Bodman, J.
A question is made in tbis case as to tbe right of a plaintiff to appeal from a decision of a Judge, or of a Justice of tbis Court, sitting at Chambers, refusing an injunction. We think tbe right is clearly given by section 299, C. C. P., and we can see no inconvenience in its exercise.
2. As to the principal question :
Tbe plaintiff contends that by virtue of the contract between tbe State and tbe Company, contained in tbe ordinance of 1868, tbe State became a trustee of the property conveyed to it under that ordinance, to wit: of tbe road and of tbe half million of tbe bonds of tbe company; not only for tbe indemnity of tbe State as tbe endorser for tbe company of a million of its bonds, but also tor tbe benefit of all tbe holders of such bonds
;
and that consequently it cannot, in good faith, do any act calculated to impair tbe security. Tbe general principle is admitted. And although there was no direct contract between tbe State and tbe plaintiff, (except^ of course, tbe endorsement,) it is conceded that any equities arising to tbe plaintiff as a creditor, out of tbe contract between the State and tbe company, are as much entitled to protection as would be any rights directly created by a contract between tbe plaintiff and tbe State. In tbe view which we take of tbis case, it is not necessary to consider whether
equitable obligations assumed by a State as a trustee, can be enforced indirectly through the process of an injunction against the State Treasurer : we avoid the expression of any ■opinion on that point, but for the sate of the argument Ave assume that they may. The only remaining question is, Avhether the act sought to be enjoined is in violation of any contract implied betAveen the State and the plaintiff, or of any equity arising on behalf of the plaintiff out of the contract betAveen the State and the defendants, contained in the ordinance of 1868. If it is not, although the plaintiff may be damaged by the threatened act, he cannot, in a legal sense, be injured. The act sought to be enjoined is the delivery to the company of the half million of its bonds which were deposited with the State under the ordinance of 1868, to be negotiated for its benefit.
Two ways are suggested in which the plaintiff will be damaged by this' act:
I. It is said that the fund provided for the security of his debt will be diminished, by withdrawing from it this half million of bonds : and, for example, it is said that if the road shall be sold under the mortgage, and bring less than two millions, the plaintiff and other like creditors, through the State as their trustee, would be entitled, in the distribution of the proceeds, to a share, in the proportion of a million and a half to the million of the notes not endorsed by the State.
This view regards the half million of bonds as property, as a real value, which it seems clear to us, as long as they remain unnegotiated and in the hands of the State, they are not. For this half million of bonds the State has given no consideration ; they do not represent a debt .to the State, actual or contiu gent; they have not been delivered to the State as bonds; they are simply in the nature of the penalty •of a bond, which does not increase the real obligation. The only debt to the State, (ayc may speak of it as a debt,
although it is in fact only a liability,) is, for the million of bonds endorsed by
it;
and the company by procuring the holders of those bonds to release the State, would be immediately entitled to receive the half million of its bonds. To such a distribution of the assets of the company as that suggested in the event supposed, the holders of the million of bonds not endorsed by the State, but seemed in the mortgage equally with those so endorsed, might reasonably object: it would be inequitable for the State to prove for an amount exceeding its liabilities; in a common risk, equality is equity. It may here be asked if this be the true construction of the contract, what purpose was intended to be answered by the deposit of this half million of bonds. The question is pertinent, and an answer will be attempted in the course of this ‘discussion.
II. It is said that the plaintiff will be damaged by the negotiation of the half million of bonds, in that the debt secured by the mortgage will be increased, and hence, in the event supposed, of the insolvency of the company, the^ro
rata
share of the plaintiff will be diminished. The suggestion is ■opposed to the former one, which considers the mortgage debt to be two millions and a half, whereas this properly regards it as being, until the negotiation of-these bonds, only two millions. It is admitted that the negotiation of these bonds may be a damage to the plaintiff in the way suggested; and if the whole debt contemplated by the mortgage, both prospective and existing, was only two millions, we are prepared to concede that the increase would be inequitable and injurious. The equities claimed by the plaintiff can arise only out of this construction of the ordinance. But it seems to us clear, on the face of the ordinance, that the intention in depositing these bonds, was, that they might be negotiated in some contingency. No other reasonable purpose can be suggested, and this is our answer to the inquiry above, which
was deferred. Unless they were to be negotiated, their existence could answer no useful purpose whatever; in the hands of the State they were without vitality. The plaintiff therefore, although he might be damaged by such negotiation, could not be injured, as it is consistent with the contract which he knew of and assented to, when he purchased his bonds.
