People Ex Rel. Cornell University v. Davenport

23 N.E. 664, 117 N.Y. 549, 28 N.Y. St. Rep. 796, 72 Sickels 549, 1890 N.Y. LEXIS 947

Opinion

Peckham, J.

We agree with the learned General Term that in deciding this case we are to be guided by the statutes of our own state, and if, under these statutes, the comptroller was not authorized to make the payment, as demanded by the relator, he was justified in his refusal, even though the state had failed to comply with the terms and conditions of the act of congress donating the land to it. That would be a matter between the federal government and the state which the comptroller would have no right to decide for himself. The view taken by the learned judge who wrote the opinion at the General Term would, we think, apply with great force to the ordinary case, as between tenant for life and remainderman, of a fund to be invested in the ordinary way of "trust funds. Such is the case assumed by him, and such are the principles laid down in Farwell v. Tweddle (10 Abb. N. C. 94).

In construing the meaning of the word “ revenue,” as used in the appropriation acts of 1881 and 1882, already quoted, other facts than the mere appropriation of money may be regarded; and it is proper not only to look at the previous ■state statutes, passed upon the subject of the land grant of congress, and its acceptance by legislative action, but also to ■carefully read the act of congress donating the land, as that act is the foundation upon which all our state statutes upon the subject are based. This may be done for the purpose of determining what was the true intent of the legislature when it appropriated these sums from the “ revenues ” of the trust fund.

The clear purpose of the act of- congress cannot .be mistaken. It was to provide a fund from the sale of the public lands or of the land scrip, of which the state should be the trustee and the safety of which should be guaranteed by it; and the whole interest of the principal sum was to be used for the purposes mentioned in the act, without the deduction of any costs, charges, or expenses of any name or nature. The whole actual earning of the fund was to be used for this purpose, and all expenses of management or disbursements were to be paid by the state which received the donation, so that, in the language of the federal legislature, “ the entire proceeds of the sale of said lands shall be applied without any diminution whatever to the purposes ” thereinafter mentioned. With this legislation of congress thus plainly set forth in the act of donation, the state, by accepting the donation by legislative act, took upon itself to comply, and it has assented to the terms and conditions of the act upon which the donation was made. In the first act of the legislature upon this subject it provided that the treasurer, on the warrant of the comptroller, should from time to time pay, out of any moneys in the treasury not otherwise appropriated, all the expenses of management, and superintendence, and taxes, if any, from the selection of said lands previous to their sale; and all expenses, incurred in the management and disbv/rsement of the moneys which might be received therefrom, and of all incidental matters connected with or arising out of the care, management and sale of the said lands; so that the entire proceeds- of the sale of said lands should be applied, without amp diminution whatever, to the purposes mentioned in said act of congress.”

This language is plain, and it shows the legislative intent to. fully comply with the conditions contained in the act of conr gress. It only required subsequent appropriations to pay over the entire proceeds of the trust fund to the beneficiary, and in this way the purpose of the federal act and of this state statute, would be fully carried out. In the same act 'the legislature also provided for the investment by the comptroller of these-trust funds in stocks of the United States, or of this state, or in some other safe stocks, yielding not less than five per cent of the par value of said stocks, and the moneys so invested were declared to constitute a perpetual fund, the capital of which should remain forever undiminished, except as provided for in and by said act of congress.

And in the act incorporating Cornell University the statute-provided for the payment to the university of all the income, revenue and avails received from the investment of the pro ceeds of the sale of the lands or of the scrip therefor, or for any part thereof, granted to the state by the act of congress above mentioned.

