Minn. & Pacific R. R. Co. v. Sibley

• Decision Date: 01 January 1858
• Citation: 2 Minn. 13
• Parties: MINNESOTA & PACIFIC RAILROAD COMPANY vs. H. H. SIBLEY, Governor.
• Court: Minnesota Supreme Court

Page 13

2 Minn. 13

MINNESOTA & PACIFIC RAILROAD COMPANY vs. H. H. SIBLEY, Governor.

Supreme Court of Minnesota.

This company having complied with the conditions of § 10, art. 9, of the constitution, as amended April 15, 1858, to entitle it to the issue of a certain amount of state bonds, applied to the governor for them, tendering a like amount of its first mortgage bonds. The governor declined to deliver to it the state bonds, claiming that, under the amendment, the bonds delivered by the company to the treasurer, should be secured by a deed of trust, giving the state the first lien.

The company, thereupon, applied to this court for a writ of mandamus.

John B. Brisbin, for Minnesota & Pacific Railroad Company.

Charles H. Berry, Attorney General.

EMMETT, J.

This proceeding grew out of a difference of opinion between the governor of the state and the railroad companies, as to the requirements of § 10 of art. 9 of the constitution, as amended by a vote of the people on the 15th day of April, A. D. 1858. The clause material to the matter in controversy is in these words: "And, as further security, an amount of first mortgage bonds, on the roads, lands, and franchises of the respective companies, corresponding to the state bonds issued, shall be transferred to the treasurer of the state, at the time of the issue of state bonds."

This language, in the opinion of the governor, gives to the state an exclusive lien on the roads, lands, and franchises of the respective companies, to the extent of the bonds which may be received from them, and in the words of his written requirement, he insists on "a deposit of first mortgage bonds of the companies, made to the state, based upon a deed of trust to the state, equal in amount to the state bonds issued to such companies, which deed of trust shall specify a priority of lien to such bonds, as the companies may deliver to the state in exchange for her bonds." On the other hand, the companies deny that the state is entitled to any preference as to these securities. The Minnesota and Pacific Railroad Company having tendered and offered to transfer to the treasurer of the state first mortgage bonds at the rate of one hundred thousand dollars for every ten miles of its road then completed and ready for the superstructure, secured by a deed of trust on its road, lands, and franchises, and demanded of the governor that he cause to be issued and delivered to said company a corresponding amount of state bonds, which he refused to do, makes the application for a peremptory writ of mandamus.

It is admitted that the company has strictly complied with the provisions of its charter, and of the constitution, in all, save that the trust deed, given to secure its first mortgage bonds, does not express a preference, as to such bonds as may be transferred to the state. This trust deed conveys the road, lands, and franchises of the company to certain trustees, to secure the payment of bonds issued, or to be issued, for the construction of the fifty miles of its road, then contracted to be built, and such other of its bonds as might thereafter be issued under certain restrictions, amongst which are the following, to-wit: Whenever, and as often as the construction of forty additional miles of said road, or its branches, shall be contracted for, additional bonds may be issued for said construction, not exceeding the rate of thirty-five thousand dollars per mile, and so on as the work progresses, until the road is completed. The bonds are all to be made payable at the same time, must be countersigned and registered by the trustees, and bear a rate of interest not exceeding seven per cent. per annum.

From this, it will be seen that the question to be determined is not, as has been insisted, whether the company can issue bonds ad libitum, and thus depreciate and destroy the security given the state by the clause under consideration; for the trust deed expressly limits the amount of the issue, and it was not claimed that the utmost limit allowed exceeds the actual costs of constructing and equipping the road. Doubtless the courts could interfere to prevent the depreciation of the securities by fraudulent issues of bonds. Here, however, the real question is, whether the state, legally or equitably, has a right of priority over all others who may expend labor or money in the construction or equipment of this road. It seems clear that such a claim could not commend itself very strongly to the favor of a court of chancery, and it should follow in all such cases, that the legal right to such undue preference must be clearly made to appear before it can be admitted.

