Cunningham v. Macon Co

• Decision Date: 03 December 1883
• Citation: 3 S.Ct. 292,109 U.S. 446,27 L.Ed. 992
• Parties: CUNNINGHAM v. MACON & B. R. CO. and others
• Court: U.S. Supreme Court

109 U.S. 446

3 S.Ct. 292

27 L.Ed. 992

CUNNINGHAM v. MACON & B. R. CO. and others

December 3, 1883.

A. G. Magrath and W. W. Montgomery, for appellant.

Joseph H. Choate and Clifford Anderson, for appellees.

MILLER, J.

This is an appeal from the decree of the circuit court for the southern district of Georgia, dismissing the bill of complainant on demurrer. The bill is filed by Cunningham a citizen of the state of Virginia, against Alfred H. Colquitt, as governor of the state of Georgia, J. W. Renfroe, as treasurer of the state, the Macon & Brunswick Railroad Company, and A. Flewellen, W. A. Lofton, and George S. Jones, styling themselves directors of said railroad company, John H. James, a citizen of Georgia, and the First National Bank of Macon. The bill sets out, with reasonable fullness and with references to exhibits which make its statements clear, what we will try to state as far as necessary, in shorter terms.

It alleges that on the third day of December, 1866, the assembly of Georgia passed an act authorizing the governor to indorse the bonds of the Macon & Brunswick Railroad Company to the extent of $10,000 per mile, and that under this authority the governor indorsed bonds to the amount of $1,950,000 which were afterwards negotiated by said company. The statute under which this was done made the indorsement of these bonds to operate as a prior mortgage upon all the property of the company, which could be enforced by a sale by the governor upon default in payment of the bonds so indorsed, or interest on them as it fell due. In addition to this the company executed and delivered to the governor, on the twenty-second of June, 1870, a written mortgage confirming the lien created by the statute, which was duly acknowledged and recorded. October 27, 1870, the legislature, by an act amending the act of December 3, 1866, authorized the governor to indorse an additional $3,000 per mile of the bonds of the company, which was done, and of this series of bonds the complainant became the holder and owner of 19 for $1,000 each.

It is then alleged that on July 1, 1873, the company failed to pay its interest coupons upon both these sets of indorsed bonds, and that in a few days thereafter the governor, under the power vested in him by the act of 1866, took possession of the road and the property of the company and placed them in the hands of Flewellen as receiver; and that on the first Tuesday in June, 1875, he sold said road to the state of Georgia for the sum of $1,000,000, and made a conveyance of it to the state accordingly, a copy of which is filed as an exhibit to the bill. It is also alleged that the state of Georgia has taken up since that time the entire issue of $1,950,000, giving her own bonds in place of the bonds which she had so indorsed.

The bill assails this transaction because the governor, in advertising the sale, gave notice that he would accept in payment for bids bonds of the state at par, of bonds of the first series of $1,950,000 at their market value, or cash, and would not receive any of the second series of $600,000 in payment. Also because the sale was made improvidently, at a bad time, as the governor was informed by his agent, Flewellen, and because the governor was not authorized to bid for the property, and the state had no constitutional power to make the purchase. And it is further alleged that if the sale is not absolutely void, it is voidable, because under the statutory and executed mortgages the state is trustee of the property mortgaged for the benefit of the bondholders, and her purchase can be set aside by the beneficiaries under the trust when they elect to do so. The bill insists that by the taking up and payment of the first series of indorsed bonds their lien on the property is extinguished, and that of the second series is now become paramount, and this suit is brought to foreclose that mortgage lien. And if the court shall be of opinion that the sale was valid, then the bill insists that the holders of the second series were entitled to the paid pro rata under that sale, and that when the legislature of Georgia appropriates any money to pay the bonds which it gave in exchange for $1,950,000 of the indorsed railroad bonds, the amount so appropriated should be divided pro rata between these bonds and the $600,000 of the second series of indorsed bonds.

