APPENDIX TO THE BREVIER LEGISLATIVE REPORTS.
VOLUME TWELFTH.
WABASH AND ERIE CANAL--DEBATE IN CONTINUATION.
IN SENATE.
THURSDAY, January 17, 1871.[CONTINUED FROM THE FOOT OF PAGE 79.]
In May, 1846, the foreign bondholders held a meeting in the city of London, and this act was fully considered by them. After full discussion, various amendments and modifications were drawn up and put in proper form and placed in the hands of Mr. Butler, to be by him presented to the next General Assembly of this State, which met December, 1846. At that meeting of the General Assembly, Mr. Butler presented the amendments that had been prepared at the London meeting, and urged that they should be made the subject of a legislative act. The result was that on the 27th of January, 1847, the Legislature of the State passed an act supplemental to that of January 19, 1846, the object of which was to more clearly define the rights and privileges of the creditors under the act of January 19, 1846, and to more completely and successfully provide for carrying into effect the compromise and settlement of the debt, as made by the original act. The first four sections of the elemental act expressly provided that one half of the debt should be paid out of the revenues of the State, and the other half only to be paid out of the canal lands, the tolls, revenues and proceeds of the canal. The supplemental act also furnishes the forms for the bonds to be issued under said acts. For that half of the principal of the debt to be paid out of the revenues of the State the bond, as furnished by the act, provides:
"Be it known, That the State of Indiana owes to A. B. or his assigns, the sum of one thousand dollars, being part of the principal of the bonds of the State declared to have been surrendered to the State by act of surrender of this date, and which amount of one thousand dollars bears interest at the rate of five per centum per annum from the first day of January,1847, payable half yearly, in the City of New York, at the times and in the manner declared by the acts of the Legislature above mentioned."
For the other half of the principal of the debt the bond provides:
"Be it known, That the Wabash and Erie Canal, and all tolls, lands and effects appertaining thereto, from the State line to Evansville, on the Ohio river, as described in the above mentioned acts of the Legislature, and all the property of the State of Indiana therein, are irrevocably pledged, in virtue of the said acts, to A. B. and his assigns, for the sum of one thousand dollars, represented by this certificate forming part of the bonds of the State declared to have been surrendered by an act of surrender of this date), together with interest upon the same at the rate of five per centum per annum from the first day of January, 1847, payable semi-annually, by equal payments at the times, and in the form and manner prescribed in the acts of the Legislature of the State of Indiana above mentioned."
The forms for the bonds for the interest are in the same language.
It seems to me clear that, by the terms and provisions of the acts of 1846-47, the State is relieved from all moral or other liability to pay any part of her old internal improvement debt except that moiety which, by the provisions of the acts, was expressly laid to her charge. The language of the acts clearly show that such is the fact. That legislation was not ordinary legislation. It was not the action of Legislators putting forth their own will and opinions independent of the desires and opinions of others, but it was the joint action of the Legislature representing the State and of Charles Butler, Esq., representing her creditors. It was the concurrent action of creditor and debtor adjusting an existing debt, and each are bound by it for all time to come It was a legislative contract entered into by the State at the solicitation of her creditors, and every clause, proviso, and matter and thing contained in it are binding upon all parties connected with it.
MEMORIAL OF BONDHOLDERS OF 1857.
In a memorial presented to the Legislature of this State, in 1857, by the bondholders, they say:
"In their anxiety both for their own interests and the continued prosperity and honor of the State, a large body of them united in 1845 in sending their agent, Mr. Charles Butler, of New York, to Indianapolis to confer with the Governor and Legislatare, as well as the principal citizens, in regard to some judicious measure by which the interests of all parties should be secured and promoted."
In all deliberations had in reference to the accomplishment of this object, Mr. Butler, the accredited agent of the bondholders, was present and participated, and his pen drew many of the main provisions of the acts of 1846-7. And it was mainly through his efforts that the State changed her position of guarantor to that of actual debtor. The compromises and settlement of the debt of 1846-7 were sought by the creditors of the State. When that settlement was made they all acquiesced in it, and it is now too late to change or disturb it.
page: 2[View Page 2]On the 30th of May, 1846, a committee of the European bondholders held a meeting in the city of London. The object of that meeting was to take into consideration the adjustment and settlement of Indiana's public debt, and to consider whether the provisions of the act of January 19, 1846, were fair and equitable. At that meeting it was resolved:
" That under the circumstances stated in the report of Mr. Charles Butler, confirmed by a letter of His Excellency, James Whitcomb, dated 5th February last, addressed to Mr. Palmer, it is the opinion of the committee that it will be for the interest of the bondholders of the State of Indiana to concur in the principle laid down in the act of the Legislature, passed at Indianapolis on the 19th of January, for the adjustment of the debt of that State, by the payment of one moiety of the principal and interest by taxation, and the other moiety by the property and tolls of the canal, from the State line adjoining Ohio to Evansville, on the Ohio River, such property to be assigned to three trustees, and the State to be freed from responsibility on that portion of the debt and interest so to be secured."
