Walker v. State

• Decision Date: 29 September 1879
• Docket Number: CASE No. 760.
• Citation: 12 S.C. 200
• Parties: G. M. WALKER, CASHIER, v. THE STATE OF SOUTH CAROLINA. F. J. PELZER v. THE SAME. EDWARD SEBRING v. THE SAME. THE BANK OF CHARLESTON N. B. A. v. THE SAME. THE W. L. I. CHARITABLE ASSOCIATION v. THE SAME. F. J. HERRON v. THE SAME.
• Court: South Carolina Supreme Court

12 S.C. 200

G. M. WALKER, CASHIER,

v.THE STATE OF SOUTH CAROLINA.

F. J. PELZER

v.THE SAME.

EDWARD SEBRING

v.THE SAME.

THE BANK OF CHARLESTON N. B. A.

v.THE SAME.

THE W. L. I. CHARITABLE ASSOCIATION

v.THE SAME.

F. J. HERRON

v.THE SAME.

CASE No. 760.

Supreme Court of South Carolina.

Sept. 29th, 1879.

1. The Court of Claims constituted under Joint Resolution No. 99, of March 22d, 1878, was not limited to an investigation of the inquiry whether the bonds surrendered in exchange for consolidation bonds were issued in accordance with the provisions of the statutes authorizing their issue, but it was empowered and directed to inquire into the validity of certain specified bonds and stocks issued under the authority of the consolidation act, and whether they were obligations binding upon the state.

2. The constitution of 1868 has been, since its adoption, the fundamental law of this state, and the acts of assembly passed in pursuance thereof, have as full force and validity as any laws upon the statute book.

3. The legal principles applicable to an action upon negotiable bonds apply, in like manner, to actions upon the coupons of such bonds.

4. Coupon bonds are, to all intents, negotiable securities.

5. States issuing negotiable securities incur the same responsibilities which attach to individuals and corporations in like case.

6. The holder of state bonds and coupons is presumed, in the absence of proof to the contrary, to have taken them under-due for a valuable consideration, and without notice of any objection to which they were liable.

7. Bonds issued by a state through its duly authorized officers under the authority of its laws, professing upon their face that the conditions imposed by the statute authorizing their issue have been complied with, are valid obligations of the state in the hands of bona fide purchasers, although such conditions were not complied with, or although in their issue gross frauds were perpetrated by the agents of the state. Cases considered.

8. To be a valid obligation of the state the bond must be issued under the authority of a statute which is free from constitutional objections.

9. No debt could be created by the consolidation act, (15 Stat. 518), as it was not passed by two-thirds of both branches of the general assembly, nor submitted to a vote of the people.

10. Under an act entitled “An act to authorize a state loan to pay interest on the public debt,” approved August 26th, 1868, the governor was authorized to borrow, on the credit of the state, on coupon bonds, within twelve months from its passage, “a sum not exceeding one million dollars, or so much thereof as he may deem necessary to pay interest on the public debt.” Held, that the governor was not restricted by the act to the issue of $1,000,000 in bonds, but to the issue of such an amount of bonds as would realize $1,000,000 in money.

11. Held further, that after there had been one issue of bonds under this act of the legislature, there was no authority for another and subsequent issue under the same act.

12. Under an act of the general assembly, approved August 26th, 1868, (14 Stat. 17), the governor was authorized to borrow, on the credit of the state, on coupon bonds, within twelve months from its passage, a sum not exceeding $500,000, or as much thereof as he may deem necessary, to redeem the bills receivable of the State of South Carolina; and it was provided “that an annual tax in addition to all other taxes shall be levied upon the property of the state, sufficient to pay the interest on the loan hereinbefore authorized.” Held, that the debt thereby created was for an extraordinary expenditure of the state government within the meaning of the constitution.

13. In Section 7, Article IX., of the constitution—“for the purpose of defraying extraordinary expenditures, the state may contract public debts”—the word “extraordinary” is used in contra-distinction to the word “ordinary,” or annual expenses of the state government, which includes current interest on the public debt. Per MCIVER, A. J. WILLARD, C. J., concurring, holds further, that annual expenses, may under certain exigencies, assume the character of extraordinary expenditures. HASKELL, A. J., holds, that “extraordinary” means everything that is not “ordinary,” as defined in the constitution.

14. The state was authorized in 1868, under the new constitution, to borrow money on coupon bonds to pay past-due interest and floating indebtedness existing at that time.

