# Opposition Brief — Virginia v. West Virginia > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386020_0257%3A28 ## Record - **Collection:** Supreme Court brief - **Document type:** Opposition Brief - **Published:** January 1, 1907 - **Citation:** 206 U.S. 290 ## Text ‘ FILE COPY. Ofiisc Seume Geert, US. Fizise DD IN THE APR 13 1914 JATAES DD. MAHER CLERK j { Supreme Court of the OCTOBER TERM, 1913. No. 2 ORIGINAL. COMMONWEALTH OF VIRGINIA ) vs. ) In Equity. ) STATE OF WEST VIRGINIA. BRIEF ON BEHALF OF WEST VIRGINIA IN OPPOSITION TO INTEREST. BRET Te PYRO PRR ae Re ee eT Pet ere pity APEC pee ig ee en Ree IN THE Supreme Court of the United States, OCTOBER TERM, 1913. No. 2 ORIGINAL. COMMONWEALTH OF VIRGINIA vs. In Equity. ee eee ee STATE OF WEST VIRGINIA. I. STATES NOT CHARGEABLE WITH INTEREST IN THE ABSENCE OF A LEGISLATIVE OR OFFICIAL PROMISE. It is a firmly fixed rule of universal recognition that interest is not to be awarded against a State unless its consent has been manifested by an act of ae . eee Te aot Lesiiis ERR rR cena i gE NIC MSM RS iat Abia RAIS sg MIRED MART a A tics Ns Bt Te BS 2 its Legislature or by a lawful contract of its execu. tive officers. U. 8. v. State of North Carolina, 136 U. S.. 211: 34 L. Ed., 336. South Dakota v. North Carolina, 192 U. S., 321: 48 L. Ed., 462. U.S. ex. rel. McCloud y. Jno, Sherman, Seey,, 98 U: S., 535; 25 L. Ed., 235. U.S. v. Sargent, 162 Fed. Rep., 81. Nat’] Home for Disabled Volunteer Soldiers et al. v. Parrish, 194 Fed. Rep., $40. U.S. v. Bayard, 127 U. S., 251-60. II. WEST VIRGINIA’S PROMISE TO PAY INTER. EST, IF ANY SHE MADE, WAS CON. DITIONAL, AND NOT ABSOLUTE. Pursuant to the above rule, therefore, and in order to determine whether or not West Virginia is chargeable with interest upon her equitable propor- tion of the principal of the Virginia debt existing prior to January 1, 1861, it becomes necessary to ascertain from the terms of her contract by which she became responsible for a part of the principal whether or not she also promised to pay interest thereon, and, if so, whether or not such promise was absolute or conditional. As held by this Court (Va. v. W. Va., 220 U.S. 1), the contract of West Virginia springs ont of See- tion 8 of Article 8 of her Constitution of 1861, the - MEL ER GE PAGING EF FLITE OG BIT I I GE I IL iia etait is on Act of the Legislature of the restored State of Vir- ginia passed May 15, 1862, giving consent to the erec- tion of the new State under the provisions of said Constitution, and the Act of Congress passed Decem- ber 31, 1862, consenting, upon the faith of both, to the creation of said State. The constitutional provision, therefore, must be looked to for the purpose of ascertaining the terms of the agreement, and it reads as follows: “An equitable proportion of the public debt of the Commonwealth of Virginia, prior to the first day of January, in the year one thousand, eight hundred and sixty-one shall he assumed by this State; and the Legisla- ture shall ascertain the same as soon as inmay be practicable, and provide for the liquidation thereof by a sinking fund suffi- cieut to pay the accruing interest, and re- deem the principal within thirty-four vears.” W. Va. Constitution 1861, Art. 8, See. 8. Here is a promise to pay an equitable propor- tion of the Virginia debt, and a like promise to es- tablish “a sinking fund sufficient to pay the accruing interest. and redeem the principal within thirty- four years”; but both promises have two qualifica- tions attached thereto: First, she was not to contri- bute to the payment of any indebtedness of Virginia, whether principal or interest, accruing after the first day of January, 1861, and, secondly, she could not, and was not to establish the promised sinking fund until after her equitable proportion of the debt had been first ascertained. DOT Is, LEE EE IE EIS BEL ILOLLD LOIN TTT AI ee APES - sc eebgit ge ae Neate aR. oo pear AR SANT sii 4 It is true that any overdue and unpaid interest existing prior te the: first day of January, 1861, might be treated as a part of the principal debt as of that date, and she compelled to contribute an equitable proportion to the payment thereof, but not so with any interest accruing upon the Virginia debt after that time; because, by her contract, she firmly fixed the first day of January, 1861, as the date be- youd which uo indebtedness should accrue to the payment of which she would contribute. Evidently she contemplated the payment of in- terest upou her equitable proportion of the debt after the same had been ascertained, but not before. Af- ter its ascertainment, the amount so fixed would become the principal of her debt, which, according to the sinking fund provision, would bear interest from that time, but no sooner or otherwise. This construction is in keeping with the rule of law that interest is not chargeable upon an unliqui- dated amount. Redfield v. Ystalyfera Lron Co., 110 U. S., 174; 28 L. Ed., 109. Stevens v. Phoenix Bridge Co., 139 Fed Rep., 248. In Redfield v. Ystalfera Iron Co., supra, Mr. Jus- tice Matthews said: “In ordinary practice, it may be con- venient, and certainly would not be improp- er nor unjust that interest propertly allow- ed on the real amount, subsequently ascer- tained, should be calculated from the date of such a verdict; but in such cases it is not interest on the verdict in fact, because, until the amount is liquidated by the sub- CLELOSLIEELAS IPG: Fe OPEL ICED LAETOLI GOL NOE GLE IE RIE FOE RIE LEA PLL IOS "5 FILM R sequent action of the Court, there is no sum certain due on which interest could be com- puted.” And in Stevens y. Phoenix Bridge Co., supra, it was said that-— “Interest is not recoverable on a de- mand which is unliquidated, and which is subject to a counter claim also unliquidated.” The Virginia authorities upon the subject are: Auditor of Public Accounts v. Dagger & Foley, 3 Leigh (Va.), 241. Phillips et al. v. Williams, 5 Gratt. (Va.), 258. M’Connico et al., Exrs. of Holloway, v. Curzen, 2 Call (Va.), 358. Skipwith v. Clinch, 2 Call (Va.), 253. Waggoner v. Gray’s Admrs., 2 H. & M. (Va.), 603. Stearns v. Mason, 24 Gratt. (Va.), 484. ITI. WEST VIRGINIA’S EQUITABLE PROPOR- TION OF VIRGINIA DEBT WAS NOT ASCER- TAINED, IF FIXED AT ALL, UNTIL THE DE- CISION OF THIS COURT ON MARCH 6, 1911. Neither the Legislature of West Virginia nor the Legislature of Virginia, standing alone, had the power to ascertain West Virginia’s equitable pro- portion of the Virginia debt, and the two