Source: https://supreme.justia.com/cases/federal/us/192/286/
Timestamp: 2019-04-19 00:54:32+00:00

Document:
This Court has jurisdiction over an action brought by one state against another to enforce a property right, and where one state owns absolutely bonds of another state, which are specifically secured by shares of stock belonging to the debtor state, this Court can enter a decree adjudging the amount due and for foreclosure and sale of the security in case of nonpayment, leaving the question of judgment over for any deficiency to be determined when it arises.
The motive of a gift does not affect its validity, nor is the jurisdiction of this Court affected by the fact that the bonds were originally owned by an individual who donated them to the complainant state.
transaction is equivalent to a cash sale to the company at par, and the state becomes the owner of the stock even though no formal certificates therefor are issued to it.
Under the special provisions of the statute involved the endorsement on bonds that each bond for $1,000 is secured by an equal amount of the par value of the stock subscribed for by the state, is tantamount to a separation and identification of the number of shares mentioned, and constitutes a separate and registered mortgage on that number of shares for each bond.
A holder of a certain number of such bonds may foreclose on the specific number of shares securing his bonds, and the holders of other bonds and of liens on the property of the railroad company are not necessary parties to the foreclosure suit.
"And, whereas, it is manifestly the interest of the people of the whole state that the residue of the bonds, when issued, shall command a high price in market, therefore,"
same, That the public treasurer be, and he is hereby, authorized and directed, whenever it shall become his duty under the provisions of said acts, passed at the sessions of 1854-1855 and 1860-1861, to issue bonds of the state to the amount of $50,000 or more, to mortgage an equal amount of the stock which the state now holds in the North Carolina Railroad, as collateral security for the payment of said bonds, and to execute and deliver, with each several bond, a deed of mortgage for an equal amount of stock to said North Carolina Railroad, said mortgage to be signed by the treasurer and countersigned by the comptroller, to constitute a part of said bond, and to be transferable in like manner with it, as provided in the charter of said Western North Carolina Railroad Company; and, further, that such mortgages shall have all the force and effect, in law and equity, of registered mortgages without actual registry."
"State of North Carolina, Treasury Department"
"Under the provisions of an act of the General Assembly of North Carolina entitled 'An Act to Enhance the Value of the Bonds to be Issued for the Completion of the Western North Carolina Railroad Company, and for Other Purposes,' ratified 19th December, 1866, ten shares of the stock in the North Carolina Railroad Company, originally subscribed for by the state, are hereby mortgaged as collateral security for the payment of this bond."
"Witness the signature of the public treasurer and seal of office, and the countersignature of the comptroller."
"Office of Schafer Brothers, no. 35 Wall Street"
"New York, September 10th, 1901"
"Dear Sir: The undersigned, one of the members of the firm of Schafer Bros., has decided, after consultation with the other holders of the second-mortgage bonds issued by the State of North Carolina, to donate ten of these bonds to the State of South Dakota."
"The holders of these bonds have waited for some thirty years in the hope that the State of North Carolina would realize the justice of their claims for the payment of these bonds."
"The bonds are all now about due, beside, of course, the coupons, which amount to some one hundred and seventy percent of the face of the bond."
"The holders of these bonds have been advised that they cannot maintain a suit against the State of North Carolina on these bonds, but that such a suit can be maintained by a foreign state or by one of the United States."
"The owners of these bonds are mostly, if not entirely, persons who liberally give charity to the needy, the deserving, and the unfortunate."
"These bonds can be used to great advantage by states or foreign governments, and the majority owners would prefer to use them in this way, rather than take the trifle which is offered by the debtor."
governments as may be able to collect from the repudiating state, rather than accept the small pittance offered in settlement."
"The donors of these ten bonds would be pleased if the Legislature of South Dakota should apply the proceeds of these bonds to the state university or to some of its asylums or other charities."
"An Act to Require the Acceptance and Collections of Grants, Devises, Bequests, Donations, and Assignments to the South Dakota."
"Be it enacted by the Legislature of South Dakota:"
"SEC. 1. That whenever any grant, devise, bequest, donation, or gift or assignment of money, bonds, or choses in action, or of any property, real or personal, shall be made to this state, the governor is hereby directed to receive and accept the same, so that the right and title to the same shall pass to this state, and all such bonds, notes, or choses in action, or the proceeds thereof when collected, and all other property or thing of value so received by the state as aforesaid, shall be reported by the governor to the legislature to the end that the same may be covered into the public treasury or appropriated to the state university or to the public schools, or to state charities, as may hereafter be directed by law."
to employ counsel to be associated with him in such suits or actions, who, with him, shall fully represent the state, and shall be entitled to reasonable compensation out of the recoveries and collections in such suits and actions."
This act was passed on the suggestion that perhaps a donation of bonds of southern states would be made to the state. On November 18, 1901, the State of South Dakota, leave having been first obtained, filed in this Court its bill of complaint, making defendants the State of North Carolina, Simon Rothschilds (alleged to be one of the holders and owners of the bonds originally issued by the state and secured by a pledge of the stock in the North Carolina Railroad Company under the acts of 1849 and 1855), and Charles Salter (alleged to be one of the holders of the bonds issued under the act of 1855 and 1866, on account of the subscription to the Western North Carolina Railroad Company), the two individuals being made defendants as representatives of the classes of bondholders to which they severally belong. In it, the plaintiff, after setting forth the facts in reference to the several issues of bonds and its acquisition of title to ten, prayed that an account might be taken of all the bonds issued by virtue of these statutes; that North Carolina be required to pay the amount found due on the bonds held by the plaintiff, and that, in default of payment, North Carolina and all persons claiming under said state might be barred and foreclosed of all equity and right of redemption in and to the 30,000 shares of stock held by the state, and that these shares, or as many thereof as might be necessary to pay off and discharge the entire mortgage indebtedness, be sold, and the proceeds, after payment of costs, be applied in satisfaction of the bonds and coupons secured by such mortgages, and also for a receiver and an injunction.
