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VOL. III.]

YOUNG v. THE RAILROAD COMPANY.

[No. 2.

In view of this fact it would be a strange proceeding for this court sitting as a court of equity to deny the right of subrogation in this case, because the state cannot be made a party here while she refuses to be a party elsewhere.

It is next alleged, as a ground of demurrer to the bill, that in fact there is no statutory mortgage or lien upon the property of the railroad company to secure the bonds held by complainants, because the governor had no authority to indorse these bonds. His indorsement is therefore void. The state incurred no obligation by reason of the manual indorsement of the governor, and consequently no lien was created thereby to indemnify the state. There was no liability against which the state could be indemnified.

This claim is based on two grounds: (1) Because the statute authorizes only the indorsement of bonds bearing eight per cent. interest, and these bonds bear eight per cent. interest in gold; and (2) Because the statute authorizes the indorsement of first mortgage bonds only, and the public statutes of the State of Alabama show that the bonds in suit are not first mortgage bonds.

Does the fact that the interest on the bonds is eight per cent. payable in gold make the interest greater than eight per cent.? The defendants claim that it does; that of necessity the agreement to pay in gold is an agreement to pay more than eight per cent. in currency. I cannot assent to this. It depends entirely upon contingencies, which, whether interest in gold is better than interest in currency, cannot be foreseen. If gold is at a premium when the interest falls due, then it would take more than eight per cent. in currency to pay the interest. If it is not, it would just take eight per cent. If gold was at a discount, as under many circumstances it might well be, then eight per cent. in currency would more than pay the interest. Suppose the agreement were to pay eight per cent. in Demand Treasury Notes of the United States, which are a legal tender, and they, when the interest was due, happened to be at a premium, as compared with United States notes, also a legal tender, would that really make the rate of interest greater than eight per cent.? When the legislature authorized the indorsement of bonds bearing eight per cent. interest, the fair construction was that it meant eight per cent. in any legal tender currency on which the parties might agree. At the time of the passage of the act "there were two descriptions of lawful money in use under the acts of Congress, in either of which damages for non-performance of contracts, whether made before or since the passage of the currency acts, might be properly assessed in the absence of any different understanding or agreement between the parties." Butler v. Horwitz, 7 Wall. 258.

But I place my decision upon this point on the ground that a contract to pay eight per cent. interest in gold is not a contract to pay more than eight per cent., because when the interest falls due gold may happen to be at a premium.

This same question substantially has been decided by the supreme court of the United States, in Mayor v. The City of Muscatine, 8 Wall. 391. In that case authority was conferred upon the city of Muscatine to issue bonds bearing a rate of interest "not higher than ten per cent. per

Vol. III.]

YOUNG v. THE RAILROAD COMPANY.

[No. 3.

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annum." The interest on the bonds was made payable semi-annually. This method of payment increased the burden on the city, and was an advantage to the bondholder. It, in fact, and under all circumstances, amounted to a higher rate of interest than ten per cent. per annum. was objected that by issuing such bonds the authority conferred upon the city was transcended, and a usurious rate agreed to be paid, but the supreme court held otherwise, and sustained the bonds.

I am of opinion, therefore, that the governor was not precluded by the law from indorsing the bonds because the interest was payable in gold. The second ground, upon which it is claimed that the governor was without authority to indorse the bonds, is that there was a prior mortgage upon the railroad company's property, and the bonds indorsed could not, therefore, be first mortgage bonds.

Let us concede, what defendants claim, that there was a prior mortgage on the road at the date of these bonds. Were the holders of the bonds under the necessity of taking notice of that fact, and does the fact make the bonds void in the hands of a bona fide holder for value?

If the governor was without any authority to indorse any bonds, his indorsement would be void. If the law authorized him to indorse the bonds of the A. & C. Railroad, and he undertook to indorse the bonds of the South & North Alabama Railroad, his indorsement would be void. But in this case there is no dispute that the law authorized him to indorse the bonds of the Montgomery & Eufaula Railroad, on the conditions that there should be completed, and equipped 20 miles of road before any indorsement, and that the indorsement should not exceed $16,000 per mile of completed railroad, and that the bonds indorsed should be first mortgage bonds. The authority of the governor to indorse such bonds on such conditions is not disputed. Now, suppose the governor indorses bonds of a railroad company before 20 miles of its road are completed and equipped, or indorses the bonds at a rate greater than $16,000 per mile, are the bonds on that account void in the hands of a bondholder? Clearly not. The unbroken authority of cases decided by the supreme court of the United States is to the effect that such bonds are valid. Knowles v. Aspinwall, 21 How. 539; Mercer Co. v. Hackett, 1 Wall. 83; Mayor v. Muscatine, Ib. 384.