States, through all the years that have passed, have taken ie ene eced SSS aE pee Spa ist ah AR ANE SR DARE GERTR SE eases | bina 2A a YL, no joint action, and, in consequence, the ascertain. iment of West \irginia’s proportion of the debt has reliained Unliguidated and unfixed. There hag uever been a oment of time from the adoption of ihe West \irginia Constitution of isoi, or from the establisiiment of the State im is65, that West Vir. ginta could lave estabiished the sinking fund prom- ised iii the kkighth Article of ber Coustitution. She could lay no jevy, and could fix no rate, because she did not know wiiat she had to meet. She did not have the power to fix the amount herself, and she Was ulWilling to perniut Virginia to do so arbitrar- ily. For the frst tine in fifty vears, the basis of lia- bility Was fixed by this Court in its finding and opin- ion ol March ©, 1oli, aud that finding was provis- ional; amd, if West Virginia should be perinitted by this Court to apply the credits thereto that she now claims, interest could only be calculuated upon the balance from the time the balance is ascertained, unless this Court should be of the opinion that West Virginia has actively prevented the ascertainment of her proportion of the debt, and to this suggestion we will now briefly address ourselves. LV. WEST VIRGINIA NOT AT FAULT. From the adoption of her Constitution in 1861 vntil ber adepission into the Union in 1863, West Virginian had no pewer to act, because she had not hecoue 2 State. From 1863 until 1866, the two States were at war, and nothing could be done. Ib SA PSL ITE S SF DRE MET GE GSE Ok POLI IT APU EM 8s PLS Te CF 1866, Virginia filed a bill in this Conrt against West Virginia, attacking the integrity of her territory. and claiming jurisdiction over the Counties of Ber- keley. Jefferson and Frederick. which suit was not decided until the sixth dav of March. 1871, and. dur- ing its pendency, it was uncertain what constituted West Virginia, and her action upon the debt ques. tion was thereby prevented and postnoned. Tmme- diately following this: that is to say, upon the 15th day of March, 1871, the Governor of West Virginia. pursuant to a joint resolution of her Legislature, appointed a Commission to negotiate » settlement of the debt question with the Commonwealth of Vir- ginia. This Commission proceeded without unneces- sarv delay to the Capitol of Virginia for the purpose of carrvine ont the ohiects of its anpointment. but was met with a refusal upon the pert of Virginia to negotiate. and West Vireinia was once more power- less. Short'y after this: that is to sav. on March 30. 1871. the State of Virginin. without consulting West Virginia. took the matter into her own hands. and, by legislative enactment. arbitrarily fixed West Virginia’s nortion of the debt one-third, thus making it imnossible for West Virginia to do any- thing in the premises: and there the matter remain ed practically until immediately hefore the institu- tion of this srit. West Virginia. it is therefore re- spectfully submitted, has not been at fant. and has not heen the cause of the postponement of this set- tlement. Upon the other hand, Virginia has had it in her power for more than forty vears to institute this suit. and ascertain through this tribunal West Vir a eee ons SOO s SE as ‘ NE ee PE ES I a EO BL 8 ginia’s equitable proportion of her debt. Ins she neglected so to do, and has caused, by her neg. lect and delay, the very time to run upon which ghe now seeks to charge interest. It is, therefore, respectfully submitted that. West Virginia should not be charged with interest until after the ascertainment of her equitable pro. portion of the debt, as promised in her Constitution, Respectfully submitted, A. A. LILLY, CHARLES E. HOGG, and JOHN H. HOLT, Associate Counsel ~ for West Virginia. x ‘ Pa Lo el LOD Ne ADE IPLT Ae IL ALE PEE ALDER ER IN THE Supreme Court of the United States, OCTOBER TERM, 1913. No. 2 ORIGINAL. COMMONWEALTH OF VIRGINIA ) vs. ) In Equity. ) STATE OF WEST VIRGINIA. OPPOSITION TO INTEREST. BRIEF ON BEHALF OF WEST VIRGINIA IN [IN THE Supreme Court of the United States, OCTOBER TERM, 1913. No. 2 ORIGINAL. COMMONWEALTH OF VIRGINIA ) vs. ) In Equity. ) STATE OF WEST VIRGINIA. STATES NOT CHARGEABLE WITH INTEREST IN THE ABSENCE OF A LEGISLATIVE OR OFFICIAL PROMISE. It is a firmly fixed rule of universal recognition that interest is not to be awarded against a State unless its consent has been manifested by an act of LOADED INE 2 its Legislature or by a lawful contract of its execu. tive officers. U.S. v. State of North Carolina, 136 U. S., 211; 34 L. Ed., 336. South Dakota v. North Carolina, 192 U. S., 321; 48 L. Ed., 462, U. S. ex. rel. McCloud y. Jno. Sherman, Secy., 98 U. S., 535; 25 L. Ed., 235. U.S. v. Sargent, 162 Fed. Rep., 81. Nat’! Home for Disabled Volunteer Soldiers et al. v. Parrish, 194 Fed. Rep., 940. U.S. v. Bayard, 127 U. S., 251-60. II. ’ WEST VIRGINTA’S PROMISE TO PAY INTER- IST, IF ANY SHE MADE, WAS CON- DITIONAL, AND NOT ABSOLUTE. Pursuant to the above rule, therefore, and in order to determine whether or not West Virginia is chargeable with interest upon her equitable propor- tion of the principal of the Virginia debt existing prior to January 1, 1861, it becomes necessary to ascertain from the terms of her contract by which she became responsible for a part of the principal whether or not she also promised to pay interest thereon, and, if so, whether or not such promise was absolute or conditional. As held by this Court (Va. v. W. Va., 220 U.S.. 1), the contract of West Virginia springs out of Sec- tion 8 of Article 8 of her Constitution of 1861, the Act of the Legislature of the restored State of Vir- ginia passed May 13, 1862, giving consent to the erec- tion of the new State under the provisions of said Constitution, and the Act of Congress passed Decem- ber 31, 1862, consenting, upon the faith of both, to the creation of said State. The constitutional provision, therefore, must be looked to for the purpose of ascertaining the terms of the agreement, and it reads as follows: “An equitable proportion of the public debt of the Commonwealth of Virginia, prior to the first day of January, in the year one thousand, eight hundred and sixty-one shall be assumed by this State; and the Legisla- ture shall ascertain the same as soon as may be practicable, and provide for the liquidation thereof by a sinking fund suffi- cieut to pay the accruing interest, and re- deem the principal within thirty-four years.” W. Va. Constitution 1861, Art. 8, Sec. 8. Here is a promise to pay an equitable propor- tion of the Virginia debt, and a like promise to es- tablish “a sinking fund sufficient to pay the accruing interest, and redeem the principal within thirty- four years”; but both promises have two qualifica- tions attached thereto: First, she was not to contri- bute to the payment of any indebtedness of Virginia, whether principal or interést, accruing after the first day of January, 1861, and, secondly, she could not, and was not to establish the promised sinking fund until after her equitable proportion of the debt had been first ascertained. 