statute; admitted the ownership of 30,000 shares of stock; denied that the mortgages were properly executed or that they had the effect of conveyances or transfers, either in law or equity, of said stock or conferred any lien by way of pledge or otherwise upon the same; denied that she ever had any compact or agreement whatever other than that contained in the Constitution of the United States with South Dakota, or that South Dakota had ever informed North Carolina of any claim against her, or made any demand in respect to it, or any effort to settle or accommodate. Salter's answer was mainly an admission of the allegations of the bill, with a claim that all the stock should be sold in satisfaction of the mortgage bonds of which he was charged to be the representative. Testimony was taken under direction of the Court, before commissioners agreed upon by the parties.
in law and equity, of registered mortgages without actual registry." While no certificate of stock was to be attached to or go with the bond, the statute evidently contemplated that the mortgage endorsed on the bond should have the same force and effect. Hence, when the indorsement was made and the bond issued by the state, it was tantamount to a separation and identification of the number of shares named therein. It cannot be that the state, having provided this means of giving to each bond the mortgage security of the corresponding shares of stock, can now prevent the attaching of the lien on the ground that no shares had been separated and no certificate transferred. It is unnecessary to refer to c. 98 of the Laws of 1879, for that act was one in the nature of an offer to compromise, although it does contain a recognition of outstanding obligations.
an action for his debt, nor McArthur a suit for his land. His title to it was extinguished, and the consideration was received. The motives which induced him to make the contract, whether justifiable or censurable, can have no influence on its validity. They were such as had sufficient influence with himself, and he had a right to act upon them. A court cannot enter into them when deciding on its jurisdiction. The conveyance appears to be a real transaction, and the real as well as nominal parties to the suit are citizens of different states."
"If the law concerned itself with the motives of parties, new complications would be introduced into suits which might seriously obscure their real merits. If the debt secured by a mortgage be justly due, it is no defense to a foreclosure that the mortgagee was animated by hostility or other bad motive. Davis v. Flagg, 35 N.J.Eq. 491; Dering v. Earl of Winchelsea, 1 Cox.Ch. 318; McMullen v. Ritchie, 64 F. 253, 261; Toler v. East Tennessee &c. Railway, 67 F. 168. . . . The reports of this Court furnish a number of analogous cases. Thus, it is well settled that a mere colorable conveyance of property, for the purpose of vesting title in a nonresident and enabling him to bring suit in a federal court, will not confer jurisdiction, but if the conveyance appear to be a real transaction, the court will not, in deciding upon the question of jurisdiction, inquire into the motives which actuated the parties in making the conveyance. McDonald v. Smalley, 1 Pet. 620; Smith v. Kernochen, 7 How. 198; Barney v. Baltimore City, 6 Wall. 280; Farmington v. Pillsbury, 114 U. S. 138; Crawford v. Neal, 144 U. S. 585."
"The law is equally well settled that, if a person take up a bona fide residence in another state, he may sue in a federal court notwithstanding his purpose was to resort to a forum of which he could not have availed himself if he were a resident of the state in which the court was held. Cheever v.
Wilson, 9 Wall. 108, 76 U. S. 123; Briggs v. French, 2 Sumn. 251; Catlett v. Pacific Ins. Co., 1 Paine 594; Cooper v. Galbraith, 3 Wash. 546; Johnson v. Monell, Wool. 390."
The title of South Dakota is as perfect as though it had received these bonds directly from North Carolina. We have therefore before us the case of a state with an unquestionable title to bonds issued by another state, secured by a mortgage of railroad stock belonging to that state, coming into this Court and invoking its jurisdiction to compel payment of those bonds and a subjection of the mortgaged property to the satisfaction of the debt.
Has this Court jurisdiction of such a controversy, and to what extent may it grant relief? Obviously that jurisdiction is not affected by the fact that the donor of these bonds could not invoke it. The payee of a foreign bill of exchange may not sue the drawer in the federal court of a state of which both are citizens, but that does not oust the court of jurisdiction of an action by a subsequent holder if the latter be a citizen of another state. The question of jurisdiction is determined by the status of the present parties, and not by that of prior holders of the thing in controversy. Obviously, too, the subject matter is one of judicial cognizance. If anything can be considered as justiciable, it is a claim for money due on a written promise to pay, and if it be justiciable, does it matter how the plaintiff acquires title, providing it be honestly acquired? It would seem strangely inconsistent to take jurisdiction of an action by South Dakota against North Carolina on a promise to pay made by the latter directly to the former, and refuse jurisdiction of an action on a like promise made by the latter to an individual, and by him sold or donated to the former.
are concerned, the suit will be dismissed, with costs against South Dakota.
"The cases cited show that such jurisdiction has been exercised in cases involving boundaries and jurisdiction over lands and their inhabitants, and in cases directly affecting the property rights and interests of a state."
The present case is one "directly affecting the property rights and interests of a state."
Although a repetition of this review is unnecessary, two or three matters are worthy of notice. The original draft of the Constitution reported to the convention gave to the Senate jurisdiction of all disputes and controversies "between two or more states, respecting jurisdiction or territory," and to the Supreme Court jurisdiction of "controversies between two or more states, except such as shall regard territory or jurisdiction." A claim for money due, being a controversy of a justiciable nature and one of the most common of controversies, would seem to naturally fall within the scope of the jurisdiction thus intended to be conferred upon the Supreme Court. In the subsequent revision by the convention, the power given to the Senate in respect to controversies between the states was stricken out, as well as the limitation upon the jurisdiction of this Court, leaving to it, in the language now found in the Constitution, jurisdiction, without any limitation, of "controversies between two or more states."
