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Bonds of the kind were forbidden to be deliv55*] ered until the acceptance thereof should be signified to the Secretary of State by the filing in his office of a certificate of such acceptance under the corporate seal of the Company with the signature of the president, and the provision was that the certificate of accept ance so executed and filed should be recorded in the office of the Secretary of State, and that it shall become and be, according to all intents and purposes, a mortgage of said road and every part and section thereof, and its appur tenances, to the people of the State, for securing the payment of the principal and interest of the sums of money for which such bonds shall from time to time be issued and accepted.

Legislative aid was also furnished in like form to certain other railroad companies of the State to expedite their construction and the completion of the same, amounting in the whole to the sum of $9,000,000, including the amount furnished to the plaintiff Company, all of which was secured as a first lien on the respective railroads in like manner.

None of the companies, however, were able to complete their railroads without further aid from the State, and on the 10th of December, 1855, the Legislature, by an Act entitled "An Act to Secure the Completion of Certain Railroads in the State," enacted that it shall be the duty of the Governor, upon the application of any of said companies, with the proof of the investment of any sum in the actual construction and equipment of the trunk line of the railroad, from sources other than the proceeds of the bonds of the State, and not secured upon the road by a lien prior to that of the State, and verified as therein required, to sign and deliver to such Company an amount in the bonds of the State equal to twice the amount so proven to have been invested in the construction and equipment of the said railroad since the last application and issue of bonds to such Company; and successively from time to time, upon the application for bonds and proof of such investment, the Governor shall issue and deliver, in like manner, bonds to such Company until the aggregate amount to the plaintiff Company 56*] shall be *$2,000,000, $1,000,000 of which shall be exclusively applied to the construction of a portion of said road therein described; and it is made the duty of the Governor to expend the other $1,000,000 for the purchase of the railroad iron necessary to lay the track of said road, from one described point to another, and to purchase the rolling stock for the same, and the provision is that the said iron and rolling stock so purchased shall belong to the State until placed upon the track for use, after which time the State shall have a first lien on said iron and rolling stock, together with all the road and its equipments, constructed and to be constructed, for the security of the payment of the principal and interest of said bonds, and all

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bonds issued or that may be issued to said Company under this or any former Act of the Legislature granting the credit of the State to the Company.

Power is also reserved to the State to enforce the lien on the railroad for the failure on its part to pay punctually principal and interest on the bonds issued for its benefit, as herein and heretofore provided for in such cases; and the Company shall pay at the times herein specified, "To the Treasurer of the State one and a quarter per cent., in addition, in each year, on each thirty year bond, and two and a half per cent. in each year on each twenty-year bond so sold or hypothecated, to be invested at not less than seven per cent, interest, in such securities as are provided in the Act."

By the same section it is also provided, that from the net profits arising from the road after the same shall be completed and in operation, a sum equal to not less than ten per cent. per shall be paid by the Company to the Treasurer annum upon the net earnings of the railroad of the State as a sinking fund, for the purpose of paying at maturity the bonds of the State so issued and to be issued to the Company.

Special provision is also made that the treasurer of the Company and the Treasurer of the State shall be the commissioners of the sinking fund, and that it shall be the duty of the Company to pay or remit the semi-yearly interest to the designated place, as therein provided, and in case the *Company shall fail to pay [*57 such interest or to remit the amount to the designated place, it is made the duty of the Treasurer of the State to supply the amount and remit the same, in which event he is required to refund the amount from the sinking fund and charge the same to the defaulting company. In that event the provision is that the defaulting company shall not draw any further state bonds. Moneys, funds and securities belonging to the sinking fund are declared to be subject to the control, care and management of the Fund Commissioners, and the provision is that from time to time they may invest the same in the bonds of the State under the conditions therein provided.

All funds derived from the sale of state bonds were expended, but still the railroad was not completed, and on the 3d of March, 1857, the Legislature made a further loan of credit to the Company of one and a half millions of dollars to be issued in bonds and to be expended upon the railroad south of the junction therein described, which bonds were to be issued in installments of $200,000, upon proof furnished to the Governor of the expenditure for the same purpose of a sum equal to their par value in the construction of the railroad, and the Company was authorized by the same Act to establish and keep a ferry across the Missouri River, where its road strikes the same, for all purposes connected with the Company, and for general purposes, by paying the usual license tax provided by law in such cases.

