Galloway v. . Chatham R. R. Co.

The complaint, filed upon the 29th day of December 1868, purported to be preferred by the plaintiff in his character as a citizen, tax-payer and property-holder of the State, on behalf of all persons of that class, against D. A. Jenkins, as Treasurer of the State, and The Chatham Rail Road Company.

It alleged that the Company had been chartered by the Act of February 15, 1861, and that its charter had subsequently been amended by Ordinances passed January 30, 1862, and March 11, 1868, and by Acts passed February 5, 1862, August 3, 1868, and August 15, 1868 — the material facts of which were given. The complaint then set forth the preamble, and ss. 4 and 5, of the Act of December 18, 1868, entitled "An Act to re-enact and confirm certain Acts of the General Assembly, authorizing the issue of State Bonds to and for certain Rail Road Companies." as follows:

SEC. 4. The Public Treasurer is hereby directed, whenever the President of the Chatham Rail Road Company shall certify that the grading of the Road between Cheraw in South Carolina, and the Gulf, or some other point on the Chatham Rail Road between Raleigh and the Gulf, has been let to contract, to subscribe to the capital stock of said Company, two million dollars in behalf of the State, which subscription shall be paid by delivering to the President of said Company coupon bonds of the State at par, of the denomination of one thousand dollars, dated October 1st, 1868, and payable in thirty years thereafter, bearing six per cent. interest, payable semi-annually, principal and interest payable in the City of New York, said bonds to be signed by the Governor, countersigned by the Treasurer and sealed with "The Great Seal of the State," and issued under the provisions of Chapter 90, Revised Code; Provided, That said bonds shall only be issued on the surrender of a like amount of bonds of the State heretofore issued under an act to amend the Charter of the Chatham Rail Road Company, ratified the 15th day of August 1868. On which surrender the same amount of bonds delivered by said Company to the State under the said act shall be cancelled. Said subscription shall be preferred stock, and pay a dividend of six per cent. before any dividend shall be declared on the other stock.

SEC. 5. In order to provide for the payment of the interest which may accrue on the bonds issued as above mentioned, there is hereby and shall be annually, levied and collected a special tax of one twentieth of one percent. on the taxable property of the State, collectable and payable into the Treasury as other public taxes.

It then alleged that the said Company was about to comply with the provisions of said Act, and apply for the bonds thereby authorized to be issued, and that the Treasurer of the State was about to subscribe to the stock of the Company, and to issue Bonds to it as by such Act required,

The prayer was, that the Treasurer should be enjoined from subscribing for stock and from issuing Bonds as the statute provided; and that the Company be likewise enjoined from accepting such subscription and from receiving such Bonds.

Upon reading the complaint to his Honor below, on motion for the defendants, the injunction theretofore granted upon an ex parte application, was vacated and dissolved; and the plaintiff appealed. On opening the case, the counsel of the plaintiff proved on principle and by authority, that the jurisdiction against irreparable injury is applicable; under the doctrine, that where there is a right common to many, or an injury that would be common to many, a bill will lie in the name of one, in behalf of himself and others, to have the right established, or the injury prevented; on the ground of avoiding multiplicity of suits; and brought this case within the rule, by the allegation that the plaintiff was a tax-payer.

The counsel of the defendants admitted the application of this doctrine, and stated they were instructed not to raise the objection; for if the General Assembly had power to issue these bonds, their clients had a deep interest in having their validity established; so as to enhance the value of the bonds, before they were put in market; and, if the Legislature had no power to issue the bonds, it was a matter of concern to every citizen of the State, that the question should be settled at the outset, so as to avoid the complication, that would grow out of the ideas of vested rights of repudiation, and the obligation of contracts, should these bonds be put in the market with a cloud over them.

We fully concur in this suggestion. It is better for all sides to have the matter settled now and here; and we were gratified to find that the Court has jurisdiction, and can determine the question in the mode in which it is presented by this bill, Manly v. City of Raleigh, 4 Jones, Eq. 370.Mott v. Pennsylvania, 30 Penn. Reports 39.

By the Act of August 1868, chapter 14th, the General Assembly enacts, sec. 1, "that to enable the Chatham Rail Road Company to finish their Road, the Public Treasurer be directed to deliver to the Company coupon bonds of the State, not to exceed two millions of dollars." Sec. 2: "In exchange for said bonds, the Company is to deposit with the Public Treasurer bonds of the Company of the same amount, same interest, and same dates." This Act is of no significance, except to show a conviction on the part of the General Assembly, that the public interest demanded the construction of this Road, and a wish to aid the Company in its construction, provided the General Assembly had power to do so, without a violation of the Constitution.

