Opinion of the Court. of the annual interest upon such bonds then outstanding and unpaid, which tax may be paid in money or in the past due coupons of the State at par, and after the expiration of five years from the completion of said road the Legislature shall impose an additional special tax of two and one-half per cent per annum upon the whole amount of state aid granted to such company, payable in money or in the bonds and coupons of the State at par; and, if in money, the same shall be invested by the treasurer of the State in the bonds of the State at their current market value. The taxation in this section provided to continue until the amount of bonds issued to such company, with the interest thereon, shall have been paid by said company as herein specified, in which case the said road shall be entitled to a discharge from all claims or liens on the part of the State: Provided, That nothing herein contained shall be so construed as to deprive any company, securing the loan of the bonds of the State herein provided for, from paying the whole amount due from such company to the State at any time in the bonds of the State loaned in aid of railroads or the coupons thereon, or in money. "SEC. 8. Be it further enacted, That in the case said company shall fail to pay the taxes imposed by the preceding section, at the time the same become due and for sixty days thereafter, it shall be the duty of the treasurer of the State, by writ of sequestration, to seize and take possession of the income and revenues of said company until the amount of said defaults shall be fully paid up and satisfied, with costs of sequestration, after which said treasurer shall release the further revenues of said company to its proper officers." In this statute the tax provided for in § 7 was to be imposed by the legislature from time to time, but on the 10th of April, 1869, another act was passed, "to provide for paying the interest of the bonds to aid in the construction of railroads," by which it was enacted that the interest on all bonds issued under the act of 1868 should be made payable on the first day of April and the first day of October in each year, and it was made the duty of "the auditor of public accounts, on or before the first day of June in each year," to "certify Opinion of the Court. to the treasurer the amount of bonds issued to each railroad company, the amount of semi-annual interest that will accrue thereon - that is to say, the amount of interest the State will have to pay on the first day of October of that year, on the bonds issued to each of said railroad companies - and the amount of tax required from each of said railroad companies to pay the same, which tax shall be deemed due and payable on the thirtieth day of June of that year." Similar provision was also made for the interest falling due in April. Upon the receipt of a certificate from the auditor, it was made the duty of the treasurer to "cause notice to be served upon each railroad company, on or before the twentieth day of June," or the twentieth day of December, as the case might be, “in each year, specifying the amount of tax to be paid, which amount shall be the interest on said bonds for the said period, and demanding payment of the same into the treasury" at the appointed time. If default occurred in the payment of the tax, and it continued for sixty days, it was made the duty of the treasurer, "through the attorney general, to make and file a petition, under the seal of the treasurer's office, in the Pulaski Chancery Court, setting forth the amount due and the fact of such default, praying the issue of the writ of sequestration contemplated in said act, and the appointment of a receiver, to be named in said petition, to receive in his behalf the revenue and income of said company, for the purpose specified in said act, which writ shall issue upon the filing of the petition for the same." Upon the issue of the writ so ordered, the receiver therein named was required to "take possession of all the income and revenues of the defaulting company, with authority to demand and receive all moneys coming to the same from the operation of such road;" and it was further made "the duty of all officers of said company to return all moneys to him, for receiving which he may require the submission of all necessary books, papers, and accounts to him, and may examine any and all persons under oath, and any person making false returns, or failing to pay over moneys, shall be deemed guilty of a misdemeanor, and any person swearing falsely shall be declared guilty of perjury." Section 5 of this act was as follows: Opinion of the Court. "SEC. 5. That such receiver shall give such bond as the treasurer may require, shall be removable at the pleasure of the treasurer, and a successor appointed, to be approved by the chancellor. He shall, at the end of each month, make full report and return to the treasurer of all moneys received by him, with his estimate of the necessary cost of operating said road, which, on the approval and order of said treasurer, shall be paid out of the money so returned, the surplus or net proceeds to be applied in the discharge of the tax due and unpaid; and shall so continue until such amount in default shall be paid, with the reasonable cost of sequestration, to be taxed and certified by the chancellor, when the treasurer shall account