Case: SOUTH DAKOTA v. NORTH CAROLINA
Abbreviation: South Dakota v. North Carolina
Decision Date: 1904-02-01
Docket Number: No. 8. Original
Citation: 192 U.S. 286
Volume: 192
Reporter: United States Reports
Court: Supreme Court of the United States
Jurisdiction: United States
Parties: SOUTH DAKOTA v. NORTH CAROLINA.
Judges: Me. Chief Justice Fullee, Me. Justice McKenna and Me. Justice Day, 'dissenting.
Pages: 286–354

Head Matter:
SOUTH DAKOTA v. NORTH CAROLINA.
IN THE SUPREME COURT OP THE UNITED STATES.
No. 8. Original.
Argued April 13, 14, 15, 1903; reargued January 8, 11, 12, 1904.
Decided February 1, 1904.
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 non-payment, 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.
Where a statute provides that a State issue bonds at not less than par to pay for a subscription to stock of a railroad company; and, after advertising for bids in accordance with the statute and receiving none, the-bonds are delivered to the railroad company in payment of the subscription, the 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 $1000 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.
By an act passed in 1849, chap. 82, Laws, 1848-49, the North Carolina Railroad Company was chartered by the State of North Carolina with a capital of $3,000,000, divided'into 30,000 shares of $100 each. The State subscribed for 20,000 shares. The statute authorized the borrowing of money to pay the state subscription and pledged as security therefor the stock of the railroad company held by the State. In 1855 a further subscription for. 10,000 shares was authorized by statute, chap. 32, Laws, 1854-55, to be issued on the same terms and with the same security. At the same session an act was passed incorporating the Western North Carolina Railroad Company, chap. 228, Laws, 1854-55, which authorized a subscription by the State and the issue of bonds secured by the stock held by the State in said company. On December 19, 1866, a further act was passed, chap. 106, Laws, 1866-67, entitled “An act to enhance the value of the bonds to be issued for the completion of the Western North Carolina Railroad, and for other purposes,” which, after reférring to the prior acts of the State authorizing the issue -of bonds and stating that a portion of them had already been issued, added: “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,
“Sec. 1. Be it enacted by the General Assembly of the State of North Carolina, and it is hereby enacted by the authority of the 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 185U-55 and 1860-61, to issue bonds of the State to the amount of fifty thousand dollars or inore, 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, óf registered mortgages without actual registry.”
Under this last act bonds were issued in the sum of $1000 , each, having this indorsement:
“State of North Carolina, Treasury Department,
“Raleigh, July 1, 1867.
“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 arid seal of office, and the counter-signature of the comptroller.
“Kemp P. Battle,
“S. W. Burgin, Comptroller. Public Treasurer.”
. • (
' These bonds ran thirty years and became due in 1897. In 1879 the State of North Carolina appointed commissioners to adjust and compromise the state debt, and all of the last men tioned bonds have been compromised with the exception of about $250,000. Simon Schafer and Samuel M. Schafer, either individually or as partners,. owned a large proportion of these outstanding .bonds, having held them for about thirty years. In 1901 Simon Shafer gave ten of these bonds to the State of South Dakota. The letter accompanying the gift was in these words: . ’ .
“Office of Schafer Brothers, No. 35 Wall Street,
“New'York, September 10th, 1901.!
“Hon. Charles H. Burke. .
“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, besides, of course, the coupons, which amount to some one hundred and seventy per cent 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..
“If your State should succeed in collecting these bonds -it would be the'inclination of the owners of a majority of the total issue now outstanding to make additional donations to such 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.
“Very respectfully,
“Simon Schafer.”
Prior thereto, .and on March 11, 1901, the State of South Dakota had passed the following- act, Session Laws, South Dakota, chap. 134, p. 227:
“An act to require the acceptance and collections of grants, devises, bequests, donations, and assignments to the State of South Dakota.
“Be it enacted by the Legislature of.the State 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,motes 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 saíne 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.
“Sec. 2. Whenever it shall be necessary to protect or assert the right or title of the State to any property so received or derived as aforesaid, or to collect or reduce into possession any bond, note, bill or chose in action, the attorney general is directed to take the necessary and proper proceedings and to bring suit in the name of the State in any court of competent jurisdiction, state or Federal, and to prosecute all such suits, and is author ized 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 Caiolina 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 thirty thousand 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 ánd coupons secured by such mortgages; and also for a receiver and an injunction.
Defendant Rothschilds made no answer. On April 2, 1902, the State of North Carolina and the defendant, Charles Salter, filed separate answers. North Carolina in its answer denied both the.jurisdiction of this court and the title of the plaintiff; averred that the bonds were not issuéd in conformity with the statute; admitted the.ownership of thirty thousand shares of stock; denied that the mortgages were properly executed or that they had the effect of conveyances &r_ 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.
Mr. Wheeler H. Peckham, with whom Mr. R. W. Stewart was on the brief, for complainant:
This court has jurisdiction as the suit comes within the precise terms of Art. Ill of the Constitution. Where the language used in a constitution or statute is plain, clear and free from ambiguity there is no room or occasion for interpretation, and the language must be construed according to its plain meaning and intent. One citation is sufficient — Bate Refrigerating Co. v. Sulzberger, 157 U. S. 1. “Quoties in verbis nulla est ambiguitas ibi 'nulla expositio contra verba fienda est.” Everard v. Poppleton, 5 Q. B. 183; Gadsby v. Barry, 8 Scott, N. R. 804. The decision in Chisholm v. Georgia, 2 Dall. 419, that the suit would lie was the occasion for the Eleventh Amendment to the Constitution, but as it limited to the event of a citizen suing a State it became conclusive proof that, as to suits between two or more States, of suits by a State against citizens of another State, it was intended that the provisions of the original Constitution should stand. See Curtis on U. S. Const. 2d ed. 15.
A State is also liable to be sued by the United States in this Court. United States v. Texas, 143 U. S. 621; on an action of debt. United States v. North Carolina, 136 U. S. 211.
The United States also may be sued by a State in this court pursuant to a statute. Minnesota v. Hitchcock, 185 U. S. 373, and see Cohens v. Virginia, 6 Wheat. 406.
