by the cities or railroad companies in this state to the sinking fund commissioners by the first of January, 1860, together with the accruing interest thereon to that date, shall be passed directly to the credit of the party having so paid the same, and be a release to said party for that amount on the debt due by them to the State of Tennessee."
state bonds, they shall be cancelled and filed in the office of the Secretary of State as hereinafter provided."
"SEC. 3. That after the first day of January, 1860, all railroad companies or city corporations who have or may hereafter receive the bonds of the state or its endorsement of their own under the general internal improvement law of this state or any other law, shall be required to pay two and one-half percent per annum as a sinking fund on the amount of the bonds so issued or endorsed by the state for said company or corporation, to be paid in equal installments on the first days of April and October, five years after the date of said bonds, and annually thereafter."
"SEC. 4. All bonds issued during any one year shall be dated on the first day of January of that year."
"SEC. 5. Said companies or corporations may pay said sinking fund in cash or in the like character of bonds that may have been issued or endorsed by the state for said company at their face or par value."
"SEC. 6. If paid in money, the commissioners shall invest it immediately in the bonds of the state, and shall have the same cancelled and filed as heretofore provided. Such bonds are to be of the same character as those issued to such company or corporation."
"SEC. 7. The sinking fund, when paid, in all cases shall be passed directly to the credit of said company or corporation and be a release to said company or corporation from that amount due by them to the state. The commissioners shall issue a receipt to each company or corporation for such payment, retaining a duplicate in a well bound book kept for that purpose."
"SEC. 8. Each and every railroad company or city corporation shall provide the interest semiannually, as now provided by law, on the amount of bonds unpaid at the time said interest falls due, and not on the original amount issued to or endorsed by the state for said company as heretofore provided."
said company or corporation by the state and crediting them by the amount of sinking fund paid, and shall furnish the Treasurer of state a statement of the amount due by each company or corporation on the first of June and December of each year, that he may know how much interest each company or corporation has to pay."
"SEC. 10. The Commissioners of the Sinking Fund shall cancel all bonds of the state as soon as paid in or purchased by cutting out the Governor's and Secretary of State's names, and so defacing each coupon that it cannot by possibility be used or circulated, and shall file the same in the Secretary of State's office."
"SEC. 11. This law shall be in full force from and after its passage, and shall repeal all laws in conflict with it, but shall not be so construed as otherwise to affect any law on the subject of the sinking fund or the payment of interest due on state or endorsed bonds."
"No. ___ UNITED STATES OF AMERICA No. ___"
"Know all men by these presents that the State of Tennessee acknowledges to owe to , or order, one thousand dollars of the lawful money of the United States of America, which the said state promises to pay in the City of New York, on the ___ day of _____, 18__, with interest thereon at the rate of six percent per annum, according to the tenor, and upon the presentation, of the coupons hereunto attached. For the payments of said sums of money, and the interest thereon at the times and places, and in the manner aforesaid, the faith of the said State of Tennessee is irrevocably pledged, this bond being issued in pursuance and by authority of an Act of the General Assembly of said state passed February 11, 1852, to establish a system of internal improvements in said state."
I, _____ _____, Governor of the State of Tennessee, have hereunto subscribed my name officially and caused the same to be countersigned by the Secretary of State, with the great seal of the state affixed."
"[ ] Done at the Executive Department in the City of Nashville this __ day of _____, 18__."
"30 THE TREASURER OF THE STATE OF TENNESSEE 30"
"Will pay the bearer THIRTY DOLLARS, in the City of New York, on the __ day of ______, 1877, being the semiannual interest then falling due on bond No. _____."
Upon the issue of the bonds, receipts were executed by the companies, respectively, in the form required by the statute, in a well bound book deposited in the office of the Secretary of State. The bonds, after their delivery, were sold in the market by the respective companies in conjunction with the state commissioner, and the proceeds used in the way contemplated by the statute.