with said company and withdraw said receiver from the management of its affairs." The Little Rock and Fort Smith Railroad Company received a land grant from the United States, and on the 28th of April, 1869, its application to the State for "the benefits of" the act of July 21, 1868, was granted as a "loan of state credit." Afterwards, beginning April 2, 1870, state bonds to the amount of one million dollars were issued to the company, as its road was built, in the following form: "No. "$1000. United States of America. No. $1000. "It is hereby certified that the State of Arkansas is indebted unto the Little Rock and Fort Smith Railroad Company, or bearer, in the sum of one thousand dollars, lawful money of the United States of America, redeemable at the city of New York thirty years from the date hereof, with interest at the rate of seven per cent per annum, payable semiannually, in the city of New York, on the first day of April and October in each year, on the presentation of the proper coupons hereto annexed. The faith and credit of the State are hereby solemnly and irrevocably pledged for the payment of the interest and redemption of the principal of this bond. Issued in pursuance of an act of the General Assembly of the State of Arkansas, approved July 21, 1868, entitled 'An act to aid in the construction of railroads,' the said act having been sub Opinion of the Court. mitted to and duly ratified by the people of the State, at the general election held November 3, 1868. "In witness whereof, the governor of the State has signed this bond, the state treasurer has countersigned the same, and the seal of the State has been affixed at the city of Little Rock, Arkansas, this first day of April, 1870. [SEAL.] "POWELL CLAYTON, Governor. "R. J. T. WHITE, Secretary of State. "HENRY PAGE, Treasurer. "J. R. BERRY, Auditor." Each of said bonds at the time of their issue had sixty interest coupons thereto attached, numbered from one to sixty inclusive, and which, with the exception of the time of payment and number thereon, were as follows, to wit: "$35.00. $35.00. "The treasurer of the State of Arkansas will pay to bearer thirty-five dollars, in the city of New York, on the first day of October, 1870, being semiannual interest due on bond No. "L. R. & F. S. R. R. J. R. BERRY, Auditor." On the 22d of December, 1869, the railroad company executed a mortgage on its railroad and the income thereof to Henry W. Paine and Samuel T. Dana, to secure a proposed issue of bonds to the amount of $3,500,000, and on the 20th of June, 1870, another mortgage to the same parties on its land grant to secure another proposed issue of $5,000,000. Interest was paid on the state bonds up to and including April 1, 1873. Default having been made in the payment of interest upon the bonds issued under the railroad mortgage, a suit was begun by the trustees, May 12, 1874, for the foreclosure. To this suit the State was not a party, but in the bill the fact that state aid had been granted to the company was set forth, and the prayer was for a sale "subject to the lien of the State of Arkansas, if your honor shall find and decree that any lien existed in favor of said State prior to the lien created Opinion of the Court. by said deed of mortgage." Upon this bill a decree was rendered pro confesso, directing a sale of the mortgaged property, but making no decision and giving no directions as to the suggestion of a lien in favor of the State. Under this decree the property was bought by a committee of the bondholders for a nominal sum, and they organized a new corporation under the laws of Arkansas by the name of the Little Rock and Fort Smith Railway, to take the title, the original bondholders, or such of them as elected to come in, being the stockholders. Afterwards the property purchased was conveyed to the new corporation. On the 15th of March, 1869, state aid was awarded to the Little Rock, Pine Bluff and New Orleans Railroad Company under the act of July 21, 1868, to the amount of $1,200,000, and on the 25th of June, 1870, to the Mississippi, Ouachita and Red River Railroad Company to the amount of $600,000. On the 20th of April, 1870, the Little Rock, Pine Bluff and New Orleans Company mortgaged its railroad and income to Benjamin A. Farnham and David B. Sickels to secure an issue of $1,200,000 of bonds, and on the 3d of May, 1870, the Mississippi, Ouachita and Red River Railroad Company mortgaged its road and income to the same trustees to secure another issue of bonds, amounting to $2,040,000. In October, 1873, these companies were consolidated into one corporation, under the name of the Texas, Mississippi and Northwestern Railroad Company. Default having been made in the payment of interest on these bonds, suits were begun by the trustees, March 15, 1875, to foreclose the mortgages under which the two roads were sold by order of the court, and afterwards conveyances made to the Little Rock, Mississippi and Texas Railway. The proceedings in these suits were substantially the same as in that against the Little Rock and Fort Smith Railroad Company. No interest was paid on the state bonds after April, 1873, and at its May term, 1877, the Supreme Court of the State decided that the bonds were void, because issued in violation of one of the provisions of the Constitution of the State. Arkansas v. Little Rock, Mississippi & Texas Railway, 31 |