Hagood v. Southern
117 U.S. 52 (1886)

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U.S. Supreme Court

Hagood v. Southern, 117 U.S. 52 (1886)

Hagood v. Southern

Argued January 12-13, 1886

Decided March 1, 1886

117 U.S. 52

Syllabus

State scrip which declares on its face that it is receivable "in payment of all taxes and dues to the state" gives the holder no right to maintain a suit

Page 117 U. S. 53

to compel its receipt for taxes unless he owes the taxes for which it is receivable.

Marye v. Parsons,114 U. S. 325, and Williams v. Hagood,98 U. S. 72, affirmed.

When a suit is brought in a court of the United States against officers of a state to enforce performance of a contract made by the state, and the controversy is as to the validity and obligation of the contract, and the only remedy sought is the performance of the contract by the state, and the nominal defendants have no personal interest in the subject matter of the suit, but defend only as representing the state, the state is the real party against whom the relief is sought, and the suit is substantially within the prohibition of the XIth Amendment to the Constitution of the United States.

Louisiana v. Jumel,107 U. S. 711, affirmed and applied.

The jurisdictional distinction pointed out between cases in which the relief sought is the performance of a plain official duty requiring no exercise of discretion, or where state officers under color of a state authority which is unconstitutional have invaded and violated personal and property rights, and cases like the present, in which the relief sought is affirmative official action by state officers in performing an obligation which attaches to the state in its political capacity.

These two cases were heard together in the circuit court upon the same testimony, and the same decree passed in each. The facts, common to both, were as follows:

By an Act of the General Assembly of South Carolina passed September 15, 1868, entitled "An act to authorize additional aid to the Blue Ridge Railroad Company in South Carolina," the state, by a guarantee endorsed thereon, pledged its faith and funds to the payment of the principal and interest of bonds to be issued by the railroad company, to the amount of $4,000,000. The bonds authorized by the act, with the guarantee endorsed, were in fact issued.

On March 2, 1872, an act of the General Assembly of South Carolina was passed entitled

"An act to relieve the State of South Carolina of all liability for its guarantee of the bonds of the Blue Ridge Railroad Company by providing for the securing and destruction of the same."

The preamble to this act recited the issue of the bonds, the fact of the guarantee endorsed, the liability of the state on account thereof, and the desire of the state to withdraw them and thus relieve itself. It then proceeded to require that all

Page 117 U. S. 54

such bonds then held by the financial agent of the state, as security for advances of money made to the railroad company by the state, should be delivered up and cancelled, releasing the railroad company from all liability on account of such advances.

It then provided, that, upon the surrender by the company to the state of the balance of the issue of $4,000,000 of said bonds, issued and guaranteed as aforesaid, the state treasurer should issue in lieu thereof, to the amount of $1,500,000, certificates of indebtedness, styled revenue bond scrip, expressing that the sum mentioned therein was due by the State of South Carolina to bearer, and that the same would be received in payment of taxes and all other dues to the state except special tax levied to pay interest on the public debt. The act also provided as follows:

"SEC. 4. That the faith and funds of the state are hereby pledged for the ultimate redemption of said revenue bond scrip, and the county treasurers are hereby required to receive the same in payment of all taxes levied by the state, except in payment of special tax levied to pay interest on the public debt, and the state treasurer and all other public officers are hereby required to receive the same in payment of all dues to the state, and still further to provide for the redemption of said revenue bond scrip, an annual tax of three mills on the dollar, in addition to all other taxes, on the assessed value of all taxable property in the state, is hereby levied, to be collected in the same manner and at the same time as may be provided by law for the levy and collection of the regular annual taxes of the state, and the state treasurer is hereby required to retire, at the end of each year from their date, one-fourth of the amount of the treasury scrip hereby authorized to be issued, until all of it shall be retired, and to apply to such purpose exclusively the taxes hereby required to be levied."

