U.S. Supreme Court

STATE OF SOUTH DAKOTA v. STATE OF NORTH CAROLINA, 192 U.S. 286 (1904)

192 U.S. 286

STATE OF SOUTH DAKOTA, Complainant,v.

STATE OF NORTH CAROLINA, Charles Salter, and Simon Rothschilds.

No. 8, Original.

Argued April 13, 14, 15, 1903

Ordered for reargument November 30, 1903.

Reargued January 8, 11, 12, 1904.
Decided February 1, 1904.

'And, whereas, it is manifestly the interest of the people of the whole state that the residue of the bonds, when issued, shall command a high price in market; therefore,

'Sec. 1. Be it enacted by the general assembly of the state of North Carolina, and it is hereby enacted by the authority of the By an act passed in 1849 (chap. 82, Laws 1848-49), the North Carolina Railroad Company was chartered by the state of North Carolina with a capital of $3,000,000, divided into 30,000 shares of $100 each. The state subscribed for 20,000 shares. The statute authorized the borrowing of money to pay the state subscription, and pledged as security therefor the stock of the railroad company held by the state. In 1855 a further subscription for 10,000 shares was authorized by statute (chap. 32, Laws 1854-55), to be issued on the same terms and with the same security. At the same session an act was passed incorporating the Western North Carolina Railroad Company (chap. 228, Laws 1854-55), which authorized a subscription by the state and the issue of bonds secured by the stock held by the state in said company. On December 19, 1866, a further act was passed (chap. 106, Laws 1866-67), entitled 'An Act to Enhance the Value of the Bonds to be Issued for the Completion of the Western North Carolina Railroad, and for Other Purposes,' which, after referring to the prior acts of the state authorizing the issue of bonds, and stating that a portion of them had already been issued, added:

same, That the public treasurer be, and he is hereby, authorized and directed, whenever it shall become his duty under the provisions of said acts, passed at the sessions of 1854-55 and 1860-61, to issue bonds of the state to the amount of $50,000 or more, to mortgage an equal amount of the stock which the state now holds in the North Carolina Railroad, as collateral security for the payment of said bonds, and to execute and deliver, with each several bond, a deed of mortgage for an equal amount of stock to said North Carolina Railroad, said mortgage to be signed by the treasurer and countersigned by the comptroller, to constitute a part of said bond, and to be transferable in like manner with it, as provided in the charter of said Western North Carolina Railroad Company; and, further, that such mortgages shall have all the force and effect, in law and equity, of registered mortgages without actual registry.'

Under this last act bonds were issued in the sum of $1,000 each, having this indorsement:

State of North Carolina,

Treasury Department.

Raleigh, July 1, 1867.

Under the provisions of an act of the general assembly of North Carolina, entitled 'An Act to Enhance the Value of the Bonds to be Issued for the Completion of the Western North Carolina Railroad Company, and for Other Purposes,' ratified 19th December, 1866, ten shares of the stock in the North Carolina Railroad Company, originally subscribed for by the state, are hereby mortgaged as collateral security for the payment of this bond.

Witness the signature of the public treasurer and seal of office, and the countersignature of the comptroller.

Kemp P. Battle,

Public Treasurer.

S. W. Burgin, Comptroller.

These bonds ran thirty years, and became due in 1897. In 1879 the state of North Carolina appointed commissioners to adjust and compromise the state debt, and all of the last-men-

tioned bonds have been compromised with the exception of about $250,000. Simon Schafer and Samuel M. Schafer, either individually or as partners, owned a large proportion of these outstanding bonds, having held them for about thirty years. In 1901 Simon Schafer gave ten of these bonds to the state of South Dakota. The letter accompanying the gift was in these words: Office of Schafer Brothers, no. 35 Wall St.,

New York, September 10th, 1901. Hon. Charles H. Burke.

Dear Sir:--

The undersigned, one of the members of the firm of Schafer Bros., has decided, after consultation with the other holders of the second-mortgage bonds issued by the state of North Carolina, to donate ten of these bonds to the state of South Dakota.

The holders of these bonds have waited for some thirty years in the hope that the state of North Carolina would realize the justice of their claims for the payment of these bonds.

The bonds are all now about due, beside, of course, the coupons, which amount to some 170 per cent of the face of the bond.

The holders of these bonds have been advised that they cannot maintain a suit against the state of North Carolina on these bonds, but that such a suit can be maintained by a foreign state or by one of the United States.

The owners of these bonds are mostly, if not entirely, persons who liberally give charity to the needy, the deserving, and the unfortunate.

These bonds can be used to great advantage by states or foreign governments; and the majority owners would prefer to use them in this way rather than take the trifle which is offered by the debtor.

If your state should succeed in collecting these bonds it would be the inclination of the owners of a majority of the total issue now outstanding to make additional donations to such

governments as may be able to collect from the repudiating state, rather than accept the small pittance offered in settlement.

The donors of these ten bonds would be pleased if the legislature of South Dakota should apply the proceeds of these bonds to the state university or to some of its asylums or other charities.

Very respectfully,

Simon Schafer.

Prior thereto, and on March 11, 1901, the state of South Dakota had passed the following act (Session Laws South Dakota, chap. 134, p. 227):

An Act to Require the Acceptance and Collections of Grants, Devises, Bequests, Donations, and Assignments to the State of South Dakota.

Be it enacted by the legislature of South Dakota:

Sec. 1. That whenever any grant, devise, bequest, donation, or gift or assignment of money, bonds, or choses in action, or of any property, real or personal, shall be made to this state, the governor is hereby directed to receive and accept the same, so that the right and title to the same shall pass to this state; and all such bonds, notes, or choses in action, or the proceeds thereof when collected, and all other property or thing of value, so received by the state as aforesaid shall be reported by the governor to the legislature, to the end that the same may be covered into the public treasury or appropriated to the state university or to the public schools, or to state charities, as may hereafter be directed by law.

