The decision of the Court in the preceding case of
Woodruff v.
Trapnall again affirmed.
But although the pledge of the state to receive the notes of the
bank in payment of all debts due to it in its own right was a
contract which it could not violate, yet where the state sold lands
which were held by it in trust for the benefit of a seminary, and
the terms of sale were that the debtor should pay in specie or its
equivalent, such debtor was not at liberty to tender the notes of
the bank in payment. And this was true although the money to be
received from the debtor was intended by the legislature to be put
into the bank and to constitute a part of its capital. The fund
belonged to the state only as a trustee, and therefore was not,
within the meaning of the charter, a debt due to the state.
By the terms of sale, also, to pay "in specie or its
equivalent," the notes of the bank were excluded.
The same question was involved which was raised in the preceding
case of
Woodruff v.
Trapnall, namely whether the State of Arkansas
could refuse to receive the notes of the Bank of the State of
Arkansas under the circumstances therein stated, and also the
additional question whether she could refuse to receive the notes
in her character of trustee under the following circumstances.
Page 51 U. S. 219
On 2 March, 1827, Congress passed an Act, 4 Stat. 235, entitled
"An Act concerning a seminary of learning in the Territory of
Arkansas," by which two entire townships of land were directed to
be set aside and reserved from sale, out of the public lands within
said territory, for the use and support of a university within said
territory.
On 23 June, 1836, Congress passed another Act, 5 Stat. 38,
entitled "An Act supplementary to the act entitled
An Act for
the admission of the State of Arkansas into the Union,' and to
provide for the due execution of the laws of the United States
within the same, and for other purposes," by which the lands so
reserved were vested in the State of Arkansas.
On 28 December, 1840, the Legislature of Arkansas passed an act
entitled "An Act to authorize the governor to dispose of the
seminary lands."
On 13 May, 1842, Archibald Yell, then Governor of Arkansas, sold
to John W. Paup the right to enter and locate six hundred and forty
acres of the above lands, and received from him five bonds, payable
in one, two, three, four, and five years after date, in specie or
its equivalent, with James Trigg and Richard Pryor as sureties. The
amount of the bonds was $3,920.
In October, 1847, Thomas Drew, as Governor of the state, and
successor to Archibald Yell, brought a suit upon these bonds in the
Pulaski Circuit Court.
On 21 October, 1847, the defendants brought into court the sum
of $6,050 in notes of the Bank of the State of Arkansas, and
pleaded a tender of the same in discharge of the debt. The plea
further set forth the act incorporating the bank as it is stated in
the report of the preceding case of
Woodruff
v. Trapnall.
On 25 October, 1847, the plaintiff's counsel demurred to this
plea, setting forth, amongst other causes of demurrer, the
following:
"4th. That the proceeds of said bonds are part of a trust fund
committed to the state by Congress for special purposes, over which
the state has no power except to collect and disburse the same in
pursuance of the objects of the grant, and the said state has no
power to apply said funds to the payment of her ordinary
liabilities, nor is the state bound to accept in payment of such
bonds any depreciated bills, bank paper, or issues, even though she
may be ultimately liable to redeem such depreciated bills, bank
paper, or issues."
"5th. The said bonds sued on never constituted any part of
Page 51 U. S. 220
the capital stock of said State Bank, nor were the issues of
said bank ever made receivable in payment of debts due the state in
a merely fiduciary capacity."
On 23 December, 1847, the Pulaski Circuit Court sustained this
demurrer, and gave judgment for the plaintiff in the sum of $3,920,
together with $2,199.44 damages, with interest on said debt and
damages at the rate of ten percent per annum till paid.
The case was carried to the Supreme Court of the State of
Arkansas upon a bill of exceptions which court, on 24 July, 1848,
affirmed the judgment of the Pulaski Circuit Court as follows:
"This cause came on to be heard upon the transcript of the
record of the Circuit Court of Pulaski County, and was argued by
counsel; on consideration whereof, this court doth adjudge and
decide that the Act of the General Assembly of the State of
Arkansas approved January 10, 1845, repealing the twentyeighth
section of the act of said General Assembly of said state
incorporating said bank of said state is not a law impairing the
obligation of any contract involved in this case, nor contrary in
any wise in regard to this case to the Constitution of the United
States, which was one of the questions in issue and necessary to be
adjudicated in this case, and that said state is in no wise bound
by law to receive the bills and notes of said bank, issued before
the passage of said Act of January 10, 1845, in payment of the
debts due to said state, as laid in the declaration, which was one
other question involved in and necessary to the adjudication of
this case; wherefore there is no error in the proceedings and
judgment of said circuit court in this cause."
"It is therefore considered by the court that the judgment of
said circuit court in this cause rendered be and the same is hereby
in all things affirmed with costs. It is further considered that
said defendant recover of said plaintiffs all his costs in this
court in this cause expended, and have execution thereof."
From this judgment, a writ of error brought the case up to this
court.
Page 51 U. S. 221
MR. JUSTICE McLEAN delivered the opinion of the Court.
A judgment was rendered in the Pulaski Circuit Court against the
plaintiffs in error on 23 December, 1847, for six thousand one
hundred and nineteen dollars and costs on bonds payable at
different times given for the purchase of a part of certain lands
granted to the state by Congress for the support of a seminary, and
which lands were sold by the governor, as the agent of the state,
under the authority of the general assembly. The bonds were made
payable and negotiable at the State Bank of Arkansas "in specie or
its equivalent."