This was a positive ratification of the act of settlement by our foreign bondholders, and an expression of satisfaction on their part with the arrangement made. Our domestic bondholders were likewise well pleased, and it was confidently hoped and expected by all that Indiana would be soon relieved from the embarrassment of her public debt. The State kept the faith she then pledged. Each year she paid the interest on that part of the debt for which she was liable, and she has redeemed nearly all the bonds. She has performed her part of the agreement in letter and spirit, and justice, equity and honesty requires that her creditors perform theirs.
In March, 1857, a committee representing the foreign and domestic holders of the stocks the payment of which was expressly charged upon the Wabash and Erie Canal, presented a very able and elaborate memorial to the Legislature of this State, asking that the State compensate the holders of such bonds to the full amount thereof. The principal reason stated in the memorial why the State should redeem the canal bonds is that in 1852 the Legislature passed a general law for the incorporation of railways that enabled companies and individuals to construct railways which came in direct competition with the Wabash and Erie Canal; that the construction of railways was prosecuted to such an extent, and the competition had become so great that it greatly reduced the prices for transportation on the canal and diminished its patronage. The right and expediency of the State to provide for the construction of railways is clearly shown in the memorial. It says:
"Of course neither we, nor the stockholders we represent, question the right ot the Legislature to enact any laws that may be deemed salutary or expedient; that is a matter wholly within its own discretion; nor do we desire to condemn the policy which has led the State into its vast and useful system of railroad communication. On the contrary, we rejoice in the liberality of disposition and the energy of enterprise which is manifested in these undertakings; we rejoice in the advantages which they have brought, and are still bringing to its inhabitants, by the impulses they give to production; by the access they open to new and better markets; by the value conferred upon land, and by the facilities presented to commercial and friendly intercourse."
If the system of railways are of such great profit and advantage to the State, that in itself is a complete justification of the State in permitting them to be constructed. When the bondholders took the Wabash and Erie Canal, they took with it the hazzard of competition. They took no indemnity against the great enterprises that were then hid in the future. And indeed it would have been a great wrong and injustice to have provided that there should be no competing means of transportation with the canal, thereby permitting it to charge extravagant prices because of its power of monopoly, and leaving large districts of country undeveloped, because of the want of outlets to market.
POSITION OF STATE OFFICERS AND LEGISLATURE IN 1857.
But this whole subject as well as everything else stated in the memorial, was carefully considered by the Governor, the Attorney General and Legislature in 1857, and after full consideration the Legislature passed these joint resolutions:
"Be it resolved by the General Assembly of the State of Indiana, That the General Assembly of the State of Indiana has no power under the Constitution to purchase the Wabash and Eire Canal.
"And be it further resolved by said General Assembly, That if the General Assembly had the power, it would be impolitic, unwise and injudicious to the best interests of the people of the State to purchase said canal."
Article five, section ten, of our Constitution provides that--
" No law shall authorize any debt to be contracted on behalf of the State, except in the following cases: To meet casual deficits in the revenue; to pay the interest on the State debt; to repel invasion suppress insurrection, or, if hostilities be threatened, provide for the public defence."
The State of Indiana, not now being liable for the payment of the canal bonds, to assume the payment of them would be contracting a debt on account of an object not stated in the Constitution. To do so would be clearly in violation of the Constitution.
PROPOSED CONSTITUTIONAL AMENDMENT TO PROHIBIT ASSUMPTION OF CANAL BONDS.
On the 19th of February, 1869, the Senate had under consideration a resolution proposing an amendment to our State Constitution, that the Legislature should pass no law authorizing the payment by the State of the canal bonds. Hon. John R. Cravens, then a Senator from the county of Jefferson, called attention to this provision of our Constitution, and moved that the resolution be referred, to the Judiciary Committee, with instructions to inquire whether there was any necessity for the constitutional amendment, and whether the Constitution does not already provide sufficiently against assuming any debt contemplated by the amendment, and intimated an opinion that it did.
His Excellency, Governor Baker, in his message delivered January 8 1869, says:
"To acknowledge any liability on the part of the State for the payment of any part of this canal debt, would be to create a new debt for a purpose expressly interdicted by the Constitution."
I am done with the first of the series of resolutions under consideration. It is my deliberate conviction that there is no power under page: 3[View Page 3] the Constitution to assume on behalf of the State the payment of that portion of the original debt which was extinguished so far as the State is concerned, by the conveyance of the Wabash and Erie Canal, its tolls, proceeds and revenues, together with some eight hundred thousand acres of land, and if the power did exist it would be unwise, injudicious and injurious to the best interests of the people of the State to exercise it.
GOVERNOR BAKER'S SETTLEMENT OF INTERNAL IMMENT BONDS UNAUTHORIZED.
