Dunn v. Savannah & Charleston Railroad

8 S.C. 207, 1875 S.C. LEXIS 69

• Court: Supreme Court of South Carolina
• Decided: September 17, 1875
• Status: Published

Opinion

The opinion of the Court was delivered by

Moses, C. J.

The decree of 28th April, 1874, in the case of Hand vs. Savannah and Charleston Railroad Company, which it is claimed deprived the State of the power it proposed to exercise under the fifth Section of the Act of 1869, (14 Stat., 202,) is interposed as a bar to the petition of the Comptroller General, filed in the cause, for the possession of the road of the said company under the Act above referred to. So far as that decree vested any rights in the creditors of the company, it must be allowed all the force and validity of a judgment of a Court having jurisdiction over the subject matter and the parties properly before it. Bo far as it appropriated the net profits of the road to the payment of the demands of certain classes of creditors, its validity, except by appeal, cannot be questioned. We cannot, therefore, perceive how the enforcement of the provision of the said Act, as to the possession of the road, conflicts with the rights of creditors, or impairs the obligation of any contract between the State and the holders of bonds issued, either by the Charleston and Savannah Railroad Company or the Savannah and Charleston Railroad Company, and guaranteed by it.

Unless the Constitution of a State recognized its liability to suit in its own Courts, it is protected, by reason of its sovereign capacity, from process issued by judicial authority, exceptas provided by the Constitution of the United States. The mere consent of an officer of the State, by appearing and answering in its name, does not bind it by the judgment or decree which may be the result of the suit.

The Attorney General, although a law officer of the State, in fact properly belongs to its executive department, and has no more power to control the State by his action in Court than the Governor or the Comptroller General. Indeed, when a State can be made a party in the Supreme Court of the United States, the process to that end must be served on the Governor. The legislative power, where in its opinion the interest of the State demands that it should be protected by a proper representation in a legal proceeding, may authorize any of its officers, or, indeed, any person, to appear on its behalf and bind it by his action. While a decree against the State so appearing could not constitute a judgment against it to be enforced by a levy and sale of its property, its good faith and honor would be so involved as to compel the Legislature to recognize the debt or demand thus created as one with which compliance could not be avoided without prejudice to its character and name.

Before determining whether and how far the decree of the Court in the case of Hand deprives the State of the power reserved by the Act of 1869, it is proper to consider whether so much of it as confers the power in question on the Comptroller General is repealed by the Act of 1871. — 14 Stat., 612.

By the Act of 1869 the Savannah and Charleston Railroad Company was empowered to raise $500,000 in bonds, to fall due twenty years from their date, and to bear seven per cent, interest per annum. To make the proposed issue available to the company, by readily raising money for its use, the State agreed that the primary lien which it then held on the road as a security for a former guarantee of bonds, for the payment of which the road was liable, “shall, upon the issue of the bonds provided for in and by the said Act, be postponed and become a second lien.” It thus subordinated its security to that which might be created in favor of such new bonds. It will not be forgotten that this Act was in the nature of an amendment of the charter and thus constituted a contract between the State and the company. The contract could only be extinguished by a compliance on the part of the company with the obligations it imposed or a release of it by the State.

This right of the State to take possession of the road through its named officer, the Comptroller General, in the event of a failure by the company to fulfill the conditions of the contract undertaken by it, was the consideration for the surrender of its first lien. It was an agreement on what the parties regarded full consideration. The company issuing the bonds and disposing of them under the advantages afforded by the condition acceded to the whole as a contract binding on it, and which still continues to bind it, unless rendered void by some subsequent legislation by the State.

The measure to which it resorted by the Act of 1871 was but the enforcement of a right incident to the lien which it held on all the roads which had failed to pay the interest on the bonds it had guaranteed.

The power to take possession, reserved by the Act of 1869, did not deprive it of its right to foreclose its lien through the Courts.