15. This act providing for a loan to redeem bills receivable complied with the requirement of Section 7, Article IX., of the constitution, that “every such law shall levy a tax annually, sufficient to pay the annual interest of such debt,” there being then upon the statute book a general act regulating an annual assessment and collection of taxes. Morton, Bliss & Co. v. Comptroller-General, 4 S. C. 430.

16. A contract valid under the laws of the state as expounded at the date of the contract, cannot be affected by any subsequent decision of the courts altering the construction of such laws.

17. A decision of this court upon a constitutional question not only affects the case before the court, but stands as an authoritative construction of the clause of the constitution thereby interpreted, and is conclusive upon other cases involving the same question.

18. Bonds of the state issued in payment of outstanding bills receivable for which the state had received value, are valid and binding obligations, even though such bills should be considered bills of credit. The constitution of the United States does not prohibit a state from paying bills of credit.

19. The provision in Section 7, Article IX., of the state constitution, that no law creating a public debt “shall take effect until it shall have been passed by the vote of two-thirds of the members of the general assembly,” &c., means two-thirds of the members present, a quorum voting. Morton, Bliss & Co. v. Comptroller-General, 4 S. C. 430;County of Cass v. Johnston, 95 U. S. 360.

20. Bills of the Bank of the State of South Carolina—a corporation created by the state, and of which it was the only stockholder—issued under the express authority of the state for its sole benefit, and to the payment of which the faith of the state was pledged, are “evidences of indebtedness” within the meaning of the provision in Section 10, Article IX., of the constitution, that “no scrip *** shall be issued except for the redemption of stock, bonds, or other evidences of indebtedness previously issued.” And bonds issued in exchange for such bank bills do not create a new debt.

21. “An act to authorize a loan for the relief of the treasury,” approved February 17th, 1869, which provides that money not exceeding a specified sum may be borrowed “for the relief of the treasury of the state,” violates the constitutional limitation, Section 7, Article IX., that “for the purpose of defraying extraordinary expenditures, the state may contract public debts; but such debts shall be authorized by law for some single object, to be distinctly specified therein.” (1.) In that it purports to create a debt which was not for the purpose of defraying extraordinary expenditures; and (2.) In that the debt is not authorized for some single object distinctly specified therein. And bonds resting upon the authority of that act, and all consolidation bonds issued in exchange for such bonds, are not valid debts of the state.

22. An act entitled “An act to provide for the appointment of a land commissioner and to define his powers and duties,” and which provides for the appointment of a land commissioner, defines his duties and authorizes the issue of bonds for the purpose of raising money with which to purchase lands, to be re-sold again on credit to citizens, is in compliance with Section 20, Article II., of the constitution, which requires that “every act or resolution having the force of law shall relate to but one subject, and that shall be expressed in the title.” Morton, Bliss & Co. v. Comptroller-General, 4 S. C. 430;Antonio v. Mehaffy, 96 U. S. 312.

23. The constitution providing in Section 7, Article IX., that no law creating a public debt “shall take effect until it shall have been passed by the vote of two-thirds of the members of each branch of the general assembly, to be recorded by yeas and nays on the journals of each house respectively,” no such law would be valid unless a record of a two-thirds vote by yeas and nays affirmatively appeared upon the journals of both houses.

24. But where it appears upon the journals of the house of representatives that the bill did not receive such vote on its third reading in that body, but did upon its final passage by the house after its return from the senate with amendments, the house journal shows a substantial compliance with the constitutional requirement.

25. An act permitting the exchange or conversion of outstanding bonds and stocks into new bonds, authorizes no new debt, and such conversion bonds issued not in exchange for outstanding obligations, were issued without authority of law, and are void even in the hands of a bona fide holder.

26. Whether a state debt shall be contracted by sale of its bonds, or by their deposit as collateral security for its loan, are not prescribed in the constitution, and are therefore left to the discretion of the legislature.

27. The registration of bonds required by the constitution, Section 14, Article IX., to be kept by the state treasurer, is not a condition precedent to their issue, but a direction of duty upon the state treasurer.

28. The state having issued new or consolidation bonds in exchange for outstanding bonds and stocks, at the rate of fifty cents on the dollar, the burden of proof is upon the state in every case to show that the consolidation bonds in question rest upon invalid vouchers.

29. The consolidation act, which authorized the issue of new bonds, at the rate of fifty...