Court Opinion

ID: 7195254
Source: CourtListenerOpinion
Date Created: 2022-07-24 17:01:58.027862+00
Date Added: 2024-06-11T16:16:18.648054
License: Public Domain

Concurring Opinion.
Watkins, J.
Claiming to be the holder of bonds of the State, aggregating in capital the sum of $4,018,626.48, the plaintiffs’ demand and prayer are that same be funded, and exchanged for' consolidated bonds of the State of Louisiana, for the amount of $2,411,-175.88, bearing date January 1, 1874, with all coupons thereto annexed from 1874, except the coupon due January 1st, 1880, which is annulled, and with the interest on said bonds reduced to 2 per cent, per annum for five years, from the 1st of January, 1881, and 4 per cent, per annum thereafter.
It is averred that these bonds were issued and subscribed under an act of the Legislature of date January 30, 1836, relative to the Citizens Bank, payable in series maturing on February 1, 1850, 1859, 1868, 1877 and 1886, and that same were renewed under *756legislative authority, and the respective maturities thereof extended to 1901, 1902, 1909 and 1911.
While the bonds mentioned are those familiarly known and designated as Citizens Bank bonds, and are signed by the Governor of the State, and countersigned by the Treasurer, yet the Citizens Bank is not made a party defendant; and, for this reason, I fail to understand why certain counsel of the plaintiff have introduced into the discussion the series of bonds for the aggregate sum of §133,333.33, which were issued by the Citizens Bank under the authority of its legislative charter, of date April 1, 1833, and for which the State is im, no way bound. It can not certainly be contended that they are valid obligations of the State, and that the plaintiff is entitled to fund them; and certainly the funding laws have no reference to any other bonds or obligations than 'such as the Statens under contract to pay.
The same may be said of the question of interest; for, whatever maybe said of the fundable character of the bonds themselves, it is clear that plaintiffs have no claim against the State for interest on the bonds. In the first place, there is no demand contained in the brief of either counsel for any allowance on that score, in bonds.
One of plaintiffs’ attorneys says, viz.:
“Upon which” — the principal of the bonds — “interest is alleged to be due and unpaid, from thejyear 1868 to date.” But it will be ascertained by actual calculation, that the sum of §2,411,175.88, for which new consols are demanded, is just 60 cents on the dollar, of the capital of the bonds, §4,018,626.48, which plaintiffs claim to own and want to have funded.
This demand is in keeping with the form of decree that is appended to the brief of same counsel.
But the contemplated object of all this array of figures, and the discussion of interest computations, and imputation of payments, evidently was to consume in interest the sums that have been remitted by the Oitizens Bank, and which are now in the possession of the plaintiffs, aggregating the large amount of §2,060,466.35 in cash, as well as the §885,000 of other values in the joint possession of the Citizens Bank and the plaintiffs; and, by this means, to obtain the full sixty cents on the dollar of its bonds, with interest thereon from January 1, 1874. The further object is, by combining in one calculation, these interest computations with the issue of §133,333.33 of *757Citizens Bank bonds, above referred to, to absorb all of the pledged assets in the possession of the plaintiffs and of the Citizens Bank, and which belong to the State.
In confirmation of this, we need only refer to the brief of one of the counsel of plaintiffs (p. 10), in which this paragraph will be found, viz.:
“If we apply the above rule to the partial payments in this ease, the result will be to extinguish all of the interest warrants, all of the bank bonds, and leave a considerable sum to be imputed to the payment of the interest upon the consols to be issued to us, and which should, of course, bear date January, 1874.
“The net result of the calculation will be, that the interest on the consols, to be issued to us, will be partly paid, and the State will hold a lien upon the balance of the assets of the mortgage stock department of the Citizens Bank * * to pay that interest,” etc.
This much having been premised, I will now examine the questions raised by the defendants, in brief, and apply them to this case.
They are as follows, viz.: (1) That the plaintiffs’ bonds represent only a contingent, and not an absolute liability of the State, and were not contemplated or included in the funding scheme; (2) that the State only bound herself as surety on said bonds, and by the agreement of the 8th of October, 1880, between the plaintiffs and the Citizens Bank, she was discharged therefrom.
It was the second defense that the district judge sustained, and on that ground he rejected the plaintiffs’ demand.
The initial point from which these questions should be considered and determined, is the date of their issuance, and the law under the authority of which same were issued. For, it is well settled, that an enabling act, under the authority of which bonds are issued, must be looked to as furnishing the vinculum of the contract, in so far as the State is concerned, and, likewise, any corporation deriving its rights thereto through a legislative enactment. Such legislative enactment is considered as having been read into the contract; and all persons contracting with such corporation on the faith of the obligations, or pledges of the State, are conclusively bound to know the extent of the authority conferred; for that is the measure of its authority to contract or bind the State to a third person.
This being the case, the law must be first consulted; for anything contained in the bonds, or in their indorsement, which are not in *758keeping therewith, are not of binding force, so far as the State is concerned.
I.
By act of April 1, 1833, the Citizens Bank was chartered and its capital stock was fixed at $12,000,000, to be procured by means of loans’on a subscription of $14,000,000, to be secured by mortgages issued by the subscribers. Secs. 1, 2 and 3. '
The directors were authorized to issue bonds of a prescribed form, for which the stock-mortgages were security, and said bonds were to be negotiated by the bank for the purpose of obtaining the necessary capital for banking operations. Sec. 4.