I desire to call the attention of the Senate to the next resolution:
"Resolved, By the Senate, the House of Representatives concurring, That the action of His Excellency, the Governor of this State, on the 5th day of November, 1868, in the settlement of one hundred and forty-one of the old internal improvement bonds, the principal and interest thereof amounting to two hundred and seventy-seven thousand three hundred dollars, was unauthorized by any law of this State, in direct violation of the acts of 1846-47, commonly known as the "Butler bills," and meets the disapproval of this General Assembly."
By the funded debt bills, the holders of the internal improvement bonds were required to surrender them to the Agent of State, and receive other bonds in lieu of them. They were not all immediately surrendered, and perhaps are not quite all surrendered yet. From 1864 to 1867, inclusive, the amount of these bonds unsurrendered was three hundred and fifty-three thousand dollars. Upon these bonds interest had been accumulated to perhaps half a million of dollars. Up to that time no interest had been paid on them for more than twenty-five years. The holders of them had not offered to exchange them with the Agent of State for other bonds, and had not made any demand for interest. His Excellency, Governor Baker, in his message, January 8, 1869, referring to these bonds, uses this language:
"I have intentionally excluded from the two foregoing classes of the public debt, a comparatively small balance of old internal improvement bonds, which the holders failed or refused to surrender under the'Butler Bill,'and upon which no interest has been paid since 1841, except as hereinafter stated."Notwithstanding the fact that no interest has been paid on these bonds since 1841, they have annually appeared in the reports of the Auditor of State as a part of the public indebtedness. From 1864 to 1867, inclusive, the amount of these bonds outstanding was stated at $353,000. The bonds thus reported were each of the denomination of $1,000, and consequently were 353 in all. Eight of those bonds were held by the Board of Sinking Fund Commissioners, in trust for the Common School Fund, when the Board ceased to exist, and its effects were passed into the hands of the Auditor of State, under the legislation adopted at the special session of 1865.
"These eight bonds had been held by the Sinking Fund Commissioners for more than twenty-five years, and no interest had been paid thereon subsequently to the year 1841. By an act of March 7, 1867, entitled 'an act to consolidate certain bonds, stocks and accounts of the School Fund into one non-negotiable bond, and making other provisions in relation thereto,' the validity of these eight bonds was recognized, and the principal and all the accrued interest thereon was included in the new non-negotiable bond given by the State to the School Fund, in pursuance of the provisions of this act. This reduced the number of the old bonds to three hundred and forty-five. Afterward, in 1868, eight others of these bonds were surrendered to the Agent of State, and new five per cent. State stocks were issued to the holders, under the "Butler bill," for one-half of the principal of the bonds so surrendered, and new two and a half per cents were issued for one half of the interest which had accrued up to the date of the surrender, thereby reducing the number of these bonds outstanding to three hundred and thirty-seven."At the time the State suspended the payment of interest on her indebtedness, in 1841, the General Government held two hundred and eleven of these bonds in trust for certain Indian tribes. The State failed to pay any interest on the bonds so held by the Government after the year 1841; but the latter, at different subsequent periods, applied moneys to which the State became entitled from the sales of public lands within her limits, (commonly called the three per cent. fund) amounting in the aggregate to $108,208 59. This application of the three per cent. fund paid the interest on one hundred and forty-one of the bonds so held by the Government, up to July 1, 1849, and on the remaining seventy up to July 1, 1855."
In April, 1868, Senator Morton wrote to His Excellency, the Governor of this State, informing him that there had been introduced into the Senate of the United States a bill directing the Secretary of the Treasury to deduct from the amount that may be due to any State on account of allowed war claims the principal and interest of all bonds issued by such State and held by the General Government, and informed His Excellency that the bill was intended to especially cover the old Internal Improvement bonds of this State, held by the General Government. In answer to that letter His Excellency says:
"That if any objections, legal or moral, could be urged to a proposition that the government should retain out of adjusted claims which it owed the State a sum sufficient to liquidate the principal and interest due on any bonds held by the United States against the State, I was ignorant of the existence or nature of such objections."
Again his Excellency says in the same message:
"Subsequently on the 8th day of September, 1868, by my direction the Adjutant General wrote to the Secretary of the Interior requesting that the proper steps might be taken for the settlement of the principal and interest due on these bonds, by the application of a sufficient amount of the allowed war claims of the State against the Government to that purpose. This letter remaining unanswered, I wrote myself to the assistant Secretary of the Interior, on the 19th day of October, 1868, to the same effect. Copies of these letters are embodied in the Adjutant General's report herewith submitted, result was that The the Secretary of the Interior sent an agent to this city with the bonds so held by the Government, and on the 5th day of November, 1868, the 141 bonds past due, the principal thereof being $141,000, and the accrued interest thereon being $136,300, were surrendered to me with the attached coupons, and I deposited them in the vault of the Treasurer of State--the principal and interest of these 141 bonds, amounted to $277,300. Of the seventy remaining bonds not matured, the Secretary of the Interior could only produce sixty-nine, one having been lost or mislaid, but he had two of the coupons of the lost bond. The coupons of these last mentioned bonds, representing interest to the amount of $46,625, were detached and surrendered to me, and deposited with the Treasurer of State. The total amount of principal and interest settled was $323,925; and I requested, in writing, that the Secretary of the Treasury would transfer that amount out of the allowed war claims of this State against the Government to the credit of the Secretary of the Interior, in consideration of the surrender of said bonds arid coupons. The Government still holds the sixty-nine bonds, the interest thereon being settled to July 1, 1868; and the principal being not yet due. This leaves page: 4[View Page 4] one hundred and ninety-six of these old bonds still outstanding, one hundred and twenty-six of them being in the hands of persons other than the Government, and one claimed by the Government being lost or mislaid."