Sec. 2. Whenever it shall be necessary to protect or assert the right or title of the state to any property so received or derived as aforesaid, or to collect or to reduce into possession any bond, note, bill, or chose in action, the attorney general is directed to take the necessary and proper proceedings and to bring suit in the name of the state in any court of competent jurisdiction, state or Federal, and to prosecute all such suits, and is author-

ized to employ counsel to be associated with him in such suits or actions, who, with him, shall fully represent the state, and shall be entitled to reasonable compensation out of the recoveries and collections in such suits and actions.

This act was passed on the suggestion that perhaps a donation of bonds of southern states would be made to the state. On November 18, 1901, the state of South Dakota, leave having been first obtained, filed in this court its bill of complaint, making defendants the state of North Carolina, Simon Rothschilds (alleged to be one of the holders and owners of the bonds originally issued by the state and secured by a pledge of the stock in the North Carolina Railroad Company under the acts of 1849 and 1855), and Charles Salter (alleged to be one of the holders of the bonds issued under the act of 1855 and 1866, on account of the subscription to the Western North Carolina Railroad Company), the two individuals being made defendants as representatives of the classes of bondholders to which they severally belong. In it the plaintiff, after setting forth the facts in reference to the several issues of bonds and its acquisition of title to ten, prayed that an account might be taken of all the bonds issued by virtue of these statutes; that North Carolina be required to pay the amount found due on the bonds held by the plaintiff, and that in default of payment North Carolina and all persons claiming under said state might be barred and foreclosed of all equity and right of redemption in and to the 30,000 shares of stock held by the state, and that these shares, or as many thereof as might be necessary to pay off and discharge the entire mortgage indebtedness, be sold, and the proceeds, after payment of costs, be applied in satisfaction of the bonds and coupons secured by such mortgages; and also for a receiver and an injunction.

Defendant Rothschilds made no answer. On April 2, 1902 the state of North Carolina and the defendant Charles Salter, filed separate answers. North Carolina in its answer denied both the jurisdiction of this court and the title of the plaintiff; averred that the bonds were not issued in conformity with the

statute; admitted the ownership of 30,000 shares of stock; denied that the mortgages were properly executed or that they had the effect of conveyances or transfers, either in law or equity, of said stock, or conferred any lien by way of pledge or otherwise upon the same; denied that she ever had any compact or agreement whatever other than that contained in the Constitution of the United States with South Dakota, or that South Dakota had ever informed North Carolina of any claim against her, or made any demand in respect to it, or any effort to settle or accommodate. Salter's answer was mainly an admission of the allegations of the bill, with a claim that all the stock should be sold in satisfaction of the mortgage bonds of which he was charged to be the representative. Testimony was taken under direction of the court, before commissioners agreed upon by the parties.

Messrs. Wheeler H. Peckham and R. W. Stewart for complainant.

Messrs. George Rountree, James E. Shepherd, Robert D. Gilmer, and James H. Merrimon for the state of North Carolina.

Messrs. Daniel L. Russell, Alfred Russell, and Marion Butler for defendant Salter.

Mr. Frederic D. McKenney for defendant Rothschilds.

Statement by Mr. Justice Brewer:

Mr. Justice Brewer delivered the opinion of the court:

There can be no reasonable doubt of the validity of the bonds and mortgages in controversy. There is no challenge of the statutes by which they were authorized. By those statutes the treasurer was directed when it became necessary to borrow money for the payment of the subscription, to prepare coupon bonds and advertise in one or more newspapers for sealed proposals, and to accept the terms offered most advantageous to the state, provided that in no event should the bonds be sold for less than their par value. The advertisement was made, no bids were received, but the bonds were delivered to the railroad company as payment for the subscription, dollar for dollar. Upon each bond was placed the statutory pledge or mortgage. It is true no money was paid into the treasury and thence out of the treasury to the railroad company, yet, looking at the substance of the transaction (and equity has regard to substance rather than form), the transaction was the same as though the company had been the only bidder, had placed a thousand dollars in the treasury in payment of each bond, and received that thousand dollars back from the treasury in payment of the subscription for ten shares of stock. It is true also that there was no formal issue of certificates by the company to the state, but that was a matter of arrangement between the parties to the subscription. The state's right as a stockholder was not abridged by lack of the certificates, and in fact it has been receiving dividends on the stock exactly as though certificates had been issued. The statute also provided that with each several bond a deed of mortgage for an equal amount of stock, signed by the treasurer and countersigned by the comptroller, should constitute a part of the bond and be transferable in like manner with it, 'and further, that such mortgage shall have all the force and effect,

in law and equity, of registered mortgages without actual registry.' While no certificate of stock was to be attached to or go with the bond, the statute evidently contemplated that the mortgage endorsed on the bond should have the same force and effect. Hence, when the indorsement was made and the bond issued by the state, it was tantamount to a spearation and identification of the number of shares named therein. It cannot be that the state, having provided this means of giving to each bond the mortgage security of the corresponding shares of stock, can now prevent the attaching of the lien on the ground that no shares had been separated and no certificate transferred. It is unnecessary to refer to chap. 98 of the Laws of 1879, for that act was one in the nature of an offer to compromise, although it does contain a recognition of outstanding obligations.

'This testimony, which is all that was laid before the court, shows, we think, a sale and conveyance to the plaintiff which was binding on both parties. M'Donald could not have main- Neither can there be any question respecting the title of South Dakota to these bonds. They are not held by the state as representative of individual owners, as in the case of New Hampshire v. Louisiana,  108 U.S. 76 , 27 L. ed. 656, 2 Sup. Ct. Rep. 176, for they were given outright and absolutely to the state. It is true that the gift may be considered a rare and unexpected one. Apparently the statute of South Dakota was passed in view of the expected gift, and probably the donor made the gift under a not unreasonable expectation that South Dakota would bring an action against North Carolina to enforce these bonds, and that such action might enure to his benefit as the owner of other like bonds. But the motive with which a gift is made, whether good or bad, does not affect its validity or the question of jurisdiction. This has been often ruled. In M'Donald v. Smalley, 1 Pet. 620, 7 L. ed. 287, an objection to the jurisdiction on the ground that the title to the property in controversy had been conveyed to the plaintiff in the belief that it would be sustained by the Federal, when it would not be by the state, court, was overruled, with this observation by Chief Justice Marshall (p. 624, L. ed. p. 289):

tained an action for his debt, nor M'Arthur a suit for his land. His title to it was extinguished, and the consideration was received. The motives which induced him to make the contract, whether justifiable or consurable, can have no influence on its validity. They were such as had sufficient influence with himself, and he had a right to act upon them. A court cannot enter into them when deciding on its jurisdiction. The conveyance appears to be a real transaction, and the real as well as nominal parties to the suit are citizens of different states.'