Bearing in mind the relations between the federal and state-governments upon the subject of this land grant, and that Cornell University has received the benefits of the trust fund on tho conditions heretofore mentioned, we are in a position to inquire intelligently what was meant by the legislature when it used the language it did in appropriating moneys for the university in the years 1881 and 1882. In each of those years the legislature appropriated $25,000 to the Cornell University, and in making such appropriations it used this language: “ Payable, from the college land scrip fund, revenue, for the Cornell University, $25,000.” What did it mean by the use of such language ? Did it mean that the revenues of the trust fund were only such revenues as remained after the payment from them of those very expenses, which, by the terms of the act of congress, and by its own legislative act in accepting the land grant, the state was itself bound to pay, or did it mean that in accordance with both the act of congress and its own plain legislation upon that subject, theretofore adopted and passed, the term “revenue” included all the revenue-arising from the bonds purchased, without diminution or-subtraction by reason of expenses for investment or premiums, paid on such bonds, and that all such interest should, in good faith, be paid by it to this university which it had established and which was to receive the benefits accruing by reason of this act of congress? We think plainly it meant the latter. The state had not only received the lands and had thus become,possessed of this trust fund upon the conditions already mentioned, and by its legislation had accepted such conditions,, but in its act creating this university, and as a part consideration for its donation to it of the interest on this fund, it hadi required that the university should annually receive one hundred and twenty-eight students, that is one from each assembly-district, who should be gratuitously instructed by it in any or- in all the prescribed branches of study in any department of said institution. Thus, at the end of four years, and from that time on, there would be, if all the places were filled, five hundred and twelve students availing themselves of gratuitous instruction from this institution. That certainly is a large item and must necessarily be a heavy burden to be borne by it, and it was undoubtedly placed upon it by the state because •of the fact that the university was to receive1 the revenue arising from the large sum above referred to, free and clear of all expense in relation to it. The effect' of the opposite construction is stated in the language of the case when it says that, if this action of the comptroller is justified, •Cornell University will be deprived wholly of the income from this fund for nearly two years. In our opinion the comptroller was not justified in charging upon his books the sum of thirty-eight thousand and odd dollars against the income for the purpose of taking for the state such income as might accrue in the future until it amounted to that sum. Whatever amount was necessary then, or may be necessary hereafter to expend in the way of premiums for investments for this fund, comes within the plain meaning of the acts of this state already referred to, and such amounts are expenses connected with the management and maintenance of the fund, which should be made good by the state by an appropriation from its treasury. In this way the principal is kept intact, and the whole income is payable to the university, and it is the only way in which it can be done. Although the comptroller was not justified in charging this amount to the revenue account, yet still this court cannot grant relief in the way of a mcmdcwrws for any greater sum than is actually in the treasury, and which arises from the revenues of that trust fund, and for which an appropriation has been made. The-comptroller purchased $200,000 of bonds, upon which he receives interest, and he paid a large premium for them. Whether he charges that premium to the principal or to the income has no effect whatever upon the fact that he receives as' interest upon that particular investment but $8,000. The whole of that amount is revenue within the meaning of that word as used in these statutes, having reference to all the circumstances already set forth. We, therefore, differ with the General Term so far as to say that the whole of the interest received should be paid by the comptroller under the language used in these appropriations up to the amount in each year actually appropriated, and no part of it should be set apart for the purpose of making good the ■charge of the comptroller against the income of the fund. It is the plain duty of the state to itself make the appropriation necessary to pay the premium upon bonds purchased, and to thus keep the principal of the trust fund entirely and absolutely intact, and to appropriate to the university every dollar of income. But, if it did not perform its duty, this court cannot compel the comptroller to pay out any funds for which the appropriation has not been actually made, nor can it compel him to pay to the university any greater sum than he has actually received as interest from the bonds which he purchased, or the other investments in which the trust fund remains. We agree with the General Term that the comptroller could not pay under the language of these appropriations any greater sum than he actually received as interest, and we do not think that the state is liable to pay any greater sum than it was enabled to receive by reason of its investment of its trust fund in safe stocks, as mentioned in the act of congress and in the statutes of our own state.

In preparing the opinion in the McGraw Case (111 N. Y. 66), reference was incidentally made to the duties of the state in connection with the trust fund. The subject arose while discussing the claim of the university that all the moneys arising from the Cornell contract of 1866, therein referred to, formed part of the -trust fund which belonged to the state, the interest of which was to be paid to the university. It was then stated that such a claim, if well founded, cast a great responsibility upon the state, and the requirements of the statute were then substantially recited as to the investment and payment of interest. The language of the opinion cannot be said to adjudge the point that the state was to guarantee the payment of the five per cent interest, as the guaranty had reference to the principal sum, which was to be kept intact, while the interest on an investment was assumed to be at the rate of five per cent, and it was all to be paid to the university without any deduction.

But there was no question of this nature before the court, in that case and none such was decided. The state could not obtain at par bonds of the character described in these acts, paying interest at the rate of five per cent, and we do not think, in view of the language both of the act of congress and of the statutes of the state, that the latter is liable, at all events,, to insure to the university five per cent upon the amount of the trust fund, irrespective of the rate which it is enabled to' receive by investing the fund in bonds of the character named in the legislation, both state and national, upon the subject.

We, therefore, modify the order of the General Term and direct the comptroller to issue his warrant for the payment to the university of all the interest from the investment remaining in his hands up to the amount of the $25,000 appropriated in each year respectively. If the amount is not agreed upon the order can be settled on notice.

All concur, except Finch, J., not sitting.

Judgment accordingly.