3 2 : 4 4 ; * Fd z no joint action, and, in consequence, the ascertain. ment of West Virginia’s proportion of the debt has remained unliquidated and unfixed. There has never been a moment of time from the adoption of the West Virginia Constitution of 1861, or from the establishment of the State in 1863, that West Vir. ginia could have established the sinking fund prom. ised in the Eighth Article of her Constitution. She could lay no levy, and could fix no rate, because she did not know what she had to meet. She did not have the power to fix the amount herself, and she was unwilling to permit Virginia to do so arbitrar- ily. For the first time in fifty years, the basis of lia- bility was fixed by this Court in its finding and opin- ion of March 6, (%ii,-amd-thet—finding was provis- ional; and, if West Virginia should be permitted by —- this Court to apply the credits thereto that she now claims, interest could only be calculuated upon the balance from the time the balance is ascertained, unless this Court should be of the opinion that West Virginia has actively prevented the ascertainment of her proportion of the debt, and to this suggestion we will now briefly address ourselves. 5Y. WEST VIRGINIA NOT AT FAULT. From the adoption of her Constitution in 1861 until her admission into the Union in 1863, West Virginia had no power to act, because she had not become a State. From 1863 until 1866, the two States were at war, and nothing could be done. In ee SN PUNT PRGREL OB PL OYE LEI ARLES AME PIT PRI 9 Y : ~ AK PS 7 1866, Virginia filed a bill in this Court against West Virginia, attacking the integrity of her territory, and claiming jurisdiction over the Counties of Ber- keley, Jefferson and Frederick, which suit was not decided until the sixth day of March, 1871, and, dur- ing its pendency, it was uncertain what constituted West Virginia, and her action upon the debt ques- tion was thereby prevented and postponed. Imme- diately following this; that is to say, upon the 15th day of March, 1871, the Governor of West Virginia, pursuant to a joint resolution of her Legislature, appointed a Commission to negotiate a settlement of the debt question with the Commonwealth of Vir- ginia. This Commission proceeded without unneces- sary delay to the Capitol of Virginia for the purpose of Catrving— Sir) Peet tR le etek | KTS REEL ER a Mb ty iN 14 ericksburg & Potomac Railroad Company on file in the office of its treasurer in the City of Richmond, and both the main and the underlying exhibits were checked by Mr. Potter, accountant for the State of Virginia, and announced by him to be correct. Under such circumstances, the book value was dependable, and, if it had been solely followed, as charged by Virginia, the resulting value of the stock would have been correct. The book value at least makes a prima facie case, and, in the absence of proof to the contrary, must establish the actual val- ue of the stock. Where the books of a company are accurately and properly kept; that is to say, where its assets and liabilities are properly invoiced and set down, the book value of its stock must be its actual value; and it must be borne in mind in this case that not a single item contained in any balance sheet of this company was attacked by the State of Virginia, either upon the credit or the debit side; but she contented herself (outside of alleged market quotations) with trying to establish June 20, 1863, instead of January 1, 1861, as the date as of which the value of this stock should be ascertained. The books and balance sheets of the Richmond, Fredericksburg & Potomac Railroad Company are prima facie correct. L. & N. R. Co. v. Hart (Ky.), 75 S. W., 289. Wilson v. Potter, 42 S. W., 836; 19 Ky. Law Rep., 988. Lambert v. Griffith, 44 Mich., 65; 6 N. W., 106. Budeke v. Ratterman, 2 Tenn. Chy., 459. Stuart v. McKichan, 74 IIl., 122. 15 The actual value of stocks may be shown by a comparison of the assets and liabilities of the com- pany issuing them. Julia v. Critechfield, 147 Fed., 65. Nelson v. First Nat’l Bank, 69 Fed., 798. Henry v. North Am. etc. Co., 158 Fed., 79. Butler v. Wright, 103 N. Y. App. Div., 463. Cabbel v. Cabbel, 111 N. Y. App. Div., 426. Vonau v. Magenheimer, 126 N. Y. App. Div., 257; 196 N. Y., 510. Leurey v. Bank of Baton Rouge, 58 So. Rep.., 1022 (La.). Beaty v. Johnson, 66 Ark., 529. McDonald v. Danahy, 196 IIl., 133. Greer Mi Lafayette County Bank, 128 Mo., 559. State v. Carpenter, 51 Ohio State, 83. White v. Jouett, 147 Ky., 197. —, Hereford, 132 Mo., 513; 34S. W., Brinkerhoff-Farris Co. v. Lmbr. Co., 118 Mo., 461; 24 S. W., 129. Tevis v. Ryan (Ariz.), 108 Pac., 461. Felker v. Ryman (Tex. Civ. App.), 135 S. W., 1128. Milwaukee Trust Co. v. City of Milwaukee (Wis.), 188 N. W., 707. MARKET QUOTATIONS. The alleged market quotations upon the stock of this company were properly ignored by the Mas- ter (Master’s report, pages 32-4). They appear as plaintiff’s revised exhibit No. 2 (New Record, Vol. 2, page 334), and are compiled from the Richmond Dispatch of various dates from November 2, 1860, Bernt) esrsen Pa TONLE OIE LE SALE EPO PGR ELE ADL 34 interest beginning with the first day of January, 1861, and its discussion is reserved until that portion of the brief wherein the subject of interest is here. inafter exclusively dealt with. WEST VIRGINIA’S EXCEPTION NO. 2. (Richmond, Fredericksburg & Potomac R. R. Stock) Virginia, on the first day of January, 1861, owned 2,752 shares of stock in the Richmond, Fred- ericksburg & Potomac R. R. Company, of the par value of $100 per share, making a total par value of $275,200. The book value of the stock per share at that time was $150, making a total actual value of $412,800 (New Record, Vol. 2, pages 2-12,, being defendant’s exhibit No. 2, with its sub-sheets 1, 2, 3 & 4). The Master, however, instead of taking the