'If the law concerned itself with the motives of parties, new complications would be introduced into suits, which might seriously obscure their real merits. If the debt secured by a mortgage be justly due, it is no defense to a foreclosure that the mortgagee was animated by hostility or other bad motive. Davis v. Flagg, 35 N. J. Eq. 491; Dering v. Winchelsea, 1 Cox. Ch. Cas. 318; McMullen v. Ritchie, 64 Fed. 253, 261; Toler v. East Tennessee, V. & G. R. Co. 67 Fed. 168. . . . The reports of this court furnish a number of analogous cases. Thus, it is well settled that a mere colorable conveyance of property, for the purpose of vesting title in a nonresident and enabling him to bring suit in a Federal court, will not confer jurisdiction; but if the conveyance appear to be a real transaction, the court will not, in deciding upon the question of jurisdiction, inquire into the motives which actuated the parties in making the conveyance. M'Donald v. Smalley, 1 Pet. 620, 7 L. ed. 287; Smith v. Kernochen, 7 How. 198, 12 L. ed. 666; Barney v. Baltimore City, 6 Wall. 280, 18 L. ed. 825; Farmington v. Pillsbury,  114 U.S. 138 , 29 L. ed. 114, 5 Sup. Ct. Rep. 807; Crawford v. Neal,  144 U.S. 585 , 36 L. ed. 552, 12 Sup. Ct. Rep. 759.

'The law is equally well settled that, if a person take up a bona fide residence in another state, he may sue in a Federal court, notwithstanding his purpose was to resort to a forum of which he could not have availed himself if he were a resident of the state in which the court was held. Cheever v. See also Smith v. Kernochen, 7 How. 198, 12 L. ed. 666; Barney v. Baltimore City, 6 Wall. 280, 18 L. ed. 825; Dickerman v. Northern Trust Co.  176 U.S. 181 , 190-192, 44 L. ed. 423, 430, 20 Sup. Ct. Rep. 311. In this last case Mr. Justice Brown, speaking for the court, said:

Wilson, 9 Wall. 108, 123, 19 L. ed. 604, 608; Briggs v. French, 2 Sumn. 251, Fed. Cas. No. 1,871; Catlett v. Pacific Ins. Co. 1 Paine, 594, Fed. Cas. No. 2,517; Cooper v. Galbraith, 3 Wash. 546, Fed. Cas. No. 3,193; Johnson v. Monell, Woolw. 390, Fed. Cas. No. 7,399.'

The title of South Dakota is as perfect as though it had received these bonds directly from North Carolina. We have, therefore, before us the case of a state with an unquestionable title to bonds issued by another state, secured by a mortgage of railroad stock belonging to that state, coming into this court and invoking its jurisdiction to compel payment of those bonds and a subjection of the mortgaged property to the satisfaction of the debt.

Has this court jurisdiction of such a controversy, and to what extent may it grant relief? Obviously, that jurisdiction is not affected by the fact that the donor of these bonds could not invoke it. The payee of a foreign bill of exchange may not sue the drawer in the Federal court of a state of which both are citizens, but that does not oust the court of jurisdiction of an action by a subsequent holder if the latter be a citizen of another state. The question of jurisdiction is determined by the status of the present parties, and not by that of prior holders of the thing in controversy. Obviously, too, the subject-matter is one of judicial cognizance. If anything can be considered as justiciable it is a claim for money due on a written promise to pay; and if it be justiciable, does it matter how the plaintiff acquires title, providing it be honestly acquired? It would seem strangely inconsistent to take jurisdiction of an action by South Dakota against North Carolina on a promise to pay made by the latter directly to the former, and refuse jurisdiction of an action on a like promise made by the latter to an individual, and by him sold or donated to the former.

A preliminary question arises from the fact that representatives of the two classes of bonds are made defendants, and that a part of the relief asked is a sale of the 30,000 shares of stock of the North Carolina Railroad Company, belonging to the state of North Carolina, in satisfaction and discharge of all the mortgages upon such stock. It is insisted

that these individuals, owners of the bonds, although named as defendants, are in fact occupying an adverse position to that of the state, and that the effect of their presence as parties is a practical nullification of the 11th Amendment, in that it is giving to individuals relief by judgment against the state. Apparently, one expectation of the donor to South Dakota was that in some way the bonds retained by himself would be placed in judgment, and relief obtained against North Carolina in the suit commenced by South Dakota. But we think that these individuals are not necessary parties-defendant, and that no relief should be given to them or to the classes of bondholders they represent. The statute under which the mortgage was executed provided that with each of the bonds a deed of mortgage for a like amount of stock should be executed by the state. There is, therefore, a separate mortgage of ten shares of stock on each one of these bonds, and that mortgage can be fully satisfied by a decree of foreclosure and sale of the ten shares of stock. No one would doubt that, if a certificate of stock was attached as a pledge to a note, the pledge could be satisfied by a sale of the stock without any determination of the rights of the purchaser as between himself and other stockholders. And such was the manifest purpose of this legislation. It contemplated that each bondholder should receive a stock security which he could realize on without the delay and expense of a suit to which all other stockholders and the corporation would be necessary parties. The purchaser at the sale to be authorized by this decree will become vested with the full title of the state to the number of shares of stock stated in the mortgage. He will occupy the same position in relation to the corporate property that other stockholders occupy, and have whatever rights they have. It is not necessary for a full satisfaction of the mortgage on one of these bonds that any other mortgage upon another bond be also foreclosed, or that a decree be entered determining what rights the purchaser will have by virtue of the stock which he obtains at the sale. So far, then, as these individual defend-

ants are concerned, the suit will be dismissed, with costs against South Dakota.