Bonds could not be lawfully issued under that Act until the Company accepted the Act, and it was provided that the failure to pay any part of the principal or interest of the bonds should be a forfeiture of all right in such Company to demand or receive any further issue of bonds, and in that event it mas made the duty of the Governor to foreclose the mortgage of

the State and to enforce her lien on the property of the Company.

Before the year expired, to wit: on the 19th of November following, the Legislature authorized the Governor to issue to the plaintiff Com58*] pany a further amount of *$250,000 in the bonds of the State, to complete a described portion of the road, and the same Act provided that the Act should not be construed to release the railroad from any penalty or forfeiture to which the Company may be liable under such prior laws.

Authority was conferred upon the Company by the Act of the 16th of February, 1865, to issue their own bonds to the amount of $6,000,000, and to the same by a first mortgage of their railroad and appurtenances, as more fully set forth in the Act. Such bonds were to be issued in three classes and were to be applied as therein provided, and to facilitate the sale of the bonds the State relinquished her first lien and mortgage upon the main line of the railroad, retaining only a second lien and mortgage thereon until the principal and interest of said bonds are paid in full. By the same Act the Legislature created a Fund Commissioner, and enacted that whenever any portion of said bonds shall be issued that they shall be placed in the hands of the Fund Commissioner to be negotiated, and the proceeds paid over to the Corporation for the purposes and under the regulations and restrictions provided in the same Act, but the Act was not to be operative unless accepted by the Company in the mode therein provided. Prior inconsistent provisions in relation to the plaintiff Company were repealed by the 12th section of the Act, and the provision is that the work on the west branch should not be expedited to the exclusion of the construction of the main line of the railroad.

Those several Acts were duly accepted by the Company and were in force on the 8th of April following. Interest was paid by the Company on the bonds issued until the year 1860, when the Company made default, and such interest has never been paid. On the said 8th of April the people of the State adopted an ordinance as a part of their Constitution, which provides to the effect that an annual tax of ten per centum of all their gross receipts, with an immaterial exception, shall be levied and collected of the Company and two other companies 59*] therein named, for the *period of two years, as therein described, and fifteen per centum thereafter, which tax shall be assessed and collected in the County of St. Louis in the same manner as other state taxes are assessed and collected, and shall be appropriated by the Legislature to the payment of the principal and interest now due or hereafter to become due upon the bonds of the State issued to the Company. Such receipts for the transportation of freight and passengers for the first of the two years, not including any sum received from the excepted source, amounted to $682,570, and the agreed statement shows that a tax of ten per cent., amounting to $68,257, was assessed in the proper county on the gross receipts of the railroad for that year, under the provisions of the said ordinance. None of the principal of the bonds was due at the time the tax was assessed, but the interest on the same, to an amount greater than the amount of the tax, was due at that time.

Payment of the tax being refused, the defendant, as the collector, seized the property of the Company to satisfy the same, and the plaintiffs here brought an action of trespass against the collector to test the validity of the tax, in the State Circuit Court for the county where the tax was assessed. Service was made and the defendant appeared, when the parties waived a jury and submitted the case to the court upon an agreed statement of facts. Hearing was had and the court rendered judgment for the plaintiffs and the defendant excepted and appealed to the Supreme Court of the State, where the judgment of the State Circuit Court was reversed and a judgment rendered for the defendant. Whereupon the plaintiffs sued out a writ of error and removed the cause into this court. Corporate powers were conferred upon the Company by the Act of the 3d of March, 1851, but the Act of incorporation contains no provision whatever exempting the property of the Company from taxation. Three years later the charter was amended, and the 6th section of the amendatory Act *provided that the capi- [*60 tal stock, with all machines, wagons, cars, engines or carriages belonging to the Company, with all their works or other property, and all profits which shall arise from the same, shall be vested in the shareholders in proportion to their shares, and that the same shall be deemed personal estate and shall be exempt from any public charge or tax whatsoever for the period of five years from and after the passage of the Act, which period has long since elapsed.