undisputed and uncriticized book value as the ac- tual value of the stock, averaged the book value per share ($150) with the alleged earning value per share of the stock ($84.83), and ascertained the actual value as of January 1, 1861, to be $117.43 per share. This was erroneous, for the following reasons: First: Because he improperly ascertained the so-called earning value of the stock. He averaged the dividends declared thereon for a period of eleven - years, ending with the year 1860, and found that the average dividend per year during that period wes 5.09%, which when capitalized at 6%, gave him his alleged earning value of $84.83 per share. [f he had taken the average dividends for the fifteen ye:rs set forth in defendant’s exhibit No. 2 (New Record. Vol. 35 2, pages 2 & 3), he would have found that the same were nearly 7% per year instead of 5.09% ; and, if he had taken the dividend declared in the year in ques- tion, that is to say, in 1860, and in the year preceding, that is to say, in 1859, he would have found that it was actually 7% in each year, and this, capitalized at 6%, would have produced a value per share of $116.66 2/3, instead of $84.83, as declared by him to be the earning value of the stock, which, when av- eraged with the book value of $150 per share would have made quite a difference; Second: Because such an average in either event would have been wrong, for the reason that the book value, as shown by defendant’s exhibit No. 2 (New Record, Vol. 2, pages 2-12), was ascertained by the surplus of assets over liabilities left after all dividends had been declared. The surplus in the case of this Company after the declaration of divi- dends for the year ending March 31, 1859, as shown by its balance sheet for that year, was $461,154.54 (New Record, Vol. 2, pages 4 & 5) ; for the year end- ing March 31, 1860, $505,403.22 (New Record, Vol. 2, pages 6 & 7) ; for the year ending March 31 1861, $562,819.05 (New Record, Vol. 2, pages 8 & 9), and for the year ending March 31, 1862, $656,577.85 (New Record, Vol. 2, pages 10-12). To average dividend values with book values under such circumstances would be practically to add the dividends in the liability column twice; Third: Because some companies may be in a condition to declare large dividends, but they may, notwithstanding this fact, declare small ones, or none at all, choosing rather to put all their net earnings tosurplus. In such case, the dividends would furnish OE LES LE LNIE ELE LO IEE IEE CD ILLS T LIN ERLE EEE SNR ARON REY — 36 no or small evidence of the actual value of the stock, and, Fourth: Because the book value of stock rep. resents its actual value, where the books are cor- rectly kept; and, in the case of this Company, not a single item, either in the asset or the liability column, in any of its balance sheets for 1859, 1860, 1861 or 1862, has been criticized or called in question by the State of Virginia, with the result that, presumtive- ly, at least, its books have been correctly kept, and its stock values actually shown. The Master should, therefore, under the circum- stances of this case, have taken the book value of $150 per share alone, which would have given to the 2,752 shares owned by the State of Virginia on January 1, 1861, a total value of $412,800, instead of $323,167.36, making a difference in the valuation of this stock as of that date of $89,632.64, 2314% of which, or $21,063.68, represents the loss to West Virginia. WEST VIRGINIA’S EXCEPTION NO. 3. (Orange & Alexandria R. R. Stock) Virginia owned of the stock of this Company on January 1, 1861, 17,490 shares, of the par value of $50 per share, making an aggregate par value of $874,500. The book value of this stock as of that date was $53.32 per share (New Record, Vol. 2, de- fendant’s exhibit 3, page 13; defendant’s exhibit 3, asset 1, page 14). This book value was ascertained by taking the last balance sheet of the Company, viz., September 30, 1856, and ascertaining therefrom the a surplus on hand at that time, and from the reports of said Company to the State of Virginia the profits for the years 1857, 1858, 1859 1860 and 1861, which were added to the surplus and the book value of the stock derived therefrom. All dividends paid upon this stock were subtracted before the surplus was as- certained, and the alleged earning power of the stock, under such circumstances, could not be taken as a standard for the measurement of its value. On the contrary, and for the reasons set forth in the next preceding exception (Richmond, Fredericksburg & Potomac R. R. Co.), its book value should have been taken alone, instead of averaging the book value, as the Master did, with the alleged earning value. The Master ascertained the earning value to be $12.28 per share (Master’s report, page 38), which, when added to the book value of $53.32 per share, makes $65.60, one-half of which, or $32.80, he ascertained to be the actual value per share. This amount, mul- tiplied by the number of shares (17,490), gave as the total value of the stock, according to the finding of the Master, $573,672.00. If the book value alone had been used, the result would have been $932,566.80, representing an increase of value over the Master’s finding of $358,894.80, 2314% of which, or $84,340.27, represents the loss to West Virginia. 37 WEST VIRGINIA’S EXCEPTION NO. 4. (Richmond & Danville R. R. Stock) Virginia owned 12,000 shares, of the par value of $100 per share, of the stock of the Richmond & Danville Railroad Company, making a total at par areiininssicoe Sad 3 ¥ ‘ : + b 38 of $1,200,000. The book value, ascertained as in the case of the Orange & Alexandria Railroad Company, on the first day of January, 1861, was $187.37 per share (New Record, Vol. 2, defendant’s exhibit 3, asset 2, page 19). Besides, this stock, for the six years preceding January 1, 1861, earned an average profit of 9%, and a profit of 11% for the year 1860; but this time the Master did not average the earning value of the stock with its book value, but took the book value alone, which we feel to be right; but it is respectfully submitted that he erred in deducting from the book value of $187.87 per share 5% of its par value for liquidation purposes, thereby reducing the value of a share to $282.87, which, when multi- plied by the total number of shares (12,000) pro- duced $1,588,440.00, or the amount of his allowance (Master’s report, page 41). This 5% reduction amounts to $60,000, and 2314% thereof represents a loss of $14,100 