The defendants pleaded a tender in the notes of the State Bank
of Arkansas, and relied upon the twentyeighth section of the
charter of the bank, which provided "that the bills and notes of
said institution shall be received in all payments of debts due to
the State of Arkansas," that the notes of the bank tendered were
issued while this section was in full force, and which constituted
a contract to receive them in payment of debts by the state, which
the state could not repudiate, &c.
There was a demurrer to the plea, which was sustained by the
court. The case was submitted to a jury, whose verdict was for the
plaintiff, on which a judgment was entered. A writ of error was
prosecuted to the Supreme Court of Arkansas, on which the judgment
of the circuit court was affirmed.
By the Act of 2 March, 1827, the Secretary of the Treasury was
authorized to set apart and reserve from sale of the public lands
within the Territory of Arkansas a quantity of land not exceeding
two entire townships for the use of a university, &c. And by
the Act of 23 June, 1836, it is provided,
"That the two entire townships of land which have already been
located by virtue of the above act are hereby vested in and
confirmed to the general assembly of the said state, to be
appropriated solely to the use of such seminary by the general
assembly."
Under the Act of the state of 28 December, 1840, these lands
were sold by the governor of the state, and the bonds now in
question were given on the purchase of a part of them as above
stated.
Page 51 U. S. 222
The entire capital of the bank is owned by the state, and its
concerns are managed by the agents of the state. The directors of
the principal bank and of the branches are elected by the
legislature of the state.
In the case of
Woodruff v.
Trapnall, decided at the present term, this Court
held that the twentyeighth section in the charter constituted a
contract between the state and the holder of the bills of the bank.
That the pledge of the state to receive the notes of the bank in
payment of debts was a standing guarantee which embraced all the
paper issued by the bank until the guaranty was repealed. And that
this construction was founded upon the fact that the bank belonged
exclusively to the state, was conducted by its officers, and for
its benefit. That the guarantee attached to the notes of the bank
in circulation at the time of the repeal, and such notes the state
was bound to receive in payment of its debts. That in this respect
the obligation of the contract applied to a state equally as to an
individual. And that as to the binding force of a similar guarantee
by an individual there would seem to be no ground for doubt. But
that under this guarantee, the state is bound to receive the notes
of the bank only in payment of debts in its own right.
The lands sold did not belong to the State of Arkansas, but were
held by it in trust "to be appropriated solely for the use of the
seminary." The money, of course, secured to be paid by the
purchaser partook of the same character. The bonds were made
payable to the governor or his successor in office. And it appears,
as stated in the plea, that the money to be received was intended,
under the act of incorporation of the bank, to constitute a part of
its capital. The governor acted as the agent of the state in making
the sale of the land and in collecting the money, but he could only
represent a trust interest. The manner in which the money was
intended to be appropriated can in no respect affect the question
now under consideration. In law, the money did not belong to the
state in any other capacity than as trustee, and consequently the
debt was not due to the state in its own right. No court can
sanction the violation of a trust, but will always act on the
presumption that it will be faithfully executed. And this is
especially the case when the trust is vested in a state, which is
not amenable to judicial process. To hold that the State of
Arkansas is bound, under the provision in the charter of the bank,
to receive its notes in payment for the seminary lands would
violate the trust, as it would greatly reduce the fund. Should the
money be invested by the state and lost, it would be responsible
for it. No hazard incurred in the appropriation
Page 51 U. S. 223
or use of this money could exonerate the state from faithfully
carrying out the object for which the fund was originally
constituted.
The bonds were given payable "in specie or its equivalent." This
shows that it was the understanding of both parties that currency
less valuable than specie should not be received in payment of the
bonds. If by a contract the state was bound to receive the notes of
the bank in payment of its debts, by a contract this obligation
might be waived. And no waiver could be more express than an
obligation by the debtor to pay in specie or its equivalent.
We are therefore of opinion that as this fund is a trust in the
hands of the state, it cannot, within the twentyeighth section of
the charter of the bank, be considered a debt due to the state, and
we think by the condition of the bonds to discharge them "in specie
or its equivalent," the notes of the bank are also excluded. On
both these grounds, the contract set up in the pleading not being
impaired, we think the judgment of the state court must be
Affirmed.
MR. JUSTICE CATRON, MR. JUSTICE DANIEL, MR. JUSTICE NELSON, and
MR. JUSTICE GRIER gave separate opinions as follows:
MR. JUSTICE DANIEL.
I concur in the conclusion adopted by the Court in these causes
(
Paup v. Drew and
Trigg v. Drew), but whilst I do
this, I cannot claim to myself the argument upon which that
conclusion professes to be founded. The principles and reasonings
propounded in these cases and in that of
Woodruff
v. Trapnall appear to me to place all three of the
cases essentially upon the same platform, and establish no valid or
sound distinction between them, but should, if those principles and
reasonings be correct, have led to the same conclusion in them
all.
MR. JUSTICE CATRON.
I concur with my brother DANIEL.
MR. JUSTICE NELSON.
I concur in the judgment of the Court on the ground first, that
the act of the legislature of the State of Arkansas repealing the
provision of a previous act, by which the bills of the Bank of
Arkansas were authorized to be taken in payment of the public dues
and taxes, was constitutional and valid, and the defendant
therefore bound to discharge his obligation
Page 51 U. S. 224
in the legal currency of the country, and secondly that if
otherwise, the obligor in this case has expressly stipulated to pay
the debt in specie or its equivalent.
MR. JUSTICE GRIER.
I concur with my brother Nelson.
Order
This cause came on to be heard on the transcript of the record
from the Supreme Court of the State of Arkansas, and was argued by
counsel. On consideration whereof it is now here ordered and
adjudged by this Court that the judgment of the said supreme court
in this cause be and the same is hereby affirmed with costs and
damages at the rate of six percent per annum.