The ground of the jurisdiction is that the States have by adopting the constitution agreed to submit .controversies between themselves to the determination of this court. Rhode Island v. Massachusetts, 12 Pet. 720. No exception was made of any possible case which might arise. The settlement of claims by diplomacy or by war was taken away by the Constitution, and it was necessary to make some provision to take their place. Such provision was made by the organization of this court and giving it this jurisdiction. It is most just that the jurisdiction should be exercised where the plaintiff’s claim is for the collection of debt; for, when a.State enters into the markets of the world as a borrower, she for a time lays aside her sovereignty and becomes responsible as a civil corporation. Louisiana v. Jumel, 107 U. S. 740; Murray v. Charleston, 96 U. S. 445. The cases of New Hampshire and New York against Louisiana can be distinguished from this case.
The State of Dakota is competent to become the owner and holder of these bonds. Texas v. White, 7 Wall. 700. It is incident to the sovereign power both to draw and purchase balls. United States v. Bank, 12 Pet. 377. Also to become a donee, whether by legacy or otherwise. Matter of Meriam, 141 N. Y. 479, 484; Estate of Cullom, 5 Misc. N. Y. 173, aff’d 145 N. Y. 593; United States v. Fox, 94 U. S. 315.
Subd. 1, section 10, article II, of the Constitution, which forbids a State to enter into any agreement or compact with another State, does not affect the right of the complainant to hold these bonds; the compacts or agreements intended are-of a political nature, such as could be made between sovereigns only and not ordinary business agreements. Union Branch R. R. Co. v. East Tenn. & Geo. R. R., 14 Georgia, 327; 2 Story Com. §§ 1354 and 1401, et seq. A promise to pay money is hot an agreement of the character intended to be prohibited. See 4 Dall. 456; 96 U. S. 445; Holmes v. Jennison, 14 Pet. 572, citing Vattel.
There is nothing in the answer or proofs respecting the gift in controversy in this suit which affects the jurisdiction. The gift was absolute and the State had a right to accept it. See B. R. Curtis in N. Am. Review, January, 1844, and vol. 2, p. 93 of Curtis’s Life.
It is impossible to impute to the complainant any improper motive, any more than if the gift had been by a legacy rather than by gift inter vivos. But motive, even in a complainant, is immaterial. The only question is, has the complainant á right? Whether acquired with good, bad or indifferent motives is quite immaterial. Morris v. Tuthill, 72 N. Y. 575; Rice v. Rockefeller, 134 N. Y. 174; Ramsey v. Gould, 57 Barb. 398; 2 Morawetz on Corporations, § 259, and cases cited; Pender v. Lushington, L. R. 6 Ch. Div. 75; Phelps v. Nowlen, 72 N. Y. 39; McDonald v. Smith, 1 Pet. 620, 624; Barney v. Baltimore, 6 Wall. 280; Smith v. Kernochan, 7 How. 198; Dickerman v. Northern Trust Co., 176 U. S. 181; Toler v. R. R. Co., 67 Fed. Rep. 177.
When the State owns the whole interest, legal and beneficial, in the bonds sued on, which interest it was empowered to acquire and did acquire by virtue of the act of the legislature, by a donation from individuals, it makes no difference that the motive of the donor was the hope that the State would bring suit on the bonds.
The assignment of the bonds of the defendant State to the complainant State carried with it the mortgage of the railroad stock created by the legislature of the defendant State to secure the bonds. Converse v. Michigan Dairy Co., 45 Fed. Rep. 18.
The endorsement and delivery operated as an assignment of-the mortgage and transferred to the holder of the notes the same equitable rights in the mortgage which he had in the notes. Cooper v. Ulmann, Walk. Ch. 251; Briggs v. Hanno wald, 35 Mich. 474; Carpenter v. Longan, 16 Wall. 271; Kennibott v. Supervisors, 16 Wall. 452; Ober v. Gallagher, 93 U. S. 199. In these cases though only a portion of the notes or bonds were acquired by the complainant the transfer enabled the complainant .to foreclose, because an assignment of a part of the debt, or of one or several bonds or notes, secured by the mortgage carries with it a proportional interest in the mortgage.
The defendant State made a statutory mortgage to secure the whole issue of the bonds sued on. The act provided for mortgaging an equal amount of stock as collateral security for the payment of said bonds. Plainly, the whole amount of shares of stock became security for the whole amount of the bonds. 3 White and Tudor’s Leading Cases in Equity, 3d Am. ed., Wallace’s notes to the cases of Row v. Dawson and Ryall v. Rowles, pp. 369 and 646.
The mortgage is simply security for the debt, and whatever transfers the debt carries with it the mortgage. English v. Carney, 25 Michigan, 178.
A mortgage given to secure several obligations stands as security for the whole, and if a mortgagee assigns one of the obligations to a third person, the mortgage in. equity stands as security for all the obligations, as well for the one assigned as those retained. Kortlander v. Elston, 52 Fed. Rep. 180, 183 ; Matter of Bronson, 150 N. Y. 20; Jermain v. L. S. Ry. Co., 91 N. Y. 483, 492. As to undivided fractional interests in the whole, see Flynn v. Brooklyn City R. R. Co., 158 N. Y. 504; Matter of Fitch, 160 N. Y. 94; 1 Morawetz on Corp. §§ 234, 237. As to rights of the second mortgage bondholders, see Sager v. Tupper, 35 Michigan, 134; Wheeler v Menold, 81 Iowa, 647.
In any aspect of this case, the first and second mortgage bondholders, upon the general principles of equity, being interested in the funds, must be rnaáe parties. Story Eq. Pl. 97, 112; Florida v. Georgia, 17 How. 510; see also California v. So. Pac. R. R., 157 U. S. 229; Minnesota v. Northern Securities Co., 184 U. S. 199; Washington State v. Northern Securities Co., 185 U. S. 255.
As to making the holders of first mortgage bonds parties, see Heffner v. Life Ins. Co., 123 U. S. 747, 754, and cases cited; Jerome v. McCarter, 94 U. S. 734; Sutherland v. L. S. Co., 1 Cent. L. Jour. 127; McClure v. Adams, 76 Fed. Rep. 899; Murdock v. Woodson, 2 Dillon, 188; Board v. Min. Pt. R. R., 24 Wisconsin, 93; Campbell v. Texas R. R., 2 Woods, 263.
The certificate upon the bond, with regard to security for ten shares, being no part of the statute, cannot affect the construction of the statute, a§ to which the rule is that what is implied in it is as much a part of it as what is expressed.
The intention of the maker of the statute being as mucb within the statute as it is within the letter, the court has to ascertain the meaning; which was to mortgage all.the stock to secure all the bonds, each proportionately. United States v. Babbitt, 1 Black, 61; County of Watson v. Nat. Bank, 103 U. S. 770.