The provision in the said Act constituted a remedy by the agreement of the parties, of which the State might avail itself in the event of a certain contingency, and that had occurred. The State consented to occupy a less favorable position than it held before, but the consideration which induced it was the right which it secured by the provision it is now attempting to enforce. If, under the Act of 1871, it had actually proceeded to a foreclosure, and consummated it by a sale, then the power under the Act of 1869 would have been lost by the change in the title and possession of, the property. The construction of the Act of 1871 contended for on the part of the appellees would place the State in a worse position than it occupied before its passage, and cannot prevail unless the intention to that end is clear and manifest, keeping in view the purposes of the two Acts. Though “a subsequent statute, if taken strictly and grammatically, would control a prior statute if it were intended to have that operation,” yet, though the terms be general, if by the peculiar character of the former statute the last enactment is so inconsistent with its terms and purposes that it is manifest it was not intended to be included in its terms, it will not be construed a repeal.—Williams vs. Pritchard, 4 T. R., 2.

The Act of 1869 was in effect-a contract between the State and the company. It annexed a condition which gave it ah additional and independent power separate and apart from that which it could exercise under its general right of foreclosure. “ A special law is not abrogated by general ones unless the intent to do it be very clear.” — Bradley, J.,in his dissenting opinion in Steamboat Company vs. Collector, 18 Wall., 478. Best, J., in Rex vs. Carlile, (3 B. & A., 161,) said: “It has long been a settled maxim that neither the provisions of the common or statute law are abrogated but by the express words of an Act of Parliament or by subsequent enactments so inconsistent with the previous law as to raise a necessary implication that the Legislature intended it should be altered.” Holding that the said provision of the Act of 1869 is not repealed by the Act of 1871, it is proper next to consider the effect of the proceedings in the case of Hand on the application now before the Court. The second Section of the Act of 1871 authorized the Attorney General, for and on behalf of the State, to appear in any action on behalf of any other party or parties against any such railroad company or companies referred to, meaning those amenable to the provisions of the said Act. The order in the Hand case, set out in the pleadings, even if it is binding on the State by the action of the Attorney General, cannot prevent the enforcement of any right by the State not necessarily lost, destroyed or absorbed by the proceedings in which the said order was made. The act of the Court prescribing the agency through which the affairs of the company were to be administered, with the purpose of making profit on its capital for the benefit,-first, of its creditors, and then of its stockholders, was not a judicial act, in the proper sense of the term, so binding as to be beyond change or modification. The form adopted may have been the best and most proper at the time, and may be considered so nowbut if the order which directed it was not of that character which vested rights, the scheme resorted to could be substituted by any other which promised better results for the general benefit of all concerned. The power exercised, that of appointing a Receiver, (even with the extraordinary adjunct of an “ Advisory Boardpjf-Managers,”) is discretionary with the Court and one of a purely provisional character. The mere appointment does not affect the title to the property or rights of any who may have an interest therein. Whatever vested rights creditors may have by the order of the Court in regard to the final disposition of the property or its profits in the hands of the Receiver are not impaired or affected by the mere change in the possession of the property.

Besides, the order for the appointment of a Receiver is not irrevocable. He is the officer of the Court, acting as its agent in a particular matter, and always subject to its control. He is usually appointed to close and wind up an estate or concern; but here the purpose was “to hold and operate the railroad of the defendants company,” under a Board of Directors, to be selected in a manner not directed by the charter but prescribed by the Court.

While the decree must be respected and enforced, so far as it fixed the rights of creditors before the Court and appropriated the profits of the road to their payment, it cannot operate to deprive the State of a right which it has against the company. Its charter has not been extinguished. The property of the company is even' now held subject to its equity of redemption, and the title to it still remains unchanged. The power conferred on the Attorney General to bind the State by appearing in any action against any railroad company must be held to refer only to cases of a nature similar to those he was authorized to bring uuder the Act and must be confined to the purposes which it was intended to accomplish. The end proposed by the Act was an enforcement of the lien given to the Staté to secure its guaranty. It contemplated no purpose of a different character. Will it be claimed that the Attorney General, by so appearing, could bind the State to any order which should be made in the cause, even to the discharge and release of the lien of the State, while, at the same time, it should be ordered to pay the bonds which it had guaranteed? The right of appeal would be no safeguard, for the appeal could only be taken and perfected by the Attorney General himself, who it is not natural or likely to suppose would move against an order to which he had consented, even if such a course would be consistent with the practice of the Courts.