"Whereas under the general internal improvement laws of the state passed from time to time, aid has been granted to various railroad companies by the loaning of the six percent bonds of the state to enable said companies to iron, equip, build, and bridge, and for other purposes, which is now secured to the state by a first mortgage or lien on the franchise, property, and fixtures of respective railroad companies, and"
"Whereas it is desirable for the general welfare of the state that the state shall be reimbursed such amounts as have been advanced to the different railroad companies as fast as may be practicable, therefore,"
"SECTION 1. Be it enacted by the General Assembly of the State of Tennessee that the respective railroad companies, or either of them that have created indebtedness to the state, are hereby authorized to repay any amount of the principal of such indebtedness as they have respectively created in the bonds of the state in such amount and at such times as may be practicable, provided however that nothing in this act shall be so construed as to release said railroad companies from any lien which the state may have on the same for any unpaid interest now due on said bonds of the state, authorized to be surrendered by this act."
"SEC. 2. Be it further enacted that any railroad company or companies repaying any indebtedness due the state under the provision of this act are authorized to issue bonds of equal amount and denomination with the bonds of the state paid and delivered up for cancellation, as hereinafter provided, which said railroad bonds, so issued in lieu of any equal amount of state bonds, shall be certified to by the Comptroller and entered in a book to be kept for that purpose, with date, number, and amount, and shall be a lien, pro rata in amount and of equal validity and effect with the unretired part of the state indebtedness, upon such railroad, and all its property, franchises, fixtures, and material."
to consolidate their property, in whole or in part, with other railroad companies and issue bonds and stock as provided for in the second section of this act, and may adopt the corporate franchise of either of the roads as the stockholders may elect, and each railroad company paying its indebtedness, and such railroad companies as may consolidate under the provisions of this act are hereby authorized to determine by a vote of the stockholders of said company or consolidated companies the number of directors of such company and elect the same under the new organization, and that the said directors, so elected, shall, according to the bylaws and rules of said corporation, elect one of their number president of said company."
"SEC. 4. Be it further enacted that the Comptroller of the state shall receive from the railroad companies, or any of them, bonds of the state in such amounts as may be presented, and cancel the same in the presence of the officer or agent of the railroad company paying them in, and execute to the said railroad company or companies duplicate receipts for the amount and number of said bonds so paid in, and it shall further be the duty of the Comptroller to certify on the bonds of any railroad company or companies, repaying indebtedness due to the state, that the same has been paid, and that the so certified [bonds] are secured by first mortgage, provided that said railroad companies shall liquidate their indebtedness prior to the maturity of the bonds that have caused said indebtedness; and be it further provided that said bonds, when executed by the respective railroad companies or either of them, shall be deposited with the Comptroller of the state, whose duty it shall be to deliver said bonds, or any number of them, to the president and directors of the company on the deposit by said president and directors or authorized agent of an equal amount of the six percent bonds of the State of Tennessee with unpaid coupons attached, and the company's first mortgage bonds, authorized to be issued by this act, shall have no validity or value except the Comptroller's certificate is affixed on the face of each bond that said bond is executed, and issued, and by virtue of law takes the place of a bond of the state, and is the first mortgage bond. "
"SEC. 5. Be it further enacted that the Comptroller shall be entitled to a fee of one dollar on each thousand dollars of the bonds certified as aforesaid to be paid by the railroad company for which the same is done, and it shall be lawful for the Comptroller to discharge the duties imposed by this act by and through an agent in the City of New York, and all the provisions of this act shall attach to and become a part of the charter of any railroad company or companies acting under it."
"SEC. 6. Be it further enacted that by and with the consent of the board of directors of any railroad company in this state under the general improvement law passed the 11th of February, 1852, and all the amendments thereto, that any person or corporation may, by paying the indebtedness of such railroad company to the state in the bonds of the state, as provided for by law, be, and they are hereby, substituted and entitled to all the liens against said company for the payment of said debt that the state had or has by law, and the Governor and Secretary of State shall give such party or parties paying such indebtedness a certificate showing the facts, which shall be evidence against said company of such indebtedness to said individuals or corporations."
previous to and before the said payment, and with full power to enforce the same."