As to former litigation in regard to legislation of North Carolina concerning this road, see Swasey v. North Carolina, 1 Hughes, 17; R. R. Co. v. Swasey, 23 Wall. 405 ; Christian v. Atlantic & Nor. Car. R. R. Co., 133 U. S. 233 For other cases as to pro rata distribution, Toler v. East Tenn. R. R. Co., 67 Fed. Rep. 168 ; Claflin v. S. C. R. R., 8 Fed. Rep. 118; Pollard v. Bailey, 21 Wall. 520; Barry v. M. K. & T. Ry., 34 Fed. Rep. 829.
In such cases, equities adjudged against partiés served with process are binding upon all persons of the same class, although absent from the litigation, because of the vicarious representation in the present litigants of the same class to which they belong. Morton v. New Orleans R. R., 75 Alabama, 590, 611. See also Knickerbocker Trust Co. v. Penacook Mfg. Co., 100 Fed. Rep. 814; Dickerman v. Nor. Trust Co., 80 Fed. Rep. 450.
The construction of the clauses of the Constitution giving-jurisdiction to this court over controversies between States and between States and citizens of other States should be liberal in the extreme to favor such jurisdiction and to carry out the beneficent purposes by the Constitution sought to be obtained.
Mr. Robert D. Gilmer, Attorney General of the State of North Carolina, Mr: George Rountree, Mr. James E. Shepherd and Mr. James II. Merrimon for the defendant, State of North Carolina :
• The court is without jurisdiction to make any decree against the State of North Carolina in this cause. A sovereign cannot be sued. Belknap v. Schild, 161 U. S. 10; The Siren, 7 Wall. 152; Smith v. Weguelim, L. R. 1869, 8 Eq. 198 ; Briggs v. Light Boats, 11 Allen, 157. This rule applies to suits brought in the Federal courts against either of the States of this Union. Beers v. Arkansas, 20 How. 527; New Hampshire v. Louisiana, 108 U. S. 76 ; Cunningham v. M. & B. R. R., 109 U. S. 116 ; Hans v. Louisiana, 131 U. S. 1; Louisiana v. Texas, 176 U.S. 1. The State did not consent to the exercise of jurisdiction by pleading to the merits. Rhode Island v. Massachusetts, 12 Pet. 657 ; Minnesota v. Hitchcock, 185 U. S. 373; 12 Ency. Plead. & Prac. pp. 127, 188, 191; Penn v. Lord Baltimore, 1 Vesey, Sr. 444; Justice Iredell’s opinion in the. Chisholm Case, 2 Dall. 429.
Apparently, there was bill, answer and proof in New Hampshire v. Louisiana, 108 U. S. 76, and yet the court dismissed the cause for want of jurisdiction.
This court has jurisdiction of the parties, provided it be such a “ controversy between two or more States ”' as is contemplated in the grant of judicial power by Art. III, sec. 2, of the Constitution, and if it be not such a controversy the objection may be taken at any time. Equity Rule, 29; 1 Foster’s Fed. Prac. 241, 249, 535, 536 ; Indiana v. Tolliston Club, 53
Fed. Rep. 18. The only authority Competent to give consent for the State to be sued is the general assembly of the State. Moody v. State Prison, 128 N. Car. 12. This has not been done. If a State consents to be sued the consent can be withdrawn at any time, as it has been by the protest of the State. Beers v. Arkansas, 20 How. 527 ; Mighell v. Sultan of Johore, 1894, 1 Q. B. 149 ; Judgment of Lord Esher.
The State did not consent to be sued in a cause like this bv becoming a member of the United States and subscribing to the Constitution. The present suit is not such a “ controversy between two. or more States ” as was contemplated by the Constitution, of the United States. There are many eases in which this court has decided against the jurisdiction which seemed to come within the words of the Constitution. Kentucky v. Dennison, 24 How. 66 ; Mississippi v. Johnson, 4 Wall. 475 ; Georgia v. Stanton, 6 Wall. 50; New Hampshire v. Louisiana, 108 U. S. 76; Wisconsin v. Pelican Insurance Co., 127 U. S. 265, 287; Hans v. Louisiana, 134 U. S. 1; Louisiana v. Texas, 176 U. S. 1.
The grant was of “ judicial power,” hence, controversies not properly subject, according to the accepted principles .of jurisprudence, to judicial determination, were not included. Louisiana v. Texas, 176 U. S. 1, 18. The word “ controversies ” is not defined in the Constitution, but all controversies were not intended, because the word “ all,” which had been used in the preceding grants, was dropped here and purposely. 2 Bancroft’s History of the Constitution, 199, 200, 212; Rhode Island v. Massachusetts, 12 Pet. 721.
The controversies intended by the framers, of the Constitution were naturally akin to those with which they had become familiar from the experience of the colonies, such as. those growing out of claims for soil, territory, jurisdiction and boundary. United States v. Texas, 143 U. S. 621, 639 ; Story on the Constitution, §§ 1674, 1675.
The dispute must arise directly between the States and not be an assumed quarrel. As to the nature of the controversy, see The Federalist, No. 80. Until recently this court has entertained jurisdiction only in boundary disputes. In each of the only two cases recently brought, Missouri v. Illinois, 180 U. S. 208; Kansas v. Colorado, 185 U. S. 125, the controversy arose directly between the contending States, and was not factitious — made by the voluntary action, of the complaining State by assuming a controversy already existing and with which it had no proper concern. Practices such as were complained of in Missouri v. Illinois, and Kansas v. Colorado, as well as the cases of disputed boundary, might lead- to war between independent nations ; but surely there was no absolute necessity in order to prevent an “ appeal to the sword ” for a tribunal to collect ordinary debts; loans due by a State to- private individuals, and which, they, being unable to collect, voluntarily assign to another State.
While writers on international law differ somewhat amon'g themselves, many of those of greatest authority say that it is the practice of nations, when petitioned by their citizens, to intervene for the enforcement of obligations due by other nations to them, to make a distinction between such obligations as are contractural — loans voluntarily entered into with a knowledge of all the risks and the inability of collection by. suit — and such as are tortious. They generally refuse to interfere for the collection of debts, but do, for the redress of' other kinds of grievances. 1 Halleck International Law, 435, and note; Hall’s International Law, 3d ed. 277 ; New Hampshire v. Louisiana, 108 U. S. 76.
And such has been the practice of England and the United States. Wharton’s Digest Int. Law, § 231; 5 Am. State Papers, 1823 (For. Rel.), 403 ; British Quarterly Review, Jan. 1876, p. 54; Mr. Balfour in the House of Commons, December 15, 1902, as to Venezuelan question.