to West Virginia. Why should 5% of the par of this stock be de- ducted from its actual value? It was not going through liquidation, and there were no liquidation expenses. Neither was it being transferred from or to Virginia, and there could be no transfer ex- penses. Virginia owned the stock on the first day of January, 1861, and continued to own it there- after. The stock was simply being appraised as of that date, and its true value as of that time measured the credit upon the debt to which it was applicable, and it was not subject to any such deduction as if it were passing through a bankruptcy or chancery court. —— 39 WEST VIRGINIA’S EXCEPTION NO. 5. (Richmond & Petersburg R. R. Stock) The par of this stock was $100 per share, and Virginia owned upon the date in question 2,856 shares, of a total par value of $385,600. The book value, ascertained as in the case of the Orange & Alexandria and the Richmond & Danville R. R. Companies, was, on January 1, 1861, $121.86 per share (New Record, Vol. 2, defendant exhibit 3, asset 8, page 22). Again the Master averaged this with its alleged earning value, arriving at a value thereby per share of $114,40, which, when multiplied by the number of shares, gives his allowance of $441,126.40. If the book value alone had been used, and it should have been for the reasons given in the case of the Richmond, Fredericksburg & Potomac R. R. Company (West Virginia’s exception No. 2), the result would have been a total value for this stock as of January 1, 1861, of $469,892.16, making a dif- ference of $28,765.76, 2314% of which, or $6,759.95, represents West Virginia’s loss. WEST VIRGINIA’S EXCEPTION NO. 6. (Virginia Central R. R. Stock) The holding of Virginia of this stock on Jan- uary 1, 1861, was 18,916.70 shares, of the par value of $100 each, or a total of $1,891,670.68. Its book value, ascertained as in the case of the other rail- —— SPT Aaa OPENS 9 RNAS RR EE hme gai. eet neal aol REE Peemerene | Satan STR A te Se ae Nettie Mae ER haat Sav Dis ak ERS Spice SO Ed 40 roads, was $131.16 per share (New Record, Vol. 2, defendant’s exhibit 3, page 13, and defendant’s ex- hibit 3, asset 4, page 24). The earning value, based upon such dividends as were declared, was ascertain- ed by the Master to be $116.95 per share (Master’s report, page 46), and he bases his finding upon a combination of the two, the average being $124.05 per share, giving a total value for all the shares of $2,390,918.08, instead of a value of $2,481,115.26, had he relied upon the book value alone, as he should have done under the circumstances. This represents a loss of $90,197.18 on the entire valuation of the stock, 2314% of which, or $21,196.34, being the di- minution of West Virginia’s credit. WEST VIRGINIA’S EXCEPTION NO. 7. (Alexandria, Loudon & Hampshire R. R. Stock) This road was incorporated in 1853 (Master’s report, 48), and between that date and January 1, 1861, a period of seven years, Virginia had expended in the purchase of its stock in cash, $993,248, the whole of which she still owned on that date. Between January 1, 1861, and April 16, 1862, she spent $24,000 more in the purchase of this stock, mak- ing a total as of the latter date of $1,017.248. On November 25, 1867, she sold all of her hold- ings to the Road itself at $5.00 a share, or for the price of $50,862.40; but West Virginia was interested only in that part of the stock sold that was owned by Virginia on January 1, 1861. The amount so then owned seems to have been 97.64% of the whole stock sold, and, therefore, $49,662.05 of the sale price would 41 be attributed to that portion of the stock held Jan- uary 1, 1861; provided the amount received by Vir- inia in 1867 for this stock could be taken as a stan- dard for the measure of its value on January 1, 1861, or could be considered as an element in fixing such value. The Master so valued the stock; that is to say, he measured its value as of January 1, 1861, by its sale price on November 25, 1867; or, worse than that, he took such sum as its value on January 1, 1861, ($35,096.85) as would produce $49,662.05 by Novem- ber 25, 1867, the latter sum being the sale price on the latter date for that proportion of the stock that was owned by Virginia on January 1, 1861 (Master’s report, 48-9). Even under ordinary circumstances, the sale price would furnish no evidence of the value of a chattel or security, especially seven years after the date as of which it was to be valued; but, when we reflect that West Virginia’s interest in this asset must be determined as of a date before the Civil War had begun, and that the Master has put a value upon it based upon a sale price after the country through which the road runs had been harried by a four years war, we begin to see the utter worthless- ness of the standard adopted. It must be borne in mind that this road, beginning at Alexandria, Vir- ginia, ran northwest through that State by way of Leesburg, practically parallel to the Potomac River, with Bull Run hard by upon the one side, and within sound of the Federal guns at Washington, upon the other; and, if we are to believe the history of the times, to which counsel for the State of Virginia ap- . RE LOE IOLA ALTE TELNET TET eB Bey aT la ERS rs Th aie a E 4 £ : % a 4 } 42 pealed so persistently before the Master, the rail- roads of the South, at the close of the war, were in such a physical condition as to render them practi- cally worthless. We are told that their embankments were gone, cuts filled, and that now and then even rails were removed and wrapped around trees. What value, then, should be given to this stock as of January 1, 1861? It must be confessed that the evidence upon the subject is meager. We have no evidence of the declaration of dividends, and little knowledge of the physical condition of the road. All we know is that it was incorporated in 1853, and, during the seven years next following, was complet- ed and put into operation from Alexandria, Vir- ginia, to Leesburg, in that State (see map, New Rec- ord, Vol. 2, page 283); that the par of its stock was $100 per share, and that, between 1853 and the first day of January, 1861, it bought at par, and paid therefor in cash 9,932.48 of its shares (New Rec- ord, Vol. 2, defendant’s exhibit 3, asset 6, page 28). We have, then, the presumption (in the absence of evidence to the contrary) that its stock was worth par, strengthened by the fact that Virginia paid par therefor in cash. This, to say the least, furnishes much stronger