Opinion of the Court.

U.S. 45; Union Bank of Tennessee v. The State, 9 Yerger, 490; Slaymaker v. Gettysburg Bank, 10 Penn. St. 373; Hutchins v. State Bank, 12 Met. 421; Palmer v. Merrill, 6 Cush. 282; S. C. 52 Am. Dec. 782; Chester Glass Co. v. Dewey, 16 Mass. 94; S. C. 8 Am. Dec. 128; Boston Music Hall Association v. Cory, 129 Mass. 435; Telegraph Co. v. Davenport, 97 U. S. 369; Mechanic's Bank v. Seton, 1 Pet. 299; Morehead v. Western Railroad Co., 96, N. C. 362; Androscoggin Railroad v. Auburn Bank, 48 Maine, 335; Winslow v. Mitchell, 2 Story, 630; Cameron v. McRoberts, 3 Wheat. 591; Hogan v. Walker, 14 How. 29, 36; Payne v. Hook, 7 Wall. 425; Hagood v. Southern, 117 U. S. 52.

Mr. R. H. Battle, for appellees, cited: Robinson v. Hurley, 11 Iowa, 410; S. C. 79 Am. Dec. 497; Kemp v. Westbrook, 1 Ves. Sen. 278; Vanderzee v. Willis, 3 Bro. Ch. 21; Greither v. Alexander, 15 Iowa, 470; Terrell v. Allison, 21 Wall. 289; Robertson v. Carson, 19 Wall. 94; Shields v. Barrow, 17 How. 130; Russell v. Clarke, 7 Cranch, 59, 98; Ribon v. Railroad Companies, 16 Wall. 446; Bank v. Carrollton Railroad, 11 Wall. 624; Williams v. Bankhead, 19 Wall. 563; Poindexter v. Greenhow, 114 U. S. 270; In re Ayers, 123 U. S. 443; Cunningham v. Macon & Brunswick Railroad, 109 U. S. 446; The Siren, 7 Wall. 152; Levey v. Stockslager, 129 U. S. 470; Briggs v. Light Boats, 11 Allen, 157.

MR. JUSTICE BRADLEY delivered the opinion of the court.

The State of North Carolina, by virtue of an act of its legislature, passed 12th February, 1855, and through its board of internal improvement, subscribed for $1,066,600 of the capital stock of The Atlantic and North Carolina Railroad Company, a corporation created by act of the legislature of said State for the purpose of building a railroad from Beaufort to Goldsborough. In order to raise money to pay for this stock, the board of internal improvement, by virtue of the same act, issued the bonds of the State, signed by the governor and countersigned by the public treasurer, each for the sum of five hundred dollars, and in the following form, to wit:

"$500.00.

Opinion of the Court.

UNITED STATES OF AMERICA. $500.00. "It is hereby certified that the State of North Carolina is justly indebted to or bearer five hundred dollars, redeemable in good and lawful money of the United States, at the Bank of the Republic, in the city of New York, on the first day of January, eighteen hundred and eighty-six, with interest thereon at the rate of six per cent per annum, payable half-yearly, at the said bank, on the first days of July and January in each year from the date of this bond until the principal be paid, on surrendering the proper coupon hereto annexed. In witness whereof the governor of the

[The great seal of the

State of North

Carolina.]

said state, in virtue of power conferred by law, hath signed this bond and caused the great seal of the state to be hereunto affixed, and her public treasurer hath countersigned the same at the seat of government of the said state, this first day of January, eighteen hundred and fifty-six.

"Countersigned:

"(Signed) THOMAS BRAGG, Governor.

D. W. COURTS, Public Treasurer."

"Issued under an act to amend an act entitled An Act to incorporate the Atlantic & North Carolina Railroad Company and the North Carolina & Western Railroad Company, chapter 232,"

The act which authorized the issue of these bonds contained the following guaranty of their payment (sect. 10):

"Be it further enacted, That as security for the redemption of said certificates of debt the public faith of the State of North Carolina is hereby pledged to the holders thereof, and in addition thereto all the stock held by the State in the 'Atlantic and North Carolina Railroad Company' hereby created shall be pledged for that purpose, and any dividend of profit, which may from time to time be declared on the stock held by the State as aforesaid, shall be applied to the payment of the interest accruing on said coupon bonds; but until such dividends of profit may be declared, it shall be the

Opinion of the Court..

duty of the treasurer, and he is hereby authorized and directed, to pay all such interest as may accrue out of any moneys in the treasury, not otherwise appropriated." Laws N. C. 1854-5, 301, c. 232, § 10.

