Woodson v. Murdock - 89 U.S. 351 (1874)
U.S. Supreme Court
Woodson v. Murdock, 89 U.S. 22 Wall. 351 351 (1874)
Woodson v. Murdock
89 U.S. (22 Wall.) 351
1. The provision of the Constitution of Missouri which ordains
"The General Assembly shall have no power, for any purpose whatever, to release the lien held by the state upon any railroad --"
a provision having reference to the statutory liens held by the state on different railroads for the credit of the state, lent to them by the issue of state bonds, the principal and interest of which the railroad companies were to pay -- was not meant, in case of a failure by the railroad companies, to prevent the state from making a compromise with any railroad company of any debt due to it or to become due, and on the compromise's being effected, to release the lien.
2. This view of the meaning of the clause is not altered by reading it in the light of the constitutional ordinance "for the payment of state and railroad indebtedness," adopted at the same time as the state constitution and as part of it, which ordinance, after providing for a sale by the state of any railroad indebted to it, and for the possible case of a purchase by the state of the road, provides further for a sale of the road after the state has so become owner, ordaining in such case
"That no sale . . . shall be made without reserving a lien upon the property and franchises thus sold . . . for all sums remaining due."
This expression is to be regarded not as having reference to what the railroad company originally owed the state -- that is to say, reference to the debt for which the road was first sold -- but to any portion of the purchase money which may remain unpaid upon a second sale -- a sale by the state, after she has become owner.
3. The provision in the same constitution
"That no law enacted by the General Assembly shall relate to more than one subject, and that shall be expressed in its title"
is not violated by any act having various details, provided they all relate to one general subject.
Hence, where an act was entitled "An act for the sale of the Pacific Railroad and to foreclose the state's lien thereon, and to amend its charter," held that after certain sections providing for the sale, a section providing that in certain contingencies no sale should be made was not a violation of the constitutional provision.
Murdock and others filed a bill in the court below for an injunction to restrain Woodson, Governor of Missouri, from advertising for sale or selling the Pacific Railroad
under an alleged existing statutory lien in favor of the State of Missouri. The complainants were trustees for the bondholders upon a mortgage upon the road for $7,000,000, subsequent to the said lien, and dated July 15th, 1868.
The case was thus:
In 1851, and at various times between that year and 1855, the Legislature of Missouri passed acts lending its credit to the Pacific Railroad, a railroad whose line extends from St. Louis to Kansas City. By the same act, it lent its credit also to two other roads. The object of the legislation was to secure the completion of the roads. The form in which the aid was extended was this: the state made its bonds, some at twenty years and others at thirty years, promising to pay the amount thereof to the company or its order. Coupons were attached, and by act of the legislature, the faith and credit of the state were pledged for the payment of the interest and the redemption of the principal of the bonds.
The company was, by the act, to make provision for the punctual payment of the interest and principal of the bonds so issued by the state, so as to exonerate the state from advances for that purpose. To secure this undertaking on the part of the company, the act provided that the net tolls and income of the road should be pledged for the payment of interest, and that the acceptance of the bonds by the company
"should become and be, to all intents and purposes, a mortgage of the road of the company, and every part and section thereof and its appurtenances, 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 as aforesaid."
This was to be the first lien or mortgage upon the road, and it was further provided by the act that if the company should make default in the payment of either principal or interest, no more bonds should be issued to it, and it should be lawful for the governor to sell the road and its appurtenances, at auction, to the highest bidder, on six months' notice, or to buy in the same at such sale for the state,
subject to such disposition of the road or its proceeds as the legislature might thereafter direct.
Under these provisions as to security, the state issued its bonds for the benefit of the Pacific Railroad to the extent of $7,000,000 or upwards.
The company paid the interest on the bonds up to 1st July, 1859, but since that date, had failed to do so.
In 1864, the road not being completed, the Legislature of Missouri authorized the company to borrow $1,500,000, payable in four, five, and six years, and to secure it by a first lien on the road west of a place called Dresden, the state waiving, for this purpose and to this extent, its priority of lien. The bonds given as evidence of this debt were called "Dresden bonds."
In 1865 -- the rebellion being now just closed and the state, which had been the theater of contending parties among its own citizens, being left in an exhausted and impoverished way, with its railroads in many cases more or less torn up or greatly injured, and the companies to which they belonged in default for what they owed the state -- the state adopted a new constitution and a constitutional ordinance, the latter being entitled "For the payment of state and railroad indebtedness."
This constitutional ordinance was adopted in pursuance of a vote taken under a statute, which enacted:
"The election shall be by ballot. Those ballots in favor of this ordinance shall have written or printed thereon the words, 'Shall the railroads pay their bonds? Yes.' Those opposed to this ordinance shall have written or printed thereon the words, 'Shall the railroads pay their bonds? No.'"