evidence of its actual value than does a mere sale price at the end of a destructive war. If, therefore, it should be valued in this way, in- stead of by the standard fixed by the Master, the result would be that the total stock was worth on the first day of January, 1861, the sum of $993,248, instead of the sum of $35,096.85, as found by the Master, and 2314% would give West Virginia a cred- it of $223,413.28, instead of $8,247.74. —7_ 43 The reason why the Master, as shown by his re- port (pages 48-9) found the value he did, instead of the one here contended for, was because the expert accountant for the State of West Virginia, in de- fendant’s exhibit No. 3, asset 6 (New Record, Vol. 2, page 28), only placed a value upon this stock of $49,662.05, making the mistake of valuing it accord- ing to the subsequent purchase price received by Virginia, instead of according to our contention. His exhibits, however, gave all the facts, and his mistake was one of law, rather than of fact; and, almost in the same breath, attention was called to the fact by counsel for the State of West Virginia, and the proper claim based upon the exhibit was made (New Record, Vol. 1, page 416). WEST VIRGINIA’S EXCEPTION No. 8. (Virginia & Tennessee R. R. Loan) On the first day of January, 1861, the Virginia & Tennessee Railroad was a completed line in op- eration from Lynchburg, in the State of Virginia, to Bristol, in the State of Tennessee, a distance of about two hundred miles (see map, New Record, Vol. 2, page 283). The stock of this company was fully paid up (Master’s report, 51). Virginia owned therein stock of all classes amounting to $2,300,000 (New Record, Vol. 2, page 167). No evidence was introduced to show that any dividends were paid on this stock prior to June 20, 1863; but a schedule was introduced for the purpose aa ate ening art oe eee 44 eee ee aan of showing dividends paid to the State of Virginia thereon after the separation of the two States, and it appears therefrom that she received as dividends thereon on March 26, 1864, $100,000, and on April first of the same year $38,000, making an aggregate of $138,000, which would be 6% upon the par of her : stock of $2,300,000 (New Record, Vol. 2, page 227); but the Master says of this fact that “one dividend ; of about one-half of one per cent. was paid in 1864, the only dividend for nearly thirty years” (Master’s report, 51). By what warrant a dividend of 6% can be turned into one of one-half of one per cent. we are at a loss to understand. The book value of this stock on June 30, 1860, was $99.90 per share, the par per share being $100.00 (New Record, Vol. 2, defendant’s exhibit 6-a, page 57). By virtue of an Act of the General Assembly of Virginia passed February 9, 1853, a loan of $1,000,000 was authorized to be made by the Board of Public Works to this road for and on behalf of the Commonwealth of Virginia, which loan was made during the same year, and secured by a mort- gage upon the property of the company, executed on March 26, 1853 (New Record, Vol. 2, plaintiff’s ex- hibit 19, page 423). This loan remained unpaid on the first day of January, 1861, and was still owned by the State of Virginia, at which time interest had accumulated thereon to the amount of $280,000, making a total of principal and interest of $1,280,000 (New Record, Vol. 2, defendant’s exhibit 3, asset 8, sheet 1, page 30). And, during the Civil War, there was paid into the treasury of the State of Virginia in Confederate wad aniaeaaaies Sate SiR LIT TIENT ct ee ee ne eee 45 currency to the credit of this loan $886,685. These ayments were made in the following amounts, and upon the following dates: I en ntetiesnshotingliod $200,000 > } ene iia ncxierceaseseemcosnncemacemntnncoti 100,000 = Sonn 100,000 Sep. 11, 1863...... mS ton mn he ee 186,685 Making a total of...............................$886,685 (New Record, Vol. 2, defendant’s exhibit 3, page 31.) These payments the Board of Public Works for the State of Virginia undertook to repudiate by reso- lution passed on February 4, 1868, upon the ground, among others, that it was paid to the Second Auditor of Virginia, and that that officer had no right or power to receive the same (New Record, Vol. 1, pages 420-2) ; but it appears that the law of Virginia at that time was that a warrant for these payments could be obtained from the Second Auditor as well as from the Auditor of Public Accounts (Act of Virginia of 1860, Chap. 45, page 266, Sec. 2; Mas- ter’s Report, 51). Afterwards, that is to say, on December 22, 1870, Virginia sold whatever interest she had left remaining in this loan, together with her stock in this company and stock in certain other railways, and her interest in certain other loans, to the Atlan- tic, Mississippi & Ohio Railroad Company, at the price of $4,000,000, secured by a second mortgage upon the property of the purchasing company (New Record, Vol. 2, defendant’s exhibit 6, page 56; Vol. 1, page 425). EME ESL SECURE BIE EAE BS AERC RSI ifn 2 EPL E Py ees 46 West Virginia, in her schedules filed before the Master, should have claimed a value for this loan as of January 1, 1861, of $1,280,000, that being the prin- j cipal with accumulated interest as of that date; but, : instead, she only claimed $886,685, that being the 4 amount paid thereon to Virginia, as hereinbefore set forth (New Record, Vol. 2, defendant’s exhibit 3, page 13); and with this valuation she would have been satisfied, but the Master, taking her at her min- imum claim, and because that amount was paid to Virginia thereon in Confederate currency during the war, reduced the same to a gold basis as of the dates upon which the payments were made, with the : result that he places a total value upon this loan as 4 of January 1, 1861, of only $84,799.90, instead of j $886,685. 