February 11, 1852." They were not even made | the language used in each particular case to expayable to the companies to which they were press the obligation assumed. *** Every stat respectively issued, but went on the market as ute, like every contract, must be read by itself, coupon bonds of the State of Tennessee, paya- and it no more follows that one statutory con ble to the bearer thereof, and apparently noth-tract is like another, than that one ordinary con ing else. In this form they were bought and tract means what another does. *** It must be sold by dealers and investors in public securities. determined from the language used in each parSo that the point to be determined, from an ex- ticular case, what has been done, or agreed to amination of the statute, is, whether a State, be done, in that case." Under the South Carowhen lending its own bonds and taking back lina Statute the primary liability for the paysecurity for their payment, intended to protect ment of the bonds to the respective holders those who might afterwards become the holders thereof rested on the company, and the State of the bonds against the consequences of its was bound only as surety. This was shown on own repudiation or inability to pay, or only to the face of the bonds themselves, and the lanindemnify itself against loss by reason of the guage of the statute was, therefore, to be conloan of its credit to those who were engaged in strued with that as the subject matter of the constructing its great works of internal improve- legislation, that is to say, a guaranty by the ment. To say the least, the strong presump- State of the obligations of the railroad company. tion is that, in such a transaction, the purpose Here the State is the primary obligor, and the [687] of a State would be to protect itself, and not legislation is with reference to a loan of state to secure its own pledge of faith to the bond- bonds, on which the railroad companies are in holders by a mortgage from those to whom its no way to appear as bound. The liability of credit was loaned. the companies grows out of the borrowing of state bonds, to be sold in the market as state bonds, and apparently nothing but state bonds The loans were to be by the State to the com panies, and the object was to secure the pay ment of the loans. It may well be that the same language, when applied to one class of se curity means one thing, and when applied to another class something else. The question now is, what does it mean in this case?

[6891

Such being the subject matter of the legislation, we proceed to inquire what the payment was which the State intended to secure by the statutory lien with which it was to be invested. It was to be a payment. This implies a debt from him who pays to him who is to receive, and that when the payment is complete the debt will be discharged. It is not claimed that a borrowing company was to incur two debts by accepting a loan under the statute, one to the State and the other to those who might become the purchasers or holders of the borrowed bonds. The obligation was to pay the bonds once, not twice, and the payment was to be inade at the time and in the way provided by the law. Who, then, became the creditor of the borrowing company when it incurred its debt for the borrowed bonds? Was it the State or the bondholders?

Much stress was laid in the argument on the provision in § 3, "that so soon as the bonds of the State shall be issued *** they shall constitute a lien," etc.; and it was insisted that, as the bond constitutes the lien, and the lien is but an incident of the debt, the lien must continue and follow the bond in the hands of the holder thereof until it is finally paid and taken up by the company. From this it was argued that the bondholder must be the creditor, within the meaning of the statute, and that a payment would not be complete so as to discharge the debt of the company until it was made to him. Similar language was used in a statute of South Carolina, passed December 20, 1856, to aid in the construction of the Charleston and Savannah Railroad, under which the State guaranteed, by indorsement, the bonds of the railroad company, and it was provided "that so soon as any such bonds shall have been indorsed as aforesaid *** they shall constitute a lien," etc. This, it was held by the Supreme Court of that State in Hand v. R. R. Co., 12 S. C., 314, vested in the State a lien, not merely for its own protection against the guaranty, but also for the better security of the bonds themselves into whosesoever hands they might fall. But, as this court had occasion to say in R. R. Cos. v. Schutte, 103 U. S., 140 [Bk. 26, L. ed. 335], "Contracts created by, or entered into under, the authority of statutes, are to be interpreted according to

The fact which establishes the lien is the issu of bonds by the State to a company; that is t say, the delivery of bonds by the State to a com pany under the contract of loan. The lien a taches as soon as the delivery is complete, an when there is no obligation on the part of th company to the holders for the payment of th bonds, because the company is itself the holde and there can be no obligation of payment b itself to itself. But the delivery of the bond by the State to, and their acceptance by, a con pany, created at once an obligation on the pa of the company to pay the loan, or, what is t same thing, pay the bonds to the State. Th it was the purpose of the statute to secure t performance of this obligation on the part the company is shown by the fact, that, fro the moment of the delivery of the first bond the company, and before the bond could negotiated by a sale or transfer to a third p son, a lien was vested in the State by the ve act of delivery, upon all the property of the co pany then acquired, or thereafter to be acquire superior to any other lien or incumbrance whi could be created by the company afterwar This is the express provision of the last pa graph in § 4; and while it is said once in entire Act that the bonds shall constitute lien, it is repeated again and again that, up the issue of the bonds, the State shall be vested with a lien, etc. The only place wher is stated that the bonds shall constitute a is that in which provision is made for the is on the completion of the first section of thi miles, and, before the sentence in which expression appears is completed, it is decla that the lien is to vest "upon the issuance the bonds, and by virtue of the same." when the whole road is completed, and the is established on all the property owned by company as incident to, and necessary for