"SEC. 5. That if any such revenue bond scrip is received in the treasury for the payment of taxes, the treasurer be, and he is hereby, authorized to pay out such revenue bond scrip in satisfaction of any claim against the treasury, except for interest that may be due on the public debt. "

Page 117 U. S. 55

The exchange contemplated by this act was effected, private individuals holding the guaranteed bonds as collateral security for loans of money to the railroad company surrendered them, and accepted in lieu thereof revenue bond scrip at the lower rate. In this way, Amos D. Williams, the appellee in one of these causes, became and remained the holder of $165,000 of revenue bond scrip, for which he surrendered $417,000 of guaranteed bonds, and Edward B. Wesley became the holder of $1,005,000 of revenue bond scrip, for which he advanced in cash $344,925, with which were redeemed $2,902,000 of guaranteed bonds, also surrendered to the state. Wesley became, by leave of court, a party complainant with Williams in his bill, before final decree. Subject to the lien of Wesley for the payment of his cash advance as above stated, the assignees in bankruptcy of the Blue Ridge Railroad Company, who were appellees in the other cause, claimed to own the revenue bond scrip held by Wesley as collateral security for his advance. Other bonds of said railroad company guaranteed by the state, by like exchanges, were surrendered by other holders, who received and held corresponding amounts of said revenue bond scrip, and who came in, under the bill of Williams, which was filed on behalf of himself and all others in like interest choosing to do so, and proved their claims before a master, so that the whole issue of $4,000,000 of said bonds, except about $4,000 thereof, were shown to have been surrendered to the state and cancelled, on the faith of said revenue bond scrip.

After the consummation of these transactions, the Legislature of the State of South Carolina, by an Act passed March 13, 1872, abolished the office of State Auditor, and vested his powers in the Comptroller General, and by an Act approved October 22, 1873, repealed the fourth section of the Act of March 2, 1872, providing for an annual tax of three mills on the dollar for the redemption of the revenue bond scrip, and also forbade the comptroller to levy any tax for any purpose whatever unless expressly thereafter authorized to do so by statute.

On December 22, 1873, it also passed an act forbidding any state or county officer to accept payment of taxes in revenue bond scrip.

Page 117 U. S. 56

In a similar case between the same parties, in which the complainant's bill was dismissed without prejudice, and reported as Williams v. Hagood,98 U. S. 72, it was said by this Court:

"This legislation was manifestly inconsistent with the undertaking of the state expressed in the Act of March 2, 1872, and in the revenue bond scrip issued thereunder, and its constitutionality and obligatory force would be a legitimate subject for consideration if the complainant had placed himself in a position to invoke our judgment. But he has not. His bill does not aver that he has been injured or will be injured by this legislation, or by any act or neglect of the comptroller general or the county treasurer. It does not aver that the comptroller general has neglected or refused to perform every duty imposed upon him by the statute under which the revenue bond scrip was issued, nor even that he threatens such neglect or refusal. It does not aver that the county treasurer has refused, or even threatened to refuse, receiving the complainant's scrip, or any scrip, in payment of taxes or dues to the state, other than taxes levied to pay the interest on the state debt. It does not aver any demand from the state treasury or any tender to the county treasurer. Its object is plainly to obtain from this Court a declaration that the legislative acts of October 22d and December 22d, 1873, are unconstitutional because impairing the obligation of the contract made by the act of 1872 and the certificates thereby authorized and thereunder issued, and this without any averment that the complainant will be injured by them. The question presented to the Court is therefore merely an abstract one -- such a one as no court can be called upon to decide, and the bill shows no equity in the complainant. Hence it was properly dismissed in the court below, and it must be dismissed here, but without prejudice to the complainant's right to bring and prosecute another suit when he shall be in a condition to exhibit any equity in himself."

To supply the omissions of his former bill, it was alleged by the complainant in the present one that in April, 1879, he tendered the said certificates of indebtedness, amounting to about $166,000, to the Treasurer of the State of South Carolina and demanded payment thereof, which was refused, and that

Page 117 U. S. 57

thereupon, having advised the defendant Hagood, the comptroller general of the state, of this refusal of payment by the state treasurer, he requested the comptroller general

"from time to time to prepare and transmit to the several county auditors all such forms and instructions as he might deem necessary for collection, in the same manner and at the same time as had been provided by law for the levy and collection of the regular annual taxes of the state far the current fiscal year, the taxes provided to be levied by the 4th section of the aforesaid act of the General Assembly for the redemption of said scrip, which class of duties, your orator avers, were duties imposed upon the comptroller general by the said act of March 2d, 1872,"

but that the said comptroller general neglected and refused to comply with said request.