2314% of the latter amount would be $208,370.97, and of the former only $19,927.97, re- sulting in a loss of West Virginia of $188,443. As a matter of fact, transactions in Confederate currency in 1863 can furnish no standard of value for this loan as of January 1, 1861, before the war began, and before Confederate currency was known. At the true date as of which it should be valued (1861), West Virginia was interested in the principal loan of $1,000,000, with accumulated interest to the extent of £280,000, the loan evidenced by bonds se- cured by a mortgage upon a growing railroad, the evidence further showing that the entire stock of the company had been paid up, and that its stock was worth almost par. Under such circumstances, a prima facie case of par value for the bonds evi- dencing the loan would be made, and, in the absence of evidence introduced by the State of Virginia to ito 47 the contrary, should prevail. At least a discount and reduction from $1,280,000 to $886,685 should not be disturbed because forsooth the loan was sub- sequently paid off in part in Confederate currency. WEST VIRGINIA’S EXCEPTION No. 9. (Norfolk & Petersburg R. R. Loan) Prior to January 1, 1861, the State of Virginia loaned to the Norfolk & Petersburg Railroad Com- pany $300,000, and this loan was still unpaid on that date (New Record, Vol. 2, page 12-a). $68,500 of the principal of this loan was paid to Virginia in the year 1867, and, in the year 1868, $68,500, making a total payment upon the principal of $137,000. This was paid in Virginia bonds. Other payments were made, but presumably upon interest (Master’s Report, 57; New Rec., Vol. 2, page 34). This left a balance of principal of $163,000, as shown by the books of Virginia; and this balance was sub- sequently sold by the State, along with other stocks and loans, on December 22, 1870, to the Atlantic, Mississippi & Ohio Railroad Company for the price of $4,000,000, secured by a second mortgage upon the property of the vendee company. The various stocks and loans in this sale were all listed, and the amount thereof in dollars and cents set down in the memo- randum of sale made by Virginia to the Atlantic, Mississippi & Ohio Railroad Company (New Rec., Vol. 2, page 56), except the balance of the loan of $1,000,000 made to the Virginia & Tennessee Rail- road Company, upon which the State had received $886,685, as seen in the discussion of our exception EER S URI he WR ERS rere 48 No. 8, and whatever interest Virginia might stil] have in a loan of $800,000 made by her to the South. side Railroad Company, to which loan the Master has given no value (Master’s Rep., 53-4), and to which finding we have filed no exception. The total values so placed upon these stocks by the State of Virginia in the schedule referred to amount to $4,689,436.41, for which she accepted $4,000,000, as aforesaid, or about 85% of the schedule price; and 85% of $163,000 (that being the unpaid balance on the loan to the Norfolk & Petersburg Railroad Com- pany) would amount to $138,550, which, when added to the $137,000 already paid in Virginia bonds upon the principal of the loan, would aggregate $275,550, giving to the loan a value, if it is to be measured by what Virginia received therefor, of said last named amount. The Master, however, contents himself with the $137,000 paid in bonds, and reduces that to $98,607.09. as representing the present value as of January 1, 1861, of $68,500 in 1867, and the same amount in 1868. WEST VIRGINIA’S EXCEPTION NO. 10. (U. S. Government Loan) The State of Virginia advanced moneys to the Government of the United States during the war of ’12. The money was returned, however, and the Government of the United States always contended that it had been settled in full. but the State of Vir- ginia claimed that there was a balance of interest due on the first day of July, 1814, amounting to $298,369.74, and finally, by an Act of Congress passed 49 in the year 1902, the claim of Virginia was recogniz- ed, and a settlement was had between the two govern- ments as of February 11, 1894, wherein the Federal Government turned over and surrendered to the State of Virginia bonds of that State, and allowed Virginia interest on her claim from July 1, 1814, to February 11, 1894, a period of 79 years, 7 months and 10 days, and amounting to $1,425,212.79, which, when added to the alleged principal of $298,369.74, made a total of $1,723,582.58. The principal sum, with the interest thereon from July 1, 1814, to January 1, 1861 (46 years and 6 months), amounted to $832,451.57, or a total of principal and interest as of that date of $1,180,821.381 (New Rec., Vol. 2, page 41). In other words, this asset, principal and interest, was worth on January 1, 1861, the sum of $1,130,821.31, and why West Virginia was not interested in it to the extent of 2314%, it is difficult to perceive. It may be that the final settlement between Virginia and the Federal Government was put upon an arbitrary basis, as sug- gested by the Master (Master’s Rep., 67-70), but an equity of some kind existed prior to January 1, 1861, that was subsequently recognized by the Govern- ment of the United States, and Virginia profited by it. It was just as much West Virginia’s equity as it was Virginia’s, and, although it may have stood on a narrow basis, and was subsequently closed by the Federal Government in a liberal way, yet it had its foundation in a claim that existed prior to Jan- uary 1, 1861, and whatever came out of it to Virginia must, in equity, be shared with West Virginia. Pe — . ROPER HF sca cacp VET MELD ORS PNPM NS Letts 5 ee CRN RT NT rls Se eA gl LES LIES 2s Sale! BE 5 i 4 iB E a 4 q } 4 4 a 4 50 WEST VIRGINIA’S EXCEPTIONS Nos. 11, 12, 13 & 14. (Farmer’s Bank of Virginia Stock) (Bank of Virginia Stock) (Bank of the Valley Stock) (Exchange Bank Stock) The exception to the valuation placed by the Master upon the stock in each of these Banks is the same, and they will be discussed together. He took the book value of the stock in each Bank as of January 1, 1861, but, instead of multiplying that book value by the number of shares held and owned by the State of Virginia in the particular Bank, and thus arriving at its total actual value, he took the book value per share, and deducted there- from 5% of the par value of a share for liquidation purposes. The book value per share of the stock in the Farmer’s Bank of Virginia was $107.89, and he re- duced the same to $102.89 per share by deducting 5% of its par, thereby placing a total value upon the shares held by the State of Virginia in this Bank of $990,419.14, instead of $1,038,549.14 (Master’s Rep., 85-6). The book value of the stock per share in the Bank of Virginia was $74.99, and it was reduced in the same way to $71.49 per share, which resulted in a total value of Virginia’s stock in this Bank of $984,131.34, instead of $1,091,312.34 (Master’s Rep., 86-8). The book value of the stock of the Bank of the Valley was $107.6 per share, but this the Master re- 51 duced in the same way to $102.6 per share, resulting in a total valuation of $496,481.40, instead of $520,676.40 (Master’s Rep., 88-9). The book value of the stock of the Exchange Bank