'The cases cited show that such jurisdiction has been exercised in cases involving boundaries and jurisdiction over lands and their inhabitants, and in cases directly affecting the property rights and interests of a state.' Coming now to the right of South Dakota to maintain this suit against North Carolina, we remark that it is a controversy between two states; that by 2, art. III., of the Constitution, this court is given original jurisdiction of 'controversies between two or more states.' In Missouri v. Illinois,  180 U.S. 208 , 45 L. ed. 497, 21 Sup. Ct. Rep. 331, Mr. Justice Shiras, speaking for the court, reviewed at length the history of the incorporation of this provision into the Federal Constitution, and the decisions rendered by this court in respect to such jurisdiction, closing with these words (p. 240, L. ed. p. 512, Sup. Ct. Rep. p. 343):

The present case is one 'directly affecting the property rights and interests of a state.'

Although a repetition of this review is unnecessary, two or three matters are worthy of notice. The original draft of the Constitution reported to the convention gave to the Sanate jurisdiction of all disputes and controversies 'between two or more states, respecting jurisdiction or territory,' and to the Supreme Court jurisdiction of 'controversies between two or more states, except such as shall regard territory or jurisdiction.' A claim for money due being a controversy of a justiciable nature, and one of the most common of controversies, would seem to naturally fall within the scope of the jurisdiction thus intended to be conferred upon the Supreme Court. In the subsequent revision by the convention the power given to the Senate in respect to controversies between the states was stricken out, as well as the limitation upon the jurisdiction of this court, leaving to it, in the language now found in the Constitution, jurisdiction, without any limitation, of 'controversies between two or more states.'

The Constitution, as it originally stood, also gave to this

'It is a part of our history that, at the adoption of the Constitution, all the states were greatly indebted; and the apprehension that these debts might be prosecuted in the Federal courts formed a very serious objection to that instrument. Suits were instituted; and the court maintained its jurisdiction. The alarm was general; and, to quiet the apprehensions that were so extensively entertained, this amendment was proposed in Congress, and adopted by the state legislatures. That its motive was not to maintain the sovereignty of a state from the degradation supposed to attend a compulsory appearance before the tribunal of the nation may be inferred from the terms of the amendment. It does not comprehend controversies between two or more states, or between a state and a foreign state. The jurisdiction of the court still extends to these cases; and in these a state may still be sued. We must ascribe the amendment, then, to some other cause than the dignity of a state. There is no difficulty in finding this cause. Those who were inhibited from commencing a suit against a state, or from prosecuting one which might be commenced before the adoption of the amendment, were persons who might probably be its creditors. There was not much reason to fear that foreign or sister states would court jurisdiction of controversies 'between a state and citizens of another state.' Under that clause Chisholm v. Georgia, 2 Dall. 419, 1 L. ed. 440, was decided, in which it was held that a citizen of one state might maintain in this court an action of assumpsit against another state. In consequence of that decision the 11th Amendment was adopted, which provides that 'the judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by citizens of another state, or by citizens or subjects of any foreign state.' It will be perceived that this amendment only granted to a state immunity from suit by an individual, and did not affect the jurisdiction over controversies between two or more states. In respect to this it was said by Chief Justice Marshall in Cohen v. Virginia, 6 Wheat. 264, 406, 5 L. ed. 257, 291:

be creditors to any considerable amount, and there was reason to retain the jurisdiction of the court in those cases, because it might be essential to the preservation of peace. The amendment, therefore, extended to suits commenced or prosecuted by individuals, but not to those brought by states.'

'In the second class, the jurisdiction depends entirely on the character of the parties. In this are comprehended 'controversies between two or more states, between a state and citizens of another state,' 'and between a state and foreign states, citizens or subjects.' If these be the parties, it is entirely unimportant what may be the subject of controversy. Be it what it may, these parties have a constitutional right to come into the courts of the Union.' In the same case, after referring to the two classes of cases, jurisdiction of which was vested in the courts of the Union, he said (p. 378, L. ed. p. 285):

'Those states, in their highest sovereign capacity, in the convention of the people thereof, . . . adopted the Constitution, by which they respectively made to the United States a grant of judicial power over controversies between two or more states. By the Constitution, it was ordained that this judicial power, in cases where a state was a party, should be exercised by this court as one of original jurisdiction. The states waived their exemption from judicial power (6 Wheat. 378, 380, 5 L. ed. 284, 285) as sovereigns by original and inherent right, by their own grant of its exercise over themselves in such cases, but which they would not grant to any inferior tribunal. By this grant, this court has acquired jurisdiction over the parties in this cause, by their own consent and delegated authority; as their agent for executing the judicial power of the United States in the cases specified.' In Rhode Island v. Massachusetts, 12 Pet. 657, 9 L. ed. 1233, this court sustained its jurisdiction of a suit in equity brought by one state against another to determine a dispute as to boundary, and, in the course of the opinion, by Mr. Justice Baldwin, said in respect to the immunity of a sovereign from suit by an individual (p. 720, L. ed. p. 1259):

And, again, in reference to the extent of the jurisdiction of this court (p. 721, L. ed. p. 1259):

'That it is a controversy between two states cannot be denied; and, though the Constitution does not, in terms, extend the judicial power to all controversies between two or more states, yet it, in terms, excludes none, whatever may be their nature or subject.'