How, then, can it be contended that a right secured to the State, in full consideration, on its part, to take possession of certain property by a designated officer, can be lost by the consent of another of its officers, the Attorney General?

The enforcement of the remedy under the Act of 1869 was to be through the agency of the Comptroller, and we see nothing in the Act of 1871, or the proceedings in the case referred to, which can properly deprive him of it. A waiver of so important a condition, and the only one which promised safety or protection to the State for its guaranty, is not to be legally presumed. Unless the intent manifestly appears from the Act of 1871, it should not be construed to be so general and absorbing, through the power which it extends to the Attorney General, as to destroy a valuable right by-contract reserved to the State. It-contemplated the foreclosure of the lien held by the State in the property of such railroad companies as had issued bonds with its guaranty, and had not paid the interest due; and as it was competent for any holder of such bonds •to resort to the same remedy, the object proposed by the State, through the said Act, would be as readily accomplished as if the proceeding had been instituted in its name and in its bohalf.

We see nothing in the Act of 1869 in conflict with the Constitution of the State. It is alleged that so much of it as looks to “a settlement of the affairs of the company by the General Assembly” assumes for the Legislature the exercise of judicial authority. But, as between the State and the company, such a contract violates none of the constitutional inhibitions against the exercise by one department of the duties belonging to another. The mode of settlement to which the Legislature may resort might be by a reference of the whole matter to the decision of the Courts, and the words “in the interest of all the creditors” seem to look to a forum with the power of a final adjudication of all rights involved. When the Legislature assumes to discharge duties from which it is prohibited by the Constitution, it will be time enough to inquire into and pass upon its action. The Court is not to anticipate that it will violate its constitutional obligation, or prescribe in advance the mode and manner in which its legitimate functions are to be administered. Such a course would find no sanction ib propriety or precedent.

The order reversing the judgment of the Circuit Court dismissing the petition has been already filed.

Wright, A. J., concurred.

Willard, A. J.

I do not regard the fifth Section of the Act “to enable the Savannah and Charleston Railraad Company to complete their road,” ratified March 2, 1869, (14 Sta't., 201,) as intending to supersede the ordinary remedies provided by law in the case of an insolvent corporation. Authority is there given, on the contingency of a failure of the corporation to fulfill certain engagements, in respect to which the State stood in the position of a surety, to the Comptroller General of the State, to take immediate possession of said road, with all its appurtenances, and to lease the same to responsible parties, who shall have control thereof until the General Assembly shall by law provide for the settlement of the affairs of the company iu the interest of all its creditors. While, as affecting the company, its stockholders and officers, this provision stands on the footing of a contract on consideration voluntarily acceded to by them, yet to hold that it bound the creditors of the company to the extent of superseding their ordinary remedies in the Courts it would be necessary to find such an intent clearly expressed. I find no such intent expressed. On the contrary, the object and intent apparent on the face of the statute can be accomplished without such a construction. The plain intent of the Section was to strengthen and enforce by special provisions the general right of subrogation which is possessed by sureties. Although the provisions in question are in excess of what the law confers upon a surety through the right of subrogation, yet the object and intent can be fully understood by referring it to a purpose, on the part of the Legislature, to give, as against the corporation, special and peculiar rights to the State in the nature of the right of sub-rogation.

Such rights cannot displace the rights of creditors, for their rights are superior even to the right of subrogation enjoyed by the surety.

I think that there should be a strict Receivership, and, in order that the purpose of the statute may be as fully accomplished as the rights of parties will permit, that such Receivership is properly conferred upon the Comptroller General as the person designated to hold the property for the benefit of all parties interested in it.