The State received certificates for the stock subscribed and still holds the same, which stock is represented in the meetings of the stockholders of the railroad company by a proxy appointed by the governor of the State, by virtue of the charter of the railroad company.

William E. Christian, a citizen of Virginia, the complainant in this suit, is the holder of ten of the bonds issued as aforesaid; and as no interest had been paid thereon since the year 1868, he filed this bill in July, 1883, in behalf of himself and all other holders of the bonds referred to who should come in and contribute to the expenses of the suit; and he made defendants to the suit the Atlantic and North Carolina Railroad Company, the president and directors of said company, personally, F. M. Simmons, the proxy representing the stock owned by the State, and J. M. Worth, treasurer of the State. The bill sets forth the material parts of the acts in question; which acts created the company and authorized the board of internal improvements, on behalf of the State, to subscribe for twothirds of the capital stock of the company; and, for that purpose, to borrow money on the credit of the State and issue bonds therefor. It particularly sets forth the section before referred to, which guaranteed the payment of the bonds, and thereto pledged the stock held by the State. It states the fact of the subscription of the stock and the issue of the bonds, and alleges that the complainant is the bona fide holder for value of ten of the bonds, whose numbers are given, all having interest coupons attached, the first payable January 1, 1869, and one on each bond for every six months thereafter. The bill then avers that, ever since the year 1868, the State has neglected and refused to make any provision for the payment of the interest, and that all interest accruing since that time remains due. As the next averment indicates the legal view on which the bill seems to be founded, we quote it in full. It alleges as follows, to wit:

Opinion of the Court.

"That the aforesaid certificates of debt or bonds are, by virtue of the act of the general assembly of the said State of North Carolina herein before recited, and of the pledges therein made by the said State, a lien upon the 10,666 shares of stock owned and held by said State in the said The Atlantic and North Carolina Railroad Company, in payment for which the said bonds or certificates of debt were issued, and upon all dividends of profits that have been and that may hereafter be declared upon said stock, and that the holders of said certificates, among whom is your orator, are in equity and good conscience entitled to have and receive all such dividends of profits as the same are paid for and upon account of the interest due and accruing on said certificates."

The bill then states that it appears from the report of the officers of the railroad company made to the annual meeting of stockholders in June, 1881, that for the preceding fiscal year the company had received more money than was expended in running and operating the road; and that, on the 1st of July, 1881, the company leased all its property to The Midland North Carolina Railroad Company for the sum of $40,000 per year, the lessee to keep the same in good repair; and then adds:

"That these sums not being required for the necessary expenses of said company, or a large part thereof, should have been distributed to and among the stockholders of said company by way of dividends, and that the holders of the coupons of said bonds or certificates, among whom is your orator, are entitled in equity and good conscience to have whatever sum may be received by the State as and for dividends on the stock owned by said State in said company appropriated to the payment of the interest due and in arrears on said bonds."

The bill further states that the Midland Company having failed to comply with its contract, the lease has been declared forfeited and rescinded, and the property has been restored to the management of the Atlantic and North Carolina Railroad Company.

The bill then states on information and belief that it is the purpose and intent of the directors to again lease the road and

Opinion of the Court.

property of the company, to which the complainant objects for reasons set forth in the bill, and asks for an injunction to prevent the same being done; but as this part of the bill and the relief sought in relation thereto was abandoned at the hearing in the court below, and is not urged on this appeal, it is unnecessary to notice it further, except to quote the concluding paragraph which states the nature of the claim of the bondholders upon the stock owned by the State in the railroad company, and is apposite to a full understanding of complainant's position. It is as follows, to wit:

"XXII. That the holders of said bonds, having a lien on the said stock for the payment of the principal and interest of their said debt, are in equity the real owners of said stock, and that the same should be applied by said State, through its proper officers, to the payment of said debt, and that the State should do nothing herself nor allow anything to be done by her officers or by her associates in said company which would destroy or impair the value of this security to her said creditors, and he insists, being so advised, that it is contrary to equity and good conscience for the proxy of the State to give his consent and thereby the consent of the State to any contract of lease to be made by said company, without the consent and concurrence of the holders of said bonds, until the State shall have made adequate provisions for the payment of said debt, both principal and interest."

The prayer of the bill, so far as relates to the stock held by the State in the railroad company, and to the dividends. thereon, is substantially as follows, to wit:

1st. That the bonds or certificates of debt held by the complainant and others may be decreed to be a lien upon the said stock and dividends until paid or redeemed.

2d. That all dividends on said stock may be paid to the complainant and the other bondholders who may join him in the suit.

3d. That if said dividends prove insufficient for this purpose, a sale of said stock, or so much thereof as may be necessary to pay said certificates, may be made under the decree of the court.