But it is understood that the contention of complainant’s counsel is that this suit is brought in vindication of its property rights, and there are several cases in which this court has entertained original bills to protect the proprietary rights of a State against injury or infringement by individuals, such as Georgia v. Brailsford, 2 Dall. 402; Pennsylvania v. Wheeling Bridge Company, 13 How. 618; Texas v. White, 7 Wall. 700; Florida v. Anderson, 91 U. S. 667; Alabama v. Burr, 115 U. S. 413.
The fact that the suit is brought in vindication of the property rights of the complaining State is also not conclusive. In New Hampshire v. Louisiana, 108 U. S. 76, and Wisconsin v. Pelican Insurance Co., 127 U. S. 265, property lights were involved ; but the court declined jurisdiction on account of the nature of the title and the method and purpose of its acquirement, and see as to validity of assignment, Walker v. Bradford Bank, 12 Q. B. D. 1883, 84, 511.
As to the sovereignty of the States, see Pennoyer v. Neff, 95 U. S. 714; Lane County v. Oregon, 7 Wall. 71; Martin v. Hunter, 1 Wheat. 325; Buckner v. Finaley, 2 Pet. 586; Cooley Const. Lim. 29; The Federalist, XXXII; Woodrow Wilson, The State, 469; Mayor &c. v. Miln, 11 Pet. 102 ; United States v. Guthrie, 17 How. 284; Stanley v. Schwalby, 147 U. S. 508 ; Kentucky v. Denison, 24 How. 66; Cherokee Nation v. Georgia, 5 Pet. 1.
As to the general rule of sovereignty the nature of things opposes the opinion that the judicial tribunals should be competent to determine that the government is a debtor. Dalloz Jur. Gen. Verbo. Tresor. Pub., No. 383; Dufour, Droit, Adm’t, 4, 629; 3 Proudhon Dom. de Prop., No. 826, p. 67.
The history of our country shows that the government has habitually determined the claims to be adjusted ; the medium' of payment, and the persons to be paid; Confederations, Union and States have-exercised their sovereign rights. Hamilton’s Report in 1792 and 1795 ; 2 Cong. Annals, 1792; 3 Cong. Annals, 1362 ; 2 Pitkin. Civil Hist. 336; 3 Writings Gallatin, 121, 113 ; Ordronaux on Constitutional Legislation, 283.
A State is not liable to.suit upon its bonds either by an individual or another State! Such suits against States were unheard of at the time of the adoption of the Constitution and the power to bring them would not have been included if the proposition had been made. Bank of Washington v. Arkansas, 20 How. 530, 532; Webster’s Opinion to Baring Bros. & Co., 1836, Works, vol. 1, p. 637 ; Briscoe v. Bank, 11 Pet. 257, 321; Crouch v. Credit Foncier, 8 Q. B. 1872, 73, 374, 384; Hamilton’s Report, 1795; Annals of Cong. 1793, 5, 3d Congress, p. 1635.
What was not contemplated by the framers of the Constitution is not included in the grant of judicial power. Campbell, J. , in dissenting opinion, Florida v. Georgia, 17 How. 513. This view was apparently adopted by Marshall, C. J., in his decision as to the status of Indian tribes, in Cherokee Nation v. Georgia, 5 Pet. 1.
A suit cannot usually be maintained against a State to coippel the payment of its debts, as it might necessitate an interference with, if not the complete control and direction of, the legislative function of assessing, levying, collecting and distributing taxes, which is, as yet, beyond the competency of courts; there is no means of rendering the decree effective, unless this court is prepared to appoint a receiver with the extraordinary powers of taking charge' of and administering the affairs of a delinquent State. The separation and careful demarkation of the functions of government into executive, legislative and judicial, is the distinguishing characteristic of our Constitution, state and national, and neither department can transgress its proper bounds. People ex rel. Broderick v. Morton, 156 N. Y. 136 ; Cherokee Nation v. Georgia, 5 Pet. 1; Dicey on Conflict of Laws, 38 ; Miller on the Constitution, 314, and notes by Davis to same, 423 ; Justice Iredell’s dissent in Chisholm's Case, 2 Dall. 445 ; United States v. North Carolina, 136 U. S. 211; cited in United States v. Texas, 143 U. S. 642, is not controlling as the State consented to be sued. Dicey on Conflict of Laws, 212; see United States v. Guthrie, 17 How. 284, 303. The States are sovereign within the province of their reserved powers, including the management of their fiscal affairs. By the constitution of North Carolina, Art. 14, sec. 3, “ no money shall be drawn from the treasury but in consequence of appropriations made by law; ” and the courts cannot direct the State Treasury to pay a claim against the State, however just and unquestioned, where there is no legislative appropriation to pay the same. Garner v. Worth, 122 N. C. 250; Railroad v. Jenkins, Treasurer, 68 N. C. 499 ; Shaffer v. Jenkins, Treasurer, 72 N. C. 275.
In many of the cases in this court in which attempts have been made to collect debts from States, there have been strong intimations that over, and above the objection that States are exempt from suit by the Eleventh Amendment, courts had no process by which they could collect debts from States. Marye v. Parsons, 114 U. S. 325 ; In re Ayers, 123 U. S. 443, 491; Rees v. City of Watertown, 19 Wall. 107; see also Heine v. The Levee Commissioners, 19 Wall. 655, 661; 8 Rose’s Notes on United States Reports, 233 ; W. H. Burroughs in Virginia Law Journal, March, 1879. The fact that there is property mortgaged to secure the bonds does not relieve the court from being obliged to take charge of the treasury of the State. See Northwestern M. L. Assn. v. Keith as to Equity Rule 92 as to deficiency judgment. This court rather than merely adjudge the indebtedness leaving it optional with the defendant State to pay it will decline to take jurisdiction at all. Kentucky v. Dennison, 24 How. 66 ; no court sits to determine law in thesi. Marye v. Parsons, 114 U. S. 330; Broderick v. Morton, 166 N. Y. 136.
If a suit can be brought upon the bonds of a State by another State, no such suit can be brought upon bonds transferred to the State merely because the holder of them cannot collect them.
If for any reason the court can take jurisdiction of a suit against a State for the collection of a debt its compulsive process should be confined to debts due directly to the complaining States upon dealings, contracts, transactions between the States, or at any rate to obligations- acquired “in due course of trade,” if such an acquisition be possible. 1 Kent’s Commentaries, 297, note d; Langdell’s Treatise on Equity Pleading, 209 ; and see Fed. Cas. No. 1007.
