508 



MINNESOTA. 



the State. A brief history of this question be- 

 comes important at this time. 



By the constitution of Minnesota, as framed 

 by the convention, it was prescribed that the 

 credit of the State should never be given or 

 loaned in aid of any individual, association, or 

 corporation ; and that the public debt of the 

 State should never, in the aggregate, exceed 

 $250,000. When these provisions were framed, 

 in 1857, the Territory had been invested by the 

 United States with grants of lands in trust, to 

 build certain specified railroads. These lands 

 were granted to four companies. In conse- 

 quence of the general panic which soon after 

 occurred, no capital could be secured for the 

 construction of the roads for which these mu- 

 nificent grants had been made. The lands 

 were given to aid in the construction of about 

 1,300 miles of railroad, and the statute which 

 conferred them provided for a reversion to the 

 United States of a large part of them, unless 

 the roads were completed within ten years. 

 So strong was the desire of the people for the 

 construction of the roads that the constitu- 

 tional obstacles above referred to were re- 

 moved by the adoption, in 1858, of an amend- 

 ment to the constitution. It provided, in sub- 

 stance, that the credit of the State shall never 

 be given or loaned in aid of any individual, 

 association, or corporation, except for the 

 purpose of expediting the construction of the 

 railroads for which these lands had been 

 granted. In other words, this amendment 

 authorized the State to loan or give its 

 credit in aid of these particular enterprises, 

 and it limited the amount for which the State 

 was authorized to become responsible to $5,- 

 000,000. The amendment also provided, with 

 great precision of direction, when and how the 

 aid or loan was to be given, which provision 

 was, that whenever either of the companies 

 produced to the Governor satisfactory evi- 

 dence, by affidavit of the chief-engineer, treas- 

 urer, and two directors of the company, that 

 any ten miles of the road were actually com- 

 pleted and ready for placing the superstructure 

 thereon, then the Governor should cause to be 

 issued and delivered to the company the spe- 

 cial bond of the State, bearing interest at seven 

 per cent, per annum, payable in New York, as 

 a loan of public credit, to the amount of $100,- 

 000. Issues in the same amount were also re- 

 quired to be made upon the furnishing of like 

 evidence that any ten miles had been actually 

 completed and cars running thereon. By this 

 amendment the faith and credit of the State 

 were expressly pledged for the payment of the 

 interest and the redemption of the principal 

 of the bonds. 



As this was merely a loan of the credit of 

 the State, the amendment providently pre- 

 scribed by what security the State should be 

 indemnified in case the companies should de- 

 fault in payment. It was therefore provided 

 that each company should make provision for 

 the punctual payment and redemption of these 



bonds, and for the punctual payment of the 

 interest which should accrue thereon, in such 

 manner as to exonerate the State from any ad- 

 vances of money for that purpose, and as secu- 

 rity therefor the Governor was required to 

 demand and receive from each of the compa- 

 nies, before issuing any of the bonds, a mort- 

 gage of the net profits of the road and a con- 

 veyance of the first 240 sections of land, free 

 from prior incumbrances, in trust, to secure 

 the State from loss on the bonds ; and, as fur- 

 ther security, the Governor was directed to 

 exact of the companies an amount of first- 

 mortgage bonds on their roads, lands, and 

 franchises, corresponding to the State bonds 

 issued, to be transferred to the Treasurer of 

 the State at the time of the issue of the State 

 bonds. It was also provided that in case the 

 companies made default in payment of interest 

 or principal due on the bonds issued to them, 

 no more State bonds should be issued, and the 

 Governor was required to sell the bonds of 

 the defaulting companies, or to sell the said 

 240 sections of land, or to require a foreclosure 

 of the mortgage which covered all the roads, 

 lands, and franchises. 



The companies accepted these provisions, 

 and work upoii the roads was begun immedi- 

 ately. 



After the companies had earned a large 

 amount of these securities, a warfare was made 

 upon them, which was so far successful that 

 distrust was excited; the companies were un- 

 able to negotiate them and obtain funds to 

 carry on construction, and they ceased to be 

 marketable. Work was therefore stopped, and 

 the companies made default in the payment of 

 interest. They have become insolvent. The 

 State then proceeded to foreclose its securities. 

 By these foreclosure proceedings it acquired 

 about 250 miles of graded road, the franchises 

 of the companies, the lands of the companies 

 in fact, it acquired the title to all the securities 

 which it had taken for its indemnity, including 

 nearly five million acres of land, as security for 

 its liability upon $2,275,000 of bonds with in- 

 terest. Here, then, the State a surety be- 

 came the owner of assets enough to satisfy all 

 this claim over and over again. 



In 1860 another amendment to the consti- 

 tution was adopted, " expunging " the amend- 

 ment of 1858, and providing that "no law levy- 

 ing a tax or making other provisions for the 

 payment of principal or interest of the bonds 

 denominated Minnesota State railroad bonds 

 shall take effect or be in force until such law 

 shall have been submitted to a vote of the peo- 

 ple of the State, and adopted by a majority of 

 the electors of the State voting upon the same." 

 " The duty of the state at this stage," said 

 Governor Davis, " was an obvious one. It 

 was to make provision for an adjustment of 

 the question by means of the securities which 

 it held for that purpose. But this duty was 

 wholly neglected. The lands and road-bed 

 and franchises which it held for its indemnity 



