Petition for Writ of Certiorari — Grant v. Mississippi

Supreme Court, U.S.

am FILED

; ‘ }

- 961513 MAR 17 197

No. 9ft cies OF THE CLERK

In The

Supreme Court of the United States

October Term, 1996

*

DR. CHARLES BARING TRAVERS GRANT,

a citizen of Great Britain, et al,

Petitioners,

STATE OF MISSISSIPPI, et al,

Respondents.

¢

Petition For A Writ Of Certiorari

To The Supreme Court

Of The State Of Mississippi

¢

PETITION FOR A WRIT OF CERTIORARI

+

Counsel of Record

Paut M. NEVILLE

Nevitte & WILSON

808-B North State Street

Jackson, Mississippi 39202-2602

(601) 355-1918

Mississippi Bar No. 3823

Barry H. Powe.

ALSTON, RUTHERFORD & VAN SLYKE

Post Office Drawer 1523

Jackson, Mississippi 39215-1532

(601) 948-6882

Mississippi Bar No. 4461

March 14, 1997

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964

OR CALL COLLECT (402) 342-2831

QUESTIONS PRESENTED FOR REVIEW

a

Whether the State of Mississippi in refusing to pay

either interest or principal on state bonds sold to individ-

uals in England in the 1830s violated Article X of the

Treaty of Amity, Commerce and Navigation Between the

United States of America and Great Britain, November

19, 1794, 8 Stat. 116 (The Jay Treaty)?

II.

Whether the State of Mississippi in amending its

state constitution in 1875 to preclude the payment of any

claim on the state bonds while five years remained under

the applicable statute of limitations to enforce payment of

the bonds violated the due process clause of the Four-

teenth Amendment to the United States Constitution?

ii

LIST OF ALL PARTIES

A list of all parties to the proceeding is as follows:

Petitioners who were the plaintiffs in the trial court and

the appellants before the Supreme Court of Mississippi:

DR. CHARLES BARING TRAVERS GRANT, DAVID J.

BARRY, FREDERICK PAUL SEABROOK, DR. DONALD

JOHN BURNS, MICHAEL ROBERT FRANCIS WILKINS,

MR. AND MRS. V. JOHN BATTEN, ROBERT KENNETH

PRATT, JOHN EDWARD MORRELL, FRANCIS PETER

DUP?PA-MILLER, ANGUS MACDONALD, DR. DEREK

NORMAN SEATON, BRIAN MICHAEL CARTWRIGHT,

DAVID VICTOR CORONNO, ALEC FIELD ATKIN, DOR-

JTHY FAHS BECK, JOE L. HOWELL, JR., DAVID M.

BEACH, JAMES C. BLACK, STEPHEN D. PISINSKI,

CYNTHIA E. PISINSKI, HENRY J. SOBEL, CATHERINE

B. KELLY, DEANE D. KOCHER, II, KAREN A. WHITE,

ROBERT J. BECHTOLDT, MARTIN AND RUTH BELL,

PAUL PSEISSER, TIMOTHY T. WALRAVEN AND WIL-

LIAM R. TUTEN, Iil

Respondents who were defendants in the trial court and

the appellees before the Mississippi Supreme Court:

STATE OF MISSISSIPPI, STATE BOND COMMISSION,

STATE BOND RETIREMENT COMMISSION; KIRK FOR-

DICE, IN HIS OFFICIAL CAPACITIES AS GOVERNOR

OF THE STATE OF MISSISSIPPI AND COMMISSIONER

OF THE STATE BOND RETIREMENT COMMISSION

AND OF THE STATE BOND COMMISSION;

iii

L*ST OF ALL PARTIES - Continued

MIKE MOORE, IN HIS OFFICIAL, CAPACITIES AS

ATTORNEY GENERAL OF THE STATE OF MISSISSIPPI

AND COMMISSIONER OF THE STATE BOND RE&TIRE-

MENT COMMISSION AND OF THE STATE BOND COM-

MISSION; MARSHALL BENNETT, IN HIS OFFICIAL

CAPACITIES AS TREASURER OF THE STATE OF MIS-

SISSIPPI AND COMMISSIONER OF THE STATE BOND

RETIREMENT COMMISSION AND OF THE STATE

BOND COMMISSION; AND EDWARD L. RANCK, IN

HIS OFFICIAL CAPACITY AS EXECUTIVE DIRECTOR

OF THE DEPARTMENT OF FINANCE AND ADMINIS-

TRATION FOR THE STATE OF MISSISSIPPI

iv

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED FOR REVIEW ........... i

Poy ee oe ke. 3 reper yr re area ye ii

TAR SI CIT ih aks nb hoi ence cease ccnsiwas iv

THROG GP AUT es seo vee pacers vernviess Vv

CITATION OF OPINIONS BELOW................. 1

Fas eG EUs 65 aR E ON 6 eo 6H eae Ree 1

TREATY, CONSTITUTIONAL AND STATUTORY

Fey TOE BON VUE de sk cca sy ee riae esata dees 1

SAPS OONTEUS GOR” CBU GPU eee cee ee es eadens venen 3

PROS: 6 Got hh Ca ee ew Esakesed serdar keine es 7

V

TABLE OF AUTHORITIES

Page

CASES

Brinkerhoff-Faris Trust & Savings Co. v. Hill, 281

Maes TA AA OUE 6 hos 4a EARS eye ae kA NeS MRC DeR 12

Brown v. United States, 12 U.S. 110:............05. 7, 8

Chapman v. Board of County Commissioners, 107

Sdichs PO ATED » bd Kegs KOS ebe eee hbERS Or been 11

CIG Contractors v. Miss. State Bldg. Com’n, 399 So.

Le ROO Ge AOE 5 ka F605 cEtkS eke e ee 11

Gagnon v. Scarpelli, 411 U.S. 778 (1973).............. 12

Geofrey 0. Riggs, 133 US. 258 (1890). ........0cccccee: 9

Hauenstein v. Lynham, 100 U.S. 483 (1879) ............ 9

Karnuth v. United States, 79 U.S. 231 (1929)......... 7, 8

Milliken v. Mayer, 311 U.S. 457 (1940)................ 12

Sohn v. Waterson, 84 U.S. 596 (1873)................. 11

United States v. State of North Carolina, 136 U.S. 211

CRUE SAG aces deeb EN RU weGeurs pia belle buae ceca as 10

Weimer v. Amen, 870 F. 2d 1400 (8th Cir. 1989)

(citing Daniels v. Williams, 474 U.S. 327 (1986)).... 12

STATUTES, CONSTITUTIONAL PROVISIONS AND TREATIES

Act of April 19, 1873, Ch. 26, Laws of Mississippi

BE 54 Ck Ka pw CHAO ae bh ORG ROT RE EEA ao 4,11

Article X of the Treaty of Amity, Commerce and

Navigation Between the United States of Amer-

ica and Great Britain, November 19, 1794, 8 Stat.

S20 CEO TRY TOONS sis Sade a aes aoa 7 &

Fourteenth Amendment to the Constitution of the

LT. RS 6-05 3 Ra ee es as the 2D

vi ‘

TABLE OF AUTHORITIES —- Continued

Page

OTHER AUTHORITIES

Dennis, The Effect of War on Treaties, 23

PE La: Ne SE a o's 5 ci eca a ee eats hai eaked) 8

Hyde, Concerning the Interpretation of Treaties, 3

PAG Sn BO CRD ies <s ba 6h bg eae nek 10

Lenoir, The Attitude of the Supreme Court as to

the Effect of War on Treaties, 7 Miss.L.J. 309

1 FRO eee a eee PM er Eo copys eae 8

SSR remeron

See ot oe tae

EES TIA ORAS

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CITATION OF OPINIONS BELOW

The published opinion of the Mississippi Supreme

Court in the case presented for issuance of writ of cer-

tiorari is Grant v. Mississippi, 686 So. 2d 1078 (Miss. 1996).

¢

JURISDICTION

The Mississippi Supreme Court issued its opinion in

this case on December 19, 1996. (Appendix A, p. 1)

This Petition for Writ of Certiorari seeking review of

a lower state court of last resort was timely filed with the

Clerk for the United States Supreme Court within ninety

days of the issuance of the lower state court opinion on

December 19, 1996. 28 U. S. C. § 1257.

¢

TREATY, CONSTITUTIONAL AND

STATUTORY PROVISIONS INVOLVED

Article X of the Treaty of Amity, Commerce and Naviga-

tion Between the United States of America and Great

Britain, November 19, 1794, 8 Stat. 116 (The Jay Treaty):

Neither the debts due from individuals of one

nation to individuals of the other, nor shares,

nor monies which they may have in the public

funds, or in the public or private banks, shall

ever in any event of war or national differences

be sequestered or confiscated it being unjust

and impolitic that debts and engagements con-

tracted and made by individuals, having confi-

dence in each other and in their respective

governments, should ever be destroyed or

impaired by national authority on account of

national differences and discontents.

Amendment XIV to the Constitution of the United States

of America:

SECTION 1. All persons born or naturalized in

the United States, and subject to the jurisdiction

thereof, are citizens of the United States and of

the State wherein they reside. No State shall

make or enforce any law which shall abridge the

privileges or immunities of citizens of the

United States; nor shall any State deprive any

person of life, liberty, or property, without due

process of law; nor deny to any person within

its jurisdiction the equal protection of the laws.

Chapter XXVI of the Laws of Mississippi of 1873:

Section 1. Be it enacted by the Legislature of the

State of Mississippi, That all actions of debt or

covenant founded upon any bond, obligation, or

contract under seal or upon the award of arbi-

trators, shall be commenced within seven years

next after the cause of such action accrued and

not after.

Sec. 2. Be it further enacted, That this Act take

effect upon its passage. Approved, April 19,

1873.

Mississippi Constitution of 1869, Amendment to Article

XII,

Section 5; Mississippi Constitution of 1890, Article

XIV, Section 258:

The credit of the state shall not be pledged or

loaned in aid of any person, association, or cor-

poration, and the state shall not become a stock-

holder in any corporation or association, nor

assume, redeem, secure, or pay any indebted-

ness or pretended indebtedness alleged to be

due by the state of Mississippi to any person,

association, or corporation whatsoever, claiming

the same as owners, holders, or assignees of any

bond or bonds, now generally known as “Union

Bank” bonds and “Planters Bank” bonds.

