Statement of the Case.

The state legislature, on December 16, 1863, passed the first act in relation to receiving treasury warrants from railroad companies, c. 57, which reads as follows:

"SEC. 1. Be it enacted by the Legislature of the State of Texas, That the comptroller of the State be, and he is hereby, authorized to receive from the railroad companies in this State who are indebted to the special school fund, all interest on their bonds that may now be or hereafter become due, provided the same is tendered in state bonds or in state treasury warrants, previous to the meeting of the next regular session of the state legislature.

"SEC. 2. That for all sums so paid in, the comptroller and treasurer shall issue to the special school fund the bonds of the State bearing 6 per cent. interest."

The legislature also passed another act on May 28, 1864, c. 16, which reads as follows:

"SEC. 1. Be it enacted by the Legislature of the State of Texas, That the provisions of the act of which it is amendatory shall not apply to railroad companies that fail or refuse to receive state bonds or state treasury warrants at par for freight or passage at the prices or rates established by law.

"SEC. 2. That whenever satisfactory evidence is produced or furnished to the comptroller of the State that any railroad company has failed or refused to receive the state bonds or state treasury warrants at par for freight or passage at the rates established by law, he is required to refuse to receive the state bonds or treasury warrants for the interest due by said railroad upon its bond.

"SEC. 3. That the president of any railroad in this State be, and is hereby, required to post in a conspicuous place in the railroad offices and in the passenger cars the provisions and terms of this act, under a penalty of $100, to be recovered for the benefit of the State by suit before any court of competent jurisdiction, upon information of any party."

On November 15, 1864, still another act was passed by the legislature, c. 16, which reads as follows:

"Be it enacted by the Legislature of the State of Texas, That the railroad companies of this State that are indebted

Statement of the Case.

to the special school fund shall continue to be allowed the, privilege of paying the interest due said fund in the treasury warrants and bonds and coupons of the State; and may also discharge the whole or any part of the principal of their indebtedness to that fund (in the same manner) provided such railroad companies shall satisfy the comptroller that the treasury warrants and bonds and coupons of the State are received by them at par with specie for freight and passenger travel.

"That all treasury warrants and bonds and coupons of the State, so received into the state treasury, shall be cancelled; and the comptroller shall issue the bonds of the State, bearing six per cent. interest to the special school fund for the amount so paid in; and this act take effect from its passage."

Upon the passage of these various acts and in reliance upon the agreement and obligation of the State, as evidenced thereby, the two companies acquired treasury warrants upon good consideration, and after the passage of the act of May, 1864, they received treasury warrants at par in payment of freight and passenger services rendered by them to the various people who demanded the same, and they subsequently paid treasury warrants to the comptroller of the State in payment of interest due on their indebtedness, (the amounts of such payments are set forth in the answer,) and upon such payment and receipt of the warrants by the comptroller and treasurer they were cancelled as authorized and required by the above mentioned act, and thereupon the comptroller and treasurer issued the bonds of the State bearing six per centum interest to the special school fund for the amount so paid by the railroad companies in treasury warrants. By reason of all which it was alleged that a valid and binding contract between the State and the railroad companies was made, that the payments in treasury warrants should be valid payments, at their par value, upon the various loans made by the State to the companies; and it was further alleged that the payments by treasury warrants had been received by the authorities of the State and cancelled, and a credit for the amount thereof as payment given to the companies on the books of the State, and that the transaction thereby became fully executed, and

Statement of the Case.

the State could not thereafter dispute or question the validity of such payments or the right of the company to the credits given it by the State.

It was also alleged that after the passage of the act of August 13, 1870, and about the first of November, 1870, the comptroller of the State, with the concurrence and approval of the governor, wrongfully and without authority of law, recharged each of the railroad companies respectively upon the books of the comptroller's office with the several amounts theretofore paid by them respectively in treasury warrants, and there was demanded from the respective companies on the first day of November, 1870, six months' interest and one per centum for the sinking fund on the aggregate amount of the loan, as made up by the comptroller, after striking out the payments made by the company with the treasury warrants. These amounts were paid under protest, as being illegally demanded and resulting in a violation of the contract existing between the companies and the State. Payments on the same basis were continued semi-annually from that time, accompanied by a protest similar to the one first mentioned, until, as the company contends, the full amount due by it to the State had been paid, provided the payments in treasury warrants were credited as valid payments. Since that time the company has refused to make further payments. It claimed that the act of August 13, 1870, as construed by the state authorities, impaired the obligation of the contract existing between the State and itself, and thereupon it prayed for judgment.