Attempt is made in argument, to show that an exemption from taxation may be implied from some of the provisions of the Act to provide for the completion of the railroad and its west branch. Based solely on that theory the error assigned is, that the ordinance of the State imposing the tax is in violation of that provision of the Constitution which prohibits the States from passing any law impairing the obligation of contracts. Pursuant to that theory the plaintiffs contend that the legislative Act to complete the railroad enacted a mode of making payments by the Company to the State, which, when the Act was accepted by the Company, became a binding contract between the parties, within the protection of that provision of the Constitution and that, as such, it could not be rescinded by any subsequent legislation, and that the ordinance does impair the obligation of that contract by providing another and a different mode of enforcing the payments without the consent of the Company.

Serious difficulty would arise in sustaining the judgment of the state court if the view assumed in the proposition was correct, that the ordinance was a mere change of the order of disbursing the receipts and earnings of the Company, instead of being what it purports to be on its face, an expression of the sovereign will of the people of the State levying taxes to pay and discharge the indebtedness of the State.

Power to tax is granted for the benefit of the whole people, and none have any right to complain if the power is fairly exercised and the proceeds are properly applied to discharge the obligations for which the taxes were imposed. Such a *power resides in the state gov- [*61 ernment as a part of itself, and need not be reserved when property of any description is

granted to individuals or corporate bodies. Cooley, Const. Lim., 127-280.

Five years before that Act was passed the Company made default in the payment of the Unless exempted in terms which amount to interest falling due on the bonds which the a contract not to tax, the property, privileges State issued for their benefit, and by that Act and franchises of a corporation are as much the the Legislature postponed and released the lien legitimate subjects of taxation as any other of the State, which was a first lien on all their property of the citizens which is within the sov- property to the amount of $4,350,000, and acereign power of the State. Repeated decisions cepted in its stead a second lien upon the same of this court have held, in respect to, such cor- property, in order that the Company might isporations, that the taxing power of the State sue $6,000,000 of bonds of their own and be is never presumed to be relinquished and, con- able to secure their payment, principal and insequently, that it exists unless the intention to terest, by a first mortgage upon the same proprelinquish it is declared in clear and unambigu-erty, to complete the main line of the road and ous terms. Soc. for Savings v. Coite, 6 Wall., its west branch and the bridge therein described. 606, 18 L. ed. 902; R. Co. v. Md., 10 How., 393; Moneys belonging to the Company from that Bk. v. Billings, 4 Pet., 561; Bk. v. Skelly, 1 time were to be placed in the hands of the Fund Black, 436, 17 L. ed. 173; Life Ins. Co. v. De- Commissioner created by the Act, and were to bolt, 16 How., 416. be disbursed by him as follows: (1) Amounts required for the actual current expenditures in operating the railroad and carrying on the ordinary business of the Corporation, in- [*63 cluding all sums that may be necessary for keeping the same in a good state of repair, and for such additions to the rolling stock, etc., as may be required to enable the Company to transact the business of the railroad. (2) Amounts sufficient to pay the salary of the fund commissioner. (3) Amounts sufficient to pay the interest upon said first mortgage bonds, as the same shall fall due. (4) Amounts necessary to pay the cost of the construction and equipment of the railroad. (5) Amounts sufficient to pay accruing dividends on preferred stock, not exceeding six per cent. per annum thereon, as provided in the Act. (6) Amounts sufficient to pay the interest due on the outstanding bonds of the State previously loaned to the Company. (Lastly). He shall disburse the surplus to the payment of the principal of said first mortgage bonds until the same shall be fully paid off, or if none of such bonds shall have become due, then to the payment of the principal of the bonds of the State, if any are still outstanding, and the balance shall be paid over to the Company.

Express exemption is not pretended, nor does the Act, to provide for the completion of the railroad, contain any provision which, when properly construed, affords any support to the proposition that any such contract exists between the Company and the State, either express or implied, even if it could be admitted that mere implication is sufficient, which may well be questioned, as the current of the deci- | sions of this court warrant the conclusion that if such an exemption be claimed it must be made to appear in clear, explicit and unequivocal terms.