¢

STATEMENT OF THE CASE

The origin of this case is in the mid-nineteenth cen-

tury when in 1830 the Mississippi Legislature chartered

the commercial banking establishment called the

Planters’ Bank. The unusual feature of the bank was its

financing. It was to be practically a state-owned bank, for

$2,000,000 of its $3,000,000 of capital would be subscribed

by the state government. (Appendix A, p. 4)

The state had a tremendous stake in this bank.

Pledged to the ownership of two-thirds of the stock,

Mississippi, with its already shaky treasury, had to cast

about for means of financing a bank to which the state’s

faith and credit had been pledged. The state undertook to

issue bonds to purchase stock. The Planters’ Bank bonds

were issued in 1831 and in 1833. (Appendix B, p. 34)!

' Appendix B is the unpublished history of the bonds

prepared by Belinda Wooley, Official Records Archivist of the

Mississippi Department of Archives and History in 1988. The

history was attached as Exhibit “C” to the bondholders’ original

complaint and was incorporated as their statement of facts.

John Delafield, President of the Phenix Bank in New

York, gladly underwrote the bonds at a premium of

$250,000.00 and, fortunate in his role of underwriter,

passed them on to trusting European investors. A very

large proportion of the total issued is still held in Great

Britain. The coupons were made payable in London.

(Appendix B-35)

In response to a demand for more banking institu-

tions, the Legislature chartered the Union Bank in 1838

with bonds issued that same year. (Appendix App. 4)

In 1841, there was a default in interest on both the

Planters’ and Union Bank bonds. The Union Bank bonds

were repudiated by the Governor of Mississippi in 1842.

and the Planters’ Bank bonds were repudiated under a

referendum vote of the people in 1853. The Union Bank

bonds matured as to the principal in 1850 and 1858. The

Planters’ Bank bonds matured as to principal in 1861 and

1866. (Appendix App. 4)

A statute of limitations was enacted in 1873 that dealt

with actions to collect debt owing on bonds. Chapter 26,

Mississippi Laws of 1873, effective April 19, 1873, pro-

vided in pertinent part that “all actions of debt

. . founded upon any bond, obligation, or contract,

under seal . . . shall be commenced within seven years

after the cause of said action, and not after.” (Appendix

App. 5)

Section 258 of the Mississippi Constitution of 1890,

which provided that the State should not ‘assume,

redeem, secure or pay any indebtedness or pretended

kee

i

‘

4

indebtedness on the bonds, was approved as an amend-

ment of the previous Constitution by the people in

November 1875. (Appendix A, p. 5)

The present case was filed in the Chancery Court of

Hinds County, Mississippi in July of 1993. The original

complaint asserted a claim under Article X of the Jay

Treaty and the Fourteenth Amendment of the United

States Constitution in the following language:

6. The State of Mississippi has pledged its full

faith and credit for the payment of the principal

and interest of these bonds. These bonds consti-

tute valid continuing obligations of the State of

Mississippi. However, the State of Mississippi

has repudiated these bonds, first through legis-

lative enactment and then a constitutional

amendment repudiating these bonds was passed

in 1875. The repudiation has been carried for-

ward into art. XIV, § 258 of the Mississippi Con-

stitution of 1890.

7. The legislative enactments and constitu-

tional provisions enumerated in paragraph 6

above, or any like law passed, adopted or

enacted after Plaintiffs’ bonds were authorized,

issued and sold by the State of Mississippi, are

null and void ab initio by reason of their contra-

vention and violation of the Plaintiffs’ rights,

immunities and/or privileges arising under the

Constitution, laws and treaties of the United

States of America, more particularly enumer-

ated as follows:

A. Article VI, Clause 2, of the Constitution

of the United States of America.

B. Article I, Section X, Clause 1, of the

Constitution of the United States of America.

C. Article I, Section IX, Clause 3, of the

Constitution of the United States of America.

D. Amendment V to the Constitution of

the United States of America.

E. Amendment XIV to the Constitution of

the United States of America.

F. Article 10 and Article 28 of the Treaty of

Amity, Commerce and Navigation between the

United States of America and Great Britain

entered into force on October 28, 1795.

(Paragraphs 6 and 7 Bondholders’ Original Complaint)

The State filed a Motion for Summary Judgment and

for a Judgment on the Pleadings in lieu of filing an

answer to the complaint. The State claimed, inter alia, that

all possible statute of limitations had run and/or in the

alternative, that the bondholders were barred from now

bringing suit by the doctrine of laches. (Appendix A, p. 6)

The trial court found, inter alia, the statute of limita-

tions had run in favor of the State during the period in

which the acts of repudiation had taken place. Thus, any

suit was time barred. (Appendix A, p. 6)

From that decision the bondholders appealed to the

Mississippi Supreme Court contending that the ruling of

the court below violated the statutory tolling law of the

State, established principles of estoppel, fundamental due

process protections of the United States Constitution, and

the 1794 “Jay Treaty” between Great Britain and the

United States. (Appendix A, pp. 7-8)

oS RIOR TE Een eT

oennuen

Pons ETE es ot enw

The Mississippi Supreme Court on December 19,

1996, issued its opinion affirming the dismissal of the

bondholders’ complaint.

¢

ARGUMENT

i.

This is a case of first impression before this Court

seeking enforcement of rights and privileges arising

under Article X of the Treaty of Amity, Commerce and

Navigation Between the United States of America and

Great Britain, November 19, 1794, 8 Stat. 116 (The Jay

Treaty). The only other reference to Article X in the

jurisprudence of this Court is found in the case of Brown

v. United States, 12 U.S. 110, 142 (1814). In that case, Chief

Justice John Marshall stated: “I hold .. . that where such

treaties exist, they must be observed. . . . ” However, this

Court’s observation in that case can only be characterized

as dicta since the issue of confiscation that was before the

Court did not arise under The Jay Treaty.

Absent any guidance from a prior consideration of

Article X of The Jay Treaty by this Court, the Mississippi

Supreme Court made some fundamental errors when pre-

sented with the treaty claims in the present case.

The Mississippi Supreme Court erred when it ruled

that Article X of the Jay Treaty did not survive the War of

1812. (Appendix A, p. 21) It cites as authority this Court’s

ruling in Karnuth v. United States, 279 U.S. 231 (1929). The

Karnuth case dealt with Article III of the Jay Treaty not

the article sub judice. This Court in Karnuth did,

however, lay down markers for determining what treaty

provisions do survive a declaration of war by quoting

with approval Westlake on International Law. Those

markers are present in Article X. It repeatedly uses the

term “ever” to emphasize its permanency of protection

for individuals’ investment in the public debt of the

contracting parties. More importantly, it provides by its

express terms its survival of future wars, disagreements

or discontents.

Most commentators were in agreement after Karnuth

that Article X of the Jay Treaty survived the War of 1812.

Dennis, The Effect of War on Treaties, 23 Am.Jur.Int.L.

602, 605 (1929); Lenoir, The Attitude of the Supreme

Court as to the Effect of War on Treaties, 7 Miss.L.J. 309,

313 (1935).

The significance of Chief Justice Marshall’s com-

ments on the treaty in Brown v. United States, supra, is that

they were made on March 2, 1814, during the War of

1812. Under those circumstances, he surely would have

noted Article X’s nullity if that was his belief. Instead he

opined that the treaty should be enforced even in the

midst of war.

The Mississippi Supreme Court ignored important

prior decisions of this Court when it undertook an inter-

pretation of Article X of the Jay Treaty. It ruled that

Article X was inapplicable to the Union and Planters

Bank Bonds because there was no war or national dis-

agreement with Great Britain after the issuance of the

bonds in the 1830s. (Appendix A, p. 22). The Court cited

no authority for this ruling. The case had been decided at

pemreeeeeeneniiaiiiiiiliiilll

the trial level on the state’s motion for summary judg-

ment and judgment on the pleadings on other issues.

Therefore, there was nothing in the record on this point.

Since Mississippi’s default began in 1842, only twenty-

seven years after the Battle of New Orleans, it would

have been more rational to speculate that national resent-

ments did play an important part in the Mississippi polit-

ical leaders’ decisions.

Examining the express provisions of Article X reveals

it offers much broader protection than that admitted by

the Mississippi Supreme Court. Its final sentence offers

permanent protection against not only confiscation but

also “impairment” of investment not only during war or

disagreements but also during periods of “discontent.”

This Court’s prior rulings on the construction of

treaties were ignored by the Mississippi Supreme Court

and led it to the erroneous finding of the inapplicability

of Article X. A general principle of treaty interpretation

long recognized by this Court is that they are to be

liberally construed so as to carry out the apparent inten-

tion of the parties. Geofrey v. Riggs, 133 U.S. 258 (1890).

Where a treaty admits of two constructions, one restric-

tive of rights that may be claimed under it and the other

favorable to them, the latter is preferred. Hauenstein v.

Lynham, 100 U.S. 483 (1879).

The clear, express purpose of Article X of the Jay

Treaty was, and is, that between the United States and

Great Britain after 1794 no national authority should ever

confiscate or impair the investment of any individual in

the public debt of either contracting party. This was bind-

ing in case of war but also in cases of general, undefined

10

situations of “disagreement” and “discontent.” There is

little doubt from a reading of the history of the bonds

prepared by the Mississippi Department of Archives that

the political leadership of Mississippi was discontented at

having to honor its full faith and credit and return the

money to individuals in England who had invested in the

state’s public debt.

Commentators have observed that if the general pur-

poses of a treaty conflict with the literal signification of

any of its terms, the former should prevail. Hyde, Con-

cerning the Interpretation of Treaties, 3 Am. J. Int. L. 46,

56 (1909).

The State of Mississippi, from and after 1842, both

impaired and confiscated the original investments of Brit-

ish individuals in its public debt in violation of rights and

privileges protected by Article X of the Jay Treaty. The

Mississippi Supreme Court erred on this important fed-

eral question.

The Mississippi Supreme Court closed its discussion

of the treaty claims by worrying that the claims would

impose undue hardship on the state’s finances and invok-

ing laches against the claims. (Appendix A, p. 23). Again,

nothing is in the record that would support the concerns

of the Court. Moreover, this Court's clear ruling in United

States v. State of North Carolina, 136 U.S. 211 (1890), obvi-

ates any speculation about an escalating interest debt

since it holds that a state is not liable for interest beyond

the maturity date on the bond. It also obviates any asser-

tion of laches since there is no damage caused by any

delay.

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11

II.