This is an admission by His Excellency that he has redeemed and paid off at their face and the full amount of accrued interest thereon, one hundred and forty-one of the Internal Improvement bonds, the payment and settlement of which is provided for in the funded debt bills. If His Excellency was duly authorized to make the settlement in the manner and form made by him, then this resolution ought not to be adopted. But, on the other hand, if his conduct in that regard was not only unauthorized by law, but in direct violation of law and in opposition to the rights and interests of the people of the State, then I submit that the Legislature, the people's representatives, should express their disapprobation of it.
LIABILITY OF STATE UNDER FUNDED DEBT BILLS.
Under the funded debt bills the State was liable only for one-half of the principal and interest of these bonds. His Excellency has paid the full amount, and I understand the only excuse offered for his doing so is that these bonds had never been surrendered to the Agent of State and exchanged for other bonds. The fact that the holders of these bonds did not surrender them gave them no additional rights. The last proviso of section eight of the act of January 27, 1847, is in these words:
"Provided further, That the State will make no provision whatever hereafter to pay either principal or interest on any internal improvement bond or bonds, until the holder or holders thereof shall have first surrendered said bonds to the Agent of State, and shall have received in lieu thereof certificates of stock, as provided in the first section of this act anything in this act to the contrary notwithstanding."
This proviso was adopted one year after the passage of the original bill. It was adopted after the meeting of our foreign bondholders in London. It was adopted after all of our creditors had full notice of the terms of the settlement, and with their knowledge and consent. It has been consented to and acquiesced in for twenty-five years by our creditors. It was adopted for a just and equitable purpose, that of putting all of our creditors upon an equal footing in reference to the payment of their debt. It was necessary that it should have been adopted, in order that the provisions of the funded debt bills might be put into complete execution. Without it there might not have been a surrender of the bonds, and then the legislation of 1846-'47 would have been in vain, Yet we learn from His Excellency's message that he has paid off in full large numbers of these unsurrendered bonds without making any effort whatever to have them adjusted according to the provisions of the funded debt bills. If the United States Government had made resistance to a proposition that these bonds would be redeemed according to the provisions of the funded debt bills, and that no settlement of our war claims could be had with her without the State redeeming the 141 bonds at their face; then, perhaps, His Excellency ought not to be criticised for making the kind of settlement he did make. But no such case as that is made. His message shows a willingness, an offer on his part to pay them at their face with all their accrued interest. His predecessors had furnished him no example for doing such a thing. The general government held these bonds during the administrations of Governors Wright, Willard and Morton. They were not so forgetful of the laws of 1846-47, and so unmindful of the people's interests as to even consider a proposition to pay these bonds in the manner in which they have been paid. On the 13th of May, 1864, the State of Indiana was indebted to the United States over nine hundred thousand dollars under the act of Congress approved August 6, 1861, laying an annual tax of twenty millions of dollars on the States and on that day Governor Morton settled and paid the same by releasing to the General Government an amount of the allowed war claims due Indiana equal to Indiana's indebtedness to the General Government. On the 6th of March, 1865, Governor Morton presented what he had done in the premises to the General Assembly, and asked that his conduct and action be ratified, which was done. How different was that settlement of accounts between the State and the General Government from the one made by the present Executive. In the former settlement none of the provisions of the funded debt bills were violated and no internal improvement bonds were paid at their face, notwithstanding the General Government held many of them upon which large amounts of interest were due.
PAYMENT OF INTERNAL IMPROVEMENT BONDS BY GOVERNOR BAKER.
The time when the present Executive made his settlement was extraordinary. It was on the 5th of November, 1868. The General Assembly met only sixty days thereafter, the 7th of January, 1869. Inasmuch as there was no law authorizing such a settlement, and inasmuch as all former Governors had failed to suggest a settlement of these bonds, would it not have been better for his Excellency to have left the matter to the General Assembly, the people's representatives?
This extraordinary action and conduct of Governor Baker was a direct, open, palpable violation of the funded debt bills, the law governing the settlement of all our old internal improvement debt. It was unwarranted by the history of our public debt. It was unauthorized by any law or precedent. It was in opposition to the rights and interests of the people, and deserves the condemnation of their representatives.