To this pleading the plaintiff filed its first supplemental petition, and therein specially set up that the three several acts of the legislature of the State, mentioned in the defendant's answer as the authority for the payment upon the bonds of the company in treasury warrants, were unconstitutional and void, because (1) the warrants in which payments were authorized to be made were issued for the purpose of being circulated as money and were in violation of the state constitution; (2) also because they were bills of credit emitted by the State, and therefore in violation of section 10 of article 1 of the Constitution of the United States; and (3) because the acts under which the

Statement of the Case.

warrants were authorized to be paid, together with other acts passed at or about the same time, plainly indicated that the treasury warrants and other obligations in which payments were authorized to be made, and which were made by the defendant, were issued in aid of the rebellion against the United States of America, and were, therefore, void.

Upon these pleadings a motion was made by the company to remove the case to the United States Circuit Court, on the ground that by the filing of the plaintiff's last above mentioned pleading it became apparent for the first time, from plaintiff's statement of its own claim, that the case was one arising under the Constitution or laws of the United States, and defendant was therefore entitled to a removal. The motion was denied, and although further pleadings were thereafter served on each side, they are not material to the matters discussed in the opinion.

The case was tried without a jury, there being no dispute as to the facts. The trial court held that the payments in treasury warrants were illegal because they were issued to circulate as money, in violation of the constitution of the State. It also held that they were issued, or at least some of them were issued, in direct aid of the rebellion and were therefore void; that the burden rested with the defendant to show, if it could, which, if any, of the warrants were valid. Judgment was given in favor of the State.

The company then appealed to the Court of Civil Appeals for the Third Supreme Judicial District of the State, where the judgment was modified so as to render no personal judgment against the company, and to foreclose the lien of the State only upon that part of the road which the findings showed was in existence on August 13, 1870, and as thus modified it was affirmed, solely on the ground that the warrants were issued in violation of the state constitution, as paper intended to circulate as money. A writ of error was applied for to the Supreme Court of Texas, and by that court refused. The company then brought the case here by writ of error to the Court of Civil Appeals. The defendant in error has made a motion to dismiss the writ on the ground that this court has no jurisdiction, for reasons stated in the opinion.

Opinion of the Court.

Mr. John G. Carlisle and Mr. R. S. Lovett for plaintiffs in Mr. J. P. Blair and Mr. Maxwell Evarts were on their

error.

brief.

Mr. Charles A. Culberson for defendants in error. S. Smith and Mr. M. M. Crane were on the briefs.

Mr. T.

MR. JUSTICE PECKHAM, after stating the foregoing facts, delivered the opinion of the court.

The motion to dismiss the writ of error must be denied. The case involves a Federal question under the contract clause of the Constitution.

The claim on the part of the defendant in error, the plaintiff below, is that the state court decided the case under the provisions of the state constitution only, and without reference to the act of 1870, which the plaintiff in error (the railroad company) alleges to be an impairment of the contract set up by it in the pleadings. Although the state court held that the payments in dispute were made by means of state treasury warrants issued to circulate as money, which were therefore void as in violation of the constitution of the State, and that the delivery of the warrants by the company amounted to no payment whatever, the question still remains whether by that decision any effect was given to the act of 1870. We think the judgment of the state court did give effect to that act.

It will be seen that the third section provides that the State will not exact of any railroad company, not thereafter in default, the payment of the principal of the debt, excepting as paid by the payments due the sinking fund under the provisions of the act; it also provides in the second section that if a railroad company failed to pay the amount required to be paid in section. one, at the times designated thereby or within ten days thereafter, then the whole debt of such company, principal and interest, should become due, and the governor was directed to proceed as therein stated.

The first thing to be done in order to be able to carry out the provisions of the act was to ascertain what the aggregate amount