At the time the State of Mississippi passed its seven

year statute of limitations on the bonds in 1873, the

bondholders had a fully enforceable right of recovery

against the state. Mississippi has never asserted sover-

eign immunity against a claim on a state contract duly

authorized by the Legislature. CIG Contractors v. Miss.

State Bldg. Com’n, 399 So. 2d 1352 (Miss. 1981). When the

amendment to the Constitution was passed in 1875 pro-

hibiting payment of the Union Bank and Planters Bank

bonds, the bondholders had some five years remaining

under the statute of limitations in which to enforce their

right to payment of the bonds against the State of Missis-

sippi. Act of April 19, 1873, ch. 26, Laws of 1873. The

combined effect of Mississippi’s amendment to its state

constitution prohibiting payment of the bonds and allow-

ing Mississippi to claim the benefit of the statute of

limitations period that ran after payment of the bonds

was prohibited by the state constitution is the equivalent

of allowing the State to simply amend its statute of lim-

itations to bar its debt to the bondholders without pro-

viding a reasonable time within which the bondholders

could file an action to enforce payment of the bonds.

Such an action by Mississippi is a violation of the

United States Constitution. A state cannot take away an

existing right by shortening the statute of limitations to a

time that has already run with respect to that right,

Chapman v. Board of County Commissioners, 107 U.S. 348,

358 (1883); Sohn v. Waterson, 84 U.S. 596, 599 (1873). This

Court has held:

12

Whether acting through its judiciary or its Leg-

islature, a state may not deprive a person of all

existing remedies for the enforcement of a right,

which the state has not power to destroy, unless

there is, or was, afforded to him some real

opportunity to protect it.

Brinkerhoff-Faris Trust & Savings Co. Hill, 281 U.S. 673, 682

(1930).

The combined effect, therefore, of Mississippi’s con-

stitutional amendment prohibiting payment of the bonds

and its successful assertion of the defense of the statute of

limitations was to bar the right of these bondholders to

recovery against the State in violation of the impairment

of Contract clause and the due process clause of the

Fourteenth Amendment to the United States Constitu-

tion.

The touchstone of due process is fundamental fair-

ness. Gagnon v. Scarpelli, 411 U.S. 778, 790 (1973). State

action which offends “traditional notions of fair play and

substantial justice” violates due process. See, Milliken v.

Mayer, 311 U.S. 457, 463 (1940). The action of the State of

Mississippi in securing the passage of an amendment to

its state constitution prohibiting payment of its lawful

debt on the bonds involved in this litigation and then the

invocation by the State of Mississippi of the statute of

limitations when its constitutional provision prohibiting

payment of the bonds is attacked as unconstitutional,

offends “traditional notions of fair play and substantial

justice” and violates “fundamental fairness.” “The cor-

nerstone of due process is the prevention of abusive

governmental power.” Weimer v. Amen, 870 F. 2d 1400,

1405 (8th Cir, 1989) (citing Daniels v. Williams, 474 U.S.

13

327, 330-31 (1986). Surely it offends “traditional notions

of fair play and substantial justice” and violates “funda-

mental fairness” for a state to amend its own constitution

in violation of the United States Constitution and then

hide behind the statute of limitations when its uncon-

stitutional action is attacked.

The response of the Mississippi Supreme Court in

this case to these claims of unfairness was the cynical

response that “[t]he bondholders were not personally

prohibited from suing, only from collecting had they sued

within the statutory time frame.” (Appendix A, p. 14)

Respectfully submitted,

Paut M. NEvILLE

NevitteE & WILson

808 North State Street

Jackson, MS 39201

Telephone: (601) 355-1918

Barry H. Power

ALSTON, RUTHERFORD & VAN SLYKE

Post Office Drawer 1532

Jackson, MS 39215-1532

Telephone: (601) 948-6882

Attorneys for Petitioners

App. 1

APPENDIX A

IN THE SUPREME COURT OF MISSISSIPPI

NO. 94-CA-00032-SCT

DR. CHARLES BARING TRAVERS GRANT, DAVID J.

BARRY, FREDERICK PAUL SEABROOK, DR.

DONALD JOHN BURNS, MICHAEL ROBERT

FRANCIS WILKINS, MR. AND MRS. V. JOHN

BATTEN, ROBERT KENNETH PRATT, JOHN

EDWARD MORRELL, FRANCIS PETER DUPPA-

MILLER, ANGUS MACDONALD, DR. DEREK

NORMAN SEATON, BRIAN MICHAEL CARTWRIGHT,

DAVID VICTOR CORONNO, ALEC FIELD ATKIN,

DOROTHY FAIIS BECK, JOE L. HOWELL, JR., DAVID

M. BEACH, JAMES C. BLACK, STEPHEN D.

PISINSKI, CYNTHIA E. PISINSKI, HENRY J. SOBEL,

CATHERINE B. KELLY, DEANE D. KOCHER, II,

KAREN A. WHITE, ROBERT J]. BECHTOLDT, MARTIN

AND RUTH BELL, PAUL PSEISSER, TIMOTHY T.

WALRAVEN AND WILLIAM R. TUTEN, III

v.

STATE OF MISSISSIPPI, STATE BOND

COMMISSION, STATE BOND RETIREMENT

COMMISSION, KIRK FORDICE, IN HIS OFFICIAL

CAPACITIES AS GOVERNOR OF THE STATE OF

MISSISSIPPI AND COMMISSIONER OF THE STATE

BOND RETIREMENT COMMISSION AND OF THE

STATE BOND COMMISSION; MIKE MOORE, IN HIS

OFFICIAL CAPACITIES AS ATTORNEY GENERAL OF

THE STATE OF MISSISSIPPI AND COMMISSIONER

OF THE STATE BOND RETIREMENT COMMISSION

AND OF THE STATE BOND COMMISSION;

MARSHALL BENNETT, IN HIS OFFICIAL

CAPACITIES AS TREASURER OF THE STATE OF

MISSISSIPPI AND COMMISSIONER OF THE STATE

BOND RETIREMENT COMMISSION AND OF THE

App. 2

STATE BOND COMMISSION; AND EDWARD L.

RANCK, IN HIS OFFICIAL CAPACITY AS

EXECUTIVE DIRECTOR OF THE DEPARTMENT OF

FINANCE AND ADMINISTRATION FOR THE STATE

OF MISSISSIPPI

BEFORE DAN LEE, C.J., McRAE AND ROBERTS,

JJ.

ROBERTS, JUSTICE, FOR THE COURT:

STATEMENT OF THE CASE

The appeal before this Court seeking to recover on

“Planters’ Bank Bonds” and “Union Bank Bonds” is the

final chapter in a dispute that originated prior to the

Great War Between the States. The Chancery Court of the

First Judicial District of Hinds County in its October 29,

1993, opinion held that the actions were barred by the

running of the statute of limitations, noting that the court

did not “know of any that runs over a hundred years.”

The Chancellor granted the State’s Motion for Summary

Judgment in light of the Plaintiffs’ failure to bring a

timely claim within the applicable statute of limitations.

The complaint alleged that the Plaintiffs owned and/

or held certain pre-Civil War bonds of the State of Missis-

sippi known as “Mississippi Planter’s Bank Bonds” and

“Mississippi Union Bank Bonds”. Further, it was alleged

that the bonds were defaulted on in 1841, were past due,

and unpaid by the State of Mississippi. The Plaintiffs

proposed that payment of the principal had not been

made because of the repudiation on the bonds by the

State and the prohibition against payment of the bonds

enumerated in § 258 of the Mississippi Constitution.

App. 3

The State, in lieu of an answer to the complaints,

filed a Motion for Summary Judgment with exhibits,

along with a supporting memorandum of law. There the

State asserted that the suit was untimely and barred by

the statute of limitations! or by laches; that the issues

determined in David J. Barry, et al. v. Governor Kirk

Fordice, et al., 814 FSupp. 511(S.D.Miss. 1992), aff'd, 8

F.3d 1 (5th Cir. 1993), were entitled to a binding effect;

that as a matter of federal law a Plaintiff cannot proceed

on federal constitutional claims in state court where the

action is against the State and has been found to be

barred by a State’s constitutional immunity.

The Plaintiffs responded by alleging that the suit was

not one based on federal constitutional claims against the

State of Mississippi, but merely a contract action. The

Plaintiffs further allege that § 258 of the Mississippi Con-

stitution effectively barred them from collecting on these

bonds so that the statute of limitations was tolled under

Miss. Code Ann. § 15-1-57.

The chancellor, in his Final Judgment entered

November 19, 1993, granted the State’s Motion for Sum-

mary Judgment on the ground that § 258 of the Miss.

Const. of 1890 was void ab initio as violative of the United

States Constitution § 10, { 1. Consequently, the actions

were time barred by the statute of limitations, and he

dismissed the complaints with prejudice. Later in an

' Attached to the Motion for Summary Judgment was a

copy of Chapter XXVI of the Laws of Mississippi of 1873, which

provides for a period of seven years from April 19, 1873, to

bring suits on any bond.

App. 4

amended judgment, the chancellor reiterated his dis-

missal of the suits based on the statute of limitations, but

then continued by declaring that § 258 of the Miss. Const.

was unconstitutional.

The plaintiffs have appealed the chancellor’s grant of

summary judgment in favor of the State based on the

statute of limitations. The State has filed a cross-appeal as

to the portion of the amended judgment declaring § 258

of the Miss. Const. unconstitutional.

STATEMENT OF THE FACTS

The origin of this case is in the mid-nineteenth cen-

tury when in 1830 the Mississippi Legislature chartered

the commercial banking establishment called the

Planters’ Bank. The unusual feature of the bank was its

financing. It was to be practically a state-owned bank, for

$2,000,000 of its $3,000,000 of capital would be subscribed

by the state government.

The Planters’ Bank bonds were issued in 1831 and in

1833. The Legislature in response to a demand for more

banking institutions chartered the Union Bank in 1838

with bonds issued that same year. In 1841, there was a

default in interest on both the Planters’ and Union Bank

bonds. The Union Bank bonds were repudiated by the

Governor of Mississippi in 1842, and the Planters’ Bank

bonds were repudiated under a referendum vote of the

people in 1853. The Union Bank bonds matured as to the

principal in 1850 and 1858. The Planters’ Bank bonds

matured as to principal in 1861 and 1866.