That the funded debt bills are yet in force is shown by his Excellency's Message. He says:
Afterwards, in 1868, eight others of those bonds were surrendered to the Agent of State, and new five per cent. State stocks were issued under the "Butler Bill," for one-half of the principal of the bonds so surrendered, and new two-and-one-half per cents. were issued for one-half of the interest which had accured up to the date of the surrender."
page: 4[View Page 4]Who the holders of these eight bonds were His Excellency has not informed us. Perhaps they were some of the guardians, widows and orphans that some of the New York papers say are the principal holders of the canal stocks. It matters not who were the holders of these bonds. There cannot rightfully be two ways of paying them off--one way by which the full amount of principal and interest is paid, and the other by which only one-half of it is paid. If it was right that the General Government should have the full face of her bonds, including all the interest upon them, the individual holders should also have had the full face of their bonds, including all the interest. It is strange indeed that the General Government should be made a favored creditor, favored to such an extent that the funded debt bills are cast aside and she is permitted to receive twice the amount of payment allowed the private citizen.
But it is said by some that the latter proviso of the eighth section of the act of January 27,1847, is repudiation. In an article published in the Cincinnati Commercial on the 21st of February, 1870, which presents the appearance of having been prepared as a special defense of the action of His Excellency, referring to this proviso, the following language is used:
"This, it will be seen, was rank repudiation."
Several of the New York papers that have lately taken upon themselves the burthen of informing the people of Indiana what their duty is in regard to these internal improvement bonds pronounce this proviso repudiation. Every dishonest jobber in our stocks, who is waiting with painful anxiety for the State to redeem the Wabash and Erie canal, calls this proviso repudiation. But every man who has the true interests of the people of Indiana at heart and who were creditors of the State in 1846-47, unite in saving that the proviso is a rightful part of the act, and compromise of Indiana's public debt, because it was consented to by all her creditors before it was adopted, and as such it should be maintained and upheld. But who can say, with any regard for consistency, that the proviso is repudiation in its application against the General Government, and that it is not repudiation in its application against the citizen? Who can justify the motive and defend the conduct of paying the General Government the full face of the bonds she holds, including all the interest upon them, and refusing to do the same thing by citizens who hold similar bonds? If it is repudiation for one, it is repudiation for the other, and should be applied to both alike. But whether repudiation or not, it is not the province of His Excellency to deterge it. His duty is to execute the law as he is it; not to disregard it on the ground of repudiation, unconstitutionally, or for any other reason. But it is not repudiation. It is a part of the law and the contract, because it was assented to before its adoption, and justice to those who have surrendered their bonds for one-half of their debt, as well as to the people of the State, requires that the whole act shall be executed according to its letter and spirit.
His Excellency did not ask that his action and conduct in making this settlement with the General Government should be approved by the General Assembly, and that provision be made for the adjustment of the internal improvement bonds. The reasons he assigned why he did not ask that his action be approved were as singular as his conduct was extraordinary. In his message of 1869 he says:
"It will remain for the General Assembly, in its wisdom, to determine what action, if any, shall be taken with reference to these old bonds. I would unhesitatingly recommend that provisions be made for their adjustment, but for the apprehension that such action on your part might give encouragement to a combined effort which it is said will be made, either at the present or some future session of the General Assembly, to induce the State to take back the Wabash and Erie Canal and impose upon the people of the State that half of the original debt which was extinguished, so far as the liability of the State is concerned, by the conveyance of the canal and its revenues, and some 800,000 acres of land under the provisions of the 'Butler Bill.' No such effort shall receive aid from any official action of mine, and I therefore refrain from making any recommendation as to these old internal improvement bonds still outstanding."
His refusal to ask a ratification of his action in the premises was based upon the idea that such ratification would give encouragement to an effort to induce the General Assembly to take back the Wabash and Erie Canal, and impose a debt upon the people of this State which is now resting upon that canal. If the ratification of His Excellency's conduct would give that encouragement, does not the action and conduct of His Excellency itself give the encouragement? In other words, if legislative approval of the payment of some of the internal improvement bonds in a manner other than that provided in the funded debt bills, would give encouragement to an effort to induce the General Assembly to take back the Wabash and Erie Canal, thereby imposing a debt of some fifteen millions of dollars upon and the people of this State, will not the act of His Excellency in paying the bonds in a manner other than that provided in the funded debt bills furnish like encouragement to that effort? And if it would be wrong for the General Assembly to ratify that conduct and make provision for the adjustment of the internal improvement bonds, was not the committing of it by His Excellency a greater wrong? I fear that the discovery by His Excellency that the payment of the internal improvement bonds at their facet with all their accrued interest, will furnish encouragement to such a wrongful effort, was made too late. His act of paying them has furnished encouragement to that wrongful design and effort and the General Assembly should at once counteract the effect of that encouragement by disapproving of His Excellency's conduct.
The message of His Excellency upon this subject is singular in another regard. He says:
"To acknowledge any liability on the part of the State for the payment of any part of this canal debt would be to create a new debt for a purpose expressly interdicted by the Constitution."