The plaintiff, however, says that although it was agreed that the State might negotiate these bonds, yet it can only do so in the event of a default of the company in the payment of interest, and the proceeds of the sale must he applied
exclusively to pay the interest of ike bonds endorsed by the State.
We think this the most serious question in the case. But upon consideration of the whole contract between the State and the company, we are led to the conclusion that it was not the intention to tie up the power of the State over these bonds so narrowly, hut that a discretion was left to it to use them in any way not injurious to the creditors secured by the mortgage.
In the first place,
it is not said expressly, or, as far as we can see, by a reasonable implication, that the proceeds of the half million of bonds is to be appropriated in the way claimed. They are deposited with the State as a collateral security for its endorsement,
u
and if the company shall fail to pay either interest or principal of said endorsed bonds, so that the State shall become liable for the same, then the State shall become the owner of the said five hundred thousand dollars of bonds but if the company shall pay the bonds endorsed by the State, the half million of bonds shall be the property of the company. It does not appear that the State has yet paid any thing for the company, nor is it material that it should appear. It is not easy to see what precise rights the Convention supposed would arise from the deposit of these bonds. It could not be that in the event of the insolvency of the
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Bodman, J.
A question is made in tbis case as to tbe right of a plaintiff to appeal from a decision of a Judge, or of a Justice of tbis Court, sitting at Chambers, refusing an injunction. We think tbe right is clearly given by section 299, C. C. P., and we can see no inconvenience in its exercise.
2. As to the principal question :
Tbe plaintiff contends that by virtue of the contract between tbe State and tbe Company, contained in tbe ordinance of 1868, tbe State became a trustee of the property conveyed to it under that ordinance, to wit: of tbe road and of tbe half million of tbe bonds of tbe company; not only for tbe indemnity of tbe State as tbe endorser for tbe company of a million of its bonds, but also tor tbe benefit of all tbe holders of such bonds
;
and that consequently it cannot, in good faith, do any act calculated to impair tbe security. Tbe general principle is admitted. And although there was no direct contract between tbe State and tbe plaintiff, (except^ of course, tbe endorsement,) it is conceded that any equities arising to tbe plaintiff as a creditor, out of tbe contract between the State and tbe company, are as much entitled to protection as would be any rights directly created by a contract between tbe plaintiff and tbe State. In tbe view which we take of tbis case, it is not necessary to consider whether
equitable obligations assumed by a State as a trustee, can be enforced indirectly through the process of an injunction against the State Treasurer : we avoid the expression of any ■opinion on that point, but for the sate of the argument Ave assume that they may. The only remaining question is, Avhether the act sought to be enjoined is in violation of any contract implied betAveen the State and the plaintiff, or of any equity arising on behalf of the plaintiff out of the contract betAveen the State and the defendants, contained in the ordinance of 1868. If it is not, although the plaintiff may be damaged by the threatened act, he cannot, in a legal sense, be injured. The act sought to be enjoined is the delivery to the company of the half million of its bonds which were deposited with the State under the ordinance of 1868, to be negotiated for its benefit.
Two ways are suggested in which the plaintiff will be damaged by this' act:
I. It is said that the fund provided for the security of his debt will be diminished, by withdrawing from it this half million of bonds : and, for example, it is said that if the road shall be sold under the mortgage, and bring less than two millions, the plaintiff and other like creditors, through the State as their trustee, would be entitled, in the distribution of the proceeds, to a share, in the proportion of a million and a half to the million of the notes not endorsed by the State.
This view regards the half million of bonds as property, as a real value, which it seems clear to us, as long as they remain unnegotiated and in the hands of the State, they are not. For this half million of bonds the State has given no consideration ; they do not represent a debt .to the State, actual or contiu gent; they have not been delivered to the State as bonds; they are simply in the nature of the penalty •of a bond, which does not increase the real obligation. The only debt to the State, (ayc may speak of it as a debt,
although it is in fact only a liability,) is, for the million of bonds endorsed by
it;
and the company by procuring the holders of those bonds to release the State, would be immediately entitled to receive the half million of its bonds. To such a distribution of the assets of the company as that suggested in the event supposed, the holders of the million of bonds not endorsed by the State, but seemed in the mortgage equally with those so endorsed, might reasonably object: it would be inequitable for the State to prove for an amount exceeding its liabilities; in a common risk, equality is equity. It may here be asked if this be the true construction of the contract, what purpose was intended to be answered by the deposit of this half million of bonds. The question is pertinent, and an answer will be attempted in the course of this ‘discussion.