The new constitution thus ordained:
"No law enacted by the General Assembly shall relate to more than one subject, and that shall be expressed in the title, but if any subject embraced in an act be not expressed in the title, such act shall be void only as to so much thereof as is not so expressed. "
"The General Assembly shall have no power, for any purpose whatever, to release the lien held by the state upon any railroad."
The constitutional ordinance provided for the levy of a heavy annual tax -- 10 percent on gross receipts from October, 1864, to October, 1868, and 15 percent thereafter -- upon the Pacific Railroad and other roads, to be
"appropriated to the payment of principal and interest now due, or hereafter to become due upon the bonds of the state, or the bonds guaranteed by the state issued to the aforesaid railroad companies."
By the fourth section of the ordinance, it was provided that,
"Should either of said companies refuse or neglect to pay said tax as herein required, and the interest or principal of any of said bonds, or any part thereof remain due and unpaid, the General Assembly shall provide by law for the sale of the railroad and other property, and the franchises of the company that shall be thus in default, under the lien reserved to the state, and shall appropriate the proceeds of such sale to the payment of the amount remaining due and unpaid from said company."
And the fifth section of this ordinance provided that,
"Whenever the state shall become the purchaser of any railroad, or other property, sold as hereinbefore provided for, the General Assembly shall provide by law in what manner the same shall be sold for the payment of the indebtedness of the railroad company in default; but no railroad or other property or franchises purchased by the state shall be restored to any such company until it shall first have paid in money or Missouri state bonds, or in bonds guaranteed by the state, all interest due from said company. And all interest thereafter accruing shall be paid semiannually in advance, and no sale or other disposition of any such railroad or other property or their franchises shall be made without reserving a lien upon all the property and franchises thus sold or disposed of, for all sums remaining unpaid, and all payments therefor shall be made in money or in bonds or other obligations of the state."
In 1866, the road was finished and put in running order
to the west line of the state; but in order to effect this, the company had in 1865 received aid from St. Louis County to the amount of $700,000., On the 31st day of March, 1868, the road was in a bad condition as to repairs and equipments, and the company owed a floating debt of $1,092,848, an unadjusted debt of about $200,000, and the first installment of the Dresden bonds, amounting to $500,000. Of its stock, $3,614,500 was held by citizens and municipalities of Missouri -- over $2,000,000 by St. Louis City and County or taxpayers therein.
In this condition of the company as respects its road and its debt to the state and to others, and with the above-quoted provisions of the constitution and constitutional ordinance in force, the legislature, on the 31st of March, 1868, passed an act entitled "An act for the sale of the Pacific Railroad, and to foreclose the state's lien thereon, and to amend the charter thereof."
By section one, the governor was directed to sell the road and its appurtenances and all the property belonging thereto, in accordance with the provisions of section five of an act entitled "An act to expedite the construction of the Pacific Railroad," &c., approved February 22d, 1851.
The act then proceeded:
"SECTION 2. Upon a sale of the road as provided in the foregoing section, the price and sum for which the same shall be sold shall not be less than $8,350,000, payable to the state treasurer, in the bonds of this state, or in money, within ninety days from the date of sale. No bid, except the bid of the governor on behalf of the state, shall be accepted unless there is paid to the state treasurer, who shall attend the sale, an amount of not less than $300,000, in such bonds or money, as a part of the purchase money, to be paid when the road is stricken off, and such bonds or money shall be forfeited to the state in case the purchaser or purchasers shall fail to the amount of the purchase money bid within the time above provided for."
"If said sum of $8,350,000 is not realized at such sale, the governor shall, by himself or agent, buy in the same for and in the name of the State of Missouri. "
"SECTION 4. Upon the payment of all the purchase money, as specified in section two of this act, and upon the delivery of an obligation in conformity with section three of this act, the governor shall execute a deed to the purchaser or purchasers conveying all such right, title, and interest, in and to said Pacific Railroad, its franchises, appurtenances, and the property belonging thereto, as are subject to the lien of this state."
Then followed section five, upon which the principal question made in this case turned.
"SECTION 5. If the Pacific Railroad shall at any time within ninety days after the first day of April, 1868, pay into the treasury of the state the sum of $350,000 in bonds of this state or in money, then and in that event the governor shall not advertise said road for sale, and if the company shall, within ninety days thereafter, pay into the state treasury an additional sum equal to $5,000,000 in all (the same being either in cash or Missouri state bonds), the governor shall, upon the production of the receipts of the state treasurer for said amounts, execute and deliver to the Pacific Railroad Company a deed of release for all claims, title, and interest which the State of Missouri has in and to the said Pacific Railroad, its property and appurtenances, and the said Pacific Railroad Company shall, from and after the delivery of said deed, be fully discharged from all claims or debts due the state and all liability growing out of the issue of the bonds of the state to aid in the construction of said road, and no sale shall in any event take place under this act."