'The cases in this court show that the framers of the Constitution did provide, by that instrument, for the judicial determination of all cases in law and equity between two or more states, including those involving questions of boundary. Did they omit to provide for the judicial determination of controversies arising between the United States and one or more of the states of the Union? This question is in effect answered by United States v. North Carolina,  136 U.S. 211 , 34 L. ed. 336, 10 Sup. Ct. Rep. 920. That was an action of debt brought in this court by the United States against the state of North Carolina upon certain bonds issued by that state. The state appeared, the case was determined here upon its merits, and judgment was rendered for the state. It is true that no question was made as to the jurisdiction of this court, and nothing was therefore said in the opinion upon that subject. But it did not escape the attention of the court, and the judgment would not have been rendered except upon the theory that this court has original jurisdiction of a suit by the United States against a state.' In United States v. North Carolina,  136 U.S. 211 , 34 L. ed. 336, 10 Sup. Ct. Rep. 920, we took jurisdiction of an action brought by the United States against North Carolina to recover interest on bonds, and decided the case upon its merits. It is true there was nothing in the opinion in reference to the matter of jurisdiction, but as said in United States v. Texas,  143 U.S. 621, 642 , 36 S. L. ed. 285, 292, 12 Sup. Ct. Rep. 488, 492:

'By its bill the United States invokes the original jurisdiction of this court for the purpose of determining a controversy existing between it and the state of Michigan. This court has jurisdiction of such a controversy, although it is not lit- See also United States v. Michigan,  190 U.S. 379 , 47 L. ed. 1103, 23 Sup. Ct. Rep. 742, decided at the last term, in which a bill in equity for an accounting and a recovery of money was sustained. Mr. Justice Peckham, delivering the unanimous opinion of the court, said (pp. 396, 406, L. ed. pp. 1109, 1113, Sup. Ct. Rep. pp. 747, 751):

erally between two states, the United States being a party on the one side and a state on the other. This was decided in United States v. Texas,  143 U.S. 621, 642 , 36 S. L. ed. 285, 292, 12 Sup. Ct. Rep. 488. . . . There must be judgment overruling the demurrer, but as the defendant may desire to set up facts which it might claim would be a defense to the complainant's bill, we grant leave to the defendant to answer up to the first day of the next term of this court. In case it refuses to plead further, the judgment will be in favor of the United States for an accounting for the payment of the sum found due thereon.'

We are not unmindful of the fact that in Hans v. Louisiana,  134 U.S. 1 , 33 L. ed. 842, 10 Sup. Ct. Rep. 504, Mr. Justice Bradley, delivering the opinion of the court, expressed his concurrence in the views announced by Mr. Justice Iredell, in the dissenting opinion in Chisholm v. Georgia, but such expression cannot be considered as a judgment of the court, for the point decided was that, construing the 11th Amendment according to its spirit rather than by its letter, a state was relieved from liability to suit at the instance of an indivdual, whether one of its own citizens or a citizen of a foreign state. Without noticing in detail the other cases referred to by Mr. Justice Shiras in Missouri v. Illinois,  180 U.S. 208 , 45 L. ed. 497, 21 Sup. Ct. Rep. 331, it is enough to say that the clear import of the decisions of this court from the beginning to the present time is in favor of its jurisdiction over an action brought by one state against another, to enforce a property right. Chisholm v. Georgia was an action of assumpsit; United States v. North Carolina, an action of debt; United States v. Michigan, a suit for an accounting; and that which was sought in each was a money judgment against the defendant state.

But we are confronted with the contention that there is no power in this court to enforce such a judgment, and such lack of power is conclusive evidence that, notwithstanding the general language of the Constitution, there is an implied exception of actions brought to recover money. The public property held by any municipality, city, county, or state is exempt from seizure upon execution, because it is held by such corporation, not as a part of its private assets, but as a trustee for public purposes. (Meriwether v. Garrett,  102 U.S. 472, 513 , 26 S. L. ed. 197, 204.)

As a rule, no such municipality has any private property subject to be taken upon execution. A levy of taxes is not within the scope of the judicial power except as it commands an inferior municipality to execute the power granted by the legislature.

'We are of the opinion that this court has not the power to direct a tax to be levied for the payment of these judgments. This power to impose burdens and raise money is the highest attribute of sovereignty, and is exercised, first, to raise money for public purposes only; and, second, by the power of legislative authority only. It is a power that has not been extended to the judiciary. Especially is it beyond the power of the Federal judiciary to assume the place of a state in the exercise of this authority, at once so delicate and so important.' In Rees v. Watertown, 19 Wall. 107, 116, 117, 22 L. ed. 72, 75, we said:

See also Heine v. Levee Comrs. 19 Wall. 655, 661, 22 L. ed. 223, 226; Meriwether v. Garrett,  102 U.S. 472 , 26 L. ed. 197.

'The only legitimate inquiry for our determination upon the case before us is this: Whether, under the organization of the Federal government or by any known principle of law, there can be asserted a power in the circuit court of the United States for the District of Columbia, or in this court, to command the withdrawal of a sum or sums of money from the Treasury of the United States, to be applied in satisfaction of disputed or controverted claims against the United States? This is the question, the very question presented for our determination; and its simple statement would seem to carry with it the most startling considerations,-nay, its unavoidable negation, unless this should be prevented by some positive and controlling command; for it would occur, a priori, to every mind, that a treasury, not fenced round or shielded by fixed and established modes and rules of administration, but which In this connection reference may be made to United States ex rel. Goodrich v. Guthrie, 17 How. 284, 15 L. ed. 102, in which an application was made for a mandamus against the Secretary of the Treasury to compel the payment of an official salary, and in which we said (p. 303, L. ed. p. 106):

could be subjected to any number or description of demands, asserted and sustained through the undefined and undefinable discretion of the courts, would constitute a feeble and inadequate provision for the great and inevitable necessities of the nation. The government under such a regime, or rather, under such an absence of all rule, would, if practicable at all, be administered, not by the great departments ordained by the Constitution and laws, and guided by the modes therein prescribed, but by the uncertain and perhaps contradictory action of the courts, in the enforcement of their views of private interests.'