In the case last cited the supreme court says, "that if the legal authority was sufficiently comprehensive, a bona fide holder for value has the right to presume that all precedent requirements have been complied with." See, also, Grand Chute v. Winegur, 13 Wall. 355.

But do these authorities cover the case where an indorsement is authorized of first mortgage bonds, and the governor indorses bonds of a railroad company whose property is subject to a prior mortgage? After some hesitation I have come to the conclusion that they do.

Unquestionably the duty is imposed on the governor by the Internal Improvement Act, as subsequently amended (Acts of 1866, 1867, p. 686), to decide whether the conditions precedent to the indorsement have been complied with. "When any railroad company," says the law, "shall have finished, completed, and equipped 20 continuous miles of road, it shall be the duty of the governor, and he is hereby required, to indorse on the part of the state the first mortgage bonds of said railroad company to the

VOL. III.

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Vol. III.]

YOUNG v. THE RAILROAD COMPANY.

[No. 3.

extent of $16,000 per mile," &c. It is as much his duty to ascertain that the bonds to be indorsed by him are first mortgage bonds, as it is to ascertain that 20 miles of the railroad have been completed and equipped. These conditions stand on precisely the same ground, namely, that the security of the state for its indorsement may be sufficient.

The law not only makes it the duty, but gives the governor the authority, to determine these facts, and having determined them, to indorse the bonds. The legal authority to make the indorsement is sufficiently comprehensive to include the indorsement of the bonds in question; and the governor having placed his indorsement upon the bonds and certified in the indorsement itself that it was made in pursuance of the act of the legislature, I think a bona fide holder has the right to presume that all precedent requirements have been complied with, and that there are no prior liens upon the railroad; and, so far as he is concerned, this presumption cannot be rebutted.

But defendants say that the holders of these bonds are bound to take notice of what is contained in the statutes of the State of Alabama, and that the Act approved December 30, 1868 (Laws of 1868, p. 497), entitled An act to authorize the governor to indorse the bonds of the Montgomery & Eufaula Railroad Company, under the Act of 19th of February, 1867, and its amendments, shows upon its face that the bonds of the railroad company were not first mortgage bonds. This act declares, “That the governor of this state be, and he is hereby, authorized to indorse the bonds of the Montgomery & Eufaula Railroad Company, to the extent authorized by the act to establish a system of internal improvements in the State of Alabama, passed and approved February 19, 1867, and the amendments made to said act, notwithstanding the indebtedness of said company to the State of Alabama for $30,000, and the mortgage made by said company to the state under the Act approved 17th February, 1866. Provided, that all sums of money which have been heretofore advanced by the State of Alabama, by the indorsement of bonds hitherto, shall be reckoned and regarded as so much of the amount authorized to be extended to said road by the authority of this act."

If this is a valid enactment it covers completely any want of authority in the governor to indorse the bonds of the railroad company by reason of a prior mortgage. It is a ratification of his indorsement, and makes it good and valid in all respects: this is conceded. But the defendants say it was not passed by the number of votes required by the Constitution of the state for the passage of such an act, and that the journals of the legislature show the fact; that it is therefore null and void, and no law at all.

If this position be true, what becomes of the claim, that the bondholders were bound to take notice of its contents. If it is no law, it is not constructive notice to anybody of anything. It is without effect, to all intents and purposes. It cannot be said that a bondholder in Europe or New York is bound by constructive notice of an act that never passed the legislature, but which by some mistake of the printer, or some one else, found its way among the published acts of the state.

I am of opinion, therefore, that the bonds of the Montgomery & Eufaula Railroad Company in the hands of bona fide holders are valid, that the

Vol. III.]

YOUNG v. THE RAILROAD COMPANY.

[No. 3.

indorsement of the governor is valid, and that by said indorsement the state acquired a valid lien upon said railroad property, superior to all other liens, unless it be that of the South & North Alabama Railroad Company. Whether the lien of complainants is better than that of the South & North Railroad Company it is not now necessary to decide.

I have noticed all the grounds of demurrer which go to the entire bill, and am of opinion that none of them are well taken, and the demurrer must therefore be overruled.