"SEC. 8. Be it further enacted that any person or persons who may, with the consent and approbation of any railroad company, pay any part or portion of the indebtedness of such company, as provided in sec. ___, shall have, hold, and [be] subrogated in all the rights, privileges, and lien or liens of the state to the extent of and in proportion to the amount of such indebtedness, with the same rights and privileges the state now has, to the extent of such payment or payments, provided the passage of this act shall not decrease the lien of the state upon any railroad of the state until the entire claim of the state is fully liquidated, or affect the interest of the present bondholders of the state, provided that railroad companies which have issued second mortgage bonds availing themselves of the provisions of this act shall file with the Comptroller bonds of the same series as those loaned to such company, for which the state holds a first mortgage lien, provided the bonds to be issued by the company under the provisions of this act shall not have a longer time to run than the bonds of the state thus released and cancelled."
"SEC. 9. Be it further enacted that this act shall take effect from and after its passage."
"AN ACT FOR THE PAYMENT OF THE STATE DEBT"
payment shall, to the extent made, be a full and perfect discharge of the lien which the state holds upon the property of such railroad company, held by virtue of the bonds of the state issued to such railroad company, whether they be the same bonds or the same series of bonds issued to said company under the act passed February 11, 1852, and acts amendatory thereof, or not."
"SEC. 2. Be it further enacted that railroad companies issuing their own mortgage bonds under the provisions of the act which this is intended to amend be allowed to fix the rate of interest which the said bonds of the railroad company are to bear, and all laws in conflict are hereby repealed, provided that when said railroad companies owe interest already due, coupons past due shall be taken by the Comptroller or Treasurer in discharge of such indebtedness for interest."
"SEC. 3. Be it further enacted that when any company, under the provisions of this act, shall pay into the Treasury of the state bonds which have been issued by the state to said company, the said bonds shall be cancelled; but should any company, in discharge of its own debts, pay into the Treasury any bonds that were issued to other companies that may still be indebted to the state, such bonds so paid in shall not be cancelled, but shall be held by the state as purchased bonds, retaining a lien for the state upon the road to which said bonds were originally issued until the debt of said road to the state shall be fully discharged when the bonds so held shall be cancelled, provided that the provisions of this act shall not be so construed as to allow the payment and satisfaction of debts created by bonds issued by the state, and upon which the state is secondarily liable, nor to the payment of the sinking fund, now required by law, of the railroad companies of this state."
"SEC. 4. Be it further enacted that this act shall take effect from and after its passage."
the Nashville, Chattanooga and St. Louis Railroad Company, the East Tennessee, Virginia and Georgia Railroad Company, the Chicago, St. Louis and New Orleans Railroad Company, the Memphis and Tennessee Railroad Company, and the Mobile and Ohio Railroad Company, by the use of substitution bonds or otherwise, obtained from the state a discharge of the liens upon their property under the Act of February 11, 1852, and the acts amendatory thereof, so far as the state had the right to execute such a discharge. In doing so, however they used to some extent, other state bonds than those which were issued to them originally under the provisions of the act. The bonds so issued and not returned to the state constitute the causes of action on which these suits are brought against the companies above named.
"Whereas, in the recent attempt to sell the state's interest in said roads, various legal questions arose, presenting serious obstacles to a sale under the act of 1870, which it is deemed expedient and necessary to obviate before the interest of the state in said roads shall be again offered for sale, and whereas, by the act of 1852, c. 151, section 12, the right is expressly reserved to the state to enact all such laws in the future as should be deemed necessary to protect the interest of the state, and to secure the state against any loss in consequence of the issuance of bonds under the provisions of said act, in such manner as not to impair the vested rights of stockholders of the companies,"
rights, privileges, and immunities appertaining to the franchises so sold under its act of incorporation and the amendments thereto, and the general improvement law of the state and acts amendatory thereof, shall be transferred to and vest in such purchaser, and the purchaser shall hold said franchise subject to all liens and liabilities in favor of the state, as now provided by law, against the railroad companies."