'The award of execution is a part, and an essential part, of every judgment passed by a court exercising judicial power. It is no judgment, in the legal sense of the term, without it. Without such an award the judgment would be inoperative and nugatory, leaving the aggrieved party without a remedy. . . . Indeed, no principle of constitutional law has been more firmly established or constantly adhered to than the one above stated,-that is, that this court has no jurisdiction in any case where it cannot render judgment in the legal sense of the term; and when it depends upon the legislature to carry its opinion into effect or not, at the pleasure of Congress.' See also Re Sanborn,  148 U.S. 222 , 37 L. ed. 429, 13 Sup. Ct. Rep. 577, and La Abra Silver Min. Co. v. United States,  175 U.S. 423, 456 , 44 S. L. ed. 223, 235, 20 Sup. Ct. Rep. 168, Further, in this connection may be noticed Gordon v. United States, 117 U.S. 697, in which this court declined to take jurisdiction of an appeal from the court of claims, under the statute as it stood at the time of the decision, on the ground that there was not vested by the act of Congress power to enforce its judgment. We quote the following from the opinion, which was the last prepared by Chief Justice Taney (pp. 702, 704):

We have, then, on the one hand the general language of the Constitution, vesting jurisdiction in this court over 'controversies between two or more states,' the history of that jurisdictional clause in the convention, the cases of Chisholm v. Georgia, United States v. North Carolina, and United States v. Michigan (in which this court sustained jurisdiction over actions

to recover money from a state), the manifest trend of other decisions, the necessity of some way of ending controversies between states, and the fact that this claim for the payment of money is one justiciable in its nature; on the other, certain expression of individual opinions of justices of this court, the difficulty of enforcing a judgment for money against a state by reason of its ordinary lack of private property subject to seizure upon execution, and the absolute inability of a court to compel a levy of taxes by the legislature. Notwithstanding the embarrassments which surround the question, it is directly presented, and may have to be determined before the case is finally concluded, but for the present it is sufficient to state the question with its difficulties.

There is in this case a mortgage of property, and the sale of that property under a foreclosure may satisfy the plaintiff's claim. If that should be the result, there would be no necessity for a personal judgment against the state. That the state is a necessary party to the foreclosure of the mortgage was settled by Christian v. Atlantic & N. C. R. Co.  133 U.S. 233 , 33 L. ed. 589, 10 Sup. Ct. Rep. 260. Equity is satisfied by a decree for a foreclosure and sale of the mortgaged property, leaving the question of a judgment over for any deficiency to be determined when, if ever, it arises. And surely if, as we have often held, this court has jurisdiction of an action by one state against another to recover a tract of land, there would seem to be no doubt of the jurisdiction of one to enforce the delivery of personal property.

A decree will, therefore, be entered, which, after finding the amount due on the bonds and coupons in suit to be twenty-seven thousand four hundred dollars ($27,400), (no interest being recoverable [United States v. North Carolina,  136 U.S. 211 , 34 L. ed. 336, 10 Sup. Ct. Rep. 920]), and that the same are secured by 100 shares of the stock of the North Carolina Railroad Company, belonging to the state of North Carolina, shall order that the said state of North Carolina pay said amount with costs of suit to the state of South Dakota on or before the 1st Monday of January, 1905, and that in default of such payment an order of sale be issued to the marshal of this court, directing him to sell

at public auction all the interest of the state of North Carolina in and to one hundred shares of the capital stock of the North Carolina Railroad Company, such sale to be made at the east front door of the Capitol building in this city, public notice to be given of such sale by advertisements once a week for six weeks in some daily paper published in the city of Raleigh, North Carolina, and also in some daily paper published in the city of Washington.

And either of the parties to this suit may apply to the court upon the foot of this decree, as occasion may require.

Mr. Justice White, dissenting, with whom concurred Mr. Chief Justice Fuller, Mr. Justice McKenna, and Mr. Justice Day:

The decision in this cause seems to me to disregard an express and absolute prohibition of the Constitution. The facts are stated in the opinion of the court. As, however, there are some facts deemed by me to be material, which are not referred to, it is proposed to make a summary of the case, and then express the reasons which control me.

In the years 1847 and 1855 the negotiable bonds of the state of North Carolina were issued to aid in the construction of the railway of the North Carolina Railroad Company, and were exchanged for the stock of that company. The bonds went into the hands of individuals and the exchanged stock passed into the possession of the state, and was declared to be pledged in the hands of the state to secure the payment of the bonds in question.

In 1855 and 1866 similar aid was given to another railway,-the Western North Carolina. Bonds, each for the par value of $1,000, aggregating nearly two and a half millions of dollars, were issued by the state. All the bonds which were issued after the passage, in 1866, of an act of the legislature, were declared to be secured, as stated in the act, by a mortgage of the stock of the North Carolina Railroad held by the state, and already, in its entirety, pledged for the security of all the bonds which had been previously issued

in aid of the North Carolina Railroad. The stock, however, remained in possession of the state, but each of the bonds thereafter issued contained an indorsement that ten shares of stock of the North Carolina Railroad Company, in the hands of the state, were mortgaged as security for the payment of each of the bonds.

Presumably, as a result of the disastrous consequences of the Civil War and the events which followed, the financial affairs of the state of North Carolina in 1879 were profoundly embarrassed. The state had not paid the interest as it accrued on the bonds issued in aid of the North Carolina Railroad. It had, in effect, paid no interest whatever on the bonds issued in favor of the Western North Carolina Railroad, and, indeed, had defaulted generally in the payment of the interest on its public debt. Statutes were passed by the state providing for an adjustment of its financial affairs so as to rehabilitate its credit, in order that when the state debt was readjusted the state might, for the benefit of all its people and its creditors, be able to pay the interest on, and provide for the principal of, the public debt. The adjustment made was accepted by those holding the bonds issued in aid of the North Carolina Railroad, and they waived a very large sum of unpaid interest, and received new bonds, accompanied with a reiteration of the pledge of all the stock of the North Carolina Railroad owned by the state, which had always been held by the state as security for the payment of all the bonds of that issue. It is to be inferred from the record that the adjustment proposed was generally accepted by the other creditors of the state, and that, as a consequence, its fiscal affairs were placed upon a sound basis. Be this as it may, certain is it that the adjustment was accepted by the holders of a vast majority of the bonds issued in aid of the Western North Carolina Railroad, and that such holders surrendered their old bonds and took new bonds of the state for 25 per cent of the face value of their bonds, these new bonds not purporting to be secured by any mortgage of the stock of the North Carolina Railroad.

