COMMUNICATION
FROM
GOVERNOR CONRAD BAKER
IN
RELATION TO THE
INTERNAL IMPROVEMENT BONDS.
Gentlemen of the House of Representatives:
I have the honor to acknowledge the receipt of a copy of a preamble and three separate resolutions, passed by the House on the 19th ultimo, in relation to the Indiana bonds or stocks held by John W. Garrett, Esq., and other kindred matters.
I was not in possession of all the information requested by the resolutions, and an effort to procure it has caused the delay in my response.
The first of the three resolutions above mentioned, requests me to inform the House:
First. Under what authority of the State of Indiana the bonds held by Garrett were issued?
Second. The date of the act under which they were issued?
Third. The amount of principal, interest and costs the State Treasury will have to furnish if the bonds are paid according to my recommendation?
In response to the first and second of these inquiries, I beg leave
page: 22[View Page 22].to say that according to the proofs taken in the case now pending in the Cass Circuit Court, wherein said Garrett is plaintiff, and the Trustees of the Wabash and Erie Canal, and others, are defendants, the said Garaett holds thirty one dollar bonds of $1,000 each, and ten sterling bonds for 225 sterling each. They were issued by and under the authority of the General Assembly of this State contained in the act hereinafter referred to. The thirty one dollar bonds were issued under the act approved January 27, 1836, entitled "An Act to provide for a General System of Internal Improvements." (See Revised Statutes of 1836, page 341, section 8.
Nine of the ten sterling bonds held by Garrett were issued under the same act. The one other sterling bond held by said Garrett was issued under the act of February 12, 1839, and I apprehend is not a lien upon the canal, or any of the public works formerly owned by the State.
As to the amount of principal and interest that the treasury would be required to furnish to pay these forty-one bonds, if the General Assembly shall direct their payment, I am not prepared to give exact information, as it involves questions of interest and exchange, requiring long and tedious calculations, which I have not time to make. These questions have been referred to a Special Master, with directions to report thereon to the Court by the 27th instant. The amount, however, due to Garrett will not vary largely from $160,000, including principal, interest and exchange. As to the costs, I have no means of forming even an approximate estimate.
For the information of the House, I herewith respectfully transmit a copy of one of the dollar bonds, and also one of the Sterling bonds, held by Garrett, with a copy of one of the unpaid coupons thereto attached, and marked respectively "A" and "B."
No interest has been paid on any of these bonds since January 1, 1841. The above estimate of $160,000 only includes the bonds held by Garrett, and does not include those held by others who may become parties to the suit.
The second of said resolutions to which this is a response, requests me to inform the House under what authority of the State of Indiana the bonds held by William H. Beers and others whose payment was sought to be enforced by suit in the Circuit Court of the UnitedStates some ten years since, were issued, the date of the act authorizing their issue, the amount of the said bonds with interest and costs, and what was the final issue of said legal proceeding subsequent to the decision of the United States Supreme Court, reported in 2 Black's
page: 23[View Page 23]Supreme Court Reports, and whether said bonds are paid, and if so who paid them, and what amount the Trustee's of the Wabash and Erie Canal were compelled to disburse out of the trust funds in consequence of said litigation.
In response to this resolution, I beg leave to say that, the case of Beers vs. The Trustees of the Wabash and Erie Canal, reported in 2 Black, page 448, and referred to in the resolution, itself shows that Beers held two bonds of $1,000 each, which were the foundation of this suit, and that they were issued under the act of the General Assembly of Indiana of the 7th of January, 1832. Said bonds, as already stated, were for the sum of $1,000 each, but I have no means of information, except the communication of Hon. Thomas Dowling, hereinafter referred to, as to the amount of interest that accrued or was paid on said bonds, or as to the costs that accrued or were paid in the suit. I am informed that the Circuit Court of the United States, after the case was sent back from the Supreme Court, made a decree in conformity with the opinion of the Supreme Court enforcing the payment of the bonds, and that they were paid, together with the interest and costs by the Trustees of the Wabash and Erie Canal. All the information I have in these matters I derive from a letter written, at my request, to me by Hon. Thomas Dowling, resident Trustee of the Wabash and Erie Canal, a copy of which I herewith respectfully submit, marked "C," and I have no doubt of the correctness of the statements therein made.