It was also alleged in the bill that the revenue bond scrip, prior to the passage of the acts of the legislature complained of, had a market value equal to seventy percent of its face value, according to which the complainant could dispose of the same to parties desiring to use the same in payment of taxes levied by the State of South Carolina, and that the complainant lately disposed of a quantity of said scrip, on a conditional sale, that it could be so used in payment of taxes, but that the county treasurers of the different counties of the state, among others, of the Counties of Charleston, Oconee, Anderson and Richland, refused, and continued to refuse, to receive the said revenue bond scrip in payment of taxes, and that thereby the said revenue bond scrip had ceased to have any market value.

It was not averred, however, in the bill that either of the complainants, Williams or Wesley, had ever tendered revenue bond scrip in payment of taxes due from either of them, but in the bill filed by Southern and Low, as assignees in bankruptcy of the Blue Ridge Railroad Company, an averment of that character was made.

In that bill, it was alleged that the Blue Ridge Railroad Company was indebted to the State of South Carolina for taxes on its property for the year 1872 in the sum of $10,845.33, none of said taxes being special taxes levied to pay the interest on the public debt, of which $7,541.22 was payable to the Treasurer of

Page 117 U. S. 58

Oconee County, and $3,304.11 to the Treasurer of Anderson County, to each of whom tenders had been duly made of said revenue bond scrip by said railroad company in payment of said taxes, but the same were refused.

The prayer of the bill in the case of Williams was,

"That the act of the Legislature of the State of South Carolina of the 2d March, 1872, may be decreed a contract binding the State of South Carolina and affecting the said state with an obligation to do and perform, or cause to be done and performed, the several matters and things therein stipulated and set forth to be done and performed by the said state, through its officers and agents, particularly so much of the said act as provides for the levy of a tax to retire the said certificates of indebtedness, and to receive the same in payment of taxes and other dues to the state, except the tax levied to pay interest on the public debt; that the several parties holding or claiming to hold the said treasury certificates of indebtedness, bona fide and for value, may be called in and admitted to prove the same before a proper person to be appointed for that purpose; that the whole amount of such treasury certificates of indebtedness may be ascertained; that the repeal of the provisions of the said Act of the 2d March, 1872, by the legislature may be declared unconstitutional, null, and void because such repeal impairs the obligation of the contract between the State of South Carolina and your orator, and all other parties who are bona fide holders of such treasury certificates of indebtedness; that for the purpose of defending itself in such manner as it may be advised to be proper, the state may be allowed, upon the application of its attorney general in its behalf, to be made a party to these proceedings; that, upon the ascertainment of the amount of the treasury certificates of indebtedness, proper process may be decreed against the state treasurer to perform the duties enjoined upon him by the 4th section of the Act of March 2d, 1872 -- that is to say, to redeem the aforesaid treasury certificates of indebtedness, otherwise called revenue bond scrip, tendered by your orator to the said state treasurer, and that he may be required to receive the same in payment of all dues to the state, except interest on the public debt, and that

Page 117 U. S. 59

proper process may be issued against the comptroller general, requiring him to perform the duties enjoined upon him under and pursuant to the different sections of said Act of March 2d, 1872, and for that purpose that he from time to time be decreed to prepare and transmit to the several county auditors all such forms and instructions as may be proper and lawful for levying and collecting, or either, in the same manner and at the same time as has been provided by law for the levy and collection of the regular annual taxes of the state for the current fiscal year, the taxes levied by the 4th section of the aforesaid act of the General Assembly for the redemption of said scrip; that the county treasurers of the said state be required to receive such treasury certificates of indebtedness as may be established as a claim under the contract created by the said act in tender of taxes and dues to the state, except interest on the public debt; that in cases where such tender is made, the county treasurer refusing to receive the same shall be prevented by injunction from selling property or otherwise enforcing the payment of the said tax; that a mandatory injunction may be issued out of this honorable court requiring the comptroller general to cease from refusing to levy the tax for retiring the said treasury certificates of indebtedness, and the county treasurers to cease from refusing to receive the same for taxes and dues to the state, except to pay the interest on the public debt, and for such other and further relief as to your honors shall seem meet,"

&c.