"In the second class, the jurisdiction depends entirely on the character of the parties. In this are comprehended 'controversies between two or more states, between a state and citizens of another state,' 'and between a state and foreign states, citizens or subjects.' If these be the parties, it is entirely unimportant what may be the subject of controversy. Be it what it may, these parties have a constitutional right to come into the courts of the Union."
"Those states, in their highest sovereign capacity, in the convention of the people thereof, . . . adopted the Constitution, by which they respectively made to the United States a grant of judicial power over controversies between two or more states. By the Constitution, it was ordained that this judicial power, in cases where a state was a party, should be exercised by this Court as one of original jurisdiction. The states waived their exemption from judicial power ( 19 U. S. 6 Wheat. 378, 19 U. S. 380) as sovereigns by original and inherent right, by their own grant of its exercise over themselves in such cases, but which they would not grant to any inferior tribunal. By this grant, this Court has acquired jurisdiction over the parties in this cause, by their own consent and delegated authority, as their agent for executing the judicial power of the United States in the cases specified."
"That it is a controversy between two states cannot be denied, and, though the Constitution does not, in terms, extend the judicial power to all controversies between two or more states, yet it, in terms, excludes none, whatever may be their nature or subject."
"The cases in this Court show that the framers of the Constitution did provide by that instrument for the judicial determination of all cases in law and equity between two or more states, including those involving questions of boundary. Did they omit to provide for the judicial determination of controversies arising between the United States and one or more of the states of the Union? This question is in effect answered by United States v. North Carolina, 136 U. S. 211. That was an action of debt brought in this Court by the United States against the State of North Carolina upon certain bonds issued by that state. The state appeared, the case was determined here upon its merits, and judgment was rendered for the state. It is true that no question was made as to the jurisdiction of this Court, and nothing was therefore said in the opinion upon that subject. But it did not escape the attention of the Court, and the judgment would not have been rendered except upon the theory that this Court has original jurisdiction of a suit by the United States against a state."
between two states, the United States being a party on the one side and a state on the other. This was decided in United States v. Texas, 143 U. S. 621, 143 U. S. 642. . . . There must be judgment overruling the demurrer, but as the defendant may desire to set up facts which it might claim would be a defense to the complainant's bill, we grant leave to the defendant to answer up to the first day of the next term of this Court. In case it refuses to plead further, the judgment will be in favor of the United States for an accounting for the payment of the sum found due thereon."
We are not unmindful of the fact that, in Hans v. Louisiana, 134 U. S. 1, Mr. Justice Bradley, delivering the opinion of the Court, expressed his concurrence in the views announced by Mr. Justice Iredell in the dissenting opinion in Chisholm v. Georgia, but such expression cannot be considered as a judgment of the Court, for the point decided was that, construing the Eleventh Amendment according to its spirit, rather than by its letter, a state was relieved from liability to suit at the instance of an individual, whether one of its own citizens or a citizen of a foreign state. Without noticing in detail the other cases referred to by Mr. Justice Shiras in Missouri v. Illinois, 180 U. S. 208, it is enough to say that the clear import of the decisions of this Court from the beginning to the present time is in favor of its jurisdiction over an action brought by one state against another to enforce a property right. Chisholm v. Georgia was an action of assumpsit; United States v. North Carolina, an action of debt; United States v. Michigan, a suit for an accounting, and that which was sought in each was a money judgment against the defendant state.
But we are confronted with the contention that there is no power in this Court to enforce such a judgment, and such lack of power is conclusive evidence that, notwithstanding the general language of the Constitution, there is an implied exception of actions brought to recover money. The public property held by any municipality, city, county, or state is exempt from seizure upon execution, because it is held by such corporation not as a part of its private assets, but as a trustee for public purposes. Meriwether v. Garrett, 102 U. S. 472, 102 U. S. 513.
As a rule, no such municipality has any private property subject to be taken upon execution. A levy of taxes is not within the scope of the judicial power except as it commands an inferior municipality to execute the power granted by the legislature.
"We are of the opinion that this Court has not the power to direct a tax to be levied for the payment of these judgments. This power to impose burdens and raise money is the highest attribute of sovereignty, and is exercised, first, to raise money for public purposes only, and second, by the power of legislative authority only. It is a power that has not been extended to the judiciary. Especially is it beyond the power of the federal judiciary to assume the place of a state in the exercise of this authority at once so delicate and so important."
See also Heine v. Levee Commissioners, 19 Wall. 655, 86 U. S. 661; Meriwether v. Garrett, 102 U. S. 472.
could be subjected to any number or description of demands, asserted and sustained through the undefined and undefinable discretion of the courts, would constitute a feeble and inadequate provision for the great and inevitable necessities of the nation. The government under such a regime, or rather under such an absence of all rule, would, if practicable at all, be administered not by the great departments ordained by the Constitution and laws and guided by the modes therein prescribed, but by the uncertain and perhaps contradictory action of the courts in the enforcement of their views of private interests."
"The award of execution is a part, and an essential part, of every judgment passed by a court exercising judicial power. It is no judgment, in the legal sense of the term, without it. Without such an award, the judgment would be inoperative and nugatory, leaving the aggrieved party without a remedy. . . . Indeed, no principle of constitutional law has been more firmly established or constantly adhered to than the one above stated -- that is, that this Court has no jurisdiction in any case where it cannot render judgment in the legal sense of the term, and when it depends upon the legislature to carry its opinion into effect or not at the pleasure of Congress."
