Learned, P. J.:
In considering the duties of the comptroller we can look only to the statutes of this State. Whatever may be the terms of the act of congress; whether, or not, the State promised by its statute to comply with those terms; whether the statutes of the State are, or are not, a substantial compliance therewith; all these are questions with which we have nothing to do. The comptroller is an officer-of the State and must obey its laws. He cannot disobey them, on the ground that, by the contract with the United States, the State should have passed a different law. That is a matter between the United States and this State. Perhaps the statute of the State does not conform to the conditions of the grant. But whether it does, or not, we must be governed by it.
The first clause of section 5 of the act of congress declares, as a condition of the grant, that if any portion of the fund invested or any portion of the interest shall, by any action of contingency be diminished or lost, it shall be replaced by the State; so that the capital shall remain undiminished and the annual interest shall be regularly applied without diminution. Now, it is urged by the relator that that condition, accepted by the State, constructively imposes on the State an obligation to make good the interest at the rate of five per cent at all hazards. If this [182]*182be so, tbe question whether the comptroller should have charged premiums against the revenue account is of little consequence; since, on that theory, he is to pay the relator five per cent without any reference to his receipts. Rut certainly the comptroller has no right to compel the State to perform this contract, which it is supposed to have made with the United States. If such a'contract was made by the act of 1863, it is for the legislature alone to carry it out, by providing for deficiencies of income. The comptroller can only obey the laws already passed.
Further still, the relator stands in no position to insist on the benefit of the conditions contained in the act of congress. The relator is a mere volunteer, to which the legislature, by chapter 585, Laws of 1865, appropriated “the income, revenue and avails which shall be received from the investment of the proceeds of the sale.” The legislature did not, by that, act, or by the provisions of chapter 511, Laws of 1863, agree with the beneficiary that the income should be five per cent on the principal. It appropriated the income, such as it might be. If the State had agreed with the United States that it would replace any deficiency of the interest, lost by action or contingency, it could appropriate the amount thus replaced to any college within the intention of the act of congress. What it appropriated to the relator was only the actual income. To give the construction claimed by the relator would be to carry the doctrine of Lawrence v. Fox to a more mischievous extent than has yet been done. The legislature said to the relator we will give you the income which shall be received. The relator now says to the comptroller, give me the income which has not been received; because the State promised the United States to replace any deficiency.
We think, then, that the relator is not entitled to require the comptroller to pay five per bent on the principal, without regard to the actual income.
Another question is presented; and that is, what is the actual income ? The comptroller insists that the sums paid for premiums, -commissions and accrued interest must be made good out of the ■earliest receipts of income; and that, not until these sums shall have been made good, will there be any income from which to pay the relator. The relator insists that these sums are not chargeable [183]*183against income, but that they must be taken from the principal; thus imposing an obligation upon the State to replace the deficiency, which must arise therein.
And just at this point we may say what was in substance said above. The relator has no right to ask 'the comptroller to do any act which shall diminish the principal. Even if we were to assume that, whenever premiums are paid on the purchase of investments, the State ought to pay them, as it might pay expenses of taking care of the fund, still the State has not done this. And the comptroller has no right to do it. That is, he cannot treat the premiums as an éxpenditure, which the State ought to make good, and which he will, therefore, compel the State to make good, or else to leave the principal impaired.
The sums thus charged against the income, or revenue account, are •of three kinds, viz., accrued interest, commissions and premiums.
First. Accrued interest. That is properly charged against the income account. It is the interest already earned by the security purchased, and the amount of it will be returned to the interest account when the purchased security makes its next payment of interest.
Second. Commissions.
The act of the State (chap. 460, Laws 1863, § 3) requires that all •expenses in the management and'disbursement of the moneys which shall be received from the sale of the land scrip, shall be .paid out •of any moneys in the treasury not otherwise appropriated; so that the entire proceeds without any diminution whatever shall be applied to the purposes mentioned in the act of congress. Commissions paid on the purchase of securities are expenses incurred in the management of the moneys. They are not chargeable to the income account, nor to the principal.
Third. Premiums. These present the most important and most difficult question. When- the law of 1863 was passed it was evidently thought that a safe stock, yielding five per cent on the par value, could be purchased at par. Einancial afEairs have so changed ■that a four per cent stock of the United States is worth, and was worth at the time referred to in the present papers, more than nineteen per cent premium. It has become impossible' to do what was contemplated by the act of congress and by the statute of this [184]*184State, viz., to invest the fund in safe stocks at par bearing five per cent interest.
As between the State and the United States we do not think that it was intended that the State should guaranty that the fund, safely invested,- would forever produce five per cent. All that could have been intended was that the State should replace the loss of the fund,, or of part of it, arising from inability to collect and like causes. And, so far as the present question is concerned, there is nothing in the statutes, which the relator can insist upon, as a guaranty to-it that the fund shall be preserved inviolate.