Jurisdiction over controversies between two or more States was given to the Supreme Court for the purpose of settling disputes — allaying strife — and not for the pui-pose of fomenting quarrels. What surer method of arousing jealousies, engendering hostilities. and retaliations can be conceived than by encouraging such suits between States ? Such, at any rate, is the-teaching of experience.
A sovereign State cannot be forced into court against her consent; but a cross bill presupposes that the plaintiff is already in court rightfully, and when the State comes into court of Tier own accord and invokes its aid, she is, of course, bound by all the rules established for the administration of justice between individuals. P. R. & A. Ry. Co. v. So. Car., 60 Fed. Rep. 552; Prioleau v. United States, L. R. 2 Eq. 659 ; The Siren, 7 Wall. 152, and see also for illustrations of these principles, Brent v. Bank of Washington, 10 Pet. 596; United States v. Bank of Metropolis, 15 Pet. 377; The Davis, 10 Wall. 15; United States v. Ingate, 48 Fed. Rep. 251; United States v. Flint, Fed. Cas. No. 15,121; United States v. Wilder, Fed. Cas. No. 16,694 ; United States v. Union Nat. Bank, Fed. Cas. No. 16,597; United States v. Barker, Fed. Cas. No. 14,520. Although- a government, state or national, is not barred by the statute of limitations, a claim barred by the statute and assigned to the government cannot be sued on, as it has no more validity after than before the assignment. United States v. Buford, 3 Pet. 12; United States v. N. C. & St. L. R. Co., 118 U. S. 125 ; 1 Cooley’s Blackstone, 247, note 6. A contract cannot be assigned if by the assignment a greater obligation is thereby imposed. Tolehurst v. Ass. Port. Cement Mfrs., 1901, 2 K. B. 811; 18 Law Quarter. Review, 10; Dicey on Conflict of Laws, 534; Edwards v. Kearsey, 96 U. S. 595, 600; Chisholm’s Case, opinion of Jay, Ch. J. 2 Dall. 479 ; Pollock on Contracts, 294; Hager v. Swayne, 149 U. S. 242, 248; Ball v. Halsey, 161 U. S. 72, 80.
. The adoption of the Eleventh Amendment and the alarm over the decision in the Chisholm case was not so much the apprehension of a loss of dignity in being haled before a court, as the danger of being compelled, by legal process, to pay their debts — the danger of having their complex fiscal affairs taken out of the control of the proper’state officers and placed in the hands of this court. Cohens v. Virginia, 6 Wheat. 246, 406, and see Alexander Hamilton in The Federalist No. 81; Miller on the Constitution, 382, and Davis’s notes to same, 652, 653; Judson’s Constitutional History of United States, 255. Individuals should not be allowed to enforce compromises for one State by threat of assignment to another State. Taking jurisdiction of this action would result in a vast number of similar claims being made which would not be confined exclusively to public securities but would extend to claims of all kinds. What then becomes of the reserved rights of the States to manage their own domestic affairs? There is scarcely any State which may not be thus palled to the bar of this court.. Even ^Massachusetts claims have been made which the Supreme Court of that State regarded as just, as between man and man, but which it could not enforce against the State for lack of jurisdiction. Murdock Grate Co. v. Commonwealth, 152 Massachusetts, 28.
There is no absolute necessity for such jurisdiction in this court; we have lived for more than a century without its exercise; that it does not exist is made probable by the fact that it'hasnot previously been invoked, although the circumstances which gave rise to it have existed from the beginning. The noveity of an action, under such circumstances, is strong evidence that it is groundless. Mississippi v. Johnson, 4 Wall. 475, 500; Mogul Case (1892), A. C. 25. And see article by Carmon F. Randolph, in the number of the Columbia Law Review, Hay, 1902, “ Notes on Suits Between States.”
Even if- suits can be brought, against a State upon bonds so assigned to another State, the present suit cannot be maintained,-because it is a suit by the State of South Dakota and an individual representing all individual bondholders of the same class, against the State of North Carolina and another representing all the first mortgage bondholders. 1 Daniel’s Chancery Practice, 6th Am. ed. 191, note; as to Judiciary Act of 1789, see Coal Co. v. Blatchford, 11 Wall. 172; but under the act of 1875, see Removal Cases, 100 U. S. 457; 9 Rose’s Notes, 850; Osborne v. The Bank, 9 Wheat. 739, has been overruled on the point that the court would look to the parties on the record and the court will now look beyond to the result of the suit. In re Ayres, 123 U. S. 443 ; Missouri &c. Ry. Co. v. Missouri Road &c. Commrs., 183 U. S. 59. The original jurisdiction of this court is limited and should be sparingly exercised. California v. Southern Pacific Ry. Co., 157 U. S. 261; Florida v. Georgia, 17 How. 478, 504.
The Circuit Court has no jurisdiction unless each one of the plaintiffs arranged according to their real interest can maintain A suit against each one of the defendants, arranged according to their real interest in the controversy. Removal Cases, 100 U. S; 457; Strawbridge v. Curtiss, 3 Cranch, 267; Smith v. Lyon, 133 U. S. 319. In New Orleans Pacific Railway v. Parker, 143 U. S. 58, if a suit is instituted between competent persons, others having the requisite interest are entitled to intervene, and if they do intervene, and do not have the requisite diversity of citizenship, the jurisdiction of the court is ousted. Mangles v. Donan Brewing Co., 53 Fed. Rep. 515; Cook on Stockholders, 3d ed. sec. 827, note 2;. Morris v. Gilmer, 129 U. S. 315 ; Tug River C. & S. Co. v. Brigel, 67 Fed. Rep. 625 ; Consolidated Water Co. v. Babcock, 76 Fed. Rep. 243, 248; Board of Trustees v. Blair, 70 Fed. Rep 416.
If this be required merely because the Judiciary Act only confers jurisdiction on the Circuit Court of controversies between the citizens of different States, a fortiori, ought it to be so held when the Constitution confers jurisdiction upon this court only of controversies between two or more States and the Eleventh Amendment expressly prohibits suits by individuals against a State ?
Nor is it possible to escape the force of this argument by saying that the individuals are not necessary parties to the suit. It would scarcely lie in the mouth of the complainant to say this, because she has elected to bring the suit in the present form and Avith the present parties, but, if she did, the objection would be futile, because they are necessaiy parties. California v. Southern Pacific Ry. Co., 157 U. S. 229, 257; Minnesota v. Northern Securities Co., 184 U. S. 199.
Even if the parties -were re-arranged according to their real interest in the controversy, the result of a successful prosecution'of this suit willequally beto-enable the individual holders of the second mortgage bonds to collect them from the State by suit against her consent, contrary to the provisions of the Eleventh Amendment, Avhich would contravene the spirit of the amendment.