By this act the State was to have a standing credit of $500,000', u tobe loaned for such time as the State may require, not exceeding the time granted to the stockholders, on the bonds or obligations of said State being furnished in such manner as may be provided bylaw, bearing interest at 5 per cent, per annum.” See. 11.
It was under this act that the Citizens Bank emitted and negotiated the $133,333.33 with the plaintiffs, as stated above. It is manifest from what has been recited from the organization act, that the State is in no way bound therefor. She was not a. partner, nor stockholder. She was entitled to a standing credit, but loans were to be made to her just as loans were to be made to stockholders, upon furnishing her bonds, or interest-bearing notes.
This scheme proved a failure, and it became necessary that some additional means should be devised to make it a success. Accordingly a supplemental act was passed by the Legislature, on the 30th of January, 1836, which was predicated upon this declaration, viz.:
“ That, in order to facilitate the Citizens Bank * * * in the negotiation of the loan of $12,000,000,” aforesaid, “ the faith of the State is hereby pledged for the security of said sum,'1'1 etc. Sec. 1.
It then provides “ that bonds for the sum of $3,000,000, with the privilege of $12,000,000, shall be subscribed to the order of the president and directors of the Citizens Bank, by the Governor, and countersigned by the Secretary of State and Treasurer.”
It further specially authorized said bank to transfer said bonds by indorsement, and thereon to designate the place at which interest would be paid by the bank.
Then, in conclusion, it declares that the State shall have all the guarantees the Citizens Bank has, andthat all the securities granted *759by the act of incorporation of said bank * * are hereby transferred to the State,” etc.
When I consider that' these bonds were issued to the Citizens Bank, with the sole object in view of facilitating the bank in negotiating a loan, as was proposed in the act of 1838, and for that purpose “the faith of the State was pledged for the security of said sum:” that, to guard against loss, the loan provided, specially, for the bank to negotiate the bonds by means of its own indorsement, in which it should be stated at what place it would make payment of interest: that, in the execution of this trust, the bank placed on the back of the bonds an indorsement of a peculiar character, containing the form and characteristics of a new and additional promise, viz.: 1. “For value received [we] do hereby endorse and transfer the within bond,” (2) “ and hereby bind the Citizens Bank of Louisiana to pay the said interest half-yearly, * * in the city of Amsterdam, at the counting house of Messrs. Hope &0o., * * upon presentation, and delivery of dividend warrants in the margin thereof,” (3) “and, also, do bind the said principal in Amsterdam, at the counting house of Messrs. Hope <& Go. * * upon presentation and delivery of this bond,” etc.
When I consider further, that to these bonds are attached dividend warrants, or coupons, representing interest installments, which are signed by the cashier of the bank, and no other person; that there are attached to the bonds no interest coupons, — I feel constrained to believe that all of these recitals and facts are the clear and undisguised insignia of a new and independent contract between the plaintiffs and the bank, which had for its payment the faith of the State pledged as security. Notwithstanding the form of the bond was that of a prinicpal obligation, yet its effect was restrained and limited by the terms of the legislative act which authorized its execution,’ and it is fairly interpreted as such by the contemporaneous acts of the parties. Such an indorsement is not controlled by the lex mercatoria, but is such an indorsement as is usually employed in the assignment of choses in action, not debarring incipient equities between original and other antecedent parties to the instrument assigned. ' This is the exact situation of Hope & Co., in my conception; and the contract of the State binds her, simply and only, as surety of the Citizens Bank.
The act of March 16,1827, which granted a charter to the Consoli*760dated Association of the Planters of Louisiana, and authorized it to organize with a capital of $2,000,000, to be raised by a loan on like mortgage subscription as the Citizens Bank was, and by its negotiation of similar bonds; and the act supplementary thereto, of February 19, 1828, whereby the capital of the association was increased to $2,500,000, and the issuance of a different series of bonds for that purpose, which was predicated upon this declaration, viz., “ that in order to facilitate the Consolidated Association in the negotiation of the aforesaid loan of $2,500,000, the faith of the State is hereby pledged for the reimbursement of the capital and interest of said sum,” cannot be referred to as controlling the question raised here.
This series of bonds was quite similar in purport to those held by the plaintiff; but nothing appears in the record as to the terms of the indorsement to the holders thereof.
The relations between the Consolidated Association and the State were, “ that the State shall be and is hereby acknowledged to be a stockholder of the amount of $1,000,000, as a bonus; on condition, however, that the credit to be granted the State, in consideration thereof, shall be $250,000 during the duration of the charter; and the State shall pay interest on the whole, as a part of its credit, as the case may be, whenever it shall make use of the same;” but one of the conditions required was that the dividends arising from the stock should be paid into the State Treasury.
It thus appears that the State was an absolute stockholder of the association, to the extent of two-fifths of its capital stock, and that her security was additionally provided for by the contemplated deposits of the association in her treasury. These were all the securities that she was supplied with; for there was no provision made in the law that the mortgage securities consented by other stockholders should, in any event, be transferred to the State as surety, as in the case of the Citizens Bank transaction.
All of these provisions point with unerring certainty to the obligation of the State as being that of a principal debtor; and so it has been repeatedly .decided. Such is the plain and unmistakable meaning of the phrase, “that, in order to facilitate the Consolidated Association in the negotiation of the aforesaid loan of $2,500,000, the faith of the State is hereby pledged for the reimbursement of the capital and interest of said sum.”