The question for the relator is what, under the circumstances, is-the actual income of the fund. The income from an investment is that which it earns, remaining itself intact. Now it is plain that,, so far as the present question goes, it matters not whether the comptroller bought these United States stocks in the market, or bought them directly from the government itself. But the matter to be decided will appear more clear, if we consider the dealing to have been directly with the government. Viewed in that light the transaction was this: The comptroller loaned to the government (in round numbers) $238,000, receiving therefor its agreement to-repay, in the year 1907, $200,000, and meantime to pay four per cent annually on the latter sum. This does not present the case-of a loss, or accident, or failure to collect.
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Learned, P. J.:
In considering the duties of the comptroller we can look only to the statutes of this State. Whatever may be the terms of the act of congress; whether, or not, the State promised by its statute to comply with those terms; whether the statutes of the State are, or are not, a substantial compliance therewith; all these are questions with which we have nothing to do. The comptroller is an officer-of the State and must obey its laws. He cannot disobey them, on the ground that, by the contract with the United States, the State should have passed a different law. That is a matter between the United States and this State. Perhaps the statute of the State does not conform to the conditions of the grant. But whether it does, or not, we must be governed by it.
The first clause of section 5 of the act of congress declares, as a condition of the grant, that if any portion of the fund invested or any portion of the interest shall, by any action of contingency be diminished or lost, it shall be replaced by the State; so that the capital shall remain undiminished and the annual interest shall be regularly applied without diminution. Now, it is urged by the relator that that condition, accepted by the State, constructively imposes on the State an obligation to make good the interest at the rate of five per cent at all hazards. If this [182]*182be so, tbe question whether the comptroller should have charged premiums against the revenue account is of little consequence; since, on that theory, he is to pay the relator five per cent without any reference to his receipts. Rut certainly the comptroller has no right to compel the State to perform this contract, which it is supposed to have made with the United States. If such a'contract was made by the act of 1863, it is for the legislature alone to carry it out, by providing for deficiencies of income. The comptroller can only obey the laws already passed.
Further still, the relator stands in no position to insist on the benefit of the conditions contained in the act of congress. The relator is a mere volunteer, to which the legislature, by chapter 585, Laws of 1865, appropriated “the income, revenue and avails which shall be received from the investment of the proceeds of the sale.” The legislature did not, by that, act, or by the provisions of chapter 511, Laws of 1863, agree with the beneficiary that the income should be five per cent on the principal. It appropriated the income, such as it might be. If the State had agreed with the United States that it would replace any deficiency of the interest, lost by action or contingency, it could appropriate the amount thus replaced to any college within the intention of the act of congress. What it appropriated to the relator was only the actual income. To give the construction claimed by the relator would be to carry the doctrine of Lawrence v. Fox to a more mischievous extent than has yet been done. The legislature said to the relator we will give you the income which shall be received. The relator now says to the comptroller, give me the income which has not been received; because the State promised the United States to replace any deficiency.
We think, then, that the relator is not entitled to require the comptroller to pay five per bent on the principal, without regard to the actual income.
Another question is presented; and that is, what is the actual income ? The comptroller insists that the sums paid for premiums, -commissions and accrued interest must be made good out of the ■earliest receipts of income; and that, not until these sums shall have been made good, will there be any income from which to pay the relator. The relator insists that these sums are not chargeable [183]*183against income, but that they must be taken from the principal; thus imposing an obligation upon the State to replace the deficiency, which must arise therein.
And just at this point we may say what was in substance said above. The relator has no right to ask 'the comptroller to do any act which shall diminish the principal. Even if we were to assume that, whenever premiums are paid on the purchase of investments, the State ought to pay them, as it might pay expenses of taking care of the fund, still the State has not done this. And the comptroller has no right to do it. That is, he cannot treat the premiums as an éxpenditure, which the State ought to make good, and which he will, therefore, compel the State to make good, or else to leave the principal impaired.
The sums thus charged against the income, or revenue account, are •of three kinds, viz., accrued interest, commissions and premiums.
First. Accrued interest. That is properly charged against the income account. It is the interest already earned by the security purchased, and the amount of it will be returned to the interest account when the purchased security makes its next payment of interest.
Second. Commissions.
The act of the State (chap. 460, Laws 1863, § 3) requires that all •expenses in the management and'disbursement of the moneys which shall be received from the sale of the land scrip, shall be .paid out •of any moneys in the treasury not otherwise appropriated; so that the entire proceeds without any diminution whatever shall be applied to the purposes mentioned in the act of congress. Commissions paid on the purchase of securities are expenses incurred in the management of the moneys. They are not chargeable to the income account, nor to the principal.