App. 5

A statute of limitations was enacted in 1873 that dealt

with actions to collect debt owing on bonds. Chapter 26,

Mississippi Laws of 1873, effective April 19, 1973, pro-

vided in pertinent part that “all actions of debt-

. founded upon any bond, obligation, or contract,

under seal . . . shall be commenced within seven years

after the cause of said action, and not after.” Section 2685,

Code of 1880 (now codified as § 15-1-3), provided that the

completion of the limitations period “shall defeat and

extinguish the right as well as the remedy.”

These suits were filed in the Chancery Court in July

of 1993, which was 152 years after the default in interest,

141 years after the vote by the people to repudiate the

Planters’ Bank bonds, and 126 years after the last bonds

reached maturity. This was also 120 years after a 7-year

statute of limitations went into effect which would have

extinguished any possible right on the bonds in 1880 at

the latest.

Section 258 of the Mississippi Constitution of 1890,

which provided that the State should not “assume,

redeem, secure or pay any indebtedness or pretended

indebtedness” on the bonds, was approved as an amend-

ment of the previous Constitution by the peopie in

November 1875, to go into effect in January of 1876. The

default on the bonds had in reality occurred nearly thirty

years earlier, and this action was brought in the Chancery

Court 117 years after the Constitution was ratified.

However, the Appellants claim that prior to 1873, in

1857, Mississippi enacted a “savings statute” providing

that the statute of limitations does not run during the

App. 6

period when a person is prohibited by law from com-

mencing or prosecuting an action or remedy. Miss. Code

Ann. § 15-1-57. Relying on this “savings statute”, the

Appellants argue that they were prohibited from bringing

suit against the State to enforce payment on the bonds

because of Section 258 of the Mississippi Constitution of

1890. Hence, the statute of limitations had not run, and

they were not time barred from bringing suit.

The State filed a Motion for Summary Judgment and

for a Judgment on the Pleadings in lieu of filing an

answer to the complaint. The State asserted the present

claims were barred as res judicata as a result of the dispo-

sition in the earlier federal suit of Barry v. Fordice, supra,

that was dismissed because of the Eleventh Amendment

bar to suits against a State. Further, the State claimed that

all possible statute of limitations had run and/or in the

alternative, that the Appellants were barred from now

bringing suit by the doctrine of laches.

The chancellor ruled that the acts of repudiation,

including the vote by the people to deny payment and the

amendment by the Legislature that was later incorpo-

rated into the Mississippi Constitution of 1890, were vio-

lative of the United States Constitution with regards to

impairments of contracts. He then found the statute of

limitations had run in favor of the State during the period

in which the acts of repudiation had taken place. Thus,

any suit was indeed time barred.

From that decision the Appellants have appealed to

this Court contending that the ruling of the court below

violates the statutory tolling law of this State, established

App. 7

principles of estoppel, fundamental due process protec-

tions of the United States Constitution, and the 1794 “Jay

Treaty” between Great Britain and the United States, and

triggers the running of the statute of limitations against

the American bondholders when a condition precedent to

the running of the limitations period had not occurred.

The Appellants enumerated specifically eight issues

on appeal. In order to be clear and concise, the issues

have been briefly restated below:

I. WHETHER THE PROVISION IN THE

MISSISSIPPI CONSTITUTION PRO-

HIBITING PAYMENT OF THE UNION

BANK AND PLANTERS’ BANK BONDS

TOLLED THE STATUTE OF LIMITA-

TIONS BY VIRTUE OF § 15-1-57 OF THE

MISS. CODE ANN.

Il. WHETHER THE STATE OF MISSISSIPPI

AND ITS OFFICIALS ARE EQUITABLY

ESTOPPED FROM ASSERTING THE

STATUTE OF LIMITATIONS HAS RUN.

lil. WHETHER THE BARRING OF CLAIMS

ON THE BONDS BY THE STATUTE OF

LIMITATIONS VIOLATES THE BOND-

HOLDERS’ DUE PROCESS UNDER THE

FOURTEENTH AMENDMENT TO THE

UNITED STATES CONSTITUTION.

IV. WHETHER THE STATUTE OF LIMITA-

TIONS WOULD RUN AGAINST THE

MISSISSIPPI BONDHOLDERS WHEN

THEY HAVE NEVER MADE DEMAND

OR HAD A RIGHT TO MAKE DEMAND

FOR PAYMENT UPON A STATE OFFI-

CER AUTHORIZED TO ALLOW OR

DISALLOW PAYMENT OF THE BONDS.

App. 8

V. WHETHER, AS TO THE BRITISH

BONDHOLDERS, THE 1794 “JAY

TREATY” BETWEEN GREAT BRITAIN

AND THE UNITED STATES PROHIBITS

THE NONPAYMENT OF THE BONDS.

The State in its cross-appeal argues that the chancel-

lor erred in his holding in the following ways:

I. WHETHER HAVING HELD THAT THE

APPELLANTS’ CLAIMS WERE BARRED

BECAUSE OF THE STATUTE OF LIM-

ITATIONS, THE CHANCELLOR ERRED

BY ISSUING AN ADVISORY OPINION

HOLDING SECTION 258 OF THE MIS-

SISSIPPI CONSTITUTION TO BE

UNCONSTITUTIONAL.

Il. WHETHER THE CHANCELLOR ERRED

IN HIS DETERMINATION OF THE

CONSTITUTIONALITY OF SECTION

258 AS IT WAS NOT PROPERLY

BEFORE THE COURT ON DEFEN-

DANT’S MOTION FOR SUMMARY

JUDGMENT.

Ill. WHETHER, AS AN ALTERNATIVE FOR

AFFIRMANCE, THESE SUITS COULD

NOT BE BROUGHT BASED ON FED-

ERAL CONSTITUTIONAL CLAIMS

AGAINST THE STATE OR STATE OFFI-

CIALS.

DISCUSSION OF ISSUES

I. WHETHER THE PROVISION IN THE

MISSISSIPPI CONSTITUTION PRO-

HIBITING PAYMENT OF THE UNION

BANK AND PLANTERS’ BANK BONDS

App. 9

TOLLED THE STATUTE OF LIMITA-

TIONS BY VIRTUE OF § 15-1-57 OF THE

MISS. CODE ANN.

The State of Mississippi has pled the statue of limita-

tions applicable to bonded indebtedness effective in this

State by legislative enactment from and after April 14,

1873. The trial court found that these consolidated causes

were barred by the statute of limitations. The statute

interposed by the State provided a seven year limitation

within which to bring the action. Prior to that date, there

was no statute of limitations applicable to the bonds.

There are policy reasons why statute of limitations are

enacted. The United States Supreme Court in United

States v. Marion, 404 U.S. 307 (1971), stated that statute

of limitations

represent a public policy about the privilege to

litigate . . . and their underlying rationale is to

encourage promptness in the bringing of

actions. . . . [T]hey promote justice by prevent-

ing surprises through the revival of claims that

have been allowed to slumber. . . . [T]hey are

primarily designed to assure fairness to defen-

dants. . . . [C]ourts ought to be relieved of the

burden of trying state claims when a plaintiff

has slept on his rights.

Marion, 404 U.S. at 323, n. 14 (internal quotations and

citations omitted).

It is the Appellants’ contention that from 1857 there

has been a “saving statute” which suspended the opera-

tion of the statute of limitations under the circumstances

of this case. That statute first appeared as Art. 26 of Ch.

57, 1857 Statute of Laws of the State of Mississippi. This

App. 10

enactment has been brought forward to the present day

Miss. Code Ann. § 15-1-57, which reads as follows:

When any person shall be prohibited by law, or

restrained or enjoined by the order, decree, or

process of any court in this state from commenc-

ing or prosecuting any action or remedy, the

time during which such person shall be prohib-

ited, enjoined or restrained, shall not be com-

puted as any part of the period of time limited

by this chapter for the commencement of such

action.

The parties in these cases on appeal were never pro-

hibited from bringing suit. The section of the Mississippi

Constitution that allegedly prohibited the appellants

from bringing suit is Section 258 and reads as follows:

The credit of the state shall not be pledged or

loaned in aid of any person, association, or cor-

poration; and the state shall not become a stock-

holder in any corporation or association, nor

assume, redeem, secure, or pay any indebted-

ness or pretended indebtedness alleged to be

due to by the state of Mississippi the same as

owners, holders, or assignees of any bond or

bonds, now generally known as “Union Bank”

bonds and “Planters’ Bank” bonds.

Miss. Const. art. 14, § 258. Nothing in this above quoted

enactment prohibits any bondholder from bringing suit.

The plain language of the enactment only prohibited the

State from making payment on the bonds if a claim was,

in fact, made. No claim was made on the bonds until

1993, well past any statute of limitations applicable to

bond indebtedness.

iia ad

App. 11

In White v. White, 601 So.2d 864, 865 (Miss. 1992), a

woman who was battered by her then-husband sued him

in tort two years after the incident took place. The circuit

court dismissed her action as barred by the one year

statute of limitations. The wife claimed that she was

prohibited from bringing suit because of interspousal tort

immunity, then recognized in this state. This immunity

was later abolished by this Court in Burns v. Burns, 518

So. 2d 1205 (Miss. 1988), subsequent to the running of the

one year statute of limitations for assault and battery.

This Court held that the savings clause in § 15-1-57 of

Miss. Code Ann. only applies where a plaintiff is person-

ally prohibited or restrained from bringing suit. It speaks

in terms of a person being prohibited by law from bring-

ing suit. White, 601 So. 2d at 865. The statute was enacted

to protect those who are disabled to sue at all, not a rule

that says they will lose if they bring suit. Id.

The Appellants assert that Section 258 prohibited

them from bringing suit when in reality it prohibited

payment of any claim that was made. This Court in White

v. White, determined that where there is a claim, it must

be brought, if at all, within the applicable limitations

period, regardless of whether the current substantive law

permits recovery. Id. There can be no tolling of the statute

of limitations unless the person is personally prohibited

from bringing suit. This Court holds that the Appellant

bondholders were not personally prohibited from filing

suit at the time their claim accrued. If they were prohib-

ited from bringing suit in 1875, they would have been

prohibited from filing suit in 1993, for the law, prior to

this suit, has not changed. The Court finds that the sec-

tion in the Mississippi Constitution did not prohibit the

App. 12

bondholders from bringing suit, but prohibited the State

from making any payment on the underlying debt. The

decision in White explained that there was no savings or

tolling of the statute of limitations unless an individual is

personally prohibited or restrained from commencing or

prosecuting his claim; the fact that he cannot recover

because of an applicable defense or immunity does not

toll the running of the statute of limitations. White, 601

So. 2d at 865.