The general rule for the construction of a constitutional provision is so to construe it as to subserve its general purpose, Legal Tender Cases, 12 Wall. 531, and that rule has been applied with liberality to the Eleventh Amendment. Fitts v. McGhee, 172 U. S. 516, 528 ; dissent of Bradley, J., in Virginia Coupon Cases, 114 U. S. 332 ; Hans v. Louisiana, 134 U. S. 1. The Constitution prohibits things — not names. Craig v. Missouri, 4 Pet. 410, 435.
That which cannot be done directly cannot be done indirectly — the immunity of a sovereign from suit is not easily to be destroyed. In the Parlement Belge, 5 L. R. P. D. 197, 219, a libel Avas dismissed against a public ship although the sovereign Avas not a defendant; and see Cunningham, v. M. & B. R. R., 109 U. S. 446; Mighell v. Sultan of Johore, (1894) 1 Q. B. 149, 154; Jarbolt v. Moberly, 103 U. S. 580, 585 ; Em parte Garland, 4 Wall. 334, 338.
To sustain this action and give judgment in accordance with the prayer will be to accomplish an unconstitutional result, and that by indirection.
. This suit is commenced and prosecuted by, or for the benefit of, individuals. Under New Hampshire v. Louisiana, 108 U. S. 76, 89, an individual cannot invoke the original jurisdiction of this court in a suit against one State by using the name of another State — a State cannot maintain a suit against another State on behalf of private individuals.
The facts, clearly show that the .suit was commenced, and is prosecuted, solely for the benefit of the private bondholders, and in the event of recovery they are the sole beneficiaries after deducting, of course, the expenses of the suit, including the fee to South Dakota. The prohibitions of the Eleventh Amendment can not so easily be nullified.
On the merits ; the bonds were disposed of contrary to the provisions of the enabling statute, c. 228, Acts North Carolina, 1854, 55, and are, therefore, illegal and uncollectible. See §§ 8, 35, 37.
As to the position of complainant that whether the bonds were illegally issued and sold or not, is immaterial to a holder for value in due course, it must be, of course, through the merit of some antecedent holder, for complainant not only took the bonds after their maturity, but paid nothing for them. '
Admitting presumptions in favor of a holder of negotiable paper, the law is that when proof has been given of fraud or illegality in the issue of paper, the burden is cast upon complainant to show that it is a purchaser for value without notice and in due course. Smith v. Sac County, 11 Wall. 139 ; Combs v. Hodge, 21 How. 397; Collins v. Givert, 94 U. S. 753 ; Stewart v. Lansing, 104 U. S. 505.
As these bonds were issued and disposed of contrary to the provisions of the enabling statute, they were illegal, and complainant’s receiving the bonds as a donation, anfi after their maturity, casts the burden of proof upon her to show that some ' one of her predecessors in title were innocent purchasers for value, and this she has not done.
As the Schafers, who are the only persons whose title complainant rests upon, purchased these state bonds with overdue interest coupons attached and at a small percentage of their face value, they are deprived of the protection given to bona fide purchasers for value in due course. Hulbert v. Douglas, 94 N. C. 122 ; Farthing v. Dark, 109 N. C. 291; Parsons v. Jackson, 99 U. S. 434, 444 ; 9 Rose’s Notes, 737; Railway Co. v. Sprague, 103 U. S. 756; London Joint Stock Bank v. Simmons, 1892, A. C. 201, 221. The circumstances were sufficient to put a reasonable person on notice that there was something wrong, and inquiry would have disclosed that they were not issued in accordance with the statute. Trask v. Jacksonville &c. R. R. Co., 124 U. S. 515.
If, however, the Schafers were bona fide holders for value, as the bonds were not suable in their hands, they ought not to become suable in the hands of a transferee unless that transferee took them for .value and without notice of dishonor, even-if such controversies are within the jurisdiction of this court. A transferee has no higher or further rights than the transferrer, unless in the exceptional cases under our recording acts and negotiable paper taken for value before maturity and without notice. To permit the State of South Dakota to collect these bonds by suit, whether- they were illegally issued or not, will be to add another exception to the rule that a man cannot give what he does not own or possess.
The provisions of the law, Act, 1866, '67, North Carolina, chapter 106, authorizing a mortgage upon the State’s stock in the North. Carolina Railroad in favor of the holders of the bonds of the class sued on were not complied with, and the mortgage is invalid.
In the indorsement upon the bonds, purporting to give a statutory mortgage upon the State’s stock, no stock was designated or described in such way as to be capable of identification, and, therefore, no particular stock has been subjected to the lien of a mortgage. The statute authorized a mortgage in favor of the holders of the bonds, but it has never been exe cuted, and the only claim which the holders of the mortgage have against the State' is, not a lien upon any particular stock owned by the State, but a cause of action for the breach of contract to give the mortgage. In North Carolina, by whose law the validity of the .mortgage is to be determined, a mortgage purporting to be upon a certain number of things, out of a larger number, and in no other wise designated, is invalid as a. mortgage. Waldo v. Belcher, 11 Iredell L. 609 ; Blackley v. Patrick, 67 N. C. 40 ; Stevenson v. Railroad, 86 N. C. 445 ; Holmes v. Whitaker, 119 N. C. 113; Jones on Chattel Mortgages, 56; Kilgore v. New Orleans Gas Co., 2 Woods, 144:
The claim on behalf of the mortgage is not stronger in equity than at law, because in order to constitute an equitable mortgage, it is equally necessary to identify the subject-matter. Halroyd v. Marshall, 10 H. L. 189; Walker v. Brown, 165 U. S. 654; 19 Enc. of Law, page 14, and authorities. The same rule prevails in actions for. the specific performance of a contract. Lighthouse v. Third National Bank, 162 N. Y. 336. The law is the same, whether the alleged mortgage be statutory or conventional. Jones on Liens, § 106 ; Tycross v. Dreyfus, 5 Ch. Div. 605.
If the court has jurisdiction of the cause, and complainant is entitled to recover anything, she is not entitled to recover interest upon overdue coupons. United States v. North Carolina, 136 U. S. 211.
Mr. Daniel L. Russell, with whom Mr. Marion Butler and Mr. Alfred Russell were on the brief, for defendant Charles Salter and the second mortgage bondholders.