Again he says:
page: 6[View Page 6]" If the assumption of this immense burden is to be proposed, let the proposition be made to the people themselves, who will have to bear it, by submitting a constitutional amendment, upon which they can vote."
CONTRADICTORY POSITIONS OF GOVERNOR BAKER.
He first said there was no power under the Constitution to assume the debt now charged upon the canal, and yet he expressed great fear that the General Assembly would assume it if he asked a ratification of his action or recommended the adjustment of the internal improvement bonds. Has His Excellency so poor an opinion of the ability and integrity of a General Assembly, the majority belonging to the political party with which he is identified, for such was the General Assembly to whom he delivered his message, as to fear that that majority would violate the Constitution and fail to keep the oath they had taken? That is a poor opinion, indeed, for the Executive to entertain of the members of the General Assembly. And if he believed there was no power under the Constitution for the General Assembly to take back the Wabash and Erie Canal, why did he recommend the adoption of an amendment to the Constitution to prohibit the General Assembly from doing such a thing? His message upon this subject is like the productions of the most of men who have committed great errors, the consequences of which it is feared will cause great mischief. His settlement of the internal improvement bonds was wrong, wholly wrong, and his great fear that the General Assembly will take back the Wabash and Erie Canal, and his great anxiety for the adoption of a constitutional amendment upon that subject, can not make it right. That settlement was in violation of the funded debt bills in this, it does not treat all the creditors as equals, and that they would be treated as equals was one of the paramount objects sought to be accomplished by the bills. It is unjust to the people in this, it compelled them to pay twice as much as they owed, and it remains to be seen whether this General Assembly will approve or disapprove of it.
The last resolution is as follows:
Resolved by the Senate, the House of Representatives concurring, That the General Assembly of the State of Indiana should make no provision for the payment of the principal or interest due or to become due on the old internal improvement bonds, except as provided in the acts of 1846-47, commonly known as the "Butler bills."
I desire to call the attention of the Senate to His Excellency's message delivered to this General Assembly. In one particular it is singularly different from the one delivered by him two years ago. In the last message he not only recommends the payment of the internal improvement bonds at their face, with all their accrued interest, but he urges with apparently no little anxiety, that this General Assembly should at once provide for their payment in that manner. The reasons stated in his message why the State should at once pay the unsurrendered internal improvement bonds are that they are a paramount lien on the Wabash and Eric Canal upon which the title of said canal may be divested from its present owners, and that good faith requires the State to protect the present owners of said canal from having the same sold upon said lien, and in case the State should not thus protect the owners ot the canal, but stand by and permit the same to be sold from them, that then they would have a strong equitable claim against the State for the full amount of the canal bonds, with all their accrued interest, which are now charged exclusively upon the canal. His message upon the subject is as follows:
"If these bonds are a lien on the Wabash and Erie Canal, as I belive them to be, the State can not afford to permit the title of the Trustees to be divested or their possession and control of the canal and its revenues to be interrupted by the judicial enforcement of said lien. To prevent this, provision should be made to pay out of the Treasury of the State such of said 191 bonds as may be adjudged to be a lien on the canal and its revenues whenever it may become necessary to make such payment in order to prevent the canal or its revenues from being subjected to the satisfaction of the lien. Indeed, independently of this lien altogether, I do not see how the State can honorably refuse to redeem these few outstanding internal improvement bonds."
Again:
"If the State should stand by and permit the canal or its revenues to be wrested from the hands of the Canal Trustees, to satisfy a paramount lien created by the State itself prior to the conveyance of the canal to said Trustees, then, indeed, might the holders of the canal stocks, with some show of reason, claim that the State should redeem the many millions of dollars of the canal stocks which under the existing arrangement are exclusively charged upon the canal, and for which the State is in no way bound. I hope that you will promptly adopt such measures as will forever prevent the possibility of the trust being disturbed or impaired by the enforcement of this lien, It is both right and expedient that the State should thus protect the trust property; and I also recommend that the State relieve the Board of Canal Trustees from all the expenses of litigation to which they have been or may be subjected in defending the trust property from the attempt made to subject it to the satisfaction of said lien."
THE QUESTION OF THE LIABILITY OF THE STATE TO PAY OUTSTANDING INTERNAL IMPROVEMENT BONDS.
I readily concede that if there is any holder of the internal improvement bonds, who was not a party to the legislative contract expressed in the funded debt bills of 1846-47, who was not represented either in person or by his agent in the making of that contract, and has never assented to it, that his bond is a lien on the Wabash and Eric Canal, upon which it may be sold. But if he agreed to the legislation, he agreed to surrender his lien, and the same good faith which requires the State to stand up to her agreement requires him to stand up to his.