See also In re Sanborn, 148 U. S. 222, and La Abra Silver Mining Company v. United States, 175 U. S. 423, 175 U. S. 456.
to recover money from a state), the manifest trend of other decisions, the necessity of some way of ending controversies between states, and the fact that this claim for the payment of money is one justiciable in its nature; on the other, certain expression of individual opinions of Justices of this Court, the difficulty of enforcing a judgment for money against a state by reason of its ordinary lack of private property subject to seizure upon execution, and the absolute inability of a court to compel a levy of taxes by the legislature. Notwithstanding the embarrassments which surround the question, it is directly presented, and may have to be determined before the case is finally concluded; but, for the present, it is sufficient to state the question with its difficulties.
There is in this case a mortgage of property, and the sale of that property under a foreclosure may satisfy the plaintiff's claim. If that should be the result, there would be no necessity for a personal judgment against the state. That the state is a necessary party to the foreclosure of the mortgage was settled by Christian v. Atlantic & North Carolina Railroad Company, 133 U. S. 233. Equity is satisfied by a decree for a foreclosure and sale of the mortgaged property, leaving the question of a judgment over for any deficiency to be determined when, if ever, it arises. And surely if, as we have often held, this Court has jurisdiction of an action by one state against another to recover a tract of land, there would seem to be no doubt of the jurisdiction of one to enforce the delivery of personal property.
at public auction all the interest of the State of North Carolina in and to one hundred shares of the capital stock of the North Carolina Railroad Company, such sale to be made at the east front door of the Capitol Building in this city, public notice to be given of such sale by advertisements once a week for six weeks in some daily paper published in the City of Raleigh, North Carolina, and also in some daily paper published in the City of Washington.
The decision in this cause seems to me to disregard an express and absolute prohibition of the Constitution. The facts are stated in the opinion of the Court. As, however, there are some facts deemed by me to be material which are not referred to, it is proposed to make a summary of the case, and then express the reasons which control me.
In the years 1847 and 1855, the negotiable bonds of the State of North Carolina were issued to aid in the construction of the railway of the North Carolina Railroad Company, and were exchanged for the stock of that company. The bonds went into the hands of individuals, and the exchanged stock passed into the possession of the state, and was declared to be pledged in the hands of the state to secure the payment of the bonds in question.
in aid of the North Carolina Railroad. The stock, however, remained in possession of the state, but each of the bonds thereafter issued contained an indorsement that ten shares of stock of the North Carolina Railroad Company, in the hands of the state, were mortgaged as security for the payment of each of the bonds.
Presumably, as a result of the disastrous consequences of the Civil War and the events which followed, the financial affairs of the State of North Carolina in 1879 were profoundly embarrassed. The state had not paid the interest as it accrued on the bonds issued in aid of the North Carolina Railroad. It had in effect paid no interest whatever on the bonds issued in favor of the Western North Carolina Railroad, and indeed had defaulted generally in the payment of the interest on its public debt. Statutes were passed by the state providing for an adjustment of its financial affairs so as to rehabilitate its credit in order that, when the state debt was readjusted, the state might, for the benefit of all its people and its creditors, be able to pay the interest on, and provide for the principal of, the public debt. The adjustment made was accepted by those holding the bonds issued in aid of the North Carolina Railroad, and they waived a very large sum of unpaid interest and received new bonds, accompanied with a reiteration of the pledge of all the stock of the North Carolina Railroad owned by the state, which had always been held by the state as security for the payment of all the bonds of that issue. It is to be inferred from the record that the adjustment proposed was generally accepted by the other creditors of the state, and that, as a consequence, its fiscal affairs were placed upon a sound basis. Be this as it may, certain is it that the adjustment was accepted by the holders of a vast majority of the bonds issued in aid of the Western North Carolina Railroad, and that such holders surrendered their old bonds and took new bonds of the state for twenty-five percent of the face value of their bonds, these new bonds not purporting to be secured by any mortgage of the stock of the North Carolina Railroad.
and accumulated interest; or that, in default, an act be passed authorizing suit in the courts to enforce the mortgage lien asserted to exist on the stock of the North Carolina Railroad. The prayer of this petition was not granted.
"to employ counsel to be associated with him in such suits or actions, who, with him, shall fully represent the state, and shall be entitled to reasonable compensation [italics mine] out of the recoveries and collections in such suits and actions."
the North Carolina Railroad Company held by the state; for a decree declaring that the holders of the bonds issued in favor of the North Carolina Railroad Company had lost their prior lien upon the whole stock by reason of their acceptance of the compromise under the act of 1879, and the taking of new bonds by them in pursuance thereof. It was, however, prayed that, in the event it should be found that the lien of such bondholders on the stock had not been waived, the stock be ordered sold, free from all encumbrances, to satisfy the claims of the respective lienholders thereon, and that distribution be made of the proceeds of the stock among them according to priority.
The state answered, challenging the jurisdiction of this Court to entertain the bill and also urging various defenses on the merits.
"that plaintiff's bill be dismissed with costs, unless the court shall decree that all the stock subject to the second mortgage be sold for the benefit of all the holders of said second mortgage bonds."
amount of the principal of the ten bonds, with more than thirty years' accrued interest. The decree will direct the sale of the stock in the North Carolina Railroad Company held by the state, subject to the prior pledge in favor of the holders of the bonds of the North Carolina Railroad. The question of a deficiency decree is reserved, in case, as a result of the sale, the debt decreed against the state should not be extinguished.