And that the obligation of the State to the Citizens Bank was that *761of a surety, appears just as clearly, from the phrase, “ that in order to facilitate the Citizens Bank * * * in the negotiation of the loan of $12,000,000, aforesaid, the faith of the State is hereby pledged for the security of said sum,” etc.
This was evidently the manner in which the plaintiff and the Citizens Bank considered this provision of the legislative act, as it appears that in its contract of endorsement of the bonds the bank alone bound itself “to reimburse the principal,” as the State had done in the bonds of the Consolidated Association.
In the case of Forstall vs. Consolidated Association, 34 An. 770, the word “reimbursement” was interpreted by this court to mean the return of money, or the putting back of money taken from the purse of another who had disbursed it; and, speaking of the case then in .hand, said the State was bound primarily; and, in case she had made payment, “ the guarantee furnished to secure satisfaction of the obligation by reimbursement would have inured in her favor,” etc.
Such an obligation is clearly and easily distinguishable from the mere “accessory promise ” of the State quoted above.
Eor “ security ship,” says the Code, “is an accessory promise by which a person binds himself for another already bound, and agrees with the creditor to satisfy the obligation, if the debtor does not.” R. C. C., 3035, 3045.
In the instant case, there was no consideration for the bonds, until the Hope Company loaned the Citizens Bank money on its contract of endorsement, and it was for the faithful performance of its contract of reimbursement that the faith of the State was pledged as surety.
In my opinion, it is quite clear that in this transaction the State sustained the rélation of surety to the Citizens Bank, and that her security for indemnification against loss was and is to be found in the mortgage securities that were transferred to her, under and in pursuance of the act of January, 1836.
II.
On the second proposition much has been said in reference to the applicability of the funding laws to what is termed a contingent liability of the State, and some well considered and exceedingly persuasive decisions have been cited to that effect; but, in the pres*762ence of the clear and unmistakeable language of the funding statutes, I am unable to concur therein, after mature deliberation on the subject.
The provisions of the first act are, “that for the purpose of consolidating and reducing the floating and bonded debt of the State” there was created “a board of liquidation;” and it authorized said board to 'issue and give consolidated bonds in exchange “for all valid outstanding bonds of the State, and all valid warrants,” etc. Sec. 1, Act 3 of 1874.
The object and purpose of the funding scheme is therein announced to be “ to reduce and restrict the whole indebtedness of the State to a sum not exceeding $15,000,000, and to agree with the holders of the consolidated bonds to be issued hereunder, that said indebtedness shall not be increased beyond the said sum,” during the.period between 1874 and 1914, i. e., forty years. Sec. 13.
The supplemental funding act of 1875 prohibits the funding board from exchanging consols for certain particularized bonds and warrants, the legality of which is or has been questioned, until same, by a “ final decree of the Supreme Court, have been declared legal and valid obligations of the State of Louisiana;” and, as if to place a statutory interpretation on that phrase, it further declares, “and that were issued in strict conformity to law, and not in violation of the Constitution of the State, or of the United States, and for-a valid consideration.” Sec. 1, Act 11 of 1875.
In the light of the foregoing facts stated in relation to the history and incidents of the Citizen Bank bonds, the question is, whether or not they constitute a part of the bonded debt of the State, or are valid outstanding bonds of the State, in the sense of the act of 1874? Whether or not they are such bonds as are denominated valid obligations of the State, or such as were issued in strict conformity to law, in the sense of the act of 1875 ?
To these questions I feel bound to make an affirmative answer; and having so replied, I necessarily conclude that said bonds are fundable, notwithstanding they are surety obligations of the State.
III.
The next question to which I will direct attention, is the date at which, or as of which, the funding shall take place — as of date January 1, 1874, or of the date of filing this suit?
*763It is quite significant that the funding statute of 1874 provides that certain designated officers “ shall cause to be prepared and to issue bonds to be known as consolidated bonds of the State of Louisiana, * * all payable forty years from the first of January, 1874; and all to be numbered consecutively, and made payable to bearer,” etc. See. 1, Act 8 of 1874.
This provision is mandatory in terms, and seems to indicate the creation of a systematized issue of bonds, having uniformity in date, maturity and form; so that the debt of the State might be brought within certain prescribed and well-defined limits, and placed within the reach of adequate appropriation for the payment of interest.
This law seems to give neither the bondholder nor the Board of Liquidation any discretion in the premises. A- creditor, accepting the grace of the statute, is bound to accept it just as it is offered; and the Funding Board is only authorized to issue in exchange for the bonds that are surrendered, bonds of the description given in the statute.
It further provides that said consols shall bear interest at the rate of 7 per cent, per annum, payable semi-annually, and interest coupons shall be annexed.
This is in exact keeping with the prayer of the plaintiffs’ petition, pro tanto.
IV.
My examination of this case, and a most careful perusal of the briefs, and the exceptionally able opinion of the District Judge, has led me to a contrary view from that entertained by him, and urged by defendant’s counsel, that the State had been absolved from her obligations as a surety, and, for that reason, the bonds of plaintiffs could not be funded.
In my opinion, every step that has been taken — every act that has been done — on the part of the plaintiffs, in reference to these bonds, was authorized by the State and solicited by the Citizens Bank.
The compromise and compact of 1880 was thus authorized and solicited, though I am not prepared to say that the State is bound by, and not relievable from, the terms and conditions of the contract. The idea I wish to convey is that the Hope Company'and the Citizens Bank were authorized by a legislative enactment to treat with each other, and the State is equitably estopped 'from denying the authenticity of her own mandate, or the permission she gave to enter *764into a compact for her own discharge; though the particular act done is not absolutely binding on her. '
The plaintiffs had a perfect right to extend the time for the payment of their bonds, as they were specially authorized so to do.