The relief prayed for in the bill of the assignees of the Blue Ridge Railroad Company included also a prayer

"That the defendants, the county treasurers, may be decreed to receive the said revenue bond scrip in payment of the said taxes due by your orators to the State of South Carolina; that on their refusal to do so, they may be enjoined from enforcing the said taxes by selling the property of your orators, or in any other manner, and that on such refusal the lien of said taxes on the property of your orators may be declared to be discharged."

The revenue bond scrip was of different denominations, varying from $1 to $5,000, and was in the form following:

Page 117 U. S. 60

"100.00 No. 91 $100.00"

"Revenue Bond Scrip"

"THE STATE of [Palmetto Tree] SOUTH CAROLINA"

"COLUMBIA, S.C., March __, 1872"

"Receivable as one hundred dollars in payment of all taxes and dues to the state, except special tax levied to pay interest on public debt."

"NILES G. PARKER, State Treasurer"

" One hundred dollars One hundred dollars "

"[On each side of scrip:] One hundred dollars, Act March, 1872"

In the case of The State ex rel. &c. v. Hoge, Comptroller General, 4 S.C. 185, the Supreme Court of that state decided, April 18, 1873, that the certificates of revenue bond scrip issued under the Act of March 2, 1872, were void as being bills of credit within the prohibition of the Constitution of the United States, the design and intention to create by means of them a circulating medium and currency being inferred from the whole scope of the act, and the form and circumstances of the emission.

Decrees were entered in the two causes, which, after reciting the findings of fact and conclusions of law reached by the circuit court, proceeded as follows:

"It is therefore ordered:"

"I. That it be referred to James E. Hagood, Esq., clerk of this court, as special master, to take proof of the claims of all parties other than the said Amos D. Williams and Edward B. Wesley (whose claims are hereby adjudged as established), holding, or claiming to hold, any of said revenue bond scrip, bona fide, and for value, who may, on contributing pro rata to the expense of such reference and this action, prove their claims. And that said special master do ascertain and report the total outstanding amount of such treasury certificates of indebtedness."

"II. That for the purpose of defending itself, the State of South Carolina may, at its option, and in such manner as it may be advised to be proper, be allowed, upon the application

Page 117 U. S. 61

of the attorney general of said state on its behalf, to be made a party to these proceedings."

"III. That upon the ascertainment of the amount of said treasury certificates of indebtedness outstanding, proper process do issue out of and under the seal of this court against the State Treasurer of the State of South Carolina for the time being and his successors in office compelling and requiring him and them to perform the duties enjoined upon the incumbent of that office by the fourth section of the Act of 2d March, 1872, to-wit, to redeem the said treasury certificates of indebtedness, and compelling and requiring him and them to receive the same in payment of all taxes and other dues to the state, except the special tax levied to pay interest on the public debt; that proper process do issue out of and under the seal of this court against the Comptroller General of the State of South Carolina for the time being and his successors in office compelling and requiring him and them to perform the duties enjoined upon that officer by the different sections of the Act of 2d March, 1872, and compelling and requiring him from time to time to prepare and transmit to the several county auditors all such forms and instructions as may be proper and lawful for levying and collecting, in the same manner as the annual taxes, the taxes required by the fourth section of the Act of 2d March, 1872; and that proper process do issue out of and under the seal of this court compelling and requiring the different county treasurers of the State of South Carolina for the time being and their successors in office to receive such treasury certificates of indebtedness in payment of all taxes due to the State of South Carolina except the special tax levied to pay interest on the public debt. And in all cases where a tender of said treasury certificates of indebtedness is made and the same refused, an injunction may issue restraining the county treasurer so refusing from selling property or in any manner enforcing payment of said taxes."

"IV. Any party to these suits may apply at the foot of this decree for further orders in the premises."

From those decrees the appeals were prosecuted, and the two causes were argued as one.

Page 117 U. S. 63

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