With this summary of the pleadings, the facts, and the decision of the court in mind, I shall now state the reasons which compel me to dissent, all of which may be embraced in the two following general propositions which I shall examine under separate headings: (A) the absolute want of power in the court to render a decree between the two states on the cause of action sued on, and (B) the want of power to render the decree which is now directed to be entered, because of the absence of essential parties whose presence would oust jurisdiction, and the impotency to grant any relief whatever in the absence of such parties.
"the judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by citizens of another state, or by citizens or subjects of any foreign state. "
The question which the case involves is not what in a generic sense may be considered a controversy between states, but whether the particular claim here asserted by the State of South Dakota is in any view such a controversy. It is also to be observed that the question is not whether a controversy between states may not arise from a debt originating as the result of a direct transaction between states, but is whether one state can acquire a claim asserted against another state by a citizen of that or of another state or an alien, and as a result sue upon it, and thereby create a controversy between states in a constitutional sense. Indeed, the question is narrower than this, since, in this case, the alleged debtor state had, years before the transfer of the claim in question, while it was yet owned by individuals, declined to recognize the debt, and had refused payment thereof, as the result of a controversy between itself and its alleged creditors.
provision will have no efficacy whatever. And this becomes doubly cogent when the history of the Eleventh Amendment is considered, and the purpose of its adoption is borne in mind.
"It is a part of our history that, at the adoption of the Constitution, all the states were greatly indebted, and the apprehension that these debts might be prosecuted in the federal courts formed a very serious objection to that instrument. Suits were instituted, and the Court maintained its jurisdiction. The alarm was general, and, to quiet the apprehensions that were so extensively entertained, this amendment was proposed in Congress, and adopted by the state legislatures."
claims not within even the reach of the ruling in Chisholm v. Georgia, for that case only decided that, under the grant of power, a citizen of one state might sue another state. But, under the rule of construction now announced, not only claims held by citizens of other states and aliens, but those held by a citizen of the state become capable of enforcement if only the holders of such claims, after the state has refused to pay them, choose to sell or make gift thereof to another state, found willing to become a party to a plan to evade a constitutional provision inserted for the protection of all the states.
Let me, arguendo, grant that a case may be conceived of where one provisions of the Constitution can be so construed as to render nugatory another and applicable provision. Even such an impossible doctrine can have no relation to the case in hand. The decisions of this Court rendered since the Eleventh Amendment have consistently held that that amendment embodied a principle of national public policy whose enforcement may not be avoided by indirection or subterfuge. Ought this rule of public policy to be disregarded by endowing every state with the power of speculating upon stale and unenforceable claims of individuals against other states, thus not only doing injustice, but also overthrowing the fiscal independence of every state and destroying that harmony between them which it was the declared purpose of the Constitution to establish and cement? Such a departure from the provisions of the Eleventh Amendment, and the rule of national public policy which it embodies, may not be sustained by the assumption that it would be unduly curtailing the independence of the several states to deny them the right of enforcing, by the aid of the federal judicial power, claims against other states, acquired from private individuals. For this assumption would amount to this -- that any and all of the states only enjoy the essential privilege of being free from coercion as to the claims of individuals, and have the power to manage their financial affairs at the mere pleasure of any of the other states. This is to say that, for the purpose of preserving the rights of the states, those rights must be destroyed.
"must be deemed to have been the only remedy the citizen of one state could have under the Constitution against another state for the redress of his grievances, except such as the delinquent state saw fit itself to grant."
"The evident purpose of the amendment, so promptly proposed and finally adopted, was to prohibit all suits against a state by or for citizens of other states, or aliens without the consent of the state to be sued, and, in our opinion, one state cannot create a controversy with another state, within the meaning of that term as used in the judicial clauses of the Constitution, by assuming the prosecution of debts owing by the other state to its citizens. Such being the case, we are satisfied that we are prohibited both by the letter and the spirit of the Constitution from entertaining these suits, and the bill in each case is dismissed."
states, and thus be made justiciable, since to do so would destroy the prohibition which the Eleventh Amendment embodied. I do not perceive, if one state may not engender a controversy between states, in the constitutional sense, in respect to claims arising out of dealings between a state and individuals, how it was competent for the State of South Dakota to create such a controversy by the acquisition of a claim of the class whose enforcement it was the purpose of the Eleventh Amendment to effectually prohibit. It is to be observed that, in the cases referred to, the Court did not deny that a sovereign state, in virtue of its existence as such, would not have possessed the inherent power to prosecute against another state the claims of its citizens, and that such a prosecution by it would have constituted a controversy between states in the international significance of those words. But the Court held that controversies between states, in the constitutional sense, did not embrace rights of that character, because of the prohibitions of the Eleventh Amendment, which operated upon the whole grant of judicial power, including, of course, such grant as to controversies between states.
"It is not necessary that we should enter upon an examination of the reason or expediency of the rule which exempts a sovereign state from prosecution in a court of justice at the suit of individuals. This is fully discussed by writers on public law. It is enough for us to declare its existence. The legislative department of a state represents its polity and its will, and is called upon by the highest demands of natural and political law to preserve justice and judgment, and to hold inviolate the public obligations. Any departure from this rule, except for reasons most cogent (of which the legislature, and not the courts, is the judge), never fails in the end to incur the odium of the world, and to bring lasting injury upon the state itself. But to deprive the legislature of the power of judging what the honor and safety of the state may require, even at the expense of a temporary failure to discharge the public debts, would be attended with greater evils than such failure can cause."