The time period with which to bring suit began to

run in 1873 when the Legislature enacted a seven year

statute of limitauons applicable to bonds. No suit was

brought within that seven year time frame, so that any

subsequent suit is time barred and should not be heard.

This issue is without merit.

il. WHETHER THE STATE OF MISSISSIPPI AND ITS

OFFICIALS ARE EQUITABLY ESTOPPED FROM

ASSERTING THE STATUTE OF LIMITATIONS

HAS RUN.

The Appellants next contend that the State is equita-

bly estopped from asserting a claim is barred by the

statute of limitations where the State’s conduct induced

the plaintiff[s] to refrain from exercising their claim.

Rhodes v. Guiberson Oil Tools Division, 927 F.2d 876, 878

(Sth Cir. 1991). They assert that the doctrine of equitable

estoppel is premised on “the maxim that no man may

take advantage of his wrong.” Glus v. Brooklyn Eastern

District Terminal, 359 U.S. 231, 232 (1959).

The principle is that where one party has by his

representations or his conduct induced the other

App. 13

party to a transaction to give him an advantage

which it would be against equity and good con-

science for him to assert, he would not in a court

of justice be permitted to avail himself of that

advantage. And although the cases to which this

principle is to be applied are not as well defined

as could be wished, the general doctrine is well

understood and is applied by courts of law as

well as equity where the technical advantage

thus obtained is set up and relied on to defeat

the ends of justice or establish a dishonest claim.

Id. at 234.

The Appellants claim the State is equitably estopped

from asserting the statute of limitations against their

claims. In 1875, with five years remaining on the statute

of limitations to sue the State for payment of the Union

Bank and Planters’ Bank bonds, the State procured pas-

sage of a constitutional amendment prohibiting payment

of these bonds. Neither the Appellants, nor their prede-

cessors, filed suit as a result of this prohibition. Further,

the Appellants allege that because the State deterred any

litigation attempts to collect on these bonds with the

passage of the amendment, it cannot now invoke the

statute of limitations when the lower court ruled that the

amendment was unconstitutional.

While articulating the correct explanation of the doc-

trine of equitable estoppel, the Appellants’ argument is

misplaced. The State did not induce the bondholders to

abstain from filing suit to protect their rights and collect

the duly owed debt. There is nothing in Section 258 of the

Mississippi Constitution that prohibited the bondholders

from filing suit to protect their claim. The language of

that section merely prohibited payment of the debt if a

App. 14

claim is made. In White, this Court held that the savings

statute contemplates one disabled to sue at all, not a rule

of law that says they will lose if they do. White, 601 So.

2d at 865. The bondholders were not personally prohib-

ited from suing, only from collecting had they sued

within the statutory time frame.

The constitutionality, or lack thereof, of Section 258 of

the Mississippi Constitution should have been attacked

within the statutory time frame allowed by Chapter XXVI

of the Laws of Mississippi of 1873. The bondholder’s

cause of action came into being at the time the interest

came due on the bonds and the State failed to pay. No

suit was brought. The next claim came into existence

when the State failed to pay when the debt came due on

the bonds themselves. Again, no suit was brought. The

seven-year statute of limitations went into effect in 1873,

and no suit was filed to protect the claims and rights of

the bondholders. “One who fails to act diligently cannot

invoke equitable principles to excuse that lack of dili-

gence.” Baldwin County Welcome Center v. Brown, 466

U.S. 147, 151 (1984). The bondholders did not file suit to

protect their rights within the statutory time period.

Therefore, this Court will not allow them to use equitable

principles to circumvent their lack of diligence in bring-

ing their suit over one hundred years after the statute of

limitations has run. Contrary to what the Appellants

suggest, there was no active misleading of the bond-

holders by the State by enacting section 258 of the Missis-

sippi Constitution. If there was any doubt as to the

meaning or constitutionality of the above mentioned sec-

tion, a claim should have been made within the statutory

time frame in order to preserve the bondholders’ rights to

nn ee ee

App. 15

any payment that was justly owed to them by the State.

This issue is without merit.

Ill. WHETHER THE BARRING OF CLAIMS ON THE

BONDS BY THE STATUTE OF LIMITATIONS

VIOLATES THE BONDHOLDERS’ DUE PRO-

CESS UNDER THE FOURTEENTH AMENDMENT

TO THE UNITED STATES CONSTITUTION.

The Appellants next argue to this Court that the State

violated their due process rights under the United States

Constitution by passing an amendment to the Mississippi

Constitution of 1869 in 1875. This amendment prohibited

payment on the Union Bank and Planters’ Bank bonds

while the bondholders had five years remaining under

the statute of limitations in which to enforce their right to

payment on the bonds by the State of Mississippi. The

Appellants assert that a state cannot take away an exis-

ting right by shortening the statute of limitations to a

time that has already run with respect to that right.

Chapman v. Board of County Commissioners, 107 U.S.

348 (1883). Further, the Appellants cite an earlier decision

by this Court, where it held:

A statute of limitations, which attempts to bar a

debt without giving a reasonable time within

which the right may be preserved, is violative of

the contract clause (article I § 10, cl. 1), as well

as the due process clause of the Federal Consti-

tution (Amendment 14), and of the like provi-

sions in our state Constitution.

Bell v. Union & Planters’ Bank & Trust Co., 130 So. 486,

487 (Miss. 1930).

App. 16

While correctly stating the rule of law, the appellants

again misread the amendment to the Mississippi Consti-

tution. The amendment is void of any language that

prohibited the bondholders from bringing suit to protect

their rights or to attack the constitutionality of such an

amendment. Although the amendment was passed with

five years remaining in which to bring suit, it did not

prohibit the bondholders from so doing.

Alternatively, if the amendment did prohibit the

bondholders from bringing suit, the bondholders come

before this Court stating the State did not give reasonable

time to preserve their rights. This argument, too, is with-

out merit. The bondholders were placed on notice that

the State was repudiating the bonds in 1841 when the

governor made his recommendation that the State stop

payment. Further notice was given when the Legislature,

in 1842, passed a resolution that repudiated the Union

bonds. The Legislature, in 1852, submitted a referendum

to the people of Mississippi for a vote to be taxed to pay

the bonds. This vote defeated a proposed tax to pay the

bonds. In 1875 the governor signed a bill proposing an

amendment to the Constitution of Mississippi to repudi-

ate the bonds. In November of that same year during the

general election, an amendment was adopted that did

repudiate the bonds. In November of 1890, the same

amendment was incorporated as section 258 of the Mis-

sissippi Constitution of 1890. At no time during these acts

by the State, which should have put the bondholders on

actual notice, but at the very least constructive notice, did

the bondholders bring suit. It was not until 1993, one

hundred and twenty years after the seven-year statute of

limitations went into effect, before the bondholders

LOT WO

App. 17

asserted their rights in claiming payment owed by the

State.

The bondholders assert that traditional notions of

fair play and substantial justice were violated when the

State passed the amendment that prohibited payment on

the bonds. Thus, violating their due process rights. The

Court finds this argument without merit. The bond-

holders knew of the State’s actions and of the statutory

time period. The bondholders failed to bring suit because

they read the amendment as prohibiting such a suit,

while it only prohibited payment. The bondholders suc-

cessfully filed suit in 1993 under the same laws in effect

at the time the statute of limitations expired. If they were

prohibited in 1875, likewise they were prohibited in 1993.

The bondholders were not denied their day in court in

1993, nor would they have been in 1875 or 1880. The

statute of limitations expired in 1880. The bondholders’

due process rights were not violated by the passing of the

amendment to the Constitution of Mississippi of 1869 in

1875, which was later Section 258 of the Mississippi Con-

stitution of 1890.

IV. WHETHER THE STATUTE OF LIMITATIONS

WOULD RUN AGAINST THE MISSISSIPPI

BONDHOLDERS WHEN THEY HAVE NEVER

MADE DEMAND OR HAD A RIGHT TO MAKE

DEMAND FOR PAYMENT UPON A STATE OFFI-

CER AUTHORIZED TO ALLOW OR DISALLOW

PAYMENT OF THE BONDS.

The bondholders claim that from the date of maturity

of these bonds until 1871, actions against the State of

Mississippi were not authorized. In 1871, a statue [sic}

App. 18

was enacted authorizing suits against the State, but only

after demand had been made of the Auditor of Public

Accounts. § 1573, Code of 1871; Miss. Code Ann § 11-45-1

(1972). According to the bondholders, demand against

the Auditor of Public Accounts was a condition precedent

before the statute of limitations could begin to run. The

Mississippi Legislature passed as part of the Codes of

1892, what eventually became § 15-1-51 of Miss. Code

Ann. (1972), the following:

The statutes of limitations shall begin to run in

favor of the state, the counties, and the munici-

pal corporations at the time when the plaintiff

first had the right to demand payment of the

officer or board authorized to allow or disallow

the claim sued upon.

Id.; See Grenada County v. Nason, 165 So. 811, 812 (Miss.

1936).

The bondholders claim that the statute of limitations

could not run prior to 1892 because they did not make a

demand for payment. Nor did the statute of limitations

run subsequent to 1892 because the present-day § 15-1-51

stated the plaintiffs first had to make a demand for pay-

ment of the officer authorized to allow or disallow the

claim sued upon.

The bondholders argue that when the State amended

its constitution to specifically prohibit payment of any

indebtedness claimed to be due on the Union Bank and

Planters’ Bank bonds, there was no state officer autho-

rized to allow or disallow payment on the bonds. Further,

because there was no state officer authorized to allow or

disallow payment, the bondholders, who had never made

demand up to that time, did not have “the right” to

App. 19

demand payment of any state officer “authorized to allow

or disallow” payment. The bondholders claim that not

until December 16, 1993, was there a state officer autho-

rized to allow or disallow payment of the bonds. That

was the date the chancellor declared Section 258 of the

Mississippi Constitution of 1890 to be unconstitutional as

an impairment of contracts in violation of Art. I, § 10 of

the United States Constitution.