"as far as may be necessary to secure the purchase money as aforesaid, and the other rights of the state under the decree in this cause and the said acts of the legislature."
Payments of the purchase money were made in bonds of the State of Tennessee without distinction. Bonds of the state, issued to the companies that constructed the foreclosed roads, not taken up at these sales or otherwise by the state, are the causes of action embraced in the suits against the last-named companies, and the defendants in those suits now claim the property under the purchases at the foreclosure sales, free of all liens in favor of the state or its bondholders.
The circuit courts dismissed the bills in all the suits, and these appeals were taken from the several decrees to that effect.
The question which lies at the foundation of all these suits is whether the statutory lien with which the State of Tennessee was invested upon the issue of its bonds to railroad companies under the internal improvement Act of February 11, 1852, and the several acts amendatory thereof, bound the property of the company to which the issue was made for the payment of the bonds so issued and the interest thereon to the several holders thereof, or only to the state, for if to the state alone, it is conceded the lien has been discharged, and is no longer operative. The precise point of the inquiry is for whose benefit the lien was created. Was it the state, or the bondholders, or both the state and the bondholders?
will, which necessarily extends the operation of the statute beyond what is required to give effect to such an intention. It may be that the legislature used the phrase "payment of the bonds and the accruing interest thereon" to express the idea of "payment to the state for the bonds," and, if it did, the statutory lien will stand only as security for such a payment.
itself, and not to secure its own pledge of faith to the bondholders by a mortgage from those to whom its credit was loaned.
Such being the subject matter of the legislation, we proceed to inquire what the payment was which the state intended to secure by the statutory lien with which it was to be invested. It was to be a payment. This implies a debt from him who pays to him who is to receive, and that when the payment is complete the debt will be discharged. It is not claimed that a borrowing company was to incur two debts by accepting a loan under the statute -- one to the state and the other to those who might become the purchasers or holders of the borrowed bonds. The obligation was to pay the bonds once, not twice, and the payment was to be made at the time and in the way provided by the law. Who, then, became the creditor of the borrowing company when it incurred its debt for the borrowed bonds? Was it the state or the bondholders?
"Contracts created by or entered into under the authority of statutes are to be interpreted according to the language used in each particular case to express the obligation assumed. . . . Every statute, like every contract, must be read by itself, and it no more follows that one statutory contract is like another than that one ordinary contract means what another does. . . . It must be determined from the language, used in each particular case what has been done or agreed to be done in that case."
Under the South Carolina statute, the primary liability for the payment of the bonds to the respective holders thereof rested on the company, and the state was bound only as surety. This was shown on the face of the bonds themselves, and the language of the statute was therefore to be construed with that as the subject matter of the legislation -- that is to say, a guarantee by the state of the obligations of the railroad company. Here, the state is the primary obligor, and the legislation is with reference to a loan of state bonds, on which the railroad companies are in no way to appear as bound. The liability of the companies grows out of the borrowing of state bonds, to be sold in the market as state bonds, and apparently nothing but state bonds. The loans were to be by the state to the companies, and the object was to secure the payment of the loans. It may well be that the same language when applied to one class of securities means one thing, and when applied to another class something else. The question now is what does it mean in this case?
"And when the whole of said road shall be completed, the State of Tennessee shall be invested with a lien . . . for the payment of all of said bonds issued to the company as provided in this act, and for the interest accruing on said bonds."
subject to the control of the state, without regard to the bondholders.
The lien was to be "for the payment of all of said bonds issued to the company, as provided for in this act, and for the interest accruing on said bonds." It was, as has been seen, to begin as soon as the bonds were put into the hands of the company, for it was then and by that act that the liability of the company under the statute was created. At that time, no one but the state could be interested in the security, and at that time clearly the lien operated only as security for the payment of the loan of the bonds. This could be made by a return of the bonds themselves, or in any other way provided in the statute. A return of the bonds to the state would not technically pay the bonds, but it would pay the loan, and thus cancel the obligation of the company to the state and discharge the lien. This brings us to the inquiry whether provision was made in the statute for payment by the company in some other way than by taking up the bonds from the several holders thereof, and if so, to whom and how.