"If the Constitution be so interpreted, it would follow that any corporation created by Congress may sue a state in a circuit court of the United States upon any cause of action, whatever its nature, if the value of the matter in dispute is sufficient to give jurisdiction. We cannot approve this interpretation."
"It seems to us that these views of those great advocates and defenders of the Constitution were most sensible and just, and they applied equally to the present case as to that then under discussion. The letter is appealed to now, as it was then, as a ground for sustaining a suit brought by an individual against a state. The reason against it is as strong in this case as it was in that. It is an attempt to strain the Constitution and the law to a construction never imagined or dreamed of. Can we suppose that, when the Eleventh Amendment was adopted, it was understood to be left open for citizens of a state to sue their own state in the federal courts, whilst the idea of suits by citizens of other states, or of foreign states, was indignantly repelled? Suppose that Congress, when proposing the Eleventh Amendment, had appended to it a proviso that nothing therein contained should prevent a state from being sued by its own citizens in cases arising under the Constitution or laws of the United States -- can we imagine that it would have been adopted by the states? The supposition that it would is almost an absurdity on its face."
"It could never have been intended to exclude from federal judicial power suits arising under the Constitution or laws of the United States when brought against a state by private individuals or state corporations, and at the same time extend such power to suits of like character brought by federal corporations against a state without its consent. "
Here again, I am unable to perceive any ground for taking the case in hand out of the rulings made in the cases just reviewed. The letter of the Eleventh Amendment was just as inapplicable to a suit by a citizen of a state against a state to enforce his constitutional rights and to a suit by a federal corporation, suing in the federal court by virtue of its creation, as it was to the grant of judicial power over controversies between states. But the prohibition of the Eleventh Amendment was held to apply, because that amendment was again construed as prohibiting the enforcement of claims by private individuals against states through the judicial power of the United States, without reference to the character of the person by whom the claim was asserted. In other words, the decision was that the operation of the Eleventh Amendment was to be determined not by the formal party complainant on the record, but by the essential character and nature of the claim or right which was asserted. This being the decision, how, consistently, can the State of South Dakota be held to have power to give effect to a character of claim as to which the Eleventh Amendment declares the judicial power of the United States shall not extend?
Will not the accuracy of what I have just stated, as applied to this case, be demonstrated by putting the question which this Court put in Hans v. Louisiana and approvingly reiterated in Smith v. Reeves, and giving it the answer which the court gave in those cases, changing, of course, the form of the question to meet the case now here? For this purpose, I repeat the question, placing, however, in brackets, the changed mode of expression necessitated by the difference in the character of the parties complainant.
"Suppose that Congress, when proposing the Eleventh Amendment, had appended to it a proviso that nothing therein contained should prevent a state from being sued [upon private claims due to its own citizens or to aliens or citizens of other states, if only such claims were sold or otherwise disposed of long after the debtor state had refused to pay them, so as to thus secure their judicial enforcement], can we imagine that the Eleventh Amendment would have been adopted by the states? The supposition that it would is almost an absurdity on its face. "
"It is true that no question was made as to the jurisdiction of this Court, and nothing was therefore said in the opinion upon that subject. But it did not escape the attention of the Court, and the judgment would not have been rendered except upon the theory that this Court has original jurisdiction of a suit by the United States against the state."
as is now necessarily held, any restriction by Congress would be repugnant to the Constitution.
state against another state was directly upheld in New Hampshire v. Louisiana and New York v. Louisiana, supra. It was not denied in those cases that the bonds sued upon were negotiable, and that, if the rules of law controlling in controversies between private individuals were to be applied, the title of each plaintiff state to the bonds it sought recovery upon could not be gainsaid, but should be regarded as absolute. Coming, however, to enforce the provisions of the Eleventh Amendment, the Court held that it was its duty to depart from the rule ordinarily applied, and to examine into the nature of the asserted rights, and if to give effect thereto would be inconsistent with constitutional provisions, to refuse to lend its aid to the enforcement of the claims.
this Union, are the necessary resultant of the adoption of the Eleventh Amendment. It is not necessary to refer to opinions of publicists on the general subject, since this Court -- as to the states of the Union -- has declared the doctrine so fully as to leave it no longer an open question in this forum.
object and purpose of the Eleventh Amendment were to prevent the indignity of subjecting a state to the coercive process of judicial tribunals at the instance of private parties. It was thought to be neither becoming nor convenient that the several states of the Union, invested with that large residuum of sovereignty which had not been delegated to the United States, should be summoned as defendants to answer the complaints of private persons, whether citizens of other states or aliens, or that the course of their public policy and the administration of their public affairs should be subject to, and controlled by, the mandates of judicial tribunals, without their consent and in favor of individual interests. To secure the manifest purposes of the constitutional exemption guaranteed by the Eleventh Amendment requires that it should be interpreted not literally and too narrowly, but fairly and with such breadth and largeness as effectually to accomplish the substance of its purpose."
creditor. This, after all, only serves additionally to demonstrate the fallacy underlying the assumption that the State of South Dakota, because it is a state, and may avail of the grant of judicial power over controversies between states, can, in doing so, escape the prohibition of the Eleventh Amendment, created for the very purpose of protecting the states and preserving their independent control over their own affairs. It seems to me the gross inequality which must arise from disregarding the judgment of the tribunal selected by the creditor is well illustrated by this case. When the facts which I have at the outset stated are recalled, it will be observed that there were about two and a half millions of dollars of outstanding bonds of the same series as those now owned by the State of South Dakota, and that that amount was reduced to about $250,000 of principal as a consequence of the conclusion of the State of North Carolina concerning the exigencies of its financial situation. It is also certain, when the facts stated in the petition presented to the legislature of North Carolina by the assignor of the State of South Dakota are recalled, that, but for this vast reduction of the debt produced by the determination of the State of North Carolina, the alleged security now sought to be realized upon by the State of South Dakota would be of no value. The moral attitude shown by the record, then, is this: that the State of South Dakota, as the mere beneficiary of the bounty of an individual, seeks to derive all the benefit resulting from the judgment of the State of North Carolina as to its public debt, and at the same time desires to repudiate that judgment and to obtain rights which never would have been within its reach if the judgment of the State of North Carolina had not been exercised. Under these circumstances, it to me seems, even if a court of equity was vested with power to disregard the final judgment of the tribunal selected at the time the bonds were issued, such court should not exercise that power in favor of one standing on the record in the position which the State of South Dakota here occupies.