However, the bondholders fail to carefully and fully

read § 15-1-51. The language clearly states that demand

must be made when “the plaintiff first had the right to

demand payment of the officer or board authorized to

allow or disallow the claim sued upon.” Id. (emphasis

added). At the time the rights of the bondholders accrued

(i.e. when the State repudiated the bonds), they had at the

latest seven years from 1873 in which to make such a

demand or bring suit to protect those rights. No demand

or suit was filed when the plaintiff[s] first had the right to

make such a demand. Also, the bondholders seek refuge

in the fact that no officer was authorized to allow their

claims if the demand was made. The statute clearly states

that demand must be made on an officer who is autho-

rized to allow or disallow their claim. The bondholders

fail to comprehend the entire statute. They want the

statute to be tolled because the amendment to the Missis-

sippi Constitution authorized the officer to disallow their

claim. This Court holds that the statute of limitations

began to run in favor of the state at the time when the

plaintiffs first had a right to make demand on the officer

authorized by the state to allow or disallow their claim.

In other words, the statute of limitations began running

App. 20

in 1873 and expired seven years later after no demand

was made. Therefore, this argument is without merit.

V. WHETHER, AS TO THE BRITISH BOND-

HOLDERS, THE 1794 “JAY TREATY” BETWEEN

GREAT BRITAIN AND THE UNITED STATES

PROHIBITS THE NON-PAYMENT OF THE

BONDS.

The bondholders call this Court’s attention to the

November 19, 1794, Treaty of Amity, Commerce and Nav-

igation between the United States of America and Great

Britain. This treaty is commonly referred to as the “Jay

Treaty”. The treaty has a provision, Article 28, which

declared that it would remain in effect in perpetuity.

Article 10 of the Treaty deals with how investments by

individuals of one nation in the public debts of the other

nation were to be protected.

Neither the debts due from individuals of the

one nation to individuals of the other, nor

shares, nor monies which they may have in the

public funds, or in the public or private banks,

shall ever in any event of war or national differ-

ences be sequestered or confiscated it being

unjust and impolitic that debts and engage-

ments contracted and made by individuals, hav-

ing confidence in each other and in their

respective governments, should ever be

destroyed or impaired by national authority on

account of national differences and discontents.

8 Stat. 116, 122.

The bondholders assert that the Jay Treaty survived

the War of 1812 with Great Britain and is still in full force

ieeieieneeemenenmnitemniinieneeneiiaitiiiiiiaiataaiiiiidiiiiiill

App. 21

and effect. Their authority is United States v. Karnuth, 24

F.2d 649 (2d Cir. 1928); however, the bondholders failed

to follow the subsequent history of this case to the United

States Supreme Court where the Second Circuit's holding

was reversed. Karnuth v. United States, 279 U.S. 231

(1929). It was in this case that the United States Supreme

Court discussed the possibilities of the Jay Treaty surviv-

ing the War of 1812.

The effect of war upon treaties is a subject in

respect of which there are widely divergent

opinions. There seems to be a common agree-

ment that at least the following treaty obliga-

tions remain in force: Stipulations in respect of

what shall be done in a state of war; treaties

cession, boundary, and the like; provisions giv-

ing the right to citizens or subjects of one of the

high contracting powers to continue to hold and

transmit land in the territory of the other; and

generally, provisions which represent completed

acts. On the other hand, treaties of amity, or

alliance, and the like, having a political charac-

ter, the object of which ‘is to promote relations

of harmony between nation and nation,’ are

generally regarded as belonging to the class of

treaty stipulations that are absolutely annulled

by war.

Id. at 236, (citations omitted) (emphasis added).

The Court notes that the “contracting powers” men-

tioned in the above quotation refers to the powers that

entered into the treaty (i.e. the United States of America

and Great Britain). This would mean that persons of

either nation could still contract to buy or sell land in

compliance with a treaty. However, the latter portion of

the quote specifies that “treaties of amity, or alliance, and

App. 22

the like” would be annulled by war. The Jay Treaty by its

very title of Treaty of Amity, Commerce and Navigation

suggests that it was of the type contemplated to be over-

turned by a war.

Notwithstanding the above discussion, the Supreme

Court of the United States discussed other alternatives to

effects by a war on a treaty. There may be treaties that

contemplate a permanent arrangement of territorial, and

other national rights, or which, in their terms, are meant

to provide for the event of an intervening war, it would

be against just interpretations to hold them extinguished

by the event of war. Id. at 238. The Jay Treaty provided in

Article 28 that the first ten articles shall be permanent. Id.

at 242. By the language employed in Article 10 and Arti-

cle 28, one could interpret the treaty to contemplate

events of war on a permanent basis.

The language of Article 10 states no monies “shall

ever in any event of war or national differences be

sequestered or confiscated.” There was no war prior,

during, or subsequent to the issuing of the bonds or the

repudiation of the bonds by the State. Neither was there a

national difference between the United States or Great

Britain during the time frame in which the bonds were

issued or repudiated. The treaty addressed actions by

either nation that would take place during a war, national

difference, or other conflict of some kind. The repudia-

tion by the State on the bonds was not a result of war,

national difference, or conflict. It was simply a breach of

the contractual agreement between the State of Missis-

sippi and the bondholders.

App. 23

This Court finds the Jay Treaty had no application to

the case sub judice, which means the repudiation by the

State on payment of the bonds was nothing more than a

breach of contract. An action for which would have had

to have been brought by the bondholders within the

statutory seven year time frame in order to preserve their

rights. No action was brought within the time limit;

therefore, the action is barred by the statute of limita-

tions.

Alternatively, the doctrine of laches prohibits the

bondholders from presently asserting their rights after

they accrued over one hundred years ago. Although the

chancellor ruled on other grounds, the State in the lower

court raised the doctrine of laches as having barred the

bondholders from bringing suit after allowing over one

hundred years to pass from when their rights accrued.

Laches is an old doctrine that was laid down as a rule

by this Court in Comans v. Tapley, 57 So. 567 (Miss. 1912),

where Justice Smith on suggestion of error wrote:

The doctrine of laches is founded principally

upon the equity maxims ‘He who seeks equity

must do equity,’ ‘He who comes into equity

must come with clean hands,’ and ‘The laws

serve the vigilant, and not those who sleep over

their rights.’

+ + *

Laches, in legal significance, is not mere delay,

but delay that works a disadvantage to another.

So long as parties are in the same condition, it

matters little whether one presses a right

promptly or slowly, within limits allowed by

law; but when, knowing his rights, he takes no

step to enforce them until the condition of the

App. 24

other party has, in good faith, become so

changed that he cannot be restored to his former

state, if the right then be enforced, delay

becomes inequitable, and operates as estoppel

against the assertion of the right.

Id.; (internal citations omitted).

Later this Court further explained the doctrine of

laches in Marks v. Toney, 18 So. 2d 452, 453 (Miss. 1944),

holding:

“It is a rule peculiar to and inherent in courts of

equity; and it applies where it would be prac-

tically unjust to give a remedy, either because

the appellant has by his conduct done that

which might be fairly regarded as equivalent to

a waiver of his remedy, or where by his conduct

and neglect he has, though perhaps not waiving

that remedy, yet put the other party in a situa-

tion in which it would not be reasonable to

place him if the remedy were to be afterwards

asserted. A long or protected delay in the pros-

ecution of rights is presumed to have produced

the situation last mentioned and equity looks

with so little favor upon such prosecutions that

it will not entertain them, although no express

statute of limitations is available, — unless facts

are shown which will rebut the presumption of

injustice arising out of the apparently undue

delay, or which will excuse the same.”

Id., quoting Griffith, Chancery Practice, Sec. 33.

The bondholders’ right to payment accrued at the

time the state stopped payment on the bonds. The bond-

holders failed to bring their claim in a timely fashion

(within the statute of limitations) and have allowed the

lll

App. 25

amount owing on the debt accumulate to a very substan-

tial sum. The sum is debatable, depending on how the

interest is calculated, but is somewhere in the neighbor-

hood of $60,000,000. If the bondholders had asserted their

rights earlier, the state could have paid the bonds or at

least worked out a payment schedule that would not

have adversely affected the state treasury. As it stands

now, if the bondholders are allowed to collect approxi-

mately $60,000,000, the financial hardship to the state

would be devastating. This is the type of hardship that

was contemplated by this Court when the doctrine of

laches was adopted.

This Court holds that the bondholders have slum-

bered on their rights and failed to assert them in a timely

fashion. Even under the Jay Treaty, if it is found applica-

ble, the bondholders, by being slothful, have placed the

State in an unreasonable position by now bringing suit.

The argument that the Jay Treaty bars non-payment on

the bonds is without merit.

CROSS-APPEAL

I. WHETHER HAVING HELD THAT THE APPEL-

LANTS’ CLAIMS WERE BARRED BECAUSE OF

THE STATUTE OF LIMITATIONS, THE CHANCEL-

LOR ERRED BY ISSUING AN ADVISORY OPIN-

ION HOLDING SECTION 258 OF THE

MISSISSIPPI CONSTITUTION TO BE UNCON-

STITUTIONAL.

The Appellee, State of Mississippi, files its cross-

appeal as a result of the chancellor having ruled that

App. 26

Section 258 of the Mississippi Constitution is unconstitu-

tional as violative of the “contract clause” of the United

States Constitution. The State complains that once the

chancellor entered a judgment that the statute of limita-

tions affirmatively barred the action the matter was

ended. The State asserts that the constitutionality of Sec-

tion 258 was a “merits” issue not briefed or properly

before the lower court on the State’s Motion for Summary

Judgment.

The State cites several cases of this Court for the

position that the constitutionality of state enactments are

not to be reached if the case can be resolved upon other

grounds. Williams v. Stevens, 390 So. 2d 1012, 1014 (Miss.

1980) (“Established law is that constitutional issues are

not reached if cases can be resolved upon other bases”). If

it is not necessary to rule upon the constitutionality of a

statute, it is necessary that a court not rule on it. Western

Line Consolidated School District, et al. v. Greenville

Municipal Separate School District, 433 So. 2d 954, 957

(Miss. 1983). The State argues that the finding by the

chancellor that the statute of limitations had run was

dispositive of the case.

The bondholders argue that the finding that Section

258 of the Mississippi Constitution unconstitutional, as it

violated the “contract clause” of the United States Consti-

tution, was a necessary prerequisite to finding that the

statute of limitations had ran against the bondholders.

The chancellor in his opinion noted that the provision

involved first was that of the “contract clause” of the

United States Constitution and not the statute of limita-

tions.

App. 27

The constitutional provision involved first

and foremost is Section 10, paragraph 1, of the

United States Constitution, which says, among

other things: “No state shall enter into or make

any law impairing the obligation of contracts.”