The obligation under the statute is to pay the bonds and the interest accruing thereon. This clearly means payment of the bonds and the interest in the way provided by the statute, if there be any. As the liability of the company to pay at all grows out of the statute, it follows that if a particular mode of payment is provided for in the statute, payment in that mode is all the company can be required to make. Looking, then, to the statute, we find that provision is made in one part for the payment of interest and the enforcement of that obligation of the company, and in other parts for the payment of principal.
1. As to interest. § 5 makes it the duty of a company to deposit in the Bank of Tennessee, at least fifteen days before coupons for interest on any of the bonds issued to that company fall due, an amount of money sufficient to pay such interest, including exchange and necessary commissions, or satisfactory evidence that it has been paid or provided for. The Bank of Tennessee was established by the Act of January 19, 1838, "in the name and for the benefit of the state," and "the faith and credit of the state" were "pledged" for its support.
The state was its only stockholder, and was entitled to all the profits of its business. It was the fiscal agent of the state, and was practically the treasury in which all public moneys were kept. The state treasurer held none of the state funds in his own hands, but deposited them all in the bank, where they were placed to the credit of the "Treasurer of Tennessee," and subject to his checks drawn according to law, and countersigned by the comptroller. Other accounts connected with the financial business of the state were kept in the books of the bank, headed "Interest on state Bonds," "Interest paid on state Bonds," "Railroad Companies for Interest," and otherwise. The entries made in the books showed the amount which each railroad company paid in for interest, but the payments were all passed to the credit of the state, either in the treasurer's general account or in the account headed "Interest on State Bonds." The bank paid the interest on all state bonds without reference to the purpose for which they were issued. It had correspondents in New York and Philadelphia through whom such payments were made, and these agents took up the coupons when presented and forwarded them to the bank, by which they were handed over to the proper state officers. The moneys paid in by railroad companies for interest were sent with other moneys of the state to the New York and Philadelphia agents, by whom they were paid out upon coupons, no distinction being made as to the different kinds of bonds. The agents kept no accounts with the companies, and neither they nor the bank knew what bonds had been issued to any particular company. No attempts were made, either by the bank or its agents, to classify or identify coupons, when paid, as being coupons from bonds issued to one company or another.
bonds, but not by whom the money was furnished nor the numbers or character of the bonds on which the interest was paid. No separate accounts were kept in the treasurer's books with the different railroad companies, and, with the exception of the distinction between capitol and internal improvement bonds on his books, the treasurer paid no attention to the different kinds of bonds, but treated all as equally the obligations of the state. This was the way in which the business was done by all the companies, the bank, and the treasurer of the state, as long as the bank was in operation.
paid by and on behalf of the state, through its own agencies, to redeem its own pledges of faith to the holders of its own obligations. The company performed its whole duty to the state when it deposited in bank, subject to the control of the state, a sufficient amount of money to meet the interest which was to accrue on the state obligations fifteen days thereafter, and the expenses incident to such payment. It is true, an option was given the company to pay the interest instead of making the deposit, but this was clearly intended for the convenience of the company, and not because of any obligation the company was supposed to be under to the bondholders. Payment, therefore, by a company into the bank of a sufficient amount of money to enable the state to meet its accruing interest was, and was intended by the legislature to be, not only a payment of the interest on the bonds by the company, but the payment, and the only payment, of interest the lien created by the statute was to secure. To hold otherwise would be to decide that the legislature, while providing for a loan of the bonds of the state to corporations engaged in works of internal improvement, required the corporations to secure by liens on their own property not only the payment to the state of the interest on the loan, but also the redemption by the state of its own pledges of faith to the future holders of the state bonds that were lent. Certainly no such construction will be given to the statute unless it is imperatively demanded, and when provision is made in express terms for a payment to the state, no second payment of the same debt will be presumed to have been in the contemplation of the parties in the absence of some positive requirement to the contrary. The lien must be held to be for the security of the payment which is expressly provided for, and no other.