Authorities from numerous sources are cited by the plaintiffs, but none of them show that a lawful tax on a new subject, or an increased tax on an old one, interferes with a contract or impairs its obligation, within the meaning of the Constitution, even though such taxation may affect particular contracts, as it may increase the debt of one person and lessen the security of another, or may impose additional burdens upon one class and release the burdens of another, still the tax must be paid unless prohibited by the Constitution, nor can it be said that it impairs the obligation of any existing contract in its true legal sense. Blackw. Tax Titles, 2d ed., 408.

62*] *Properties of every kind over which the sovereign power of a State extends are objects of taxation outside of the means and instruments of the Federal Government. Hamilton Mfg. Co. v. Mass., 6 Wall., 639, 18 L. ed. 906.

Unrestricted by constitutional limitations the only restraint upon the taxing power of the States is the responsibility of those in whom the power is lodged, and the power of appropriation of the proceeds, when not so restrained, is equally unlimited. People v. The Mayor, 4 N. Y., 419; People v. Lawrence, 41 N. Y., 141. Questions not involved in the assignment of errors will not be examined, nor is it necessary, as all agree that the main question in the case is, whether the ordinance impairs the obligation of any contract made and concluded between the State and the Company before the ordinance was adopted.

Unless the power of the State to tax the Company was surrendered by the antecedent Act to provide for the completion of the railroad, it must be conceded that the power exists, as it is plain that none of the other Acts referred to afford any support whatever to such a proposition.

Further examination of those provisions is certainly unnecessary, as it is too plain for argument that they do not afford the slightest support to the views of the plaintiffs. On the contrary, they are entirely silent upon the subject of taxation, and fully justify the remarks of the state court when they say that the subject of taxation forms no part of the contract contained in the Act under consideration. St. Louis v. Ins. Co., 47 Mo., 155.

Nothing is said about taxation, and it does not seem to have entered into the contract between the parties, but was obviously left where the law had placed it before the Act was passed, nor was any provision made for the payment of taxes unless it may be held that the disbursements for that purpose may fairly be included in such as are required to pay the current expenditures in carrying on the ordinary business of the Corporation. R. Co. v. Maguire, 49 Mo., 490; R. Co. v. Maguire, 51 Mo., 142.

Reference is also made to some other sections of the act as supporting the proposition [*64 submitted by the plaintiffs, but it is so obvious that they cannot be so regarded without departing from the established rules of law applicable in such cases, that it is not necessary to pursue the discussion.

Like controversy exists between the State and,

another of the railroads mentioned in the ordinance, in which case it is contended that the ten per cent. charge imposed by that instrument is not a tax within any correct meaning of that word, that it is an appropriation of the property of the Company without due process of law, or the taking of the property of the Company without just compensation, but no such questions are open for examination in this case, as no such errors are assigned in the record. Judgment affirmed.

Dissenting, Mr. Chief Justice Waite.

Mr. Justice Strong did not sit in this case.

THE FIRST NATIONAL BANK OF WASH-
INGTON and William S. Huntington's
Admrs. et al., Appts.,

v.

STATE OF TEXAS.

(See S. C., 20 Wall., 72-92.)

Overdue note transferred by delivery-defense -Texas bonds-indorsement of Governorcases reviewed.

1. A note payable to bearer, though overdue and dishonored, passes by delivery, the legal title to the holder, subject to such equities as may be asserted by reason of its dishonor.

of Columbia against the first National Bank of Washington, W. S. Huntington, its cashier, and others, for discovery and relief in regard to certain bonds, called Texas indemnity bonds, given by the United States to the State of Texas, of which, it was alleged, the State had been dispossessed by fraud or treasonable practices. The history of these bonds is given in full in the report of the case of Texas v. White, 7 Wall., 718, 19 L. ed. 235.

*The bill alleges that the bonds were [*75 each for the sum of $1,000, dated January 1, 1851, redeemable after December 31, 1864, and that those in controversy were received and remained in the Treasury of the State of Texas until after the period fixed for redemption. It is alleged that in the year 1865, the insurrectionary power which had usurped control of the State, made a contract with George W. White, and John Chiles, by which from one hundred and forty-five to one hundred and sixty-two of these bonds were delivered to them, in consideration of which they agreed to furnish means to carry on the war against the United States, in which that State was then engaged with others, under the name of the Confederate States of America.