That is the key language of the United States

Constitution that the Court finds to be control-

ling in this case. So when the State of Missis-

sippi enacted Section 258 of its Constitution,

which says, among other things, that it shall not

“pay any indebtedness or pretended indebted-

ness alleged to be due by the State of Missis-

sippi to any person, association, or corporation

whatsoever, claiming the same as owners,

holders, or assignees of any bond or bonds, now

generally known as ‘Union Bank’ bonds and

‘Planters’ Bank’ bonds,” it was in conflict with

the above section of the federal constitution.

That section (258), counsel for both sides

concede, specifically applied to the bonds in

question here, and, without any equivocation

under numerous authorities, that provision

would be contrary to the United States Constitu-

tion prohibiting any impairment of contracts

and, therefore, would be unconstitutional.

The chancellor determined that Section 258 was

unconstitutional ab initio, because it was in conflict with

the United States Constitution. Regardless of whether it

was in conflict or not, this Court holds that the statute of

limitations began running at the time the right to collect

the interest and debt duly owed on the bonds accrued.

Thus, the time bar of the claim was dispositive, and it

was not necessary for the chancellor to go further and

hold Section 258 unconstitutional.

App. 28

Secondly, the State asserts that the determination by

the chancellor of the constitutionality of Section 258 was

an impermissible advisory opinion on an issue that had

become moot. The State claims that once the statute of

limitations had run, and the chancellor dismissed the

complaints, any underlying debt was extinguished under

Mississippi law. Proctor v. Hart, 16 So. 595; Miss. Code

Ann. § 15-1-3 (1972).

The bondholders respond that “the interpretation of

the constitution becomes the duty of the judicial depart-

ment when the meaning of that supreme document is put

in issue.” Alexander v. State By and Through Allain, 441

So. 2d 1329, 1333 (Miss. 1983). Their assertion is that the

chancellor had to make a determination on the constitu-

tionality of Section 258 of the Mississippi Constitution

because it was an issue presented by the Plaintiff’s com-

plaint and the affirmative defenses of the statute of lim-

itations raised by the defendants. Further, the

bondholders state that by holding that their claims were

barred by the statute of limitations, the chancellor was

exercising his judicial duty in holding Section 258 to be

unconstitutional.

This Court finds that it was impermissible for the

chancellor to make a determination of the constitu-

tionality of Section 258 when the running of the statute of

limitations was dispositive in granting the State’s Motion

for Summary Judgment. Therefore, the decision by the

chancellor that Section 258 of the Mississippi Constitution

is reversed and rendered.

App. 29

II. WHETHER THE CHANCELLOR ERRED IN HIS

DETERMINATION OF THE CONSTITU-

TIONALITY OF SECTION 258 AS IT WAS NOT

PROPERLY BEFORE THE COURT ON DEFEN-

DANT’S MOTION FOR SUMMARY JUDGMENT.

The State next argues that it did not raise the consti-

tutionality of Section 258 before the lower court on its

Motion for Summary Judgment. There were two issues

raised: that the statute of limitations had run, and also

that a state court could not entertain a federal cause of

action, based on the alleged federal unconstitutionality of

a law, against the State or State officials, where a federal

court had refused to entertain the case. The State com-

plains that it was not proper for the lower court to “jump

the gun” and decide a substantive issue of law pre-

maturely and without full briefing.

On a motion for summary judgment the chancellor

may look beyond the pleadings of the parties. The rule

should operate to prevent the system of extremely simple

pleadings from shielding the claimants without real

claims or defendants without real defenses; in addition to

providing an effective means of summary action in clear

cases, it serves as an instrument of discovery in calling

forth quickly the disclosure on the merits of either a claim

or defense on pain of loss of the case for failure to do so.

Comments to M.R.C.P. 56. The chancellor was merely

looking at all the evidence that was presented before him

in making his determination as to whether the statute of

limitations had run. Again, as stated above, the chancel-

lor was in error to find section 258 of the Mississippi

Constitution void ab initio because the running of the

App. 30

statute of limitations was dispositive on granting the

State’s Motion for Summary Judgment.

Ill. WHETHER, AS AN ALTERNATIVE FOR AFFIR-

MANCE, THESE SUITS COULD NOT BE

BROUGHT BASED ON FEDERAL CONSTITU-

TIONAL CLAIMS AGAINST THE STATE OR

STATE OFFICIALS.

Finally, the State claims that as a matter of controlling

federal law, these complaints in Chancery Court, based

on identical federal claims which a federal district court

held were barred from federal court, could not be enter-

tained in state court. The State contends that as a matter

of controlling federal law the plaintiffs cannot proceed on

federal § 1983 constitutional claims in state court where

the action seeking monetary relief is against the state, as

the real party in interest, or state officials in their official

capacities, such that the suit would be barred by the

immunity granted by the Eleventh Amendment to the

United States Constitution if it were brought in federal

court. Will v. Michigan Department of State Police, 491

U.S. 58 (1989).

The bondholders respond to the State by asserting

that their cause of action was not one under § 1983 for

damages for deprivations for Plaintiff’s constitutional

rights, so that Will is inappropriately cited by the State.

The bondholders claim that their cause of action is a

simple breach of contract seeking payment on bonds

issued by the State of Mississippi. The Plaintiffs were

entitled to bring their suit for breach of contract against

the State. Mississippi State Department of Public Welfare

ne AON DUNE ik I ne Ae

eh ree

a i a Nl EAT

ee ee

App. 31

v. Howie, 449 So. 2d 772, 776-77 (Miss. 1984); Cig Con-

tractors v. Mississippi State Building Commission, 399

So. 2d 1352, 1355 (Miss. 1981). This Court has held that:

[t]he general rule is that when the legislature

authorizes the State’s entry into a contract, the

State necessarily waives its immunity from suit

for a breach of such contract. Where the state

has lawfully entered into a business contract

with an individual, the obligations and duties of

the contract should be mutually binding and

reciprocal. There is no mutuality of fairness

where a state or county can enter into an advan-

tageous contract and accept its benefits but

refuse to perform its obligations.

449 So. 2d at 776-77; 399 So. 2d at 1355.

The cause of action for breach of contract was recog-

nized by this Court in the above decisions. This is distin-

guishable from the federal claims that the State alleges

the bondholders are asserting. The bondholders were

attempting to file suit against the State to enforce pay-

ment on the bonds issued by the State. However, the

statute of limitations has run, and the claims are time

barred.

The State also alleges that the state court claim by the

bondholders is barred by res judicata because the federal

court claim was barred by the Eleventh Amendment. It is

clear from a review of Barry v. Fordice that the Eleventh

Amendment was the sole reason for dismissal of the

federal suit. Res Judicata only applies to questions actually

litigated and determined by or essential to the judgment

rendered in the former proceedings. Trammell v. State,

App. 32

622 So. 2d 1257, 1261 (Miss. 1993); citing Riley v. More-

land, 537 So. 2d 1348, 1354 (Miss. 1989).

This Court holds that the claims brought in the Chan-

cery Court were not federal claims as the State suggests,

nor were they somehow barred by res judicata because of

the decision by the federal district court. The claims filed

in the Chancery Court were state law claims seeking

damages for a breach of contract by the State on bonds it

had issued to the bondholders. However, the claims were

barred by the statute of limitations having expired.

CONCLUSION

These claims were brought over one hundred years

after the right to demand payment had accrued. The

bondholders mistakenly read Section 258 to preclude suit

to seek payment on the bonds, when in reality the section

only prohibited payment. The seven-year statute of lim-

itations began to run in 1873 and expired in 1880. No

demand was made until 1993 when the suit was filed in

Chancery Court. The chancellor correctly held that the

statute of limitations had run and the bondholders were

barred from pursuing their claim. The determination that

Section 258 of the Mississippi Constitution is unconstitu-

tional was error because the running of the statute of

limitations was dispositive in granting the State’s Motion

for Summary Judgment.

App. 33

AFFIRMED IN PART; REVERSED AND REN-

DERED IN PART.

LEE, C.J., PRATHER AND SULLIVAN, P.JJ., PITT-

MAN, McRAE AND MILLS, JJ., CONCUR. BANKS

AND SMITH, JJ., NOT PARTICIPATING.

App. 34

APPENDIX B

EXHIBIT “C”

Planters’ Bank Bonds

Belinda Wooley

Official Records Archivist

Mississippi Department of Archives and History

November 23, 1988

On February 10, 1830, the Legislature of Mississippi

chartered a commercial banking establishment called the

Planters’ Bank.! Its headquarters were in Natchez,

although eventually the home office would be transferred

to Jackson. Branches were to be set up at Port Gibson,

Woodville, Monticello, Vicksburg, Rodney, Columbus,

and Liberty. The unusual feature of the Planters’ Bank

was its financing. It was to be practically a state-owned

bank, for $2,000,000.00 of its $3,000,000.00 of capital

would be subscribed by the state government.

The state had a tremendous stake in this bank.

Pledged to the ownership of two-thirds of the stock,

Mississippi, with its already shaky treasury, had to cast

about for means of financing a bank to which the state’s

faith and credit had been pledged. The state undertook to

issue bonds to purchase stock. As there were no takers

for the bonds, the state reduced its subscription to

$500,000.00 worth of stock. Governor Gerard Brandon

appointed three commissioners with full power to negoti-

ate a loan or loans in an amount not to exceed $500,090.00

and at an interest of six percent per annum.?

1 Laws of Mississippi, ch. 74, sec. 35 (13th Session), 1830.

2 Laws of Mississippi, ch. 1, sec. 3 (14th Session), 1830.

ae

App. 35

In 1831 the commissioners were successful in selling

$500,000.00 of Mississippi state bonds to New York bro-

kers at a premium of '/s percent; and two years later the

remaining $1,500,000.00 were sold to Eastern capitalists at

a premium of 13.25 percent.?

John Delafield, President of the Phenix Bank in New

York, gladly underwrote the bonds at a premium of

$250,000.00, and, fortunate in his role of underwriter,

passed them on to trusting European investors. A very

large proportion of the total issued is still held in Great

Britain. The coupons were male payable in London.°®

The careful management of the Planters’ Bank for a

number of years reflected the confidence reposed in it.

The bank was paying annual dividends of 10 percent and

was recognized as one of the best regulated institutions in

the country.© The apparent success of the Planters’ Bank

stimulated the desire for more banks.’

As a result of the demand for the establishment of

more banking institutions, the Mississippi Legislature

chartered the Mississippi Union Bank, with the state

pledging its credit for $15,500,000.00 in stock with state

3 Reginald C. McCrane, Foreign Bondholders and American

State Debts (New York: The Macmillan Company, 1935), p. 194.