sum was realized from the earnings to discharge such "unpaid interest." The failure of a company to make its deposit did not relieve the state from the obligation to keep its faith and pay the interest to its bondholders at maturity. Consequently, the "unpaid interest" here referred to must have been the interest for which a deposit had not been made, and this clearly implies that the deposit was section the payment which the lien was intended to secure. Interest on the lent bonds deposited for was paid within the meaning of the statute, and that not deposited for was unpaid. A receiver was to be appointed and possession taken only when there was default on the part of the company in making its deposit. Nonpayment of interest by the state after the deposit created no such default. As the statutory remedy for the enforcement of the statutory lien must be presumed to have been intended to be commensurate with the lien itself, and this remedy was confined to cases of default in making deposits, there cannot be a doubt that it was the understanding of the legislature that a deposit for interest was a payment of interest on the bonds so far as the company was concerned, and released the company as well as its property from all further liability to the state or to anyone else which had been assumed for interest. The pledge of state faith for the performance of all state obligations under the act constituted the only security of the bondholders for the prompt payment of the interest due to them. The liens on the property of the companies stood only as security for the payment of the interest on the bonds to the state.
2. As to the principal. This is provided for in three ways: 1, by the establishment of a sinking fund, (2) by foreclosure if the company failed to pay the bonds at maturity, and (3) by foreclosure and proceedings against guilty stockholders, before maturity if an issue of bonds was obtained by fraud or contrary to the provision of the act.
bonds the company was to pay into the treasury of the state, taking a receipt therefor, and, as between the state and the company, the bonds so paid in were to be a credit on the bonds issued. The bonds paid in, and the accruing interest thereon, were to be held and used by the state as a sinking fund for the payment of the bonds issued to the company. If in this way a company repurchased and paid in any of the bonds issued to it, they were to be cancelled. Should a company fail to comply with these provisions, it was to be proceeded against, as in § 5, for a failure to pay or deposit for interest. This provision was changed by the act of 1856 so as to increase the annual payments to two percent on the amount of the issue of bonds, and to require them to be made in money, and to begin at the end of five years after the dates of the several issues. The money, when paid into the treasury, was to be invested by a Board of Sinking Fund Commissioners in bonds of the state, and all accruing interest was to be reinvested in like securities. If a company failed to comply with these provisions of the amending act, it was to be proceeded against as for a default in the payment of the bonds at maturity under § 6 of the act of 1852. Under the statutes of 1852 and 1856, the companies were not released from their obligations to provide semiannually for the payment of the accruing interest on the entire issue of bonds. That was still to be kept up notwithstanding the debt of the company to the state had been reduced by the annual payments required by § 7.
"shall be passed directly to the credit of the party having so paid the same, and be a release to said party for that amount of the debt due by them to the State of Tennessee."
The comptroller of the state was also required to open and keep a regular account with each company, charging it with the total amount of bonds originally issued to such company and crediting it with the amount of the sinking fund paid. It was also made his duty to furnish to the treasurer of state a statement of the amount due by each company on the first days of June and December in every year, "that he may know how much interest each company has to pay" -- that is, deposit -- "as now provided by law, on the amount of bonds unpaid at the time said interest falls due, and not on the original amount issued to . . . said company." Act of 1860, §§ 8, 9.
to the state for the bonds at the times and in the manner provided.
that payments to the sinking fund should release and discharge the companies pro tanto from their liability on that debt.
