Court Opinion

ID: 7984542
Source: CourtListenerOpinion
Date Created: 2022-09-09 01:24:09.085492+00
Date Added: 2024-06-11T16:35:07.371534
License: Public Domain

Simrall, J.,
delivered the opinion of the court.
The fund which gives rise to this litigation was donated to the state by act of congress “for the endowment, support, and maintenance of at least one college,” for instruction in agriculture, and the mechanic arts. The grant was accepted by the legislature in 1866. The state thereby assumed to deal with the fund according to the conditions prescribed in the act of congress. It requires no argument to show that the state could only control the fund, so as to make it productive and subserve the purposes of the grant by the action of the political department of the government. Ye accordingly find that the first thing done by the legislature was to direct that the land scrip should be sold, and the money placed in state bonds, and the annual interest paid over in certain proportions to the universities of the state. Afterwards by the act of 1873, the money, bonds, and securities derived from the sale of the land scrip, are set apart and appropriated, to be used in the construction of the Yicksburgand Nashville Eailroad. For which the state treasurer shall take the notes or bonds of the company, payable in ten years, to be secured by the first mortgage bonds of the company, with interest at 8 per cent., payable semi-annually, and to be turned over, as under the previous act, to the universities.
*365The attorney general, in behalf of the state, brought a bill in chancery to restrain the treasurer from delivering the fund and securities, or any part of it to the railroad company. Upon motion the injunction was dissolved, and from that order this appeal was taken. As already observed, the grant was made to the state for a specific purpose. Necessarily the law making department must administer and control the fund by the selection or establishment of one or more colleges, to impart the requisite instruction, and by an investment of the fund, so as to make it productive. The state, too, it may be said, is under a moral obligation to conform to the terms and conditions contained in the act of congress. These are, that the capital shall never be encroached upon, or diminished, but shall be invested in United States bonds or other safe stock, to bear interest at not less than five per cent., and that the interest alone shall be used for the endowment and support of at least one college,” etc. * * The 5th section imposes a guaranty on the state against the contingency of loss by an improvident investment, so that if any portion of the fund invested, or the interest * * shall be diminished or lost, it shall be replaced by the state. The capital must remain forever undiminished, and the annual interest shall be regularly applied without dimunition to the purposes mentioned. Two ideas are distinctly set forth: First, that the capital sum shall be kept perpetually invested; and secondly, if the state shall make a bad investment, and a loss should happen, the state must make it good. Where the state is under a duty to replace the capital that may be lost, it is too plain for argument that she ought to have the selection of investments, and it was intended that such discretion should be conferred, and if at any time the legislature should discover or be of opinion that an investment authorized was unsafe, the legislature is competent to direct such investment not to be made. Here is a fund to be perpetually invested in interest bearing securities, and yet none of them enumerated in the act of congress are of that character. The bonds of the United States, of the several states, of the municipalities, of the railroad corpora*366tion, have fixed maturities. Certainly all that is meant by the act of congress is, that the investment may be changed from time to time, as the wisdom of the legislature may determine, but a reinvestment be made, so that the fund shall be perpetually out at interest on safe stocks or securities, to be selected by the legislature. When the money under the act of 1871 was placed in state bonds, none of them had a longer time to run than three or four years. If the legislature, for any reason, should choose to change the investment, there is nothing in the legislature which prevents it. The discretionary power of the legislature over the subject is full. The foregoing observations are applicable in the main as respects the college, or colleges that may become the beneficiaries. The legislature is free to establish one or more colleges of the character described in the act of congress, and make them the recipients of the interest for their support, or it may, as it has done, bestow it upon the universities. These universities are public eleemosynary corporations, which dispense the bounty of the state, their founder, to such persons as it directs. They were created by the state, and are supported by public funds, and are instrumentalities in the scheme of education. Both of them are subject to change and modification by the legislature. Against the state, neither of them can set up a vested right to property, or corporate franchises. Their governing boards are appointees of the state without right or power to continue the succession. The state could withdraw the interest of this fund from them, and found another institution, and make it the recipient of it.
But the bill avers, in substance, that the railroad company is insolvent, and that the investment of the fund, or any part of it, in its bonds and mortgage is unsafe. That allegation proceeds on the predicate of law that a court of equity, by reason of its general jurisdiction over trusts and trustees, can control or defeat the action of a coordinate department of the government in the exercise of its legislative power and discretion, if, in the opinion of the court, it has been unwisely exercised. If that be so, then the legislative department may revise and reverse the judgment of a *367court, if, in its opinion, it is improvident and erroneous, j If the regulation of a subject belongs to the legislature, the choice of means is purely in its discretion, and no other department of the government can intervene on the ground that the law is unwise. It pertains exclusively to the legislature to say what “ stocks ” are safe and solvent. Its decision is binding and conclusive on the judiciary, nor can they interpose on the suggestion that the stocks they have selected are unsafe. To attempt ,to control or restrain the lawmaking department in this respect would be an' encroachment on the functions of another branch of the government. The argument in support of this aspect of the bill was, that when the state assumed the position of trustee, she was subject, also, to its responsibilities; but when the state administers a trust it acts through the legislature (Perry on Trusts, § 41), and assumes the same measure of responsibility that pertains to it in the exercise of its lawmaking power. No other mode can be suggested in which a state can manage a fund for charitable uses. It must by statute derive the machinery to carry out the object, If the agent or officer of the state, acting under the law, disobeys its injunctions, transcends his powers, or refuses altogether to act, then it is in the jurisdiction of the judicial department to restrain his illegal acts and compel him to conform to the law. If in this case the treasurer should assume to part with the fund upon any other security than that named in the act, it would be competent for a court to restrain him. But if the court should undertake to declare that the investment should not be made, because, in its opinion, the security authorized by the act of the legislature was “unsafe,” it would be assumption of a right to decide a question which had already been determined by the legislature, and which it alone has the right to decide. A court of chancery has the jurisdiction to control, advise, and direct private persons and corporations in the administration of charitable funds. It may direct an unsafe investment to be called in, and a new one of its own selection to be made; it may hold the trustee responsible in proper cases. Manifestly the state in its sovereign capacity cannot *368be called to the bar of its own court, and be compelled to render an account and be directed; nor to put out a trust fund in the way pointed out in her own statute. Another position in support of the bill was, that the universities were private corporations, and, therefore, acquired a vested interest in the fund, which could not, by subsequent legislation, be divested. It is, perhaps, a sufficient answer to that, to say that the act complained of does not deprive them of the interest that is still assured to them. Neither of these institutions are, in the legal sense, private corporations. They did not have their origin in private or individual endowment, but are sustained by public endowments and appropriations. The title to their property is in the state. They are public corporations, established and endowed by public authority and funds, and are controlled by trustees appointed by the state for limited terms. University v. Maultsby, 8 Ired. Eq., 257; 5 Stew. & Port., 17; Dart v. Houston, 22 Gra., 506. The answer filed in support of the demurrer denies the fraud charged in the bill in procuring the passage of the act of 1873; that dispenses with the necessity for further consideration of that point. But because we decline to consider it; it must not be assumed that we assent to the proposition that such an inquiry can be instituted, and for such reason a public law could be declared inoperative.
These views cover all the material questions involved.
We think there is no error in the decree, and it is affirmed.