Court Opinion

ID: 6673564
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:14:10.439985+00
Date Added: 2024-06-11T16:00:37.366121
License: Public Domain

The opinion of the Court was delivered by
Moses, C. J.
It is admitted in the argument on the part of the respondent that the provisions of the fifth Section of the Act of 1869 (14 Statutes at Large, 385,) entered into and formed a material part of the contract made by the State with the holders of bonds issued under its direction and authority. Neither the genuineness of the coupons set out in the suggestion nor the title of the relator is disputed, and the only question left for our determination involves his right to demand their payment out of the fund provided and set apart, as he claims, for that purpose by the seventh Section of the said enactment.
Its language is as follows: “It shall be the duty of the said Land Commissioner to deposit with the Treasurer of the State all moneys collected by him as interest due upon the sale of lands, which shall be used by the Treasurer of the State in the payment'of the interest on the stocks and bonds of the State issued for the purchase of said lands, and to invest in bonds of the State all moneys received by the Land Commissioner in payment for said lands as principal; said State bonds to be deposited with the Treasurer of the State to constitute a sinking fund for the final payment and redemption of all stocks or bonds issued by the State for the purchase of said lands. -The interest accruing on the bonds of the said sinking fund shall be applied to the payment of the interest upon the stocks or bonds of the State issued for the purchase of lands.”
The relator contends that the money in the hands of the Treasurer, collected as interest due upon the sales of said lands, is pledged for the payment of the interest on the stocks and bonds of the State issued for their purchase; that the provisions of said Section enter into and become part and parcel of the contract between the State and the holders of bonds and stocks, and any diversion by the State of such proceeds impairs the obligation of the contract, and is, therefore, void and of no effect, because repugnant to the *79tenth Section of the first Article of the Constitution of the United States.
It is not denied that there is in the hands of the Treasurer, derived from the sources specified in the said seventh Section, a sum sufficient for the payment of the coupons held by the relator, and that it is only withheld because the General Assembly, by the Act approved March 3, 1876, to make appropriations to meet “the ordinary expenses of the State government for the fiscal year commencing November 1, 1875,” (16 Stat. at Large, 97,) diverted it to other purposes.
The intent of the Act is too clear to admit of any doubt as to the purpose of the Legislature proposed, or the mode by which it was to be accomplished. The money for the purchase of the lands was to be raised on the bonds directed to be issued, and as to these certain terms and stipulations are expressed- with no other possible view than to add to their worth and security. The greater the certainty of payment to the holder of the bond, the higher would be the market value. If the means of meeting the interest and of reducing the bonds were provided and assured in a fixed and permanent form, there would be a higher guaranty than that promised by the pledge of “the faith and credit of the State,” which could not be practically enforced by the process of the legislative ■Acts in the conscience of those who chance, from time to time, to constitute the General Assembly.
As was said in Morton, Bliss & Co., vs. the Comptroller General, (4 S. C., 448,) “ when a sovereign State enters into a contract of borrowing with an individual, it assumes to be bound, in all particulars as an individual under like circumstances would be bound, by what is expressed or properly implied by the terms of such contract.” If one agreed with another that, for the security of the punctual payment of the interest and principal of a loan, he would set apart, by delivery to a third person, certain securities, from the income of which, at fixed periods, it would be returned, would not his attempt to convert them from the use to which they had been appropriated by diverting them to another, entirely inconsistent with the one to which they had been before devoted, be good cause for the interposition of a preventive remedy through the Courts ? As if to render certain the object proposed by the provisions of the said Section, “the Treasurer is required to invest in the bonds of the State all moneys received by the Land Commissioner in pay*80ment for said lands as principal, said State bonds to be deposited with the Treasurer of the State to constitute a sinking fund for the final payment and redemption of all stocks or bonds issued by the State for the purchase of said lands. The interest accruing on the bonds of. the said sinking fund shall be applied to the payment of the interest upon the stocks or bonds of the State issued for the purchase of lauds.” A permanent mode of absorbing the whole loan is provided in the nature of a sinking fund, which promised as certain a security for the loan as the State could well supply in addition to that which it had at the same time furnished by the fifth Section.
In fact, the seventh Section afforded at least a more available security for the payment of the bonds issued under the Acts than did the fifth ; for, while the Acts declared that “ a sufficient amount of taxes is hereby levied to pay the interest accruing on said bonds annually,” it made no provision for the redemption of the bonds, and even the tax to meet the interest could only be levied through the action of some future Legislature fixing the rate that would be necessary to ensure the “sufficient amount of taxes to pay the annual accruing interest.” If, as is said at page 449, in Morton, Bliss & Co. vs. Comptroller General, already cited, “when the lawmaking power makes a contract with an individual the legislation conferring authority upon its agent and limiting his powers is to be considered a part of the contract, of which one dealing with the State is bound to take notice,” surely the State must stand bound to the terms and conditions which it imposes on itself as a security for the investment which it invites. In the same case the principle now invoked by the relator was thus announced : “When the authority under which the contract of borrowing is made proceeds wholly from the Legislature, the act and proceedings of that body in reference to it enter into and become a part of that contract.”
It is claimed by the respondent that it is within the power of any General Ass.embly to order the investment of these funds in bonds of the United States instead of bonds of the State, or go further and release the debt of the purchaser altogether. As to the first, it is enough to say, if such a change diminished the security of the bondholder the obligation of the contract would necessarily be violated. As to the last, the State has pledged the proceeds of all the lands sold as a security to the bondholder, and devoted them, on valuable consideration, to the constitution of a fund for the pay*81ment of a specific class of creditors. The security, though not in the form or language of a mortgage, attaches to it all the incidents and obligations of such an instrument, and the debtor can with no, more propriety or right divert the funds from the purpose to which he has devoted it by his contract than could the mortgagor affect the priority and validity of his mortgage by converting the subject of it to some other and different use.
But it is said that “ even if the provisions of Section 7 be regarded as a part of the contract they belong to the remedy and do not form a part of the obligation of the contract.” Where an agreement is entered into by a State through an Act of its General Assembly, its terms are to be found in the provisions of the Act to which it owes its creation. Its intent can in no other way be ascertained; and whatever of the substance of the contract is therein expressed enters into the obligation, which is mutually binding. In no sense can the said Section be said to belong to the remedy. It sets forth the terms of the loan and provides a security for its payment; fixes a time for its redemption, and in and of itself constitutes one entire contract, imposing “the duty of performing it,” which, following the eminent authorities cited, we have said in State vs. The Bank of the State of South Carolina, (1 S. C., 78,) “ constitute the obligation.” Even if the respondent is right in assuming that the provisions of the said Section belong only to the remedy, the diversion of the fund proposed by the Act of 1876 so affected the mode of payment which they designated, as entirely to destroy it. On this point it is enough to repeat here what we said in the case to which we last referred, quoting the language of Mr. Justice Washington in Green & Biddle, (8 Wheat., 1,) adopted by Dunkin, C. J., in State vs. Carew, (13 Rich., 498). If the Act so change the nature and extent of existing remedies as materially to impair the “rights and interests of the owner, they are just as much a violation of the compact as if they directly overturned his rights and interests.”
Let the writ issue requiring the Treasurer to pay the coupons described in the petition out of the funds applicable thereto in conformity to the opinion of the Court. The order will be considered as extending only to the coupons the subject of the proceeding.
Wright, A. J., and Willard, A. J., concurred.