Court Opinion

ID: 8634016
Source: CourtListenerOpinion
Date Created: 2022-11-24 19:42:12.915008+00
Date Added: 2024-06-11T16:55:52.176798
License: Public Domain

WOODS, Circuit Judge:
1. It is apparent to the most careless reader, that by the passage of the so-called “-Funding Act” the state of Louisiana undertook to make a contract with the holders of all valid outstanding bonds of the state and all valid warrants dratvn previous to the passage of the act, who should accept its terms. What that contract was is not difficult to determine. On the one hand the holders of the-outstanding bonds and warrants drawn before the passage of the act were to surrender their evidences of debt, and receive in-full satisfaction therefor sixty cents on tbe-aollar, to be paid in the consolidated bonds of the state authorized by this act. On hei~ part the state agreed to issue consolidated? bonds to the amount of fifteen millions of dollars, “or so much thereof as might be-necessary,” to take up the bonds and warrants at the rate just mentioned, and to pay the consolidated bonds over to the holders of the outstanding bonds and warrants, on the surrender of their evidences of debt, to the board of liquidation. As an inducement to the holders of the bonds and warrants, to take sixty per cent, of their claims, not in cash, but in other evidences of debt,, the state agreed that the consolidated bonds, which were to be paid to these creditors of the state, should be held and used by the-board of liquidation, “only for the purpose of" exchange as aforesaid,” that “said bonds-should be used for no other purpose or purposes than as authorized by the funding act., and that a tax of five and a half mills on the dollar should be levied annually on all the-taxable property of the state, to pay the-prineipal and interest on the consolidated bonds, and the revenue derived therefrom, should be set apart for that purpose and no other.” These are the express provisions of the act, and the act itself in terms declares that each provision shall be a contract between the state and each and every holder-of consolidated bonds. Now what is it that the state, after entering into this solemn contract, proposes, by the act of February-20, 1875, to do? To take a portion of the-consolidated bonds which were to be issued only to an amount sufficient to pay off the-outstanding bonds and warrants at sixty cents on the dollar; which were authorized only for the purpose of being exchanged for-bonds and warrants at that rate, which the state promised should be used for no other purpose or purposes, and any other use of which she declared shall be a felony; these-bonds she proposes to give to a general creditor, dollar for dollar. This, it seems tome, would be a most palpable violation of a solemn public contract.
The suggestion that the legislature has reserved the right to use such of the consolidated bonds as may not be necessary to *1290take up tlie old bonds or warrants for the purpose of satisfying other creditors is a misconception of the funding act. In the first place, the contract is (section 1), that the state will only issue so many consolidated bonds as may be necessary to take up the outstanding bonds and warrants; (section 3) that they shall be exchanged for all valid outstanding bonds and valid warrants drawn previous to the passage of the act, at the rate of sixty cents in consolidated bonds for one dollar in outstanding bonds and warrants; and (section 5) that the consolidated bonds shall be used for no other purpose or purposes than as authorized by this act. Section 7 provides for a levy of - a tax of five and a half mills to pay the consolidated bonds, principal and interest, and scrupulously devotes the proceeds of the tax to that purpose. Placing' these provisions of the funding bill side by side, it is impossible to see where the state has reserved either an express or implied right to use the consolidated bonds to pay general creditors at par. The assumption appears to be at war, not only with the spirit and purpose of the funding act, but with its express declarations, and the attempt so to use the bonds is a flagrant breach of a contract, to which the honor and good faith of the state were pledged in the most explicit terms.' An act of the general assembly which authorizes and directs such a violation of the contract of the state clearly impairs the obligation of the contract, and is therefore unconstitutional, null and void.
[NOTE. On appeal to the supreme court, the decree of the circuit court was affirmed in respect to prohibiting the funding of the debt of the Louisiana Levee Company in the consolidated bonds issued under the act of 1874. and reversed so far as it ruled that the said debts should not be lirjuidated by any other issue of bonds. 92 U. S. 531.]
2. Has a holder of the consolidated bonds any remedy against this threatened breach of his contract? and if he has, what is it? “When a state becomes a party to a contract, the same rules of law are applicable to her as to private parties. When she or her representatives are properly brought into the forum of litigation, neither she nor they can assert any right or immunity as incident to her political sovereignty.” Davis v. Gray, 16 Wall. [83 U. S.] 232; Curran v. Arkansas, 15 How. [56 U. S.] 308. It is objected to this bill, that in effect the state of Louisiana is a party, and that the 11th amendment to the constitution of the United States forbids such a suit. This objection is answered by a reference to the cases of Osborn v. Bank of U. S., 9 Wheat. [22 U. S.] 738, and Davis v. Gray, 16 Wall. [83 U. S.] 220. In the latter case the court says the cause of Osborn v. Bank, decided: (1) That a circuit court of the United States may enjoin a state officer from executing a state law in conflict with the constitution of the United States, when such execution will violate the rights of complainants; (2) that when the state cannot be made a party, the court may decree against the officers of the state, in all respects as if the state were a party to the record; and (3) in deciding who are parties to the suit, the court will not look beyond the record. This authority seems to answer the objection made to the jurisdiction of the court. The case is this: The state of Louisiana has entered into a contract with certain of her creditors. Certain officers of the state, without authority of any valid law, but presuming to act under a law of the legislature, which is unconstitutional, and therefore void and no law, are about to violate the contract of the state and inflict irreparable injury upon the complainant. The authorities cited sustain the jurisdiction of the court, and justify it in interfering to prevent the mischief threatened.
It is insisted for the defense, that the attorney general of the United States is the only proper person to bring suit to have an act of the legislature declared unconstitutional and void. The authorities cited to sustain this proposition (Doolittle v. Supervisors, 18 N. Y. 155; Roosevelt v. Draper, 23 N. Y. 318; 1 Joyce, Prac. Inj. 746) concede that this may be done by a private person, when the act complained of involves some peculiar damage to his individual interests. This case falls clearly within this exception. My conviction is, therefore, that the demurrer to the bill is not well taken, and that the prayer for injunction pendente lite ought to be sustained. Ordered accordingly.