In 1901,-twenty-two years after the passage of the acts re-

ferred to, and their acceptance as above stated,-Simon Schafer and his brother, composing the firm of Schafer & Brothers, bankers and brokers in the city of New York, addressed a petition to the legislature of North Carolina. Therein it was recited that the parties named were the holders, in their own right and as trustees, of nearly two hundred and fifty thousand dollars of the bonds issued in aid of the Western North Carolina Railroad Company, attached to which were unpaid interest coupons for more than thirty years. The petitioners declared that these bonds were substantially all the bonds of the series then outstanding, because the holders thereof had not accepted the arrangement of 1879. It was stated that such arrangements had been accepted by the vast majority of others who held such bonds, by reason of the financial stress of the state at the time, and because those creditors knew that the stock of the North Carolina Railroad, mortgaged to secure the bonds, was of no avail for such purpose, since its value at the time of the adjustment was not adequate to pay the bonds issued in aid of the North Carolina Railroad, in favor of which it was first pledged. It was recited that the petitioners had not availed of the adjustment because they preferred waiting a restoration of the credit of the state, and trusted that the stock of the North Carolina Railroad might ultimately prove adequate to pay the bonds as reduced, issued in favor of the North Carolina Railroad, and the small amount of bonds which remained outstanding, as a result of the adjustment. It was declared that this had been accomplished; that in consequence of the reduced amount of the North Carolina Railroad bonds brought about by the adjustment, and the retirement thereby effected of all the bonds of the Western North Carolina Railroad except the small amount held or represented by the petitioners, the stock of the North Carolina Railroad held by the state, if sold, would be adequate to pay both series and leave a balance in favor of the state. Reciting that the petitioners and those they represented were aware that their claims against the state could not be judicially enforced either in the state or Federal courts, the prayer was that an appropriation might be made to pay their bonds in principal

and accumulated interest; or that, in default, an act be passed authorizing suit in the courts to enforce the mortgage lien asserted to exist on the stock of the North Carolina Railroad. The prayer of this petition was not granted.

Shortly following the failure to act favorably upon the petition just referred to, the act of the legislature of South Dakota, set out in the opinion of the court, was passed. It will be observed that, among other things, it empowered the governor to accept gifts made to the state of bonds or choses in action, and authorized the attorney general of the state, when such gifts were accepted, to bring suit in the name of the state to enforce payment of the same, and for that purpose 'to employ counsel to be associated with him in such suits or actions, who, with him, shall fully represent the state, and shall be entitled to reasonable compensation (italics mine) out of the recoveries and collections in such suits and actions.' Thereupon Simon Schafer addressed the letter to the Hon. Charles H. Burke, a member of Congress from South Dakota, which is reproduced in full in the opinion of the court. It suffices to say that by that letter ten of the bonds were given to the state of South Dakota, and it was specially mentioned that the gift was made because Schafer was aware that he could not sue the state of North Carolina, whilst the state of South Dakota could do so. The letter also contained the suggestion, presumably as an inducement to an acceptance by the state, that if the ten bonds were enforced by the state of South Dakota, other gifts of similar bonds might be made. The bonds were accepted by the governor of South Dakota, and the attorney general of that state thereupon filed the present bill. The parties-defendant were the state of North Carolina, a person sued as representing all the holders of bonds issued in aid of the North Carolina Railroad, and a person sued as representative of the holders of the outstanding bonds issued in aid of the Western North Carolina Railroad. The prayer of the bill was, in substance, for a decree against the state of North Carolina for the amount of the principal of the bonds, and for more than thirty years' accrued interest; for an enforcement of the mortgage asserted to exist on the stock of

the North Carolina Railroad Company held by the state; for a decree declaring that the holders of the bonds issued in favor of the North Carolina Railroad Company had lost their prior lien upon the whole stock by reason of their acceptance of the compromise under the act of 1879, and the taking of new bonds by them in pursuance thereof. It was, however, prayed that in the event it should be found that the lien of such bondholders on the stock had not been waived, the stock be ordered sold, free from all encumbrances, to satisfy the claims of the respective lienholders thereon, and that distribution be made of the proceeds of the stock among them according to priority.

The state answered, challenging the jurisdiction of this court to entertain the bill, and also urging various defenses on the merits.

The person joined as representing the bonds issued in aid of the North Carolina Railroad made no appearance. Charles Salter, who was made defendant as representative of the holders of the bonds issued in aid of the Western North Carolina Railroad, answered, substantially admitting all the allegations of the bill, but praying 'that plaintiff's bill be dismissed with costs, unless the court shall decree that all the stock subject to the second mortgage be sold for the benefit of all the holders of said second mortgage bonds.'

The court now decides that it has jurisdiction, because of the delegation in the 2d section of the 3d article of the Constitution, of judicial power to the United States over 'constroversies between two or more states,' and because of the grant to this court of original jurisdiction over cases in which a state shall be a party. Whilst conceding that, if the holders of the bonds issued in aid of the North Carolina Railroad are necessary parties, the jurisdiction would be ousted, it is held that such bondholders are not necessary parties, since there may be a sale to enforce complainant's rights of a portion of the stock held by the state of North Carolina, subject to the prior rights therein of the holders of such bonds. The decree which will be entered will, therefore, adjudge the state of North Carolina to be indebted to South Dakota in the

amount of the principal of the ten bonds, with more than thirty years' accrued interest. The decree will direct the sale of the stock in the North Carolina Railroad Company held by the state, subject to the prior pledge in favor of the holders of the bonds of the North Carolina Railroad. The question of a deficiency decree is reserved, in case, as a result of the sale, the debt decreed against the state should not be extinguished.

With this summary of the pleadings, the facts, and the decision of the court in mind, I shall now state the reasons which compel me to dissent, all of which may be embraced in the two following general propositions which I shall examine under separate headings: (A) The absolute want of power in the court to render a decree between the two states on the cause of action sued on; and (B) The want of power to render the decree which is now directed to be entered, because of the absence of essential parties whose presence would oust jurisdiction, and the impotency to grant any relief whatever in the absence of such parties.

(A)

The absolute want of power in the court to render a decree between the two states on the cause of action sued on.

First. The power of this court to award a decree against the state of North Carolina is based on the provision in the 2d section of the 3d article of the Constitution, extending the judicial power of the United States over 'controversies between two or more states,' and to the delegation to this court of original jurisdiction over such controversies. If the provisions in question were the only ones on the subject it might be more difficult to deny that the Federal judicial power embraced this controversy. Those provisions, however, do not stand alone, since they must be considered in connection with the 11th Amendment to the Constitution, providing that 'the judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by citizens of another state, or by citizens or subjects of any foreign state.'

