Opinion of the court.

reached under such a pledge of faith alone, because a suit could not be prosecuted for that purpose.

Understanding this, a lien was given upon the stock as security "in addition" to the pledge of faith. But it was no addition if the bondholder had no power to make his security available. A lien which cannot be enforced has no value as a security. These parties were engaged in no such vain work. It was clearly their understanding that the State not only should, but that it in fact did, grant to the bondholders the power to use the machinery of the courts to subject this portion of their security if default should be made in the payment of the debt.

In sustaining this action, then, we are but carrying into effect the manifest intention of the parties at the time the money was borrowed.

The next objection is that the stock was pledged as security for the payment of the principal of the debt alone, and not the interest, and that as the principal is not yet due there can be no decree for a sale.

The stock was pledged for the "redemption of the certificate of debt." The certificate bound the State "for the payment of the sum therein mentioned, with interest thereon." Thus it is apparent that the interest is as much a part of the obligation of the certificate as the principal. If more is necessary to sustain this view, it is to be found in a subsequent part of the section where it is provided that the "principal of the certificate shall be redeemable," etc. If it had been supposed that the certificate only related to the principal, it would have been sufficient to provide for the time of the redemption of the certificate, the same as in Section 41, the security for the redemption of the certificates was designated and granted.

If then the certificate bind the State for the payment of both principal and interest, it would seem to follow most unquestionably that whatever was given as security for its redemption could be held for the performance of all its obligations.

But it is argued that the dividends are specially designated as security, and the only security, for the payment of the interest. The language of the act is that the dividends "shall be applied to the payment of the interest accruing on such certificates."

Opinion of the court.

This is additional security. Without it (as the State could not be sued) there was no power to compel this application. With it there was. The officer in whose custody the dividends were placed, was, so long as the fund remained in his hands, amenable to the process of the courts to compel him to do what the law required of him.

It is again claimed that, as it was made the duty of the treasurer, until dividends were declared, to pay the interest as it accrued out of any moneys in the treasury not otherwise appropriated, it could not have been intended that the stock should be held for anything but the principal. This, too, was additional security. Without it the bondholder had no power to enforce the payment of the interest. With it, after default, upon a proper showing, the treasurer could be compelled to apply the unappropriated moneys in his hands to discharge that obligation.

Neither can an argument in favor of the claim of the defendant be drawn from the fact that the stock is pledged for the redemption of the certificate. It is true the principal of the certificate was made redeemable at the end of thirty years, and that the interest thereon was payable semi-annually. The certificate could not be redeemed until both principal and interest were paid.

Redemption and redeemable are, therefore, in this connection, only other names for payment and payable, and the General Assembly appears to have used the words as though they conveyed the same meaning.

If the stock was not given in security for the interest, then the faith of the State was not pledged for its payment, for that, like the stock, was only pledged for the redemption of the certificate. So, too, if no payment of interest should be made during the whole thirty years, no part of the stock could be applied to its payment then, even though its value should be sufficient to discharge both principal and interest. If the stock is held at all for the payment of the interest, it may be subjected at any time after a semi-annual instalment falls due.

For these reasons we are clearly of the opinion that the plaintiff, and those whom he represents, are entitled to have their proportion of the stock, or so much thereof as may be necessary,

Syllabus.

sold in order to pay the past due interest upon their bonds. They can act, however, only for themselves. So much of the stock as equitably belongs to them as security they can control in this action, but no more. The security is divisible, and should be apportioned to the various bondholders according to the amount of their respective claims. Each bondholder should have an amount of stock which bears the same proportion to the whole stock that his bonds do to the whole amount outstanding. We are not willing, however, to order that a sale be made until ample time has been given the State to provide, by levy and collection of taxes, the necessary funds for the payment of the interest now past due, and such as may fall due before the money can be realized and applied. An account may be taken of the amount due for unpaid interest upon the bonds represented in this cause, and of such as will mature on or before the first day of April, 1875, and a decree entered that if full payment thereof is not made by that day, so much of the stock apportioned as security to the plaintiff, and those he represents, as may be necessary to pay the same, be sold. If on or before the day of sale it shall be made to appear to the court that the State has, in good faith, levied a tax to pay the arrears of interest on the debt, and provided for its collection, the sale will be further suspended until a sufficient time shall have elapsed for the collection to be made.

