Wright v. State Board of Liquidation

• Decision Date: 12 April 1897
• Docket Number: 12,399
• Citation: 22 So. 361,49 La. Ann. 1213
• Court: Louisiana Supreme Court
• Parties: BENJAMIN WRIGHT v. STATE BOARD OF LIQUIDATION

22 So. 361

49 La.Ann. 1213

BENJAMIN WRIGHT v. STATE BOARD OF LIQUIDATION

No. 12,399

Supreme Court of Louisiana

April 12, 1897

Argued March 20, 1897

Rehearing Refused June 30, 1897.

APPEAL from the Fifth Civil District Court for the Parish of Orleans. Theard, J.

Richard De Gray, F. B. Thomas and William Hopkins Young, for Plaintiff and Intervenor, Appellants.

M. J Cunningham, Attorney General, for Defendant, Appellee.

BLANCHARDJ. NICHOLLS, C.J., recused himself.BREAUX, J., takes no part.

OPINION

BLANCHARD J.

Plaintiff sues as owner and holder of eight bonds of the State of Louisiana, each for one thousand dollars, issued by authority of Act 31 of the General Assembly of the State, approved February 21, 1870.

William Hopkins Young intervened in the suit, alleging that he is the owner and holder of twenty-two bonds of the same series, each for the sum of one thousand dollars.

The bonds are all dated July 1, 1870, and were made payable to the New Orleans, Mobile & Chattanooga Railroad Company, or bearer, forty years from date, with interest coupons attached.

Both petitions aver that the bonds were issued for a valid consideration, after full compliance with all the conditions and requirements of Act 31 of 1870, and that they are constitutional, legal and valid obligations of the State.

The object of the suit is to compel the Board of Liquidation to exchange the bonds for consolidated bonds of the State under the terms of ActNo. 3 of 1874.The allegation is made that the Board of Liquidation had been duly applied to for this purpose, but that the application to fund and exchange had been refused.

In the answer of defendant it is specially denied that the railroad, in aid of which the bonds were issued, was ever constructed as contemplated by the law.It is averred that the bonds declared on are questioned and doubtful as to their legality and validity; that they are unconstitutional, without valid consideration and not fundable under Act 3 of 1874 and the amendment thereto.

The case was tried on these issues, and there was judgment in favor of plaintiff and intervenor.It is this judgment we are called upon to review.

The State, by the Funding Act, approved January 24, 1874, declared its willingness to fund its outstanding obligations at sixty cents on the dollar, and organized the Board of Liquidation to carry into effect its provisions.

By ActNo. 11 of the Extra Session of 1875, known as the Supplemental Funding Act, it prohibited the Board of Liquidation from issuing bonds in exchange for any outstanding obligations of the State, the legality or validity of which is questioned, until the same shall first, by final decree of this court, be declared legal and valid obligations of the State, contracted in strict conformity to law, not in violation of the Constitution of the State or of the United States, and for a valid consideration.

In reference to suits brought under the Supplemental Funding Act, this court, in the case of Lord Cecil et al. vs. Board of Liquidation, 30 An. 35, said:

"It will be observed that the object of this and similar suits is not to obtain a judgment against the State for the amount of the bonds.The decree we are to render is assimilated to a special verdict of a jury, who had been charged to ascertain or find certain facts -- i. e., do the bonds possess the requisites enumerated in the act of 1875, which it is essential they should have in order to justify the Board of Liquidation in funding them."

The State can be sued only by its own consent, and it may, therefore, impose such limitations and restrictions on the right of suit as it pleases.

Hence, this court, in determining its powers and duties in cases against the State, must look to the act authorizing the same, in order to determine the scope and limitation of its power and jurisdiction.Outside of the act authorizing the suit, and beyond the limitations therein fixed, it is absolutely without authority to hear and determine; and must, therefore, confine its investigations within the limits and to the objects specified.Spencer, J., Concurring Opinion, 30 An. 46.

The bonds in controversy being questioned as to their validity, the Board of Liquidators declined to fund them.

Plaintiff, under the terms of both the original and supplemental funding acts, is authorized to apply to the courts for relief, and accordingly does so.

But the later act tells him that his bonds can not be funded until this court shall have investigated and decreed that the bonds are legal and valid obligations against the State, that they were not issued in violation of the Constitution, that they were issued in strict conformity to law, and that they have a valid consideration.If they fail to pass muster in any one of these particulars this court can not order their funding and exchange for consolidated bonds.

And the court must make this inquiry without regard to the ownership of the bonds.It must make it whether the bonds be in the hands of the original payees, or in those of innocent third holders for value before maturity.

The case can not be affected in the slightest degree by any equities which plaintiff and intervenor may lay claim to under the law governing negotiable instruments.That question was fully settled in Lord Cecil'scase, supra, and reaffirmed in Carver vs. Board,35 An. 263, and in Adams vs. Board,39 An. 690.In this view of the case, if the consideration of these bonds has failed so far as the original payees are concerned, it has failed equally with regard to all subsequent transferees; and if the consideration has failed, these bonds can not be held to be, in the language of the Supplemental Funding Act, "legal and valid obligations against the State."

The Attorney General insists that the bonds are stricken with unconstitutionality on two grounds:

1.Because at the time when they were actually issued the debt of the State had already reached the limit of twenty-five million dollars, beyond which, by the third amendment to the Constitution of 1868, it could not be extended.

2.Because Art. 114 of the Constitution of 1868 required the object or objects of every law to be expressed in its title, and the title of Act 31 of 1870 did not express any object to levy a tax, or to provide the ways or means to pay the debt therein authorized.

He also insists it is not shown by legal and competent evidence that the bonds were issued in strict conformity to law; that is to say, that all the conditions and requirements of Act 31 of 1870 were complied with, and that it was incumbent upon plaintiff to show this affirmatively, and he can not rely upon legal presumptions arising from the act of the State officials in issuing the bonds, etc.

In our view of the case it is not necessary to pass upon these defences.There is another decisive of the controversy, and that is that the consideration of these bonds has failed, and therefore they do not occupy before the court the status of "legal and valid obligations against the State."

Section 7 of Act 31 of 1870, after reciting "that in order to invite immigration to the State, extend the cultivation and increase the products of that part of its territory lying west of the Mississippi river, augment the commerce and growth of the city of New Orleans and promote the general prosperity of the people of the commonwealth, it is of vital importance that the railroad of the New Orleans, Mobile &amp Chattanooga Railroad Company be extended westerly from the city of New Orleans * * * to the city of Houston in Texas, and that the same be constructed and put in operation between said cities in the shortest practicable time, and to induce the said company to so extend its said railroad, and incur the inconvenience and increased cost of a speedy construction of the same, and to insure its construction and opening for traffic between said cities within the time hereinafter specified," declared that the State granted and would pay and deliver unto the said company the bonds of the State to the amount of three million dollars, as follows: "Seven hundred and fifty thousand dollars of bonds whenever the railroad was constructed from a point opposite New Orleans to Bayou Lafourche, at or near Donaldsonville; another instalment of seven hundred and fifty thousand dollars of bonds when the road was completed from Bayou Lafourche to Vermilionville; a third instalment of seven hundred and fifty thousand dollars of bonds when the road was completed from Vermilionville to the Sabine river; and a fourth instalment of seven hundred and fifty thousand dollars of bonds when the road...