The assets of the mortgage-stock department of the Citizens Bank having been pledged to the State and the plaintiffs jointly, as a security for the payment of these bonds exclusively (Act 3 of January, 1836), the latter had authority to deal with them in any way they chose, not inconsistent with their covenants with the bank and the State.
But the negotiations of the plaintiffs with the bank had not reached the stage of an absolute appropriation of the assets. They had received them on deposit, and the money also. In their dealings with the bank in 1880, they only released the banking department, as never having bound itself at all. Hence, it can not be said that, by any act of the plaintiffs, the State’s subrogation has been lost. R. O. 0., 3061.
V.
On this theory and argument, what is the proper disposition to be made of the issues involved?
If the bonds presented are fundable — and they are — the first question is, How many consols are the plaintiffs entitled to receive? Sixty cents on the dollar of what amount? Inasmuch as the funding must be made as of January 1,1874, the status of the plaintiffs claim must be taken as of that date. This is in keeping with the plaintiffs demand and the argument of their counsel. On that date, it is evident, the plaintiffs claim was in statu quo.
It is an undisputed fact that nothing has been paid on the capital of the bonds, but that, on the contrary, there are large arrearages of interest due and unpaid; yet plaintiffs counsel admit that the Hope Company has no right to claim in consols anything on the score of interest. They say:
“That the coupons represented in ; warrants for extended coupons ’ [are] not fundable, is clear from the face of the funding legislation, which nowhere provides for funding of coupons.” Sup. brief, p. 3.
Then the matter stands thus: The plaintiffs are entitled to consolidated bonds of the series authorized by the funding act of 1874, bearing date January 1, of that year, and maturing in forty years *765thereafter, that is, on the 1st of January, 1914; with interest coupons attached, payable semi-annually, at the rate of 7 per cent, per* annum, up to the 1st of January, 1880, and from and after the 1st of January, 1881, at the rate of 2 per cent, for four years, and at the rate of 4 per. cent, per annum thereafter — the interest coupon of 1880 having been remitted — in exchange for the Citizens Bank bonds,, at the rate of 60 cents on the dollar of the latter.
The capital sum being $4,018,626.48, the plaintiffs are entitled to consols aggregating in amount $2,411,175.88, with all interest coupons since the 1st of January, 1874, attached thereto. Inasmuch as the Citizens Bank bonds to be exchanged were extended to 1901, 1902, 1909, and 1911, respectively, no actual settlement can be made between the plaintiff and the State — the former surrendering bonds not yet due, in exchange for consols of the State to mature in the future.
But notwithstanding no final adjustment can be made at this time, I think it proper and right, and an act of simple justice to the State, that the mutual relations of the State to the plaintiffs and the Citizens Bank should be stated, and suitable restriction's imposed upon the plaintiffs, as a condition precedent, sine qua non, to the execution of the decree of the court, and to the consummation of the funding of the bonds.
In the first place, it is plaintiffs duty, the performance of which must be required at their hands, to surrender to the Board of Liquidation the whole of the Citizens Bank bonds, which are to be given in exchange for consolidated bonds — they being allowed to receive and retain all interest coupons thereto attached, and all interest debentures or warrants for unpaid interest, whether due or to become due.
The State is entitled to these bonds for use in making a settlement with the bank, as her principal; and the plaintiffs, by their acceptance of the consols in exchange therefor, necessarily absolve the State and the bank from any and all liability thereon, and must look to the consols and their interest for her recourse, alone.
In other words, the novation of its obligation is to be full and complete.
A further consequence and necessary result of the funding nunc pro tunc is, that the novation takes place as of date January 1, 1874, as well as the funding; for one is but the consequence of the other. *766The plaintiffs can not maintain the contract in its integrity for one purpose, and for another purpose insist that it was, in effect, surrendered and yielded up fifteen years ago.
It appears that under and by virtue of the compromise of the 8th of October, 1880, the mortgage-stock department of the Citizens Bank has collected and remitted to the plaintiffs a suha “ aggregating $2,060,466.35and that this sum was realized from the assets in the possession of that department of the bank which were jointly pledged to the. plaintiffs and to the State, as security for the faithful performance of the bank’s obligation to the State as. its surety, as well as the bank’s obligation to the plaintiffs for the payment of the capital of the bonds.
This fact is acknowledged by the plaintiffs counsel. Brief, p. 9.
This sum was realized and remitted to the plaintiffs “subsequently to the 20th of January, 1881.” Id.
It is evident that this sum must be at once restored to the State, as a condition precedent to liquidation.
It further appears that “ there is still on hand, applicable to the aforesaid bonds * * a large amount of mortgage stock assets of the Citizens Bank, not yet realized and remitted to the bondholders; that these assets consist of stock mortgages given under the act of 1836, on the property of the shareholders of the bank to secure their stock subscription; property which the bank has been unable to sell, acquired under foreclosure of such stock mortgages; mortgages not collected, given for mortgage stock; property acquired by the bank under such foreclosure, and afterwards sold by the bank; and amounts due by shareholder? on their stock subscriptions — the value of said assets and property, applicable to the payment of said bonds, being about $800,000.” See admission printed in defendant’s brief at p. 9.
It is likewise evident that those assets must be restored to the State as pledgee thereof, and as surety of the Citizens Bank, as a further condition precedent to the funding of the plaintiffs bonds.