33

*****, the language is, “And when the whole | It was the fiscal agent of the State, and was
al shall be completed, the State of practically the treasury in which all public mo-
"we stall be invested" with a lien ***neys were kept. The state treasurer held none
payment of all of said bonds issued to of the State funds in his own hands, but deposited
saty as provided in this Act, and for them all in the bank, where they were placed to
rest accruing on said bonds." This the credit of the "Treasurer of Tennessee," and
takably that the State attached no subject to his checks drawn according to law,
mportance to the particular phraseology and countersigned by the comptroller. Other
h reference to the issue for the first accounts connected with the financial business
s of the road. The evident purpose of the State were kept in the books of the bank,
evale provision was to vest in the State headed "Interest on State Bonds," "Interest
secure the obligation which the com- paid on State Bonds," "Railroad Companies
ed in consideration of the state for Interest," and otherwise. The entries made
ad to it in aid of works of internal im- in the books showed the amount which each
Sto be constructed for the benefit of railroad company paid in for interest, but the
If that obligation was to pay the payments were all passed to the credit of the
the several persons who might become State, either in the treasurer's general account,
ders thereof, then the security would run or in the account headed "Interest on State
the bond; but if the obligation was to pay Bonds." The bank paid the interest on all State
for the bonds, the security would bonds without reference to the purpose for
y to the benefit of the State, and be which they were issued. It had correspondents
to the control of the State, without re- in New York and Philadelphia, through whom
the bondholders.
such payments were made, and these agents
took up the coupons when presented and for-
warded them to the bank, by which they were
handed over to the proper state officers. The
moneys paid in by railroad companies for in-
terest were sent with other moneys of the State
to the New York and Philadelphia agents, by
whom they were paid out upon coupons, no dis-
tinction being made as to the different kinds of
bonds. The agents kept no accounts with the
companies, and neither they nor the bank knew
what bonds had been issued to any particular
company. No attempts were made, either by
the bank or its agents, to classify or identify
coupons, when paid, as being coupons from
bonds issued to one company or another.

was to be "for the payment of all of sed to the company as provided Act, and for the interest accruing on It was, as has been seen, to begin the bonds were put into the hands of ay, for it was then and by that act abity of the company under the statcreated. At that time no one but the d be interested in the security, and at clearly the lien operated only as sethe payment of the loan of the bonds. d be made by a return of the bonds in any other way provided in the Art of the bonds to the State would ly pay the bonds, but it would , and thus cancel the obligation of y to the State and discharge the Things us to the inquiry whether proTade in the statute for payment by in some other way than by taking ás from the several holders thereof, * to whom and how.

L

under the statute is to pay the be interest accruing thereon. This payment of the bonds and the the way provided by the statute, if As the liability of the company to out of the statute, it follows that ar mode of payment is provided for payment in that mode is all that be required to make. Looking state, we find that provision is part for the payment of interest ent of that obligation of the in other parts for the payment

Section 5 makes it the Try to deposit in the Bank of fifteen days before coupons ay of the bonds issued to that ➡e, an amount of money suffiarch interest, including exchange missions, or satisfactory evihas been paid or provided for. Twee was established by the Ja, 1938, ** in the name and for the state," and "the faith and were pledged" for its was its only stockholder, and all the profits of its business.

In the books of the Treasurer of State there
was an account headed "Bank of Tennessee,"
the reverse of that kept by the bank in the name
of the treasurer. There was also an account
headed "Interest on Capitol Bonds," in which
was shown the interest paid on bonds issued

for the state house. Besides this there was an
account headed" Interest on Internal Improve
ment Bonds," showing the gross amount paid
out on such bonds, but not by whom the money
was furnished, nor the numbers or character of
the bonds on which the interest was paid. No
separate accounts were kept in the treasurer's
books with the different railroad companies,
and, with the exception of the distinction be-
tween capitol and internal improvement bonds
on his books, the treasurer paid no attention to
the different kinds of bonds, but treated all as
equally the obligations of the State. This was
the way in which the business was done by all
the companies, the bank, and the treasurer of
the State, as long as the bank was in operation.