The third resolution requests me to give my opinion "whether, if the State, out of abundant precaution, with accustomed generosity, ex gratia, makes provision for the payment of the Garrett bonds, as recommended," etc., "the State will ever in the future be threatened or harrassed on account of unsurrendered internal improvement bonds by any other person or persons, or by any corporation, trust or other source whatever, and whether such payment by the State can be construed into a breach of plighted faith on the part of the State by reason of the latter proviso of section 8 of an act approved January 27, 1847, being an act supplemental to an act commonly called the Butler Bill."
In response to the first part of this resolution, I beg leave to say that I do not consider the redemption of the bonds held by Mr. Garrett, or the redemption of other similar bonds held by others, still outstanding, to be at all a matter of generosity or mere favor to the bondholders. If I did so consider it, I should never recommend their payment. In my judgment, it is a matter of duty and not a
page: 24[View Page 24]matter of favor on the part of the State to pay these bonds, because they were issued by her authority and she pledged her faith for their payment, and because she is abundantly able to pay them. I think it is perfectly clear, from all the evidence that can be attained, that the whole number of old bonds still outstanding, issued prior to the year 1841, does not exceed one hundred and ninety-one (191), a majority of these being dollar bonds of $1,000 each, and the rest being sterling bonds of two hundred and twenty-five pounds sterling each, one of the latter being equivalent in value to one of the former.
I suppose that the payment of the forty-one bonds held by Mr. Garrett will imply the duty on the part of the State of paying the remaining one hundred and fifty by whomsoever held, and I have on several occasions recommended, and now recommend, the payment of all of them. If this shall be done, I can not imagine how, or by whom the State could be threatened or harrassed on account of unsurrendered Internal Improvement bonds from any quarter whatever, for the simple reason that there will then be no other old bonds of the State upon which to predicate threats or annoyance.
I might say that the evidence taken in the case pending in Cass county has accounted for one hundred and fifty-four of the one hundred and ninety-one old bonds still supposed to be outstanding, by showing where and by whom they are held, leaving thirty-seven thereof still unaccounted for. I believe that some of these thirty-seven bonds will never be presented or accounted for, as it would be wonderful if some of them, after the lapse of so long a time, had not been lost or destroyed, especially when it is considered that no interest has been paid on them since 1841, and in consequence thereof the holders would be likely to esteem them of little value.
As to the question whether the payment by the State of these old bonds can be construed into a breach of plighted faith on her part, by reason of the latter proviso of Section 8, of the Act approved January 27, 1847, I beg leave to submit it as my opinion that no such conclusion can be justly drawn from the payment if it shall be made.
The proviso to which the resolution refers reads as follows, viz.:
"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
page: 25[View Page 25]have received in lieu thereof certificates of stock as provided in the first section of this Act."
In my judgment, this provision is void in morals and in law, because it stipulates that the State will not perform its obligations to its creditors until they shall acede to material conditions not contained in the orignal contract. Such a stipulation between a natural person who was indebted, with one or more of his creditors, that he would never pay the rest of his creditors unless they acceded to new conditions not contained in the original contracts, would be null and void, and the Courts, instead of compelling the debtor to perform such stipulation would compel him to break it by paying his debts to the extent of his ability. Sovereignties who can not be sued ought to do voluntarily the same things which individuals, under like circumstances, would be compelled by the Courts to do.
Besides, these bonds were contracts of the State, protected by that clause of the Constitution of the United States which prohibits States from passing laws impairing the obligation of contracts.
The Supreme Court, in the case in 2 Black, before alluded to, expressly hold that the Legislature of Indiana could not, by the Act of 1847, impair the obligation of her contracts previously made.
It is worthy of note that the holders of the Canal Stocks charged exclusively upon the Wabash and Erie Canal, have, within the last two weeks, presented to both Houses of this General Assembly their printed protest against the payment of these old bonds. Now, if their payment would, as is assumed by some, create an obligation on the part of the State to pay the canal debt, is it possible that the holders of this debt would protest against the doing of the very thing which would secure to them the payment of their debt, or at least create on the part of the State an obligation to pay it? The very fact that they thus protest is conclusive to my mind that the Garrett suit was commenced and prosecuted in the interests of the holders of the Canal Stocks, and that they desired that Garrett's lien should be enforced by a decree of sale or sequestration, and the trust thereby destroyed so that they might make this destruction the basis of a claim against the State for the payment of the Canal debt.
Respectfully submitted, CONRAD BAKER, Governor.