The provisions of the statute under consideration, are expressed so plainly as to relieve the Court from the task of construction. The tenor and effect of it is, that, to aid in constructing a Rail Road from Cheraw to the Coalfields, the State subscribes two millions of stock — and to pay for the stock, creates a debt of two millions of dollars, and directs the bonds of the State to be handed to the President of the Company, upon the surrender of the bonds issued under the Act of August, 1868, and in the same bill, a special tax is levied to pay the interest annually.

Under Art. 5, Sec. 5, of the Constitution a question is made: "Has the General Assembly power to create this debt of two millions in aid of the Chatham Rail Road Company, unless the subject be submitted to a direct vote of the people?"

The Section is in these words: "Until the bonds of the State shall be at par, the General Assembly shall have no power to contract any new debt or pecuniary obligation in behalf of the State, except to supply a casual deficit, or for suppressing invasion or insurrection, unless it shall in the same bill, levy a special tax to pay the interest annually. And the General Assembly shall have no power to give or lend the credit of the State, in aid of any person, association or corporation, except to aid in the completion of such Rail Roads as may be unfinished at the time of the adoption of this Constitution, or in which the State has a direct pecuniary interest, unless the subject be submitted to a direct vote of the people of the State, and be approved by a majority of those who shall vote thereon."

The statute under consideration complies with the first clause, and the question depends upon whether the two clauses of this Section are to be treated as being separate and independent of each other, or as being so connected as to mean: "Until the bonds of the State shall be at par," the General Assembly shall have no power to create any new debt or pecuniary obligation (except in two specified cases), unless a special tax be levied in the same bill to pay the interest — and in addition to this restriction, although the interest of the new debt is provided for, if the purpose be to aid any person, association or corporation, in respect to a Rail Road, Navigation or other like object, the General Assembly shall have no power to give or lend the credit of the State, unless the subject be submitted to a vote of the people (except in two specified cases.)

The two clauses being in the same section, and connected by the conjunction "and," would naturally lead to the inference that they are to be taken in connection; and that the second is superadded to the first, with a view of making a further restriction upon the power of contracting a new debt or pecuniary obligation, in the cases covered by it. This inference is not conclusive; and leaves the question, in some degree, open for the application of other rules of construction.

The section under consideration is worded with much precision, and without the use of expletives; the terms are intensified. In the first clause the two exceptions have the effect to make it read: "shall have no power to create any new debt or pecuniary obligation whatever, except,"c., — not even to build a Penitentiary, unless a special tax, c. In the second clause, the two exceptions have the effect to make it read: "shall have no power to give or lend the credit of the State, in any casewhatever, except" c., "unless the subject be submitted to a vote of the people;" so, the intention to restrict the power of the General Assembly in regard to increasing the public debt in any mode or manner, is as strongly expressed as the English language can do it. In matters of construction, the Court is not to confine itself to the particular section; but is to consider the entire instrument, in order to find the general purpose, and the object arrived at.

"To maintain the honor and good faith of the State untarnished, the public debt regularly contracted before and since the rebellion, shall be regarded as inviolable, and never to be questioned." Art. 1, § 6.

"No law shall be passed to raise money on the credit of the State, or to pledge the faith of the State, directly or indirectly, for the payment of any debt, c., unless the bill is read three times on three different days, and unless the yeas and nays on the second and third readings of the bill shall have been entered on the Journal." — Art. 2, § 16.

"The General Assembly shall, by appropriate legislation, and by adequate taxation, provide for the prompt and regular payment of the interest on the public debt, and, after the year 1880, it shall lay a specific annual tax upon the real and personal property of the State, and the sum thus realized shall be set apart as a sinking fund, to be devoted to the payment of the public debt." — Art. 5, § 4.

Here, we have a declaration of a purpose to maintain the honor of the State, and pay off the public debt, — a rebuke of hasty legislation, in reference to raising money and pledging the faith of the State, — and an announcement that, although the debt is so large that it cannot be paid off for years, yet the interest must be paid promptly, and a sinking fund be provided for the discharge of the principal. This purpose could not be effected without putting a stop to the increase of the public debt, by restricting the power of the Legislature. Accordingly, that restriction is made by the next Section, which in effect forbids the General Assembly from creating any new debt whatever, "except," c. without providing for the interest; and in respect to debts or pecuniary obligations contracted by giving or lending the credit of the State, in aid of any person, association, or corporation, that shall be done in no case whatever, "except," c., unless the subject is submitted to a vote of the people;"until the Bonds of the State shall be at par."