It is further alleged that these bonds, then overdue, afterwards came to the hands of the defendants, who purchased them with full notice of the purpose for which they had been delivered to White and Chiles.

It is also alleged that said bonds were never indorsed by the Governor of the State of Texas, in such manner as by the law of Texas was required, by reason of which no legal title to the same passed from the State or was vested in the parties to whom they were delivered. Certain allegations were then made as to the substitution of other bonds placed in the hands of Taylor, the Comptroller of the Treasury, as an in

2. Any one disputing the title of the holder of such paper, takes the burden of establishing, by sufficient evidence, the facts necessary to defeat it. 3. There is no competent evidence in this chancery suit, that the bonds in controversy, which were issued by the United States to the State of Texas, though overdue when they passed from the Treasury of the State, were issued by the State or received by the persons to whom they were delivered, for any treasonable or other unlawful pur4. The absence of the indorsement of the Gov-demnity to the Secretary of the Treasury for ernment of the State, on the bonds, does not raise a presumption of such unlawful purpose, under

pose.

the circumstances of this case.

5. The cases of Texas v. White, 7 Wall., 718, 19 L. ed. 235; Texas v. Hardenberg, 10 Wall., 68, 19 L. ed. 859; and Texas v. Huntington, 16 Wall., 402, 21 L. ed. 316, considered, and their true result ascertained and applied to the present case.

[No. 73.]

Argued Apr. 18, 1872. Affirmed Mar. 17, 1873,
and re-argument ordered. Judgment annulled
May 1, 1873. Re-argued Mar. 24, 25, 1874.
Decided Apr. 20, 1874.

A1

the payment of those already mentioned to the Bank, which are immaterial in the view we take of the case. Defendants are required to answer under oath, and a decree against them in regard to the bonds left with Taylor or for other relief, is prayed.

The Bank and Huntington answer and admit the purchase of some of the Texas indemnity bonds; and having others, as agents for their owners. They give a list of all these, specifying those held in their own right, and those held as agents. They aver that they had all been paid to them in full by the Treasurer of the United States before this suit was commenced,

PPEAL from the Supreme Court of the Dis- and that those owned by themselves were purtrict of Columbia.

The case is stated by the court. Messrs. C. Cushing, E. R. Hoar, J. Hubley Ashton and Walter S. Cox, for appellants. Messrs. T. J. Durant and R. T. Merrick, for appellee.

Mr. Justice Miller delivered the opinion of

the court:

The State of Texas brought her complaint in chancery in the Supreme Court of the District

Headnotes by Mr. Justice MILLER.

NOTE. Rights of holder of commercial paper transferred after due-see notes, 18 L. ed. U. S. 931; 46 L. R. A. 753.

chased for value (namely: ninety-eight cents to the dollar) without notice of any of the matters set up in plaintiff's bill. And they deny the statements of the bill in these matters. A general replication was filed and testimony taken, all of which is found in the records.

Waiving, for the present, the question whether the bonds were overdue in the sense which puts a purchaser of dishonored negotiable paper on the inquiry as to defenses which may be set up against it, it is quite clear that they were transferable by delivery after due the same as before. To invalidate the title so acquired by a purchaser, it is necessary to make out some defect in that title.

The main allegation of the bill is that these

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are part of the bonds issued to White and Chiles, in aid of the rebellion. All knowledge of this fact is denied by defendants, and the fact itself is denied. Conceding that their denial of the fact, about which, perhaps, they knew nothing, had no other effect than to put in issue the allegation of plaintiff's bill on that subject, it remained for plaintiff to establish its truth by evidence.

This it attempted to do. Two witnesses alone are relied on for this purpose, namely: Taylor, the Comptroller of the Treasury of the United States, and Paschal, one of the attorneys for complainants. The former was examined at much length, and gave it as his opinion, from certain calculations made by him, based upon 82*] papers in his office and *information received by him from officers of the State of Texas, and other sources, that these bonds were of the White & Chiles issue. He says that it is only an opinion, and it is evident that the data on which he bases that opinion are far from conclusive. The following extracts from his deposition place this matter in a very clear light. He is under examination by plaintiff's counsel. "Q. I see it stated that these bonds came through the hands of John P. White. Do your investigations enable you to say they were part of the bonds received by White & Chiles?