A question, raised by one of the grounds of demurrer and much discussed during the argument, was whether this court would, if the bill was sustained, appoint a receiver to take possession of the property of the defendant railroad company, according to the prayer of the bill.

It seems to me that there can be but one answer to this question. It appears from the bill that a suit to foreclose the second mortgage, executed by the defendant railroad company, is now pending in the United States circuit court for the Southern District of Alabama; and that in that case the defendant Lane has been appointed receiver, that he has taken possession of all the mortgaged property, and is administering it under the order and directions of that court.

If there are any adjudged cases which would authorize this court to interfere with the possession of a receiver appointed by another court having jurisdiction, and who is in actual possession of the property, they have never fallen under my observation. The authorities all sustain the contrary doctrine. Smith v. McIver, 9 Wheat. 532; Williams v. Benedict, 8 How. 107; Wiswell v. Sampson, 14 How. 52; Taylor v. Carryl, 20 How. 583; Mellet v. Dexter, Í Curt. 178; Ala. & Chattanooga R. R. Co. v. Jones, 7 Bank. Reg. 331; Memphis City v. Dean, 8 Wall. 64.

These authorities show that a question, which is pending in one court of competent jurisdiction, cannot be raised and agitated in another court; much less can one court assume to take possession of and administer property which is in the possession of another court and in course of administration by it. Nor is the case for the appointment of a receiver by this court aided by the leave granted to complainants by a judge of the court, when the other suit is pending to sue the receiver appointed in such other suit. It is clear the leave given did not contemplate such a proceeding as the removal of that receiver by this court. No court or judge would be authorized to grant such a leave ex parte, and thus dispose of valuable rights and advantages of other parties, without giving them at least their day in court.

There are no averments in the bill which would justify the court which appointed Lane receiver in removing him from his trust. And no matter what showing the complainants may be able to make as to the incompetency, unfitness, or dishonesty of the receiver, this court cannot act. That showing must be made to the court which appointed him, and it must be asked to remove him. If these complainants are not satisfied with the manner in which the suit and proceedings of Strong v. The Railroad Co. are conducted in the United States circuit court for the Southern District of Alabama, they must become, if they can, parties to that suit, and make their complaints to that court. This court does not sit to revise or review the proceedings of that court. Any motion, therefore, to appoint a receiver

Vol. III.]

WELTON V. THE STATE OF MISSOURI.

[No. 3.

in this case, while the property to be administered is in the possession of a receiver appointed by another court, must be overruled, and this court can entertain no motion to remove or otherwise interfere with a receiver appointed by another court.

I add a few words in regard to the relations which the two cases referred to bear to each other. That suit was commenced by the holders of second mortgage bonds. They did not see fit to make the holders of the first mortgage bonds parties, nor was it necessary for them to do so. Calvert on Parties, 13, 14; Story's Eq. Pl. § 193. They have the right to proceed to a decree and sell the mortgaged property, but the sale must necessarily be made subject to the lien of the first mortgage bonds. The holders of these bonds are not parties, and can only be made parties by service of process or voluntary appearance. No general notice calling on them to present their claims will make them parties or bind them. If they were represented in the case by trustees, then a notice calling upon them to present their bonds before the master would be binding. But they are in no way represented in that suit. Their rights cannot therefore be affected by any decree in that case. Campbell v. The Railroad Co. 1 Woods, 368.

They have the same right to commence suit in this mortgage as the holders of second mortgage bonds have in theirs. But as the latter have commenced their suit first and have first obtained possession of the mortgaged property, the suit of the first mortgage bondholders cannot be allowed to interfere with the suit of the second mortgage bondholders. They can only interfere by being admitted as parties in that suit.

When the suit of the second mortgage bondholders has ripened into a decree of sale and the property has been sold, the first mortgage holders may then proceed in their suit to subject the property again to sale to satisfy their lien. But not till the proceedings in the first suit have so resulted that the property is no longer in the possession of the court through its receiver, can any other court or parties interfere with it.

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1. A license tax required for the sale of goods is in effect a tax upon the goods themselves.

2. A statute of Missouri which requires the payment of a license tax from persons who deal in the sale of goods, wares, and merchandise which are not the growth, produce, or manufacture of the state, by going from place to place to sell the same in the state, and requires no such license tax from persons selling in a similar way goods which are the growth, produce, or manufacture of the state, is in conflict with the power

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