It appears that by an act of the Legislature, there was a change made-in the charter of the Citizens Bank in 1853, whereby a banking department was added to the theretofore property bank, and fresh capital in money was subscribed — it being the legislative intention and purpose that these two departments should act separately and independently of each other.
*767Hence, since the banking department was established under the law of 1853, it has done a legitimate banking business, while the property bank, or, as it is familiarly termed, the mortgage-stock department, has pursued its particular branch of business — though virtually engaged in a liquidation of its affairs and endeavoring to realize on its assets. Pollock vs. Citizens Bank, 12 An. 230.
While this division of the bank into two departments, is doubted and denied by the defendant, and with some show of plausibility for the contention, yet the compromise of 1880 proceeded on that theory, and the State apparently acquiesced in that condition of things.
In fact, I fail to see the impropriety or impracticability of such an arrangement. It is an established fact that, on the faith of the legislative authority aforesaid, $100,000 of fresh money capital was subscribed and actually paid into this new banking department; and it could not be supposed that this would have been done if the subscribers had believed that these assets would, in any event, have become liable for the large claims of the plaintiff.
But, by this arrangement, the Legislature did nofl charter a new bank, but merely permitted the organization and equipment of a banking department, per se, as an addition to the existing property bank, by the subscription of a specified amount of fresh [capital— the stockholders in the property bank being accorded a preference in taking stock in the new department, to a limited extent.
In my opinion, the obligations of the property, or mortgage department, of the bank, were unaltered or unaffected thereby— neither were they diminished or increased — and the banking department never incurred any liability to the plaintiff, and never acquired any interest in, or right to, the assets of the mortgage department. Accepting this view of the character and organization of the bank, it becomes necessary to examine into plaintiffs responsibility for the sum of $500,000 of mortgage] assets of the property department, which were by them received and applied to the payment of interest on their bonds prior to 1868.
It is true, as a matter of fact, that, as between the plaintiffs and the Citizens Bank — both departments thereof — this claim was adjusted in the compromise of 1880; but, while it was authorized by the Legislature, the State was not a party to the compact, and is not concluded thereby.
*768The facts may be fairly summarized thus:
In 1853, when the banking department of the Citizens Bank was organized, there was withdrawn from the mortgage stock department $500,000 of assets, and same were carried to the credit of, and were reduced to possession by, the banking department, and constituted a part of its capital. The banking department thereby became the debtor of the mortgage-stock department for the sum of $300,000, as the admitted value of said assets.’ Subsequently, the banking department made advances to the mortgage-stock department, at different times in different amounts, aggregating about $650,000, with which the latter paid its interest to Hope & Co., and was credited therewith. In the compromise of 1880 the mutual account of these three parties were'squared and settled.
By this arrangement the “ pledged assets ” of the State were illegally attributed to the discharge of interest claims which she did not owe, and to this absorption of these values the plaintiffs made themselves parties, and they thus came under an obligation to the State for restitution thereof — and this, notwithstanding the mortgage-stock department of the Citizens Bank is likewise bound. I am, therefore, of opinion that the restitution of this amount, without interest, must likewise be imposed as a condition precedent to the funding of the plaintiffs bonds.
While it is perfectly true, as stated above, that no formal settlement can now be required, because of the’ immaturity of the plaintiffs bonds, yet this must be restricted to the capital therof, because, when consols shall be issued¡to the plaintiffs in exchange for bonds, there will be matured interest coupons attached, which will represent interest accumulations thereon since January 1, 1874, to date of issuance and delivery to the plaintiffs.
As the result of a hasty calculation, the Aggregate amount of this interest on consols will be $1,651,535 on the 1st of January, 1891. Deducting this sum from the amount now in the plaintiffs ■ hands, there will still remain a sum of about $400,000 to be placed to the credit of the capital of the consols on that date, and which could at his option be applied thereto by takiug less.
It further appears that there are in the coffers of the bank $85,000, which was realized from the “ pledged assets,” and it should also be applied as a credit, or surrendered to the State as a further condition precedent to funding of plaintiffs bonds.
*769Upon the plaintiffs acceptance of consolidated bonds, under the terms and restrictions imposed, the State, as surety of the bank, is entitled, and is of right subrogated to, all of the rights, as well as securities of the plaintiffs. R. O. C., 8052, 8058. She is also entitled to an accounting by the mortgage-stock department of the bank, which right ought to be reserved.
These are the views I entertain, but I am willing to so modify my conclusions as to concur in the decree, as to values, amounts and interest.
Separate Opinion.
Fenner, J.
On two propositions, I think, prior decisions of this court preclude further controversy. These are:
1. That, as regards the holders of these bonds, the State is liable as a principal obligor and not as surety.
2. That the bonds were fundable under the terms of the funding acts.
I.
Notwithstanding certain slight differences in the terms of the respective laws and in the forms of endorsement, the bonds issued in aid of the Citizens Bank stand on the same basis with those issued in aid of the Consolidated Association of the Planters of Louisiana.
The bonds themselves are identical in form. In both eases, the State, on the face of the bonds, acknowledged herself indebted to the bank in a certain sum of money, and promised to pay the said sum with the stipulated interest to the order of [the bank. In both cases, the bonds were issued in aid of the bank and under laws which required the bank toj'pay the interest and principal of the bonds as they became due, and to protect the State against all liability thereon. Although in the endorsement provided for the Citizens Bank bonds, the bank expressly bound itself to pay the principal and interest as they matured, while the endorsement of the Consolidated Planters’ bonds contained no such stipulation, the former endorsement could not restrict the unconditional obligation of the State alreadjr expressed on the face of the bonds, but only added thereto a like unconditional obligation on the part of the bank.