The first and second mortgage bondholders being interested in the funds must be made parties to the suit, citing cases on complainant’s brief and Jones on Mortgages, § 1369; Wilkins v. Frye, 1 Mer. 244, 262 ; Hancock v. Hancock, 22 N. Y. 568; Carpenter v. O'Dougherty, 58 N. Y. 681; Rankin v. Major, 9 Iowa 297; Thayer v. Campbell, 9 Missouri, 280. The second mortgage is in solido and not a separate and independent mortgage of ten shares for each bond. See cases cited in complainant’s brief. The motives of the donor in making the gift to the complainant State are not material. See cases cited in complainant’s brief. As to the turpitude of repudiation and the obligation of a State to pay its debts, see Louisiana v. Jumel, 107 U. S. 740; Murray v. Charleston, 96 U. S. 445.
Hollingsworth v. Virginia, (1798) 3 Dall. 378; Osborn v. Bank, (1824) 9 Wheat. 738, 849; Briscoe v. Bank, (1837) 11 Pet. 257, 321; Louisiana v. Jumel, (1883) 107 U. S. 711; Poindexter v. Greenhow, (1885) 114 U. S. 270, 286; Marye v. Parsons, (1885) 114 U. S. 325; Hagood v. Southern, (1886) 117 U. S. 52; In re Ayers, (1887) 123 U. S. 443, 504; Christian v. Atlantic & N. C. R. R. Co., (1890) 133 U. S. 233, 243; Louisiana ex rel. N. Y. Guaranty & Indemnity Co. v. Steele, (1890) 134 U. S. 230; Pennoyer v. McConnaughy, (1891) 140 U. S. 1; In re Tyler, (1893) 149 U. S. 164, 190; Reagan v. Farmers’ Loan & Trust Co., (1894) 154 U. S. 362, 388; Scott v. Donald, (1897) 165 U. S. 58; Tindal v. Wesley, (1897) 167 U. S. 204, 219; Smyth v. Ames, (1898) 169 U. S. 466, 518; Fitts v. McGhee, (1899) 172 U. S. 516, 524.

Opinion:
Mr. Justice Brewer,
after making the foregoing statement, delivered the opinion of the court.
There can be no reasonable doubt of the validity of the bonds and mortgages in controversy. There is no challenge of the statutes by which they were authorized. By those statutes the treasurer was directed, when it became necessary to borrow money for the payment of the subscription, to prepare coupon bonds and advertise in one or more newspapers for sealed proposals, and to accept the terms offered most advantageous to the State, provided that in no event should the bonds be sold for less than their par value. .The advertisement was made, no bids were received, but the bonds wjere delivered to the railroad company as payment for the subscription, dollar for dollar. Upon each bond was placed the statutory pledge or mortgage. It is true no money was paid into the treasury and thence out of the treasury to the railroad company, yet looking at the substance of the transaction (and equity has regard to substance rather than form), the transaction was the same as though the company had been the only bidder, had placed a thousand dollars in the treasury in payment of each bond and received that thousand dollars back from the treasury in payment of the subscription for ten shares of stock. It is true also that there was no formal issue of certificates by the company to the State, but that was a matter of arrangement between the parties to the subscription. The State's right as a stockholder was not abridged by lack of the certificates, and in fact it has been receiving dividends on the stock exactly as though certificates had been issued. The statute also provided that with each several bond a-deed of-mortgage for an equal amount of stock, signed by the treasurer and countersigned by the comptroller, should constitute a part of the bond and be transferable in like manner with it, " and further, that such mortgage shall have all the force and effect 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 endorsement 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 vthe 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 chap. 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.
Neither can there be any question respecting the title of South Dakota to these bonds. They are not held by the State as representative of individual owners, as in the case of New Hampshire v. Louisiana, 108 U. S. 76, for they were given outright and absolutely to the State. It is true that the gift may be considered a rare and unexpected one. Apparently the .statute 'óf South Dakota was passed in view of the expected gift, and probably the donor made the gift under a not unreasonable expectation tha,t South Dakota would bring an -action against North Carolina to enforce these bonds, and that'Such action might, enure to his benefit as the owner of other like bonds. But the motive with which a gift is made, whether good or bad, does not affect its validity or the question of jurisdiction. This has been often ruled. In McDonald v. Smalley, 1 Pet. 620, an objection to the jurisdiction on the ground that the title to the property in controversy had been conveyed to the plaintiff in.the belief that it would be sustained by the Federal when it would not be by the state court; was overruled,, with this observation by Chief justice Marshall (p. 621):
" This testimony, which is all that was laid before the court, shows, we think, a sale and conveyance to the plaintiff, which was binding on both parties. McDonald could not have main tained an action for bis debt, nor Me Arthur 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."
See also Smith v. Kernochen, 7 How. 198; Barney v. Baltimore, 6 Wall. 280 ; Dickermam v. Northern Trust Co, 176 U. S. 181, 190, 191, 192. In this last case Mr. Justice Brown, speaking for the court, said :
" 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 defence 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 Fed. Rep. 253, 261; Toler v. East Tenn. &c. Railway, 67. Fed. Rep. 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 non-resident 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, 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, 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 riot 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 — arid 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, arid, 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.
A preliminary question arises from the fact that representatives of. the two classes of borfds are made defendants,- and thqt a part of the relief asked is a sale of the thirty thousand stories of stock of the North Carolina Railroad Company, belohging to the State of North Carolina, in satisfaction and discharge of all the mortgages upon such stock. It is insisted that these individuals, owners of the bonds, although named as defendants, are in fact occupying an adverse position to that of the State, and that the effect of their presence as parties is a .practical nullification, of the Eleventh Amendment, in that it is giving to individuals relief by judgment against the State. Apparently one expectation of the donor to -South Dakota was that in some way the bonds retained by' himself would be placed in judgment and relief obtained against North Carolina in the suit commenced by South Dakota. , But we think that these individuals are not necessary parties-defendant, and that no relief should be given to them or to the classes of bondholders they represent. The statute under which the mortgage was executed provided that with each of the bonds-a deed of mortgage for a like amount of stock should be executed by the State. There is, therefore, a separate mortgage of ten shares of stock on each one of these bonds, and that mortgage can be fully satisfied by a decree of foreclosure and sale of the ten shares of stock. No one would doubt that, if a certificate of stock was attached-ms a pledge to a note, the-pledge could be satisfied by a sale of the stock without any determination of the rights of the purchaser as between himself and other stockholders. And. such was the manifest purpose of this legislation. It' contemplated that each bondholder should receive a stock security which -he could realize on without the delay and expense of a suit to .which all other stockholders and the corporation would be necessary parties. The-purchaser at the sale to be authorized by this decree will become vested with the full title of the State to the number of shares of stock stated in the mortgage. He will occupy the same position in relation to the corporate property that other' stockholders occupy, and have whatever rights they have. It is not necessary for a full satisfaction of the mortgage on one of these bonds that any other mortgage upon another bond- be also foreclosed, or that a decree be entered determining what rights the purchaser will have by virtue of the stock which he obtains at the sale. So far-then as these individual defend ants are concerned,- the suit will be dismissed with costs against South Dakota.