II. It is said that the plaintiff will be damaged by the negotiation of the half million of bonds, in that the debt secured by the mortgage will be increased, and hence, in the event supposed, of the insolvency of the company, the^ro
rata
share of the plaintiff will be diminished. The suggestion is ■opposed to the former one, which considers the mortgage debt to be two millions and a half, whereas this properly regards it as being, until the negotiation of-these bonds, only two millions. It is admitted that the negotiation of these bonds may be a damage to the plaintiff in the way suggested; and if the whole debt contemplated by the mortgage, both prospective and existing, was only two millions, we are prepared to concede that the increase would be inequitable and injurious. The equities claimed by the plaintiff can arise only out of this construction of the ordinance. But it seems to us clear, on the face of the ordinance, that the intention in depositing these bonds, was, that they might be negotiated in some contingency. No other reasonable purpose can be suggested, and this is our answer to the inquiry above, which
was deferred. Unless they were to be negotiated, their existence could answer no useful purpose whatever; in the hands of the State they were without vitality. The plaintiff therefore, although he might be damaged by such negotiation, could not be injured, as it is consistent with the contract which he knew of and assented to, when he purchased his bonds.
The plaintiff, however, says that although it was agreed that the State might negotiate these bonds, yet it can only do so in the event of a default of the company in the payment of interest, and the proceeds of the sale must he applied
exclusively to pay the interest of ike bonds endorsed by the State.
We think this the most serious question in the case. But upon consideration of the whole contract between the State and the company, we are led to the conclusion that it was not the intention to tie up the power of the State over these bonds so narrowly, hut that a discretion was left to it to use them in any way not injurious to the creditors secured by the mortgage.
In the first place,
it is not said expressly, or, as far as we can see, by a reasonable implication, that the proceeds of the half million of bonds is to be appropriated in the way claimed. They are deposited with the State as a collateral security for its endorsement,
u
and if the company shall fail to pay either interest or principal of said endorsed bonds, so that the State shall become liable for the same, then the State shall become the owner of the said five hundred thousand dollars of bonds but if the company shall pay the bonds endorsed by the State, the half million of bonds shall be the property of the company. It does not appear that the State has yet paid any thing for the company, nor is it material that it should appear. It is not easy to see what precise rights the Convention supposed would arise from the deposit of these bonds. It could not be that in the event of the insolvency of the
company and a failure of its assets, the State was to prove as a creditor for half a million more than was owing to it, or than it was bound for. The injustice of this to other creditors in the event supposed is so obvious, that we cannot attribute such a purpose to the Convention. But, in any event the half million were to be the property either of the State or of the company; they were regarded as a part of the debt secured by the mortgage, and this they could not be so long as they remained in the hands either of the State or of the company; they had no existence as a debt until they were negotiated, and the expectation plainly was that they should be negotiated, under circumstances not clearly described, and probably not clearly foreseen.
Secondly,
the holders of the million of bonds seemed by the mortgage, but not endorsed by the State, might truly allege that to sell the half million of bonds and apply the proceeds to pay the interest of the endorsed bonds, would be disadvantageous to them, as enlarging the principal of the mortgage debt for the exclusive benefit of the holders of the endorsed bonds. We are not prepared to say that this application of the half million of bonds would be inequitable, because it probably was one of the modes in which it was contemplated in the ordinance that they might be used: but we think it was not the only one, and that the State and the company might agree to any other application not expressly or impliedly forbidden by the ordinance. The act of 1870 gives the bonds to the compare, to be negotiated by them, and the proceeds to be expended in the construction of the road. This application does not impair, but may increase the security of the mortgage creditors.: it is neither expressly, nor, so far as we can see, by any probable implication, forbidden by the ordinance of 18G8, but we think was contemplated, as possible, by that ordinance. We do not see that the plaintiff is damaged — much less injured — by this
application. We think, therefore, the injunction was prop-erly refused; the restraining order is also dissolved.
The defendant will recover costs.