All the questions affecting the nature of the State’s obligation on the Planters’ consolidated bonds and their fundability have been considered and determinedby this court in three cases. Lessassier & *770Binder vs. Board, 30 An. 611; Forstall’s Sons vs. Board, Id. 1151; Forstall vs. Bank, 34 An. 771.
We consider that these decisions fully cover and determine the same questions as to the Citizens Bank bonds.
In Forstall’s Sons vs. Board, 30 An., p. 1152, this court said, speaking of the bonds: “ They are unquestioned and unquestionably debts of the State of Louisiana, possessing all the requisites and characteristics, as we held in the Lessassier & Binder case, which entitle them to be exchanged for consolidated bonds, under the provisions of the funding law and its amendment.”
In Lessassier & Binder, page 615, after transcribing'the words of the bond, “The State of Louisiana acknowledges to be indebted unto the Consolidated Association of the Planters of Louisiana in the sum of $1000, which sum the State of Louisiana promises to pay, * * etc., this court said:
“ Such words do not, can not, create or describe an accessory promise. Those words are the studied and clear expression of a principal obligation of an unconditional promise.
“ Can we add to those terms? Can we arbitrarily presume that the State did not intend to bind itself, as, in law and in fact, she is bound by the terms of her contract; that, when she said without reservation, ‘I acknowledge to be indebted, I promise to pay’ — it meant, though she said just the reverse, indebted as a surety, the surety of one who, in the instrument, is recognized as a creditor, and pay in case my recognized creditor fails to do so. This would be a perversion o.' the very' letter of the contract submitted to our consideration.
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“ Whatever may be, as between the State and the Consolidated Association, the liabilities of the latter to'the former, as to third parties and those bonds, the State was, and has not ceased to be, a principal debtor, and, as to third parties, can not be legally regarded as the surety of one who, in those bonds, is represented as its creditor.”
In Forstall’s Sons, page 1152, the court says, resuming an equally unanswerable reasoning on this point:
“ Whatever may be the relation between the State and the association, as between themselves, by no possible interpretation can the State be considered anything less or other than the ’principal, and indeed the sole, obligor upon the bonds, as to the holders thereof.
*771“ They are no accessory, but original and principal obligations, not payable contingently, but absolutely and at all events.”
Even the two dissenting judges in this case, Justice Spencer and Chief Justice Manning, while they did not agree with the majority of the court on the question of the bonds being fundable under the acts of 1874 and 1875, declared, with the same positiveness as the decision itself, that they were absolute and valid debts of the State. See Dissenting Opinion at page 1153.
On the subject of the indorsement, this court said, in Lessassier & Binder, at page 616: “The indorsement on these bonds does, in no way, change or impair the unqualified amjl unconditional obligation of the State to satisfy said bonds. It adds to the State obligation that of the Consolidated Association.”
And in Forstall’s Sons, at page 1152, this court said again: “The fact that the act made them [the bonds] transferable by the indorsement of the president and cashier of the association, no more modified or changed the obligation of the State than if they had been drawn'payable to bearer, or had been the obligations of any individual or private person.”
And again, in O. J. Forstall’s case, 34 An. p. 776, this court said: “The declaration in the indorsement was a superfluity for the incurring of the obligation [that of the bank], which already existed and ■was not thereby absolutely created. The indorsement was, however, a legal formality required for the negotiability of the obligations or bonds.”
The case of Forstall’s Sons was decided after the Pacific Railroad case. 30 An. 980. It was rendered by the same court, and on full consideration of the Pacific Railroad case, and it overruled the suggestion contained in the latter, to the effect that these bonds were not embraced in the funding scheme.
The later decision of this court, in Adams & Co. vs. Board, 39 An. 689, referred to the Pacific Railroad ease only as establishing the principle that bonds not intended to be embraced in the funding scheme could not be funded; and we held that the particular bonds therein concerned, being bonds issued under the Confederate régime, were not within the purview of the act; but we meant and said nothing to abrade the authority of the decisions referred to holding that the bonds of the State issued in aid of the property banks were fundable.
*772II.
But while thus holding, very different questions present themselves, in determining whether or not the plaintiffs have preserved their right to accept the proposition made to them by the State in her funding laws, or have, by their conduct and dealings, lost it. It is all important, at the outset of this discussion, to have a clear comprehension of the meaning and effect of the funding acts of the State. They embody a simple proposition, made by the State to her creditors, to exchange the consolidated bonds issued under the acts for “valid outstanding bonds and warrants of the State, at the rate of sixty cents in consolidated bonds for one dollar in outstanding bonds and warrants.” No creditor was bound to accept this proposition. Every creditor falling within its terms had the right to accept it, provided he accepted it precisely as made. It provided distinctly for an exchange. No creditor could receive consolidated bonds without surrendering to the State the bonds or warrants held by him, with all the rights and obligations evidenced thereby. Section 8 of the original Act No. 8, of 1874, required that the bonds and warrants so surrendered should be destroyed; but when the question arose as to the funding of the bonds issued in aid of the Consolidated Planters Bank, the Legislature provided, by Act 20, of 1878, that such bonds, if funded, should not be destroyed, but should be “ preserved as evidence of the obligation of the corporation to the State,” which direction would necessarily apply to the Citizens Bank Bonds, if surrendered.