' Coming now to the right of South Dakota to maintain this suit against North Carolina, we remark that it is a controversy between two States; that by sec. 2, art. Ill, of the Constitution this court is given original jurisdiction of " controversies, between two or. more' States." In Missouri v. Illinois and the Sanitary District of Chicago, 180 U. S. 208, Mr. Justice Shiras, speaking for the court, reviewed at length the history of the incorporation of this provision into the Federal Constitution and the decisions rendered by this court in respect -to such jurisdiction, closing with these words (p. 240):
"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 niore 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."
The Constitution .as it originally stood also gave to this court jurisdiction of controversies "between a State and citizens of another State." Under that clause Chisholm v. Georgia, 2 Dall. 419, was decided, in which it was held that a citizen of one State might maintain in this' court an action of assumpsit against another State. Inconsequence of that decision the Eleventh Amendment was adopted, which provides'that "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." It will be perceived that this amendment only granted to a State immunity from suit by an individual, and did not affect the jurisdiction over controversies between two or more States. In respect to this it was said by Chief Justice Marshall in Cohens v. Virginia, 6 Wheat. 264, 406:
" 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 entertaine'd, this amend- . ment was proposed in Congress, and adopted by the state legislatures. That its motive was not to maintain the sovereignty of a State from the degradation supposed to attend a compulsory appearance before the tribunal of the nation, may be inferred from the terms of the amendment. It does not comprehend controversies between two or more States, or between a State and a foreign State. The jurisdiction of the court still extends to these cases: and in these a-State may still be sued. We must ascribe the amendment, then, to some other cause than the dignity of a State. -There is no difficulty in finding this cause. Those who were inhibited from commencing a suit against a State, or from prosecuting one which might be commenced before the adoption of the amendment, were persons who might probably be its creditors. There was not much reason to fear that foreign or sister States would be creditors to any considerable amount, and there was reason to retain the jurisdiction of the court in those cases, because it might be essential to the preservation of peace. The amendment, therefore, extended to suits commenced or prosecuted by individuals, but not to those brought by States."
In the same case, after referring to' the two classes of cases, jurisdiction of which was vested in the courts of the Union, he said. (p. 378):
" In the second' class, the jurisdiction depends entirely on the character of the parties. In this are comprehended 4 controversies between two or more States, between a State and citizens of another State,' and 4 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."
In Rhode Island v. Massachusetts, 12 Pet. 657, this court sustained its jurisdiction of a suit in equity brought by one State against another to determine a dispute as to boundary, and in the course of the opinion, by Mr. Justice Baldwin, said in respect to the immunity of a sovereign from suit by an individual (p. 720):
" 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, (6 Wheat. 378, 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."
And, again, in reference to the extent of the jurisdiction of this court (p. 721) :
" 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."
In United States v. North Carolina, 136 U. S. 211, we took jurisdiction of an action brought by the II nited States against North Carolina to recover interest on bonds, and decided the case upon its merits. ,It is true there was nothing in the opinion in reference to the matter of jurisdiction, but as said in United States v. Texas, 143 U. S. 621, 642:
" 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 morp 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 ivas 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."
See also United States v. Michigan, 190 U. S. 379, decided at the last term, in which a bill in equity-for an accounting and a recovery of money was sustained. Mr. Justice Peckham, delivering the unanimous opinion of the court, said (pp. 396, 406):
. " By its bill the United States invokes the original jurisdiction of this court for the purpose of determining a controversy existing between it and the State of Michigan. This court has jurisdiction of such- a controversy, although it is not lit erally 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. 611, 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 defence 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 and for the payment of the sum found due thereon."
W e 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 noticingin detail' the other cases referred to by Mr. Justice Shiras in Missouri v. Illinois et al., supra, 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, 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.
In Rees v. City of Watertown, 19 Wall. 107, 116, 117, we said:
" We are of the opinion that this court has hot 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. The Levee Commissioners, 19 Wall. 655, 661; Meriwether v. Garrett, supra.
In this connection reference may be made to United States v. Guthrie, 17 How. 284, in which an application was made for a mandamus against the Secretary of the Treasury to compel the payment of an official salary, and in which we said (p. 303):
" The only legitimate inquiry for our determination upon the case before us is this : Whether, under the organization of the Federal government, or by any known principle of law, there ean be asserted a power in the Circuit Court of the 'United States for the District of Columbia, or in this court, to command the withdrawal of a sum or sums of money from the Treasury of the United States, to be applied in satisfaction of disputed or controverted claims against the United States? This is the question, the very question presented for our determination; and its simple statement wrould seem to carry with it the most startling considerations — nay, its unavoidable negation, unless this should be -prevented by some positive and controlling command ;. for it would occur, a priori, to every mind, that a treasury, not fenced round or shielded by fixed and established modes and rules of administration, but which 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."
Further, in this connection may be noticed Gordon v. United States, 117 U. S. 697, in which this court declined to take jurisdiction of an appeal from the Court of Claims, under the statute as it stood at the time of the decision, on the ground that there was not vested by the act of Congress power to enforce its judgment. We quote the following from the opinion, which was the last prepared by Chief Justice Taney (pp. 702, 704):
" 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, 456.
We have, then, on the one hand the general language of the Constitution vesting jurisdiction in this court over " controversies between two or more States," the history of that jurisdictional clause in the convention, the cases of Chisholm v. Georgia, United States v. North Carolina and United States vMichigan, (in which this court sustained jurisdiction over actions 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; oh 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.
A decree will, therefore, be entered, which, after finding the amount due on the bonds and coupons in suit to be twenty-seven thousand four hundred dollars ($27,400), (no interest being recoverable, United States v. North Carolina, 136 U. S. 211), and that the same are secüred by one hundred shares of the stock of the North Carolina Railroad Company, belonging-to the State of North Carolina, shall order that the said State of North Carolina pay said amount with costs of suit to the State of South Dakota on or before the 1st Monday of January, 1905, and that in default of such payment an order of sale be issued to the Marshal of this court, directing him to sell 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.
And either of the parties to this suit may apply to the court upon the foot of this decree, as occasion may require.