The question which the case involves is not what, in a generic sense, may be considered a controversy between states, but whether the particular claim here asserted by the state of South Dakota is, in any view, such a controversy. It is also to be observed that the question is not whether a controversy between states may not arise from a debt originating as the result of a direct transaction between states, but is whether one state can acquire a claim asserted against another state by a citizen of that or of another state or an alien, and as a result sue upon it, and thereby create a controversy between states in a constitutional sense. Indeed, the question is narrower than this, since in this case the alleged debtor state had, years before the transfer of the claim in question, while it was yet owned by individuals, declined to recognize the debt, and had refused payment thereof, as the result of a controversy between itself and its alleged creditors.

I take it to be an elementary rule of constitutional construction that no one provision of the Constitution is to be segregated from all the others, and to be considered alone, but that all the provisions bearing upon a particular subject are to be brought into view and to be so interpreted as to effectuate the great purposes of the instrument. If, in following this rule, it be found that an asserted construction of any one provision of the Constitution would, if adopted, neutralize a positive prohibition of another provision of that instrument, then it results that such asserted construction is erroneous, since its enforcement would mean, not to give effect to the Constitution, but to destroy a portion thereof. My mind cannot escape the conclusion that if, wherever an individual has a claim, whether in contract or tort, against a state, he may, by transferring it to another state, bring into play the judicial power of the United States to enforce such claim, then the prohibition contained in the 11th Amendment is a mere letter, without spirit and without force. This is said because no escape is seen from the conclusion if the application of the prohibition is to depend solely upon the willingness of the creditor of a state, whether citizen or alien, to transfer, and the docility or cupidity of another state in accepting such transfer, that the

provision will have no efficacy whatever. And this becomes doubly cogent when the history of the 11th Amendment is considered, and the purpose of its adoption is borne in mind.

'It is a part of our history that, at the adoption of the Constitution, all the states were greatly indebted; and the apprehension that these debts might be prosecuted in the Federal courts formed a very serious objection to that instrument. Suits were instituted; and the court maintained its jurisdiction. The alarm was general; and, to quiet the apprehensions that were so extensively entertained, this amendment was proposed in Congress, and adopted by the State legislatures.' It is familiar that the amendment was adopted because of the decision of this court in 1793, in Chisholm v. Georgia, 2 Dall. 419, 1 L. ed. 440, holding that the grant of judicial power to the United States to determine controversies between a state and a citizen of another state vested authority to determine a controversy wherein a citizen of a state asserted a claim against another state. That the purpose of the amendment was to remove the possibility of the assertion of such a claim is aptly shown by the passage from the opinion of Mr. Chief Justice Marshall in Cohen v. Virginia, 6 Wheat. 264, 5 L. ed. 257, as quoted in the opinion of the court in this case, saying (p. 406. L. ed. 291):

As the purpose of the amendment was to prohibit the enforcement of individual claims against the several states by means of the judicial power of the United States, and as the amendment was subsequent to the grant of judicial power made by the Constitution, the amendment qualified the whole grant of judicial power to the extent necessary to render it impossible, by indirection, to escape the operation of the avowed purpose which the people of the United States expressed in adopting the amendment. How, as declared by Chief Justice Marshall, could the adoption of the amendment have quieted the apprehensions concerning the right to enforce private claims against the states, if the power was left open, after the amendment, to do so if only they were transferred to another state? It is also to be observed that the construction now given causes the judicial power of the United States to embrace

claims not within even the reach of the ruling in Chisholm v. Georgia, for that case only decided that under the grant of power a citizen of one state might sue another state. But under the rule of construction now announced, not only claims held by citizens of other states and aliens, but those held by a citizen of the state, become capable of enforcement, if only the holders of such claims, after the state has refused to pay them, choose to sell or make gift thereof to another state, found willing to become a party to a plan to evade a constitutional provision inserted for the protection of all the states.

Let me, arguendo, grant that a case may be conceived of where one provisions of the Constitution can be so construed as to render nugatory another and applicable provision. Even such an impossible doctrine can have no relation to the case in hand. The decisions of this court, rendered since the 11th Amendment, have consistently held that that amendment embodied a principle of national public policy whose enforcement may not be avoided by indirection or subterfuge. Ought this rule of public policy to be disregarded by endowing every state with the power of speculating upon stale and unenforceable claims of individuals against other states, thus not only doing injustice, but also overthrowing the fiscal independence of every state, and destroying that harmony between them which it was the declared purpose of the Constitution to establish and cement? Such a departure from the provisions of the 11th Amendment, and the rule of national public policy which it embodies, may not be sustained by the assumption that it would be unduly curtailing the independence of the several states to deny them the right of enforcing, by the aid of the Federal judicial power, claims against other states, acquired from private individuals. For this assumption would amount to this,-that any and all of the states only enjoy the essential privilege of being free from coercion as to the claims of individuals, and have the power to manage their financial affairs at the mere pleasure of any of the other states. This is to say, that for the purpose of preserving the rights of the states, those rights must be destroyed.

It is true that the greater number of cases decided by this

court concerning the right to enforce a private claim against a state concerned controversies where suit was brought by citizens of other states or aliens, who were therefore persons expressly within the terms of the 11th Amendment. An analysis of those cases, however, will show that they were decided, not upon the mere ground that the person who sued was within the 11th Amendment, but upon the broad proposition that, by the effect of that amendment, claims of private individuals could not be enforced against a state, and that in upholding this constitutional limitation the court would look at the real nature of the controversy, irrespective of the parties on the record. If it were found by doing so that, in effect, the consequence of the granting of the relief would be to enforce, by the Federal judicial power, the claim of a private individual against a state, such relief would be denied. I content myself with the reference in the margin to the leading cases of this character,1 and come at once to consider the adjudications of this court rendered in two cases which directly related to the operation of the prohibitions of the 11th Amendment on the grant of judicial power to the