After the exchange, all claims of the holders of the bonds, against either the State or the bank, would be completely effaced, or transferred to the State, as effectively as if the bonds had been sold to k third person.
The funding act fixed no time within which the proposition made by the State should be accepted by the creditors, and, therefore, such acceptance could be made at any time before withdrawn, or, at least, “ within such time as the situation of the parties and the nature of the contract shall prove it was the intention of the proposer to allow.” Rev. C. C. 1802.
But the Code further declares: “ The acceptance, to form a contract, must be, in all things, conformable to the offer; any condition or limitation contained in the acceptance of that which formed the matter of the offer, gives him who makes the offer a right to with*773draw it’ ’ (Art. 1805). And further: ‘ ‘ This takes place even when more is promised than was demanded, or when less is offered than was required. * * * The modification or change of the proposition is, in all respects, considered as a new offer, and the party-making it is bound by the acceptance in the same manner as if the original proposition has been made by him.” Art. 1806.
All parties agree that, as to their construction and effect, ihe proposition made by the State and the acceptance by the creditors, whenever the latter is signified, must both be governed by the facts and conditions prevailing on January 1, 1874. No matter how long afterward the creditor might accept, the proposition obliged the State to deliver, in the exchange, consolidated bonds bearing date January 1, 1874, payable forty years after date, and with coupons attached for interest to be paid semi-annually from the same date. And so, whenever he might accept, the creditor was bound to surrender to the State the old bonds, with all the obligations evidenced thereby intact, as they existed on the 1st day of January, 1874.
Let us now consider the condition of affairs as existing at this crucial date.
At that date the plaintiffs held bonds of the State of Louisiana issued in aid of the Citizens Bank aggregating, in amount of principal, the sum of §4,118,222.29.
These bonds, with the indorsement thereon, represented absolute indebtedness to the holders by both the parties thereto, viz., (1) the State, and (2) the Citizens Bank; and the holders had the right to call upon either or both for payment in full. But under the law by virtue of which the bonds were issued, as between the State and the bank, the latter was primarily bound to pay and was bound to protect the State against any liability thereon.
By the 3d section of the Act of January 30, 1836, under which the bonds were issued, it was provided: “ That for the'guarantee of the bonds to be emitted by the State, in favor of the Citizens Bank, and of the interest thereof, and for which the State pledges its faith, all the securities granted by the act of incorporation of said bank, and especially by the 3d and 4th sections of said act, to the holders of its bonds, are hereby transferred to the State and to the holders of the bonds which may be issxied in virtue of this act; and the Governor shall only emit the State bonds after it shall have been proved to him by the .certificate of the president of the bank, that mortgages have been *774subscribed by the stockholders of said bank, in conformity with the charter, for at least one-fifth more than the bonds required ; andboih the capital and interest of said bonds shall be paid by the bank at the time they shall becoine due.”
The nature of the securities thus transferred is defined in Sections 3, 4, 5, 6, 7 and 28 of the original charter, Act of April 1, 1833. They consist of mortgages granted by the stockholders as security for their subscriptions of stock, in a sum exceeding by one-fifth all the bonds issued, and of which a large amount was extant when the funding acts were passed.
It thus conclusively appears that, at the date of the funding act, the holders of these bonds and the State held jointly these valuable securities as a pledge for their common benefit and protection. Had the holders of these bonds then accepted the proposition made by the State, what would have been the result? As already shown, they would have received from the State consolidated bonds, and they would have surrendered to the State the secured bonds. By the effect of this exchange, plaintiffs would have ceased to be holders of the bonds, and would have lost the sole quality in virtue of which they had any claim upon the pledged securities for the payment of the bonds. The State would then have become the. holder of the bonds, and would have thus become the sole holder of the pledged securities, so far at least as they were affected to the payment of the bonds. The State never made any other proposition to plaintiffs than the above; and plaintiffs had no power to bind the State otherwise than by its unconditional acceptance. Suppose plaintiffs had then said to the State: “We are willing to accept your proposition, provided you will allow us first to, liquidate our common securities; if they pay more than the value of the bonds which you offer us, we will get the benefit of it and will call on you for nothing; if they pay less, you will only fund the difference.” 1 Evidently this would not have been an acceptance of the proposition made by the State; it would have been a new proposition, which could not bind the State unless accepted by the State.
Or suppose the plaintiffs had then offered such a kind of acceptance to the funding board, what would have been the possible answer, except that the board had no powers other than those conferred by the terms of the law, and could add no conditions thereto?
Yet, what have plaintiffs done? Instead of accepting the propo*775sition of the State as made — instead of surrendering their bonds to the State with all the securities 'attaching thereto and including their claim against the bank itself on these bonds- — they have chosen, during all these long years, to retain their bonds and to look bo and deal with the bank as debtor thereon; they have retained their hold on the pledged securities; they have participated in their liquidation; they have collected apd appropriated over two million dollars from the proceeds of these securities; they have taken the chances of realizing more than the value of the consolidated bonds, which they might have received under the proposition of the State; and now, when it turns out that the securities are inadequate, they come to the funding board and demand the funding of the deficiency.
I think the funding board is bound to reply that it has no mandate in the premises except that conferred by the funding act; that this mandate is confined to executing the proposition made by the State when accepted by the creditor as made, and according to the conditions existing at that time; and that plaintiffs, having failed to accept the proposition while those conditions existed, and having altered the conditions in such manner that they can nob be restored, have lost the right to fund.