A. I do not know anything more about that, than what is to be gathered from the general appearance of the transaction. There was nothing at that time known here about the White & Chiles purchase; at least, I had heard nothing of it.

Q. But from this general appearance of which you speak, what is your opinion as to their having been part of the same bonds?

A. From all the circumstances, my opinion is, those were of the White & Chiles bonds. That is only an opinion, however."

His cross-examination is still more to this purpose:

"Q. Do you know of your own knowledge that White & Chiles or either of them, ever saw one of these bonds?

A. I knew it only from the papers on file in the department; that is, from my opinion of what those papers show.

Q. It would be a very tedious process (and I presume you could not do it) to furnish the various papers from which you make up your opinion.

A. They are too numerous for me to present now, and I might add that one would have to study them very carefully and make his calculation as to the different bonds.

Q. Would you not have to do so by ascertaining the entire number of bonds, and then tracing those bonds into the hands of persons other than White & Chiles? Would not your opinion be based upon the conclusion that, inasmuch as so many bonds were in the hands of other people, it followed as a necessary result, that if White & Chiles had any, they must be those?

A. It would, by taking the 782 bonds that were not indorsed, and tracing them back by the evidence into the hands of those parties who held them at different times, and ascertaining, in some instances, the particular numbers there were known to be in the hands of particular parties before the transaction between White & Chiles and a Military Board, and taking others,

again, that came from the State of Texas, and then drawing my conclusions as to what were White & Chiles' bonds."

It is unnecessary to pursue the deposition of this witness through many pages, in which what he here says of his means of knowledge is more fully demonstrated.

Nor is it worth while to waste words in proving that such testimony is wholly incompetent to establish any fact, or rather to show that it is not evidence at all.

The deposition of Paschal is to the effect that by reason of his connection with the suit of Texas v. White, he had become familiar with a number of facts from which he had satisfied himself that these bonds were of the White & Chiles lot. As the matters on which this conclusion was founded were all of them statements of others, some verbal, some written and all of them capable of being proved, no reason is perceived why the witness should be substituted for the court in weighing these facts, and making the proper inferences. The same observation applies with equal force to Taylor's testimony.

Not only is there no evidence that these bonds were irregularly or improperly issued, or were issued for any treasonable or other unlawful purpose, but there is evidence that there were, at the time these depositions were taken, bonds greatly exceeding in amount those in controversy, issued lawfully to a railroad company, which were not identified by their numbers, or in any other manner, so as to prove that the bonds in controversy were not these bonds. Nor was there any evidence tracing all the bonds lawfully issued, so as to show where these were or to repel the presumption that they were of that class. In short, the testimony on this branch of the subject is an absolute failure.

But it is said that, as these bonds did not bear the indorsement of the Governor of the State of Texas, this fact alone was sufficient to prove that they were unlawfully obtained from its treasury, and that the rights of the State should, therefore, be protected in this suit.

The opinions of this court in the case of Texas v. White, *7 Wall., 718, 19 L. ed. 235, [*83 and Texas v. Hardenberg, 10 Wall., 68, 19 L. ed. 839, are much relied on in support of this proposition, and in fact are supposed to control this case in all respects. But while it is true that the bonds in question in both those cases (they were, in fact, but one case) were the bonds delivered to White & Chiles, and that some very important questions were decided concerning the relation of the State of Texas to the Union, and the validity of her legislation while under control of the enemy during the war of the rebellion, it is also true that the very matters of which the present bill is full, but of which there is a flat denial and no proof whatever, were supported in that case by sufficient evidence. On an examination of the report of that case it will be seen that the court was of opinion that it was established, both in evidence and by the answers of some of the parties, that the bonds then in controversy were all of them issued to White & Chiles, and the illegal contract on which they were issued was in evidence, and the court was further of opinion that the parties defendant had notice of those facts.

It is true that, in the first of these cases, the

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