"It can require no argument to show that the transfer of any claim to the United States cannot give to it any greater validity than it possessed in the hands of the assignor."
"The Crown is only entitled to its debtor's right, and cannot create or revive any right in the person of its debtor if none ever existed, or it has become extinct. In this case, nothing could have been recovered by the debtor of the Crown against this defendant if the statute had been pleaded; I therefore consider that it is also a good bar to the suit of the Crown, who stands precisely in the same situation as its debtor, and that this is an honest plea, which therefore the law allows. If the Crown could thus put its debtor in a better situation than he was in before by such a proceeding as this, the consequences would be monstrous before the passing of the late statute, and the mischief would have been incalculable."
"In this case, the claim of the Crown is only a derivative right, and it must therefore stand in the same situation as its principal. "
"By a process, said, by a fiction, to be for the benefit of the Crown, it is attempted to revive the debt and place the creditor in a better situation than the law permits. This is too gross an absurdity. . . ."
These authorities additionally demonstrate that a claim which, when acquired by the State of South Dakota, was without legal sanction did not, by the mere fact of such acquisition, become a justiciable, enforceable right. It may be said that there was no statute of limitations in the State of North Carolina barring the claim. But this begs the whole question. It assumes that the State of North Carolina should have indulged in the idle ceremony of passing a special statute of limitations extinguishing, after the lapse of a certain time, a cause of action which had never existed. The proposition is but a further illustration of the misconception which results from holding that the claim of an individual against a state, which is not enforceable, can be made such by the voluntary act of transferring. The very attribute of sovereignty renders it unnecessary for the sovereign to legislate for its own behalf in the passage of statutes of limitations, insolvent and other like laws, as his will, controlled alone by the duty and sense of responsibility which sovereignty must be presumed to engender, determines the question of liability.
no significance whatever. The fact that the State of North Carolina, in her own courts, was not subject to be coerced as to the claim in question was, in effect, a state statute of limitations, since the act of the state in forbidding the arising of a cause of action is certainly in reason the equivalent of an act of that state barring a cause of action in a case where one could exist. It is the nonexistence of the cause of action at the time of the transfer upon which rests the rule preventing a sovereign from recovering on a claim which was barred at the time he acquired it. This is true also of the Eleventh Amendment. As that amendment, from the date of the inception of the alleged contract, prohibited the assertion of any cause of action concerning the same in the courts of the United States, the amendment was substantially a national statute of limitations. Thus operating, it furnishes an effectual barrier preventing the State of South Dakota from asserting in the courts of the United States that it had acquired from its transferrer a cause of action which the Constitution of the United States prevented from ever existing so far as the judicial power of the United States was concerned.
Nor does the fact that the State of South Dakota alleges there was a pledge or mortgage of certain stock in the North Carolina Railroad serve at all to take the case out of the control of the provisions of the Eleventh Amendment. It is not pretended that any delivery of stock alleged to have been pledged was ever made to the bondholders; on the contrary, it is conceded that the stock in question has always been in the possession of the State of North Carolina. The right to enforce the alleged pledge must therefore rest upon the power to enforce a private claim against the State of North Carolina, and to take from its possession property of which it has ever had the absolute dominion and control. And this view is, to my mind, concluded by the previous rulings of this Court, one of which I shall now particularly notice.
referred to, and many more might be cited to the same effect. The proceeding is a suit against the party to obtain, by decree of court, the benefit of the mortgage right. But, where the mortgagor in possession is a sovereign state, no such proceeding can be maintained. The mortgagee's right against the state may be just as good and valid, in a moral point of view, as if it were against an individual. But the state cannot be brought into court or sued by a private party without its consent. It was at first held by this Court that, under the Constitution of the United States, a state might be sued in it by a citizen of another state, or of a foreign state; but it was declared by the Eleventh Amendment that the judicial power of the United States shall not be construed to extend to such suits. New Hampshire v. Louisiana, 108 U. S. 76; Louisiana v. Junel, 107 U. S. 711; Marye v. Parsons, 114 U. S. 325; Hagood v. Southern, 117 U. S. 52; In re Ayers, 123 U. S. 443."
Applying the ruling made in the case just cited to the case in hand, it to me clearly results that as possession of the alleged pledged or mortgaged stock was never parted with by the State of North Carolina, the right asserted by the State of South Dakota to enforce the alleged pledge comes directly within the prohibition of the Eleventh Amendment, since, in its essence, it depends upon the existence in this Court of the power to enforce against the State of North Carolina in favor of the State of South Dakota a mere promise made by North Carolina to a private individual, as to which the State of South Dakota acquired no greater right than was possessed by the individual who made the transfer to it of the bonds in question.
justice, refuses to be bound by the letter of legal procedure, or to lend its aid to a mere speculative purchase which threatens injury and ruin to a large body of honest creditors who have trusted for the payment of their debts to the legal validity of proceedings theretofore taken."