Third. Premiums. These present the most important and most difficult question. When- the law of 1863 was passed it was evidently thought that a safe stock, yielding five per cent on the par value, could be purchased at par. Einancial afEairs have so changed ■that a four per cent stock of the United States is worth, and was worth at the time referred to in the present papers, more than nineteen per cent premium. It has become impossible' to do what was contemplated by the act of congress and by the statute of this [184]*184State, viz., to invest the fund in safe stocks at par bearing five per cent interest.
As between the State and the United States we do not think that it was intended that the State should guaranty that the fund, safely invested,- would forever produce five per cent. All that could have been intended was that the State should replace the loss of the fund,, or of part of it, arising from inability to collect and like causes. And, so far as the present question is concerned, there is nothing in the statutes, which the relator can insist upon, as a guaranty to-it that the fund shall be preserved inviolate.
The question for the relator is what, under the circumstances, is-the actual income of the fund. The income from an investment is that which it earns, remaining itself intact. Now it is plain that,, so far as the present question goes, it matters not whether the comptroller bought these United States stocks in the market, or bought them directly from the government itself. But the matter to be decided will appear more clear, if we consider the dealing to have been directly with the government. Viewed in that light the transaction was this: The comptroller loaned to the government (in round numbers) $238,000, receiving therefor its agreement to-repay, in the year 1907, $200,000, and meantime to pay four per cent annually on the latter sum. This does not present the case-of a loss, or accident, or failure to collect. It is a part of the-bargain, that, in order to secure a greater amount annually, the lender consents to take less at the end of the .loan. If the comptroller had lent to the government $238,000, to be repaid in frill, he would have received rather less than three per cent; taking as-authority for that statement the market price of stocks, and the income would have been (say) $7,100. Hence it may be seen that the whole of the $8,000 annually received on the four per cent, stocks cannot justly be considered income.
It is a,, common matter with bankers and dealers in stocks to compute, by the aid of tables, what the actual income is, of a stock running a certain definite time, for which a certain premium is-paid. That actual income is plainly less than the amount yearly received, because the premium paid must be so distributed, in the-calculation, over the time the stock has to run, thatdhe owner at the-end of the time will have his original investment unimpaired-[185]*185Otherwise (though he may not notice this), he will have been gradually impairing his capital; in fact, using it up in the form of income.
To illustrate this, let us suppose a person is trustee for one for . life with remainder absolutely to another. The trustee holds $120,000. If he invests in three per cent United States bonds at par, the tenant for ]ife receives annually'$3,600 and the remainder man will (except for unforseen calamities) have the estate unimpaired.
But if, in order to give the tenant for life a better income, the trustee invests in United States four per cepts (say at 120) and pays all that is annually received to the tenant for life, then such tenant receives $4,000 annually, and the remainder man, supposing the tenant to live to the year 1907, gets but $100,000. (See Farwell v. Tweddle, 10 Abb. N. C., 94.) This would not he just. Nor on the other hand would it be just to stop all payment of income for five years, until the annual $4,000 had made up the premium of $200,000.
That the mode of charging adopted by the comptroller is not fair may be seen from this. ' In a year or two the revenue Will have paid these premiums. And at that time these United States four per cent bonds, standing in the account of principal at' $200,000, will still be worth nearly their present amount of $238,000. So that, at the expense of the income, the principal will then have been increased by about $38,000; an increase which, of course, will eventually be lost, when the bonds are paid off.
On the other hand, the rule above stated will maintain the principal and available revenues uniform. That rule is that so much only of the moneys received annually on these bonds shall be treated as income as, according to the computations and tables above mentioned, they are found to produce. (We do not attempt te make the calculation. It is probably about $7,100.) The residue belongs to the principal; and annually added thereto will make up for the gradual depreciation which must come, as the bonds approach maturity; and will keep the fund unimpaired when they are paid off.
It will be noticed that we have not been discussing the case of accidental losses, or of fluctuations in value; but only the case where a sum has been invested, upon an agreement to receive back a certain definite less sum, at a certain fixed time, and meantime a [186]*186certain annual payment. In that case wc think that the whole of the annual payment cannot be treated as income ; when a question arises between the principal fund on the one hand and the income on the other. The income, as above said, from an investment is that which it earns, remaining itself intact.
The view of the matter above stated will probably entitle the relator to a mandamus requiring the- comptroller to pay a certain sum ascertainable by calculation. And that amount can be ascertained and fixed in the order.
Order denying mandamus reversed and mandamus granted ■according to above views. No costs.
Present — Learned, P. J., and Bookes, J.; Boardman, J., not acting.
Order reversed and ma/ndamus granted according to the terms of the opinion.