It is argued, however, that as these payments under all the statutes were to be held and used by the state as a sinking fund for the ultimate redemption of the issued bonds themselves from the several holders thereof, the obligation of the company to pay the bonds would not be discharged in that way, and some remarks of this Court in the Sinking Fund Cases, 99 U. S. 725, are cited as authority to that effect. The decision in that case was that the contributions to the sinking fund, then under consideration, did not pay the debts of the several companies by which the contributions were made, because that fund was established not to secure the payment of the bonds of the United States which had been lent to the companies, but the repayment to the United States, in the manner and at the time required by law, of "the amount of said bonds so issued and delivered to said company, together with the interest thereon which shall have been paid by the United States." But here the sinking fund is to be held and used by the state not to discharge the debt of the company to the state, but that of the state to its bondholders. It was established not to secure the state, but to enable the state to pay its own debts at maturity. In this way, all payments made by the companies to the state on account of the principal of the bonds were set apart and laid by under investment, so that at the appointed time they might be used by the state to redeem its own obligations. The fund in the treasury belonged to the state, and was not in any manner subject to the control of the company or to be used to pay its debt. That debt was discharged by the payments which, under the law, were put into the fund. All payments out of the sinking fund were to be made by the state on its own debts, and not on the debt of the company. A sinking fund may be, and generally is, intended as a cumulative security for the payment of the debt with which it is connected. In this case, the debt to which it belongs is that of the state, and not that of the company, which was paid so as to furnish the state with the means to create such a fund.
Reference was made in the argument to the way in which, under the act of 1852 and perhaps that of 1856, the sinking fund was to be kept and invested, and it was urged that the fund must have been intended as security for the payment of the bonds to the bondholders by the company, because if a bond issued to a particular company was bought by that company and paid into the fund, it was cancelled, while all other bonds were kept alive to be held and used by the state to take up at maturity the bonds issued to the company, which had not been so paid in. The argument seems to be that, as the purchase of a bond issued to a particular company and its payment into the fund by that company would of itself be a payment of that bond by the company both to the state and the holder, the special provision for the cancellation of such a bond, while others are to be kept alive, is indicative of a purpose not to cancel the obligation of the company under the statute until the company had not only provided the state with the means to take up all the other outstanding bonds, but until the state had itself performed its own obligations and actually taken them up. This is undoubtedly a circumstance to be considered in determining what the payment was which the state intended the company should make and for the security of which the lien was created, but it is not to our minds enough to overcome the many provisions found in the other parts of the statute which so clearly show that there was to be but one creditor of the company on account of the contemplated loans of the bonds, and that creditor the state. Whatever, therefore, satisfies that creditor under the law satisfies the debt. We cannot accede to the proposition, so much relied on by the counsel for the bondholders, that on putting out the bonds, the company occupied toward the bondholder the relation of principal debtor and the state that of surety only until the company made the prescribed payments to the state, and that after these payments were made, the relations of the parties changed so that thereafter the state was principal and the company a surety only. The debt of the company, whatever it was, continued the same in its relation to all the parties from the time it was created until it was paid.
There is nothing in the statute which contemplates any change in the obligations of the parties to wards each other. There may have been no good reason for keeping some of the state securities paid into the fund alive and directing that others should be cancelled, inasmuch as all were to represent state debts for which the state was equally bound, but that was the will of the legislature, and it was consequently so enacted. Afterwards this policy was changed, and all state bonds of whatever character were cancelled by mutilation as soon as they were paid in, or bought for the sinking fund. Act of 1860. In this way, all danger of a misappropriation of securities in the sinking fund was avoided. As bonds issued to railroad companies under the act could alone be used for the investment of the fund under this act, their cancellation did not affect the liability of the several companies thereon to the state, because that was to continue until payment was made to the state by the company to which it was issued. Payment by the state to the bondholder did not discharge the liability of the company on the bond so paid.
"a money loss . . . in the way of counsel charges, or receiver's charges, or betterment expenses, or debts not included in the words 'to secure the payment of said bonds.'"
"for the payment of the bonds so fraudulently obtained by such company and for all other losses that may fall upon the state in consequence of the commission of any other fraud by such company."