How aptly these observations apply to the case in hand is shown when it is considered that the holders of more than two million dollars of bonds of the same class as that held by the State of South Dakota, more than twenty years before the transfer to that state, accepted, on the faith of the operation of the Eleventh Amendment and the circumstances surrounding the State of North Carolina at the time, the adjustment proposed by the act of 1879, and therefore that the claim of South Dakota now urged, in effect, as I have previously stated, seeks to avail of the result brought about by the operation of the Eleventh Amendment, and yet at the same time to deny its efficacy as regards the rights which it claims. It is additionally shown by the inference arising from the record that the whole fiscal system of the State of North Carolina in existence since the adjustment of 1879 has rested upon the action taken by the creditors of the state consequent upon their reliance upon the possession by the state of the attributes of sovereignty which it was the purpose of the Eleventh Amendment to consecrate.
The want of power to render the decree which is now directed to be entered because of the absence of essential parties, whose presence would oust jurisdiction, and the impotency to grant any relief whatever in the absence of such parties.
Court as to its authority over the controversy as one between states is well founded, I cannot agree that the holders of the bonds issued in aid of the North Carolina Railroad are not essential parties to this controversy, since the nature of the relief specifically prayed necessitates their presence, and since, without such presence, in my opinion, no decree giving substantial relief to the complainant or doing justice to the principal defendant can be rendered. If they are such essential parties, it is not questioned that the Court is without jurisdiction. California v. Southern Pacific Company, 157 U. S. 229.
Under the assumption that there was a valid mortgage in favor of the complainant and other holders of the same class of bonds, the bill proceeds upon the theory that it is essential that it be determined what claim or right the holders of the bonds issued in aid of the North Carolina Railroad have upon or in the stock in question. To that end, the bill challenged the existence of any right of pledge in favor of such bondholders upon the theory that, as against the holders of bonds issued in aid of the Western North Carolina Railroad, they had lost their right by accepting the compromise of 1879. It is, however, further asserted in the bill that, even if the holders of the bonds issued in aid of the North Carolina Railroad had not, by accepting the compromise of 1879, lost their rights as to the complainant and those similarly situated, yet, as the pledge was past due when the adjustment of 1879 was entered into, it was essential, to afford the complainant relief as a junior secured creditor on the stock, that the entire stock be sold, free from all encumbrances. And this was also the position taken by the answer filed on behalf of the representative of the outstanding bonds issued in aid of the Western North Carolina Railroad. The bill, then, having been framed upon the theory of the necessity of the specific relief referred to, which could not be afforded without the presence of the other lienholders, the cause, it seems to me, ought not now to be decided upon a wholly different theory, and relief inconsistent with that specifically prayed for be awarded to the complainant upon that changed basis.
of North Carolina. Its rights, as well as those of the complainant, are entitled to consideration. The possibility of a deficiency decree is now taken into account in the opinion, and rights on that subject are reserved. But if the sale which is to be ordered is one which must lead to a prejudicial result, then the effect of the decree is simply to order a sale which can produce, at best, no more than a nominal sum, and will lay a foundation for a deficiency decree for an amount wholly out of proportion to the actual value of the mortgaged property. It is to my mind no answer to point out that, whilst there was no segregation and delivery of the ten shares of stock mortgaged to secure each bond, as such division was provided for, a court of equity will treat that as being done which should have been done. The fallacy of this lies in failing to consider the rights of the prior lienholders and overlooking the fact that their lien was indivisible, and that the segregation provided for in the act of 1866 could not be made without being subordinate to the entire sum of the prior and indivisible right of pledge. When this is borne in mind, it results that the rights of those prior lienholders are necessarily clouded or impaired by decreeing that a court of equity will treat that as having been done which ought to have been done, when the very question is could it have been done efficaciously, consistently with the rights of the prior lienholders? They are, therefore, I submit, essential parties if it is proposed to give any real relief by the decree of sale which is ordered. If it is not proposed to give that character of relief, then such a decree ought not to be entered, especially when it does not accord with, and in reality is inconsistent with, the specific relief asked for.
I am authorized to say that THE CHIEF JUSTICE, MR. JUSTICE McKENNA, and MR. JUSTICE DAY concur in this dissent.
* Hollingsworth v. Virginia, (1798) 3 Dall. 378; Osborn v. Bank of United States, (1824) 9 Wheat. 739, 849; Briscoe v. Bank, (1837) 11 Pet. 321; Louisiana v. Junel, (1883) 107 U. S. 711; Poindexter v. Greenhow, (1884) 114 U. S. 270, 114 U. S. 286; Marye v. Parsons, (1884) 114 U. S. 325; Hagood v. Southern, (1886) 117 U. S. 52; In re Ayers, (1887) 123 U. S. 443, 123 U. S. 504; Christian v. Atlantic & N.C. R. Co., (1890) 133 U. S. 233, 133 U. S. 243; Louisiana ex Rel. New York Guaranty & Indemnity Co. v. Steele, (1890) 134 U. S. 230; Pennoyer v. McConnaughy, (1891) 140 U. S. 11; In re Tyler, (1893) 149 U. S. 164, 149 U. S. 190; Reagan v. Farmers' Loan & Trust Co., (1894) 154 U. S. 362, 154 U. S. 388; Scott v. Donald, (1897) 165 U. S. 58; Tindal v. Wesley (1897) 167 U. S. 204, 167 U. S. 219; Smyth v. Ames, (1898) 169 U. S. 466, 169 U. S. 518; Fitts v. McGhee, (1899) 172 U. S. 516, 172 U. S. 524.

References: v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v.

 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v.