* McGrane, p. 107.

5 “Historical Survey of the Debts of the State of Mississippi

Repudiated Before the Civil War, “Fifty-fourth Annual Report of

the Council of Foreign Bondholders (London: Council House,

No. 17, Moorgate, May 1929), p. 2.

6 Mississippi Legislature House Journal, January 5, 1836, p. 30.

7 McGrane, p. 194.

App. 36

bonds issued against security to be pledged by the stock-

holders.’ In a supplemental act of 1838, the state was

committed to the purchase of 50,000 shares of stock, to be

paid for by the sale of $5,000,000.00 in bonds.’ But by the

time fall elections occurred, the banking institutions

throughout the country were in bad repute due to the

Panic of 1837.10

In 1841, the State defaulted in interest on both bond

issues. Governor Alexander McNutt recommended that

state bonds issued to purchase Planters’ Bank and Union

Bank stocks should be repudiated. The Legislature

answered the Governor with a resolution declaring that

“The insinuation that the State of Mississippi would

repudiate her bonds and violate her plighted faith is a

calumny upon the justice, honor, and dignity of the

State;”!! but the succeeding Legislature, in 1842, passed a

resolution of repudiation that applied only to the Union

Bank issue.!?

In 1852, the Legislature submitted a referendum to

the people for a vote as to whether they were willing to

be taxed to pay the Planters’ Bank Bonds.!> The people of

the State, by a large majority, declared their unwilling-

ness to be taxed for the payment of the bonds, which in

8 Mississippi Legislature Senate Journal, January 18, 1837, p.

95.

9 Mississippi Legislature Senate Journal, February 12, , 1838,

p- 312.

10 McGrane, p. 195.

11 Mississippi Legislature House Journal, 1841, p. 416.

12 Laws of Mississippi, ch. 127, sec. 6-7, 1842.

13 Laws of Mississippi, ch. 25, . , 1852.

App. 37

effect, virtually repudiated the debt.!4 The Legislature,

however, did not repudiate the debt at this time.15 They

felt the payment of both bonds and interest constituted a

legal and moral obligation of the state.

By this time many investors were beginning to worry

about their purchases of Planters’ Bank Bonds. One such

investor, however, held on to the idea that one day the

Mississippi bonds would be paid. His name was George

Peabody. After several visits to England, Mr. Peabody, a

Massachusetts banker and philanthropist, settled perma-

nently in London in 1837. There he established under his

own name a successful investment banking house which

invested in the Planters’ Bank Bonds.’ On February 7,

1867, George Peabody donated $464,000.00 of Planters’

Bank Bonds to his Southern Education Fund. Former

Chief Justice and Provisional Governor of Mississippi,

Honorable William L. Sharkey, assured Mr. Peabody that

the Planters Bank Bonds were a just debt of the State. The

faith of the state of Mississippi had been pledged for the

redemption and payment of said bonds.17

In February, 1871, a petition was received by the

Mississippi Legislature on behalf of British, American,

Dutch, Spanish, and other investors in Mississippi Union

4 “Mississippi State Bonds,” Hinds County Gazette,

December 8, 1858, vol. 162, n.p.

1S Mississippi Legislature House Journal, 1852, p. 545-547.

te “George Peabody”, The World Book Encyclopedia

(Chicago: World Book - Childcraft International, Inc., 1978), vol.

15, p. 182.

7 Campbell v. Mississippi Union Bank, Howard’s Reports, vol.

6, p. 625-683.

App. 38

Bank and Planters’ Bank Bonds from various investing

companies and individual holders. The petitioners urged

that the State now recognize as among its earliest and

fundamental duties the enactment of a law to redeem the

faith of Mississippi pledged upon these bonds, and free

her forever from the bane of repudiation. The petition

was ignored.!8

In March, 1871, the Trustees of the Peabody Southern

Education Fund addressed a memorial dated February 16,

1871, to the Mississippi Legislature. This memorial

appealed for the payment of the Planters’ Bank Bonds

donated by George Peabody, recalling that the validity of

these bonds had never been questioned, and that it was

the cherished hope and confident belief of the founder to

the last hour of his life that this long-deferred debt would

soon be honored. By this time the bonds with accrued

interest were worth $1,100,000.00.19 Mr. Peabody had

wanted the income to be applied “for the promotion and

encouragement of intellectual, moral, or industrial educa-

tion among the young of the more destitute portions of

the Southern States of our Union.”2° No answer was

given to the Trustees.

On February 12, 1875, Governor Adelbert Ames

signed a bill proposing an amendment to the State’s

18 Chronology of the Repudiated Debts of the State of Mississippi

Issued Before the Civil War (London: Council of Foreign

Bondholders, No. 17, Moorgate, February 1932), p. 9.

19 Chronology of the Repudiated Debts of the State of Mississippi

Issued Before the Civil War, p. 8-9.

20 Memorial of the Trustees of the Peabody Education Fund

(1881), n.p.

App. 39

Constitution to repudiate the Planters’ and Union bank

bonds. At a general election held on November 2, 1875,

the amendment, which read as follows, was adopted by

the people:

“Nor shall the State assume, redeem, secure, or

pay any indebtedness claimed to be due by the

State of Mississippi to any person, association,

or corporation whatsoever claiming the same as

owners, holders, or assignees of any bond or

bonds known as the Union Bank bonds or the

Planters’ Bank bonds.”2!

The holders of Planters’ Bank Bonds persistently

sought redress over the years. On February 21, 1881, the

Trustees of the Peabody Southern Education Fund again

requested payment of their Planters’ Bank Bonds. Their

representative, Judge Thomas C. Manning, was informed

by letter from Governor Stone, dated March 4, 1881, that

the bonds were excluded from legislative consideration

by the Constitutional amendment that had been adopted

in 1875.22

For nearly a quarter of a century the Peabody Trust

Fund had repeatedly appealed to the State to settle. Dur-

ing that time Mississippi children were recipients of the

Fund’s benefactions. Finally, in 1884, the trustees

announced that, in justice to other States, they would halt

21 Laws of Mississippi, Amendments to the Constitution,

Amendment 1, November 2, 1875.

22 Chronology of the Repudiated Debts of the State of Mississippi

Issued Before the Civil War, p. 10-11.

App. 40

the distribution of its philanthropy in Mississippi until

such time as the state recognized its obligations.

The Mississippi Constitutional Convention, on

November 1, 1890, incorporated the repudiation amend-

ment adopted by the 1875 Legislature and passed by the

people into the new State Constitution as Section 258,

Article 14. This amendment found its way almost word

for word from the 1875 Legislature to the present Consti-

tution of 1890.

After forty-four years of assistance to Southern edu-

cation, the Peabody Education Fund was dissolved in late

1913. On November 5, 1913, Governor Earl Brewer of

Mississippi and Chancellor Andrew Kincannon of the

University of Mississippi appeared together in person at

the annual meeting of the Trustees in New York, and

requested that the Peabody donation of Planters’ Bank

Bonds be turned over in trust to the University of Missis-

sippi.

The Peabody Trustees agreed to transfer their

Planters’ Bank Bonds to the University of Mississippi to

hold in trust.24. On May 20, 1914, the Trustees of the

Peabody Fund, after an interview with Governor Brewer

and Chancellor Kincannon, delivered to the Treasurer of

Mississippi half a million dollars or more in bonds of the

Planters’ Bank issue to be held with the understanding

23 “The Federal Aspect of the Debts of the State of

Mississippi Repudiated Before the Civil War.” Fifty-sixth Annual

Report of the Council of Foreign Bondholders (London: Council

House, No. 17, Moorgate, March 1930), p. 9.

24 Chronology of the Repudiated Debts of the State of Mississippi

Issued Before the Civil War, p. 11.

‘nai te nina

App. 41

that if they should ever be redeemed the money would be

divided equally among the University of Mississippi,

Mississippi A&M college, Industrial Institute and college

at Columbus, and George Peabody College for Teachers

at Nashville, Tennessee.?°

The trust was accepted and the bonds are now held

by the State Treasurer of Mississippi pending ultimate

distribution of their proceeds.*°

Bibliography

Campbell v. Mississippi Union Bank, Howard’s Reports, vol.

6, 1867.

Chronology of the Repudiated Debts of the State of Mississippi

Issued Before the Civil War. London: Council of Foreign

Bondholders, No. 17, Moorgate, February 1932.

“The Federal Aspect of the Debts of the State of Missis-

sippi Repudiated Before the Civil War.” Fifty-sixth Annual

Report of the Council of Foreign Bondholders. London: Coun-

cil House, No. 17, Moorgate, March 1930.

“George Peabody.” The World Book Encyclopedia (Chi-

cago: World Book-Childcraft International, Inc., vol. 15,

1978.

“Historical Survey of the Debts of the State of Mississippi

Repudiated Before the Civil War.” Fifty-fourth Annual

Report of the Council of Foreign Bondholders. London: Coun-

cil House, No. 17, Moorgate, May 1929.

25 “Record Facts and Comment on State’s Repudiated

Bonds,” p. 9.

26 Chronology of the Repudiated Debts of the State of Mississippi

Issued Before the Civil War, p. 12.

App. 42

Laws of Mississippi (Jackson: Peter Isler, State Printer) 13th

and 14th Sessions, 1830.

Laws of Mississippi (Jackson: C.M. Price and G.R. Fall,

State Printers), 1842.

Laws of Mississippi (Jackson: Fall and Marshall, State

Printers), 1852.

Laws of Mississippi, Amendments to the Constitution,

Amendment 1, 1875.

McGrane, Reginald C. Foreign Bondholders and American

State Debts. New York: The Macmillan Company, 1935.

Memorial of the Trustees of the Peabody Education Fund. n.p.,

1881.

Mississippi Legislature House Journal (Jackson: C.M. Price,

State Printer), 1836.

Mississippi Legislature House Journal (Jackson: C.M. Price,

State Printer), 1841.

Mississippi Legislature House Journal (Jackson: C.M. Price,

State Printer), 1852.

Mississippi Legislature House Journal (Jackson: G.R. and J.S.

Fall), 1837.

Mississippi Legislature House Journal (Jackson: B.D. How-

ard, State Printer), 1838.

“Mississippi State Bonds.” Hinds County Gazette, Decem-

ber 8, 1858, vol. 162.

“Record Facts and Comment on State’s Repudiated

Bonds.” The Planters’ Bank and Union Bank of Mississippi.

n.p., March 20, 1931.