But suppose that all of the unsurrendered internal improvement bonds are a lion upon the Wabash and Erie Canal, because of their having gone into the hands of innocent purchasers, or from any other cause, they being a lien in the first instance, that I am mistaken in saying the consent of the holders of them to the passage of the funded debt bills extinguished them as liens upon the canal, and that they are worthless unless they be surrendered according to the provi- page: 7[View Page 7] sions of the funded debt bills? The question whether the State is bound to protect the owners of the Wabash and Erie Canal against them, or whether the owners of the Wabash and Erie Canal are not bound to protect themselves against them, is one worthy of consideration. The liability for the payment of these bonds is fixed by the laws under which they were issued, and by the funded debt bills of 1846-7. Before the passage of the funded debt bills they were all charged upon the internal improvement works, and the State guaranteed the sufficiency of the internal improvement works to pay them. By the funded debt bills the State was to convey the canal and its lands in absolute payment and discharge of one-half of the whole debt. The letter, as well as the spirit, of the funded debt bills is that upon the State conveying the Wabash and Erie Canal, and its lands, she was to be forever freed from the payment of one-half of the whole debt. Such is the plain interpretation of the funded debt bills. His Excellency in his message delivered to the General Assembly two years ago, says:
"The adjustment made under the "Butler bill" was, as between the State and the creditors who assented to the arrangement a complete accord and satisfaction. One-half of the debt was extinguished and ceased to be a debt against the State, and was charged exclusively with the assent of the creditors upon the canal and its revenues."
In his message delivered at the present session he says substantially the same thing. In the memorial presented to the General Assembly, in 1857, by our foreign and domestic bondholders, this language is used:
"It is about ten years since an arrangement was effected between the State of Indiana and her creditors, under which the Wabash and Erie Canal, with its lands and revenues was placed in the hands of trustees, as security for the payment of one-half of the State debt."
This language clearly indicates that the canal and lands were transferred in payment of one-half of the debt, and the construction put on the funded debt bills in this memorial is conclusive upon all the creditors, because it is the production of the joint committee of both the foreign and domestic bondholders.
THE CONTRACT BETWEEN THE STATE AND HER CREDITORS.
It has become a part of the history of the State that one-half of her old internal improvement debt was extinguished by the transfer of the Wabash and Erie Canal and its lands to her creditors. When the canal and its lands were transferred, there was extinguished one-half of the whole debt, so far as the State is concerned, no matter whether all the creditors joined in the acceptance of the conveyance or not. Those who accepted the conveyance took it subject to the conditions of the legislative contract expressed in the funded debt bills, which was that when the State parted with the Wabash and Erie Canal and its lands she was to be freed forever from one-half of her public debt. Those creditors of the State who surrendered their bonds and accepted the deed for the canal and its lands, took the same subject to the then outstanding internal improvement bonds, and if the holders of the then outstanding bonds refused to surrender them under the funded debt bills, and become parties to the arrangement, it was incumbent upon those who had surrendered their bonds and accepted the deeds to get in the outstanding bonds as best they could, for the reason that they had accepted property from the State upon condition that that property would pay one-half ot the whole debt of the State and the outstanding bonds represented a portion of that half of the State's indebtedness. That being so, the owners of the Wabash and Erie canal are bound to protect themselves against the unsurrendered internal improvement bonds which are a lien upon their canal, for the reason that when they took the canal and its lands they took them subject to the lien. If the owners of the canal desire to extinguish the lien, they must get possession of the bonds and surrender them according to the provisions of the funded debt bills. If suit is brought upon any of the unsurrendered bonds the owners of the canal must pay them, off either before or after judgment, and then have the matter adjusted according to the provisions of the funded debt bills. But if the owners of the canal stand by and permit the canal to be sold to pay any of the outstanding internal improvement bonds that furnishes them no just reason for calling upon the State to pay them for the loss of it.
The funded debt bills expressly provide that the State will make no provision for the payment of the internal improvement bonds other than that provided in the funded debt bills. Whether that is valid as to the unsurrendered bonds or not, it clearly is valid as to those surrendered, and constitutes a part of the contract between the State and the holders of the canal bonds. And if the State voluntarily pays the unsurrendered bonds it is a breach of the contract made with those who did surrender, and they would not longer be required to submit to it, hence the fear expressed in His Excellency's message of two years ago was well founded, that if the bonds were voluntarily paid in full by the State it might incur serious consequences. Hence I say the State should not make any provision for the payment of any part of her old internal improvement bebt. It has already been adjusted, and let it remain as it is.
Again His Excellency in his last message says:
"John W. Garrett, Esq., of Baltimore, is repre-represented to be the owner of forty-one of these 191 bonds; ten of the forty-one being sterling bonds, and the residue being dollar bonds. Mr. Garrett soon after the adjournment of the last special session of the General Assembly, as the holder of these forty-one bonds, commenced an action in the Circuit Court of Carroll county, in his State, against the Board of Trustees of the Wabash and Erie Canal, for the purpose of enforcing against said canal and its revenues in the hands of said Board of Trustees, a lien on the canal, which he insists was created to secure the payment of said bonds by the provisions of the General Internal Improvement Act, before mentioned."