The prayer of the bill is for the appointment of a receiver to whom all the property of the company shall be delivered; that the mortgage be foreclosed and the proceeds applied to payment of the bonds of the second series so far as necessary for that purpose. Or, if the court shall be of opinion that the sale was valid, that Renfroe be enjoined from paying the coupons of interest on the state bonds exchanged for the first series of bonds, and that the holders thereof be made parties to the suit, and be compelled to account to the holders of the $600,000 series of bonds for their pro rata share of said exchanged bonds; and the bill prays that Colquitt, the governor, and Renfroe, the treasurer, and the three directors of the company be compelled by subpoena to appear and answer it and certain interrogatories in it, and produce certain papers, and that Renfroe be enjoined from paying the coupons on the state bonds, exchanged for the indorsed bonds, and that the state of Georgia may come in and make herself a party defendant to this bill if she should wish to do so; and there is a prayer for general relief.

To this bill there was filed by Flewellen, Lofton, and Jones, the directors, a demurrer and plea, as it is called. The plea is to the effect that they have no interest in the road otherwise than as agents of the state of Georgia, for which they hold and control the Macon & Brunswick Railroad and all its property and franchises of every description, and the plea and demurrer both rely on the proposition that the court has no jurisdiction of the case, because it cannot proceed without the state as a party, and that the court cannot compel the state to become a party to the suit. Renfroe, the treasurer, filed a similar plea, and Colquitt, the governor, filed a demurrer and a plea separately. The ground of demurrer stated by the governor is that it is apparent on the face of the bill that the court cannot take cognizance of the matters and things set up in said bill as against the defendant, because it appears that he has no personal interest in the same, but that it is an attempt to make the state of Georgia a party to the suit through the defendant as governor, so as to bind the state by the judgment and decision of the court in the case. On this demurrer of Colquitt and the joint demurrer of the three trustees the case was decided and the bill dismissed. Mr. Justice Woods in dismissing it said:

'The bill is to all intents and purposes a suit against the state. It is mainly her property, and not that of Alfred H. Colquitt or J. W. Renfroe, that is to be affected by the decree of this court. It is the title of the state that is assailed. The attack is not made against the state directly, but through her officers This indirect way of making the state a party is just as open to objectior as if the state had been named as a defendant.' 3 Woods, 426.

The failure of several of the states of the Union to pay the debts which they have contracted and to discharge other obligations of a contract character, when taken in connection with the acknowledged principle that no state can be sued in the ordinary courts as a defendant, except by her own consent, has led, in recent times, to numerous efforts to compel the performance of their obligations by judicial proceedings to which the state is not a party. These suits have generally been instituted in the circuit courts of the United States, or have been removed into them from the state courts.

The original jurisdiction of this court has also been invoked in the recent cases of New Hampshire v. Louisiana and New York v. Same, These latter suits were based on the proposition that the constitutional provision that states might sue each other in this court would enable a state whose citizens were owners of obligations of another state to take a transfer of those obligations to herself and sue the defaulting state in the court. The doctrine was overruled in those cases at the last term by the unanimous opinion of the court. In the suits which have been instituted in the circuit courts the effort has been, while acknowledging the incapacity of those courts to assume jurisdiction of a state as a party, to proceed in such a manner against the officers or agents of the state government, or against property of the state in their hands, that relief can be had without making the state a party. The same principle of exemption from liability to suit as applied to the government of the United States has led to like efforts to enforce rights against the government in a similar manner. And it must be confessed that, in regard to both classes of cases, the questions raised have rarely been free from difficulty, and the judges of this court have not always been able to agree in regard to them. Nor is it an easy matter to reconcile all the decisions of the court in this class of cases. While no attempt will be made here to do this, it may not be amiss to try to deduce from them some general principles, sufficient to decide the case before us. It may be accepted as a point of departure unquestioned, that neither a state nor the United States can be sued as defendant in any court in this country without their consent, except in the limited class of cases in which a state may be made a party in the supreme court of the United States by virtue of the original jurisdiction conferred on that court by the constitution. This principle is conceded in all the cases, and whenever it can be clearly seen that the state is an indispensable party to enable the court, according to the rules which govern its...