"If, however, for any cause, the said company shall be unable to pay the additional sum as herein provided, the governor shall proceed to advertise said road; but if the said company shall, during the pendency of said advertisement, pay into the state treasury the additional sum, with interest thereon from the first day of October, 1868, at the rate of six percent per annum, then and in that case no sale of said road shall take place and the governor shall execute and deliver to the said Pacific Railroad Company the deed of conveyance and release provided for in this act, and the said Pacific Railroad Company shall be exempt from all the liabilities and obligations herein specified; but in case the said company shall, after the payment of $350,000 above stated, fail to pay the additional sum specified (being the
remainder of the $5,000,000), then and in that case the sum first paid shall be forfeited to the state."
The company within the ninety days paid into the state treasury the $350,000, and within ninety days thereafter the balance of $5,000,000, and received a deed from the governor in pursuance of the act releasing and discharging it and its property from all liens and claims on the part of the state, and from all liabilities growing out of the issue of the bonds of the state to aid in the construction of its road. The governor's deed was made July 1, 1868.
In order to take up the "Dresden bonds" and to raise the $5,000,000 to be paid to the state and to put its road in repair, the company, on July 15, 1868, made a mortgage to Murdock and others (the complainants in the case), as trustees, to secure $7,000,000 of bonds. This mortgage recited the Act of March 31, 1868, and it was the professed intention to make it, after the payment of the $5,000,000 to the state, and upon the payment of the Dresden bonds, a first lien on the entire Pacific road, its property and franchises. Subsequently, on July 1, 1871, a second mortgage was made by the company for $3,000,000, the proceeds of which it is alleged were exclusively used in improving the road and in purchasing rolling stock. Both of these mortgages were outstanding and unpaid, as also another mortgage for $800,000, secured upon certain lands in St. Louis, purchased for a station.
In March, 1873, the General Assembly of Missouri adopted a concurrent resolution reciting that grave doubts had arisen as to the constitutionality of the Act of March 31st, 1868, just quoted, and directing proceedings to protect and enforce all the rights and claims of the state against the road.
Upon this authority, the governor advertised the road and its appurtenances for sale under the original statutory lien in favor of the state. This proceeding on the part of the state authorities assumed that the fifth section of the Act of March 31, 1868, was unconstitutional; that the statutory lien of the state was yet in full force, and that it was the first lien on the Pacific road, its property and appurtenances.
If this assumption was well founded in point of law, then, of course, the proposed sale, if made, would cut off the mortgage to Murdock and the others (the complainants), and the rights of the holders of the $7,000,000 of bonds secured thereby. On the other hand, if the said fifth section was not unconstitutional, then the state had no lien to be enforced, and the proposed sale, if made, would be wholly nugatory.
The controlling question in the case, therefore, was whether the said fifth section violated either provision of the constitution or violated the constitutional ordinance of the state, as all are above quoted.
It was insisted:
1st, and in regard to the merits, that the transaction authorized by the said section, and carried out under it, evaded that provision of the constitution which ordained that "the General Assembly shall have no power whatever to release the lien held by the state upon any railroad." And that the transaction did evade the said provision of the constitution, it was argued, was made more obvious by the provisions in the fifth section of the constitutional ordinance, that when the state sold any railroad for debt due the state and bought it in, and afterwards sold it, it should not be sold "without reserving a lien upon all the property &c., thus sold, for all sums remaining unpaid;" a provision which the counsel insisting on it, interpreted as meaning all those sums "remaining unpaid," at the time when the sale was made by the state, in the first instance, and not as meaning those sums which might remain unpaid after making any cash payment on the occasion of the second sale -- i.e., the sale made by the state after she had by the first sale herself become the owner.
2d, and on grounds more technical, that the said section was unconstitutional, because it made the act in which it was, relate to more than one subject; the subject presented by the said section not being the one embraced in the title.
This title, as the reader will remember, was "An act for
the sale of the Pacific Railroad, and to foreclose the state's lien thereon, and to amend the charter thereof."
The court below decided that the said section was not unconstitutional by reason of either objection urged against it.
1st. That the transaction under consideration was in effect a sale of the state's interest to the company for $5,000,000; that the legislature had the power to order a sale, and, not being restrained by the constitution, it necessarily had the power to fix the price and terms of the sale.
2d. That only the general purpose (which was to be a single one) of the act needed to be expressed in it was its title, and that this had been sufficiently done in the present case.
An injunction against a sale by the governor was accordingly decreed. From that decree he took this appeal.