Under these circumstances it is difficult to
see how a deposit in the bank, by a company,
of the money to pay interest, can be treated
otherwise than as, within the meaning of the
statute, the payment by the company of the
accruing interest on the bonds, which the com-
pany had bound itself to make. The deposit
was made to enable the State to meet its own
obligations. It was not placed, neither by the
statute was it required to be placed, to the
credit of the company, but of the State. The
bank did not take the money for the company,
but for the State, and consequently the deposit

[692]

[693]

on the bonds. This clearly implies that the
loan of the bonds was to create a debt on the
bonds by the company to the State, and that
this debt was to be discharged pro tanto on the
payment annually into the state treasury of the
amount required by the sinking fund section.
If there were nothing else in the statute, no one
would doubt that the payment of the bonds
which the company was required to make was
a payment to the State for the bonds at the [697]
times and in the manner provided.

rewry, was to be invested by a board and commissioners in bonds of the accruing interest was to be reine securities. If a company failed with these provisions of the amendAit was to be proceeded against as for a the payment of the bonds at maturity 6 of the Act of 1852. Under the 41832 and 1856the companies were not in their obligations to provide semifor the payment of the accruing interthe entire issue of bonds. That was still up, notwithstanding the debt of the the State had been reduced by the -ments required by section 7. Act of 1860 other changes were made, ased the amount of annual paywo and one half per cent, on the es and allowed them to be made in in bonds of a like character with to the company, at their face value. Imoney, the sinking fund commisTere to invest it immediately in bonds aracter with those issued to the comI have them canceled. By this Act pany was released from the obligathe Act of 1852 to provide for the the whole issue of bonds, and redeposit only for that which would the amount of bonds "unpaid" at the terest fell due. What was here the word "unpaid" is shown by secd of the Act, which provide that d payments, in money or bonds, are January 1, 1860, with the accruthereon to that date, "shall be y to the credit of the party having same, and be a release to said party nt of the debt due by them to the tesse." The Comptroller of the required to open and keep a with each company, charging tal amount of bonds originally company, and crediting it with the sinking fund paid. It was duty to furnish to the Treasurer t of the amount due by each the first days of June and Decem-rity. Tear, "that he may know how ach company has to pay," that now provided by law, on the snpaid at the time said interand not on the original amount *** said company." Act of 1860,

TW ASC

It is contended, however, that, as the credit to be secured by these payments was only "as between the State and said company," the liability of the company to the bondholders is not affected by what may be done by and with the State. This would be true if there were any such liability to the bondholders, but the very point to which our inquiries are now directed is as to whether or not that liability exists. The phrase relied on and quoted above is undoubtedly suggestive of some other liability of the company on the bonds than one to the State, but it does not of itself create such a liability. If it exists at all, it must be by virtue of some other provision of the statute. As has already been seen, there is but one debt, and whatever pays that debt cancels all the obligations of the company upon the bonds. Whenever, therefore, it appears that payment of the bonds must be made to one, the idea of a debt on the bonds to another is excluded. Here a payment to the State is absolutely required This obligation to pay is express, and has not been left to impli cation. The provision is that the sinking fund bonds must be bought and paid in at the appointed times and to the prescribed amount. If this is not done, the payment is to be enforced by putting the railroad of the company into the hands of a receiver, and running and managing it until the requisite amount of money is realized by the State from the earnings. Under the Act of 1856 the payments were required to be made in money, and in case of default proceedings for foreclosure and sale were to be instituted to collect the amount to be paid, as in cases of nonpayment of bonds at matu

true that neither the Act of 1856 can change any contracts the may have made with bondholders A of 1552 before their passage, they to in aid of construction to een the legislative understandseries of years, of the meaning ement of said bonds and the rst thereon," as used in the

on of section 7 is that the comhe bonds purchased into the that for the purchased bonds A shall be given and a credit en the State and the company, Thus the company was payment to the State, and the State was to give a credit

If the statutes of 1852 and 1856 stood alone, it would be clear to our minds that payments into the sinking fund were to be treated as a release pro tanto of all the liability of the company on, or on account of, the bonds. But the Act of 1860 shows, beyond all question, that such was the legislative understanding at that time of the operation of this provision of the original Act. It is there declared, in positive language, that by the loan of the bonds a debt [698] was incurred by the company to the State, and that payments to the sinking fund should release and discharge the companies pro tanto from their liability on that debt.