It seems to me clear that the plaintiffs had the option either to accept the proposition of the State, thereby surrendering the bonds and relinquishing ail claims thereon, either against the bank or the securities, or to retain their bonds, and to look for satisfaction to the obligor thereon, and to the securities. They were bound to make their election. They could not first exhaust their right against the bank and the securities, and then claim the funding by the State.
It is true that Act 79 of 1880 authorized the Citizens Bank to make compromises and settlements with its mortgage stockholders, and to apply the sum realized to the payment of these bonds.
But this act does not purport to amend, or refer to, the funding acts.
It was passed six years later, and at a time when it might well have been supposed that these bondholders did not intend to accept the proposition of the State. It does not enlarge or alter, in any respect, the proposition made in the funding act, or the duties of the board constituted thereby. It seems rather to have been passed with a distinct understanding that these bondholders had declined, or would decline, to accept the proposition. It said, to the bond*776holders, in substance: “If you decline the proposition made by the State — if you prefer to retain your claim against the bank, and your recourse upon the pledged securities, rather than to surrender them with your bonds, in exchange for consolidated bonds, the State acknowledges your right to do so, and will pass this act to facilitate you in the liquidation of your claims, and to enable you to get out of them the largest possible result.”
The acceptance of this act by the bondholders, and their action under it, as evidenced by the elaborate compact entered into between them and the bank, operated, in my opinion, a complete abandonment of their right to fund under the existing law.
Be it well understood, that I am not discussing the question of the effect of their action upon their claim against the State. It may well be that, after a fair and honest liquidation of these pledged securities made with the consent of the State, they may still hold the State as bound for any resulting deficiency. It may well be that sound policy and honorable duty would suggest to" the State the propriety of passing an amendment to her funding law which would admit plaintffsto the privilege of settling their ultimate claim against the State on the same basis with other creditors. But as this court said in Lord Cecil’s case, “We are not the law-making power of the State; the policy or impolicy, the good or bad faith, of an enactment such as the Funding Bill of 1874 is beyond our inquiry.” 30 An. 38.
This court is bound to take the law as it finds it. Our only function is to determine whether, under the law as passed, it is the duty of the respondent board, having no power or duty beyond the terms of the law, to fund the bonds of plaintiffs. Holding that plaintiffs have not accepted the proposition made by the State, and have, by their own action, placed it beyond their power to comply with the essential terms of the proposition, I am bound to say that the board complies with its duty under the law in refusing to fund.
The functions imposed by the law upon the Board of Liquidation are, and were intended to be, of the simplest character, requiring nothing more difficult than a calculation of 60 per cent, of the face of valid bonds and warrants tendered for exchange. If the plaintiffs had accepted the proposition of the State as made, there would have been nothing to do except for them to surrender their bonds and receive consolidated bonds for 60 per cent, in exchange.
But under the course pursued by plaintiffs and under the demand *777as now made, the board finds itself confronted with one of the most difficult problems conceivable, involving a marshaling of assets, the ranking of claims, the imputation of payments, investigation and settlement of accounts, and all kinds of troublesome questions. The learned counsel on either side differ widely on all these points. The mere fact that the case bristles with such difficulties indicates how far the course of relators departs from the acceptance of the simple proposition made by the State.
The State has never referred the settlement of such important questions, affecting her rights and obligations, to the Board of Liquidation, or even to the Judiciary. The sole question referred, under the terms of the funding act, to judicial determination, and the sole jurisdiction conferred upon the courts,' extend no further than to declare whether or not bonds or warrants presented for funding are “legal, valid obligations against the State of Louisiana, issued in strict conformity to law, and not in violation of the Constitution of the State or of the United States, and for a valid consideration.” Act 11 of 1875, Sec. 1.
We are asked in this case to determine as between the plaintiffs, the bank, and the State, that an indebtedness of the bank to plaintiffs, for which the State is not bound, or denies that she is bound,, and exceeding §1,000,000, enjoys a concurrent privilege with the State on the pledged securities, and, indeed, in effect, a superior privilege, because it is claimed that, under the law as to imputation of payments, their indebtedness is entitled to be first paid out of the sums collected on these securities. Certainly this is a question of vast importance to the State. The State is sovereign, and exempt from suit without her consent. Where is the law by which the State has authorized the funding board, or the judiciary, to take cognizance of such a claim against her? Certainly no such authority is found in the funding acts. Moreover, how could such a question be determined without the presence of the Citizens Bank, which is not a party to. this suit?
The subject might be further pursued by a statement of other like issues involved. But this is sufficient, in my opinion, to show the impossibility of plaintiffs’ position and its entire inconsistency with their claim that they preserve the right to accept the proposition made by the State, and have not, by their conduct, abandoned and destroyed the right, which they might once have had, to fund these bonds.
*778No one is more sincerely anxious than myself to see the State perform honorably and justly all her obligations. Perhaps, if I felt authorized in this proceeding to take part in the final adjustment, between the State and plaintiffs, of the rights and obligations arising out of these transactions, I might, in some respects, hold views more favorable to the latter than those reached by the court.
While my opinion, as herein expressed, prevents me from participating in the decree, it is, no doubt, fortunate for the State to have this matter settled. The adjustment effected by the decree of the court, while far beneath the claim of plaintiffs, may yet be more satisfactory to them than would be the rejection of their demand for funding and the preservation of their rights against the State, in other respects, intact. If so, I do not hesitate to say that the adjustment is one most favorable to the State, and should be entirely acceptable to her. I dissent.