This is manifestly for the benefit of the state alone. The bondholder can have no special interest in such a proceeding. His rights are in no way affected by the fraud of the company in obtaining the bond he owns. The state is his debtor, and he has no right to call for the money owing to him until the maturity of his bond, which will not be until thirty or may be forty years after the commission of the fraud which gave the state the right to call at once on the company and its implicated stockholders for the payment of the bond he holds. It will hardly be contended that it was intended to make the stockholder individually liable to the bondholder, yet his liability is for "the payment of the bonds" just as is that of the company. If in his case payment of the bonds does not mean payment to the bondholder, it does not in that of the company. The language of the act is the same in both cases, and there is nothing whatever to show that as to one it meant one thing, and as to the other something else. The evident purpose of this section was to give the state the power, immediately on the discovery of a fraud, to demand of the company "payment of the bonds" -- that is, payment of an amount of money equal to that called for by the bonds -- and a remedy at once against the company and its implicated stockholders for the enforcement of such a payment in case it was not voluntarily made. The money when collected was to be set apart and invested "as a sinking fund for the payment of the bonds" by the state.
receiver to manage and run in the way provided in § 5 until the next meeting of the general assembly. The receiver was to settle his accounts with the comptroller semiannually, but no directions were given in relation to the manner in which the net earnings were to be used in case of a sale under § 6. He was to take possession of "the said road and property and use the same as provided for in the fifth section," and, on the settlement of his accounts with the comptroller, the balances remaining in his hands would necessarily go into the treasury, there to be dealt with as the general assembly should direct. If a purchase was made by the state under § 13, the presumption would be that the earnings must go into the sinking fund, as such was the provision made for the proceeds of a sale to another purchaser; but all that would necessarily be under the control of the general assembly when it met.
"all such laws as may be deemed necessary to protect the interest of the state, and to secure the state against all loss in consequence of the issuance of bonds under the provisions of this act, but in such manner as not to impair the vested rights of the stockholders of the companies."
the bonds and the security created therefor, just as might, under any circumstances that should arise, be deemed most for the interest of the state and the companies, they being the only parties to the contract of the companies that were to be at all interested in what was to be done. As has been seen, the bonds to be issued were on their face to bind only the state. At that time, repudiation of state faith was not thought of. No purchaser of state bonds ever asked whether anything else than the faith of a state was pledged for their payment promptly at maturity. Repudiation was looked upon as dishonorable, and something that would never occur. Security to the state against loss by the loans of its bonds which were provided for must therefore be presumed to have been the sole purpose of the liens which were to be created on the issue of the bonds. Bondholders were never thought of in this connection, for they had the security of the faith of the state, and could not have been supposed to look for anything else. Hence this reservation of power by the state was made broad enough to allow the state to deal with the securities which were taken from the companies at its own discretion, and in any way that might be deemed just. No such power could be exercised if the bondholders held an interest in the securities adverse to the state. Under these circumstances, this section is to be looked upon as excluding any such possible intent, and operating as a standing notice to all who might, from time to time, become the holders of any of the lent bonds that the payment of the bonds, and the interest thereon, which the several companies bound themselves for, was to be made to the state, and not to them, and that the security which was taken by the state was for the performance of this obligation, and might be dealt with by the state in any manner its own legislature should direct or provide. This reservation of power is entirely inconsistent with the idea of a debt from the company to the bondholders on account of the bonds, and if there could have been any doubt on this subject without § 12, there certainly is none with it.
whose property is involved in these suits from all its obligations growing out of the original loans and has cancelled the liens created for their security. The companies have either voluntarily paid their debts to the satisfaction of the state or the state has foreclosed the lien which was reserved and sold the property, free of that encumbrance, either to the present defendants or to those under whom they claim.
Some reliance was placed in the argument for the bondholders upon the legislative history of the passage of the act of 1852, which showed an offer and rejection of certain proposed amendments, and also upon the construction which had been put on the act by certain state officers of high authority in the administration of the public affairs; but we have deemed it unnecessary to add to the length of this opinion by particular reference to that branch of the argument because, as we think, the statute contains within itself unmistakable evidence of its meaning. The same is true of the reference which has been made to other statutes of Tennessee and to statutes of the states and of the United States upon the same general subject. This statute differs in its phraseology from some and perhaps all of the others, but its own language furnishes all the aid which is required for its true interpretation.
The decree in each of the cases is affirmed.

References: v. 
 v. 
 § 5
 § 5
 § 6
 § 7
 § 5
 § 6
 § 13
 § 12