It is argued, however, that as these payments under all the statutes were to be held and used by the State as a sinking fund for the ultimate redemption of the issued bonds themselves from the several holders thereof, the obligation of the company to pay the bonds would not be discharged in that way; and some remarks of this court in the Sinking Fund Cases, 99 U. S., 725 [Bk. 25, L. ed. 503], are cited as authority to that effect. The decision in that case was that the contributions to the sinking fund then under consideration did not pay the debts of

the several companies by which the contribu- | We cannot accede to the proposition, so much
tions were made, because that fund was estab-relied on by the counsel for the bondholders,
lished, not to secure the payment of the bonds that on putting out the bonds the company oc-
of the United States which had been lent to the cupied towards the bondholder the relation of
companies, but the repayment to the United principal debtor, and the State that of surety
States, in the manner and at the time required only, until the company made the prescribed
by law, of "the amount of said bonds so issued payments to the State, and that after these pay-
and delivered to said company, together with ments were made the relations of the parties
the interest thereon which shall have been paid changed, so that thereafter the State was prin-
by the United States." But here the sinking cipal and the company a surety only. The deb
fund is to be held and used by the State, not to of the company, whatever it was, continued
discharge the debt of the company to the State, the same in its relation to all the parties from
but that of the State to its bondholders. It was the time it was created until it was paid. There
established, not to secure the State, but to en- is nothing in the statute which contemplates
able the State to pay its own debts at maturity. any change in the obligations of the parties to-
In this way all payments made by the compa- wards each other There may have been no
nies to the State on account of the principal of good reason for keeping some of the state se-
the bonds were set apart and laid by under in-curities paid into the fund alive, and directing
vestment, so that at the appointed time they that others should be canceled, inasmuch as all
might be used by the State to redeem its own were to represent State debts, for which the
obligations. The fund in the treasury belonged State was equally bound; but that was the will
to the State, and was not in any manner sub- of the Legislature, and it was consequently so
ject to the control of the company, or to be enacted. Afterwards this policy was changed,
used to pay its debt. That debt was discharged and all State bonds, of whatever character, were
by the payments which under the law were put canceled by mutilation as soon as they were
into the fund. All payments out of the sinking paid in, or bought for the sinking fund.
fund were to be made by the State on its own of 1860. In this way all danger of a misappro
debts and not on the debt of the company. A priation of securities in the sinking fund wa
sinking fund may be, and generally is, intended avoided. As bonds issued to railroad com
as a cumulative security for the payment of panies under the Act could alone be used fo
the debt with which it is connected. In this the investment of the fund under this Act, thei
case the debt to which it belongs is that of the cancellation did not affect the liability of th
State, and not that of the company, which was several companies thereon to the State, becaus
paid so as to furnish the State with the means that was to continue until payment was mad
to create such a fund.
to the State by the company to which it wa
issued. Payment by the State to the bond
holder did not discharge the liability of th
company on the bond so paid.

Reference was made in the argument to the way in which, under the Act of 1852, and perhaps that of 1856, the sinking fund was to be kept and invested, and it was urged that the [699] fund must have been intended as security for the payment of the bonds to the bondholders by the company, because if a bond issued to a particular company was brought by that company and paid into the fund, it was canceled, while all other bonds were kept alive to be held and used by the State to take up at maturity the bonds issued to the company which had not been so paid in. The argument seems to be, that, as the purchase of a bond issued to a particular company, and its payment into the fund by that company, would of itself be a payment of that bond by the company both to the State and the holder, the special provision for the cancellation of such a bond, while others are to be kept alive, is indicative of a purpose not to cancel the obligation of the company under the statute until the company had not only provided the State with the means to take up all the other outstanding bonds, but until the State had itself performed its own obligations and actually taken them up. This is undoubtedly a circumstance to be considered in determining what the payment was which the State intended the company should make, and for the security of which the lien was created; but it is not to our minds enough to overcome the many provisions found in the other parts of the statute, which so clearly show that there was to be but one creditor of the company on account of the contemplated loans of the bonds, and that creditor the State. Whatever, therefore, satisfies that creditor, under the law, satisfies the debt

Act

The provision for a foreclosure in case of th failure of the company to pay at maturity th bonds issued to it is found in section 6, whic makes it the duty of the Governor, when such default occurs, to notify the Attorney-Genera who must thereupon file a bill against the con pany in the name of the State of Tennessee i the Chancery or Circuit Court of the prop county. Upon the filing of this bill, the cou is authorized to make such judicial orders, it cluding the appointment of a receiver, and sale of the road and all the property of th company, as may be necessary and propert secure the payment of the bonds, with the i terest thereon, and to indemnify the Sta against loss by their issue. We see no speci: significance, so far as the present question concerned, in the direction to the Attorne General to file the bill in the name of the Stat Without such a direction there might be dou whether the suit to be instituted should be the name of the Attorney-General or of the Stat It was probably unimportant whether the o form or the other was adopted, for, in a event, the object would be to enforce the o ligation of the company and collect the mon which was due. The Legislature, howeve saw fit to avoid all doubt on this subject, a to direct that the proceeding should be in t name of the State. Taken by itself, therefor this section adds little, if anything, to the oth evidence in the statute as to who the credit was for whose benefit the mouey was to be c lected. The proceeds of the foreclosure w