In giving construction to this section of the constitution, we will be aided by recurring to the condition of that instrument before it was amended, and considering the occasion, the necessity, and the object of the change. We shall then be better able to determine the precise meaning of the language employed. Prior to the amendment, the state was prohibited from loaning its credit in aid of any individual association or corporation. The constitution was ratified by the people, when submitted to them, with marked unanimity, as much perhaps out of regard for it as a whole, and to put to rest the vexatious questions of regularity which attended its formation, as from any particular favor with which each particular provision was viewed. Congress had, previous to this, made a munificent grant of lands to the territory, to aid in the construction of certain lines of railroads, and a territorial legislature had disposed of these lands to certain railroad companies. These several companies had duly organized, and most, if not all of them, had located their respective roads. Scarcely had the people passed upon the constitution in this form, before the financial embarrassment into which the whole country was thrown, made it apparent to all, that, unless these roads received some assistance from the state, they could not be built, and the land grant for which our people had labored so long and arduously would thus be lost to us. To secure this governmental aid, and to prevent so great a misfortune as the loss of the land grant, a change in the fundamental law was deemed necessary, and accordingly the legislature then in session passed an act in accordance with § 1, of art. 14, of the constitution, proposing so to amend § 10 of art. 9, as to authorize the state to loan its credit to the several railroad companies having possession of this grant of lands. This proposition was duly submitted to the people for approval or rejection, and was adopted by a majority quite as decided as that given for the constitution in its original form, showing that, whatever would have been the result on the provision as it stood originally, had there been an opportunity to vote on the proposition separately, they were at last satisfied that a change was necessary. Certain it is, that they gave unequivocal expression to their desire that the state should loan its credit in aid of these lines of railroads. The first paragraph of the section expresses the object of the change to be "for the purpose of expediting the construction of the lines of railroads, &c.," and in this the state has an interest scarcely inferior to that of the companies themselves, not an antagonistic interest, but one in perfect harmony with the interest of the companies.

The section is now in these words, "the credit of the state shall never be given or loaned in aid of any individual, association, or corporation, except that, for the purpose of expediting the construction of the lines of railroads, in aid of which the congress of the United States has granted lands to the territory of Minnesota, the governor shall cause to be issued and delivered to each of the companies in which said grants are vested by the legislative assembly of Minnesota, the special bonds of the state, bearing an interest of seven per cent. per annum, payable annually at the city of New York, as a loan of public credit, to an amount not exceeding twelve hundred and fifty thousand dollars, or an aggregate amount to all of said companies not exceeding five millions of dollars, in manner following, to-wit:"

The section then proceeds to declare what it is necessary for the several companies to do, in order to obtain the state bonds; provides for the manner in which they shall be issued; pledges the faith and credit of the state for the payment of the interest and the redemption of the principal; and, after requiring each company to make provision for the punctual payment of the principal and interest, provides that "as security therefor the governor shall demand and receive from each of said companies, before any of said bonds are issued, an instrument pledging the net profits of the road for the payment of said interest, and a conveyance to the state of the first two hundred and forty sections of land, free from prior incumbrances, which such company is, or may be, authorized to sell, in trust for the better security of the treasury of the state from loss on said bonds," and authorizing the governor to make title to such lands to certain purchasers. Then follows that portion already quoted. As has before been stated there can be no reasonable doubt that the end and object of the amendment, taken altogether, was "for the purpose of expediting the construction of these lines of railroad;" and it seems equally clear that the design of the clause under consideration was to provide the state with a certain class of securities, in addition to those already designated as the security required of the companies, for the punctual payment of the principal and interest of those bonds. The language refers to the kind and not to the sufficiency of the security. This clause then should be so construed as not to defeat the object of the section itself; and a majority of the court hold that the construction contended for by the...