But the Court is also required to look at the previous legislation, by which the evil, calling for these cumulative restrictions was caused, and this will furnish a key to the meaning, and open it so plainly to view, "that he who runs may read."

The war debt has been put out of the way by a dash of the pen. It will be found, that most of the public debt was incurred in three modes: 1st, by subscribing for stock in Rail Road and navigation companies, and issuing bonds to pay for the stock, the State becoming a member of the corporation; this is the heaviest item, and amounts to, say eight millions of dollars: 2nd, by issuing bonds of the State, and exchanging such bonds for a like amount of the bonds of the corporation, the State not becoming a stockholder, and taking collateral security of more or less value; this is the next heaviest item, and amounts to abount [about] three millions of dollars: 3d. by endorsing the bonds of corporations and taking a mortgage or some other collateral security; this item amounts to about two millions.

These are the three modes, by which, judging from the past, it was apprehended the public debt might be so run up, as to ruin the credit of the State, and tarnish her honor, and her reputation for good faith.

Is the construction admissible, by which the Constitution is supposed to guard against two of these sources of danger, and leave the public interest exposed to the other? And that, the one most fruitful of evil! Would we impute wisdom to an individual, who having a field exposed on three sides, should carefully fence up two of the sides, and leave the other side open?

Let us see, what word is relied on to justify this construction; for it rests on a single word. "And the General Assembly shall have no power to give or lend the credit of the State, in aid," c. It is the word "give," and the argument is: This was a regular business transaction — the State subscribes for stock and becomes a member of the corporation, and creates a debt by issuing its bonds to pay for the stock; true, the purpose was to aid the corporation in making a Road which will greatly benefit the State; but, this is in no sense giving the credit of the State; for the State receives a consideration, to wit: the stock; and to give, is to do an act gratuitously; to pass something for nothing. In construing an instrument, the words must be taken in their ordinary meaning in connection with the purpose for which they are apparently used. "To give," is sometimes used to convey the idea of a gratuity; but it has a much broader meaning. "Give," means to pass from one to another, and the idea of its being done for or without a consideration is not involved. In old conveyances "give and grant" is used in place of dedi et concessi. I willgive you my horse for yours? What will you give me for my horse? What did you give for your house and lot? I will give you a thousand dollars for it — provided you will give me six months credit.

This is obviously the sense in which the word is used in the section under consideration. For, besides the purpose which, as we have seen, the framers of the Constitution had in view, it is used in connection with the word lend, which imports a gratuity, and is introduced, lest the word "give" might be confined to cases where a consideration passed, and to cover the whole ground; so as to show that the credit of the State was not to be used in any way, either for a consideration or as a gratuity. The General Assembly shall have no power to give the credit of the State to this corporation, by making a subscription for its stock, is one sense. The General Assembly shall have no power to give the credit of the State to this corporation by an exchange of bonds, is another sense. The General Assembly shall have no power to give the credit of the State to this corporation by endorsing its bonds, is another sense. And the section might have included this class, without the additional word "lend." But its being used, shows an extreme solicitude to cover every supposable case in which the credit of the State might be used, whereby the public debt would be increased.

In the first clause of the Section, "to contract any new debt," covers the whole ground, without the additional words "or pecuniary obligation." It is remarkable, that these two are the only instances in which the use of what might seem to be an expletive word is resorted to, showing an extreme anxiety that the intention to cover the whole ground should be plainly expressed.

The suggestion, that the credit of the State was given by this statute to aid in the completion of an unfinished Rail Road, was not strongly urged on the argument, and, indeed, it could not be. An unfinished road is one that has been begun, and partly worked on, and such a road is made an exception, on the ground that it might be proper to finish it, in order to prevent a sacrifice of the work that had been done. There is no evidence that such was the fact in regard to this road.

The other suggestion, that the State has a direct pecuniary interest in this road, was properly abandoned. The word has, is in the present tense; the exception, is obviously confined to roads in which the State had a direct pecuniary interest at the time of the adoption of the Constitution; otherwise the State might, by a subscription for stock, become directly interested in every Rail Road or Navigation scheme, that should thereafter be projected; and thus, the restrictions of the Constitution would be of no effect, whatever.

Our opinion is, that the statute under consideration is void, and that the General Assembly had no power to pass it, without submitting the subject to a vote of the people.

In making this decision, we are relieved in some measure, from our feeling of responsibility, by the fact, that if the public interest imperiously calls for the construction of this road, the Constitution provides that it may be done, if such be the will of the people.