His Excellency insists that this General Assembly shall pay of the bonds, which are the subject of the action he refers to, before judgment is rendered upon them. "Sufficient page: 8[View Page 8] unto the day is the evil thereof." If the General Assembly should do such a thing, it would be not only an invitation to the court to render judgment upon the bonds, and declare them a lien upon the canal, but it would also be an admission on the part of the State that she was bound to protect the owners of the canal against the bonds. Such a course of conduct as that would be admitting the case away. It would not only be saying to the holders of all the unsurrendered internal improvement bonds that these bonds were not liable to the provisions of the funded debt bills for their payment, but that they were paramount liens upon the canal, and that it was liable to be sold for their payment. It would also be saying to the owners of the canal, notwithstanding the canal and lands was conveyed to them as a payment of one-half of the whole debt of the State, that the State was liable to pay the face of the bond, including all the interest, and was bound to protect the owners of the canal against any judgment or decree that may be rendered upon them. In other words, notwithstanding the State had conveyed the Wabash and Erie Canal and 800,000 acres of land to certain parties in consideration that they would pay one-half of the debt of the State, that the State now voluntarily and without any consideration releases them from their obligation, and proposes to pay it herself. Such a course of conduct as that shall receive no support from me. If the State is liable at all let her pay the judgment after it is rendered, not admit away in advance the rights she may have in the case.
THE CANAL OWNERS MUST PAY LIENS UPON IT.
His Excellency insists that if the canal is sold away, the owners of it would have a strong equitable claim against the State for the many millions of canal bonds. In my judgment such is not the case. The canal owners are in possession of the canal, and they must protect It against all liens upon it, and their measure of damages, in any event, is the amount of money required to do so. And if the canal should be sold, they will have no legal or equitable claim against the State for the canal bonds, in any possible event, until they had accounted to the State for the 800,000 acres of land they got, which is now worth more than their canal bonds.
His Excellency's position on the proposition that the State should pay the unsurrendered internal improvement bonds is, indeed, singular. In his message of two years ago he said to do so would give encouragement to a combined effort that would be made at that or some other session of the General Assembly to induce the State to take back the Wabash and Erie Canal, and for that reason he refused to recommend their payment. He, in his last message, says the General Assembly must pay the internal improvement bonds, or the holders of the canal bonds will have a strong equitable claim against the State for their payment, and will insist upon the State taking back the canal. If His Excellency was right two years ago, when he said if the State provided for the payment of the outstanding internal improvement bonds it would give encouragement to an effort to have the State take back the Wabash and Erie Canal, and thereby charge the people with a debt of some $15,000,000, the position he has taken in his last message can only be construed to mean that he is in favor of its being done I shall occupy no such doubtful position on this subject. No act of mine shall give aid or assistance to an effort which, if successful, will bring great injustice and disaster to the State. I take my stand with the people of this State, and will never consent that they shall ever be made to pay one dollar of the debt which was extinguished by the legislative contract of 1846-47.
THE EVILS THAT WILL FLOW FROM THE ASSUMPTION OF CANAL BONDS.
If the funded debt bills are maintained and upheld, and recognized as furnishing the only rule by which the remainder of our old internal improvement debt is to be adjusted and paid, then there can be no just reason assigned that the State should pay the Wabash and Erie Canal bonds, and the General Assembly will not be memoralized and importuned to take back the Wabash and Erie Canal. If the funded debt bills are maintained and upheld, the prosperity and advancement of our State will not be retarded, but it will continue to increase, as it has done since these acts of settlement were adopted. Governor Whitcomb, in his annual message for the year 1847, says:
"This debt, large in itself, was increased, at a rapid and fearful rate," and that, in view of it, "many of the best citizens, involved in despair, and anxious to leave their property unencumbered to their children, were sacrificing their homes for less than their value, and leaving the State. The same causes were preventing men from coming into it to purchase property, improve the country, and add to our wealth. All had a tendency to increase the gloom and despondency which pervaded business affairs generally, and to diminish the ability of the people, the great mass of whom were also involved in debt, to meet their individual engagements."
Let us hope that there will be no repetition of that gloom and despondency, and let our highest aim and object be to save the people from such a condition of affairs If equitable compromises and binding agreements are to be broken, let others break them. If public laws are to be disregarded, let others disregard them; but let us maintain those compromises and agreements, and respect and uphold the laws, and not violate that confidence that an intelligent people for the time being have reposed in us. Far be it from me to desire that the State shall come short of paying the full amount of her obligations. I will never consent that repudiation shall be written on her banner. To do so, would bring dishonor upon her people and reproach upon the memory of her citizens who have laid down their lives that the country might live. But an act of injustice to the living would be equally disreputable. All that is required in order that honor may be secured for the State, happiness for her people and justice for her creditors, is a faithful recognition of the compromises, laws, covenants and agreements that the State and her creditors have made.