U. S. Circuit Court, Eastern District of North Carolina, at Raleigh, June 18th, 1874.

SELF v. JENKINS, STATE TREASURER.*

Where money in a State treasury devoted by the State Constitution to the payment of a particular indebtedness has been applied by direction of the State legislature to another purpose, and, afterwards, money comes into the State treasury which a public creditor, who was entitled to the money first unapplied, seeks to have paid to himself in discharge of his claim: Held, that although a court of chancery might properly have

*This case is also reported in 71 N. C. Reports, 578.

Opinion of the court.

enjoined the State treasurer from the original misapplication, on bill filed in time, yet that it has no power, after the misapplication, to restrain the State treasurer from applying to the general purposes of the State subsequently received moneys, not especially dedicated by law, nor to compel the treasurer by mandamus to substitute such general funds for the moneys already improperly paid.

IN equity.

The facts are fully set forth in the opinion of the court delivered by

WAITE, C. J.-Article 5, section 5 of the Constitution of North Carolina is in these words:

"Until the bonds of the State shall be at par the General Assembly shall have no power to contract any new debt or pecuniary obligation in behalf of the State, except to supply a casual deficit, or for suppressing invasion or insurrection, unless it shall in the same bill levy a special tax to pay the interest annually. And the General Assembly shall have no power to give or lend the credit of the State in aid of any person, association, or corporation, except to aid in the completion of such railroads as may be unfinished at the time of the adoption of this Constitution, or in which the State has a direct pecuniary interest, unless the subject be submitted to a direct vote of the people of the State, and be approved by a majority of those who shall vote thereon."

Article 5, section 8, is in these words:

"Every act of the General Assembly levying a tax shall state the special object to which it is to be applied, and it shall be applied to no other purposes."

The Wilmington, Charlotte and Rutherford Railroad Company was incorporated in 1855, to construct a railroad from Wilmington to Rutherford. This railroad was unfinished at the time of the adoption of the Constitution.

By an act of the General Assembly, passed on the 29th January, 1869, the capital stock of this company was increased to seven million dollars, and, in order to complete the road, the public treasurer was directed to subscribe four millions of dollars to the stock. Payment of this subscription was to be made in the bonds of the State having thirty years to run, the interest, at six per cent., being payable semi-annually. To provide for the payment of the interest and the principal at its maturity, the act

Opinion of the court.

imposed an annual tax of one-eighth of one per cent. upon taxable property of the State, to be levied, collected, and paid into the treasury as other public taxes.

This authorized subscription was made, and bonds to the amount of $3,000,000 delivered to the president of the company in part payment thereof.

The special tax provided for was levied in 1869, and $151,491.13 collected therefrom and paid into the treasury. Out of this, $29,400 was paid on account of the interest accruing upon the bonds; but on the 20th of January, 1870, a resolution was adopted by the General Assembly instructing and directing the treasurer not to pay any more until authorized by the General Assembly, and he thereupon suspended the payment.

On the 8th March, 1870, the General Assembly repealed the act making appropriations to the railroad company, and directed all the bonds in the hands of the president to be returned to the

treasurer.

On the 12th of the same month, the General Assembly, by a law duly enacted, directed the treasurer to use $150,000 of the special tax funds, in payment of the ordinary expenses of the State government, and to pay advances theretofore made by the board of education, and authorized him to replace the same out of the first moneys which might come into his hands by way of dividends of corporations or of taxes theretofore or thereafter to be levied.

By another act, passed December 20th, 1870, he was directed to use $200,000 more of the same funds in payment of the ordinary expenses of the State government, and the appropriations for the charitable and penal institutions, and to replace the same from the first moneys paid into the State treasury from dividends or taxes levied and collected for general purposes.

In obedience to these directions the treasurer used $122,091.13 of the fund collected to pay interest on these bonds for the purposes specified in the acts.

On the 20th December, 1871, the treasurer was forbidden by the General Assembly to apply any money collected under the Revenue Act of 1871 to the repayment of any moneys borrowed under the act of December, 1870.