per share was $107.2, which was reduced by the Master in the same way to $102.2 per share, resulting in a total valuation of $894,761, instead of $938,536 (Master’s Rep., 89-90). This stock was owned by Virginia on the first day of January, 1861, and she continued to own it. No transfer was necessary to put the title thereto in her; neither were these Banks, or any of them, going through a process of liquidation, and the $5.00 de- ducted from the book value of each share was purely an arbitrary discount that was required for no legi- timate purpose, and performed no function, except to diminish the value of the stock below its real worth. The balance sheets of these Banks will be found in New Record, Vol. 2, pages 48-52. WEST VIRGINIA’S EXCEPTION NO. 15. (Atlantic, Mississippi & Ohio R. R. Co.) On the first day of January, 1861, the State of Virginia owned numerous shares of stock in the Nor- folk & Petersburg, South Side, Virginia & Tennessee and Virginia & Kentucky Railroad Companies. The book value per share at that time of the Norfolk & Petersburg was $89.52; the South Side $105.98; the Virginia & Tennessee $99.90, and the Virginia & Kentucky $100, and the total value of Virginia’s holdings, measured by the book value, a EC LEI LIES ONLI Se Pee ae 52 was $4,276,044.39 (New Rec.,Vol. 2, defendant’s ex. hibit 6-a, page 57). Virginia still owned these stocks in the month of December, 1870, at which time she sold them, along with certain loans she had made these Companies, to the Atlantic, Mississippi & Ohio Railroad Com- pany for the lump sum of $4,000,000, payable in eight installments of $500,000 each, and took a second mortgage upon the property of the Railroad Com- pany to secure the payment of the same (New Ree., Vol. 2, defendant’s exhibit 6, page 56); but never realized anything out of the transaction but the sum of $500,000, which she received in the year 1882 (New Rec., Vol. 2, pages 165-7). The Master placed a value on these stocks as of January 1, 1861, of only $204,688.42 (Master’s Rep., 98), which value was arrived at by apportioning the $500,000 among the stocks of the four railroad com- panies in the ratio of 10 2/3% to each, making an aggregate of $464,642.72, which, when calculated back to January 1, 1861, gave a present value of $204,688.42. The $500,000 received in the year 1882 for these stocks, twenty-one years after the date as of which they should have been valued, furnishes little, if any, evidence of their value as of January 1, 1861. It would be more just and equitable to have taken the value placed upon them in the year 1870, both by the seller and by the purchaser; that is to say, by the State of Virginia and the Atlantic, Mississippi & Ohio Railroad Company. This was only nine years after January 1, 1861, and the price then named ($4,000,000) represented the judgment of both the 53 eller and the purchaser as to the value of the stock; yr it would have been more accurate still to have gone yack to the proper date itself, January 1, 1861, and ylace a value on these stocks, as shown by the books f the Company, of $4,276,044.39. WEST VIRGINIA’S EXCEPTION NO. 16. (Manassas Gap R. R. Stock) The Master gives no value to this stock. The ntire capital was $3,322,164.67, $3,188,312.97 of vhich had been paid up in 1860. Virginia owned 32,105,000 of this stock at par (New Rec., Vol. 2, page 61). Virginia’s stock was fully paid up, and, on Jan- lary 1, 1861, the road was constructed and in opera- ion from Manassas to Mt. Jackson via Strasburg, ind it was in process of construction from Mt. Jack- on to Harrisonburg, Virginia (testimony of J. K. Anderson, New Rec., Vol. 1, page 724-6). Par was aid for this stock by the State of Virginia, and it epresented an actual railroad in operation. It was 10t shown to have any debts, and, under such cir- umstances, in the absence of evidence to the con- rary, this stock was worth prima facie par. WEST VIRGINIA’S EXCEPTION NO. 17. (General Exceptions) A. It appears that certain Counties in West Vir- rinia, after the latter State had been organized, hat is to say, after June 20, 1863, paid taxes, fines, a ’ WS ML TS ARS Og sam bn at AE dee ed RGR Sache £ Abo Oe wk = poke ed A ey aE 54 etc. to the State of Virginia to the amount of $224,799.63 (New Rec., Vol. 2, defendant’s exhibit 10, page 224). $44,535.18 of this amount seems to have been assessed prior to June 20, 1863, while the residue, $180,264.45, was assessed after that time (New Rec., Vol. 1, page 608). The Master disallowed this item, for the follow. ing reason: He says “no part of this sum, $180,264.45, was paid by West Virginia, directly or indirectly, Payment of this sum in taxes by individual taxpayers creates no right in West Virginia to recover the amount of Virginia * * * * ” (Master’s Rep., 113). We do not understand that these taxes were paid by individual taxpayers living in West Virginia Count- ies to sheriffs and collectors of adjoining Counties in Virginia, but that these taxes were collected by West Virginia officials and turned over by them to the State of Virginia; and, if this be true, the whole money, in consequence, was covered into the treasury of Virginia, although she had no interest therein or title to the same, or to any part of it, and should be compelled to account for the whole thereof unto the State of West Virginia. B. The Master likewise charges us with having received frum the restored government of Virginia $170,771.46, with which he charges us (Master’s Rep., 116). This consisted of money paid by Governor Pierpont, of the restored government of Virginia, to Governor Boreman, of West Virginia, but it had been collected, as appears from the record, from West Virginia territory, and she should not in equity 55 be charged with it as if it had been raised from Virginia territory. WEST VIRGINIA’S EQUITY IN THE VIRGINIA ASSETS. If the division of the old Commonwealth of Virginia into two States had taken place without any agreement upon the part of the State of West Virginia to assume an equitable proportion of the pre-existing debt, out of analogy to the rule that obtains in the division of municipalities, Virginia would have taken all the property originally owned by the old Commonwealth, excepting the physical property actually situated within the new State, and would have become responsible for the entire debt. Dillon Mun. Corp., Vol. 1, Sec. 188, page 216 (3 ed.). Mt. Pleasant v. Beckwith, 100 U. S., 514; 25 L. Ed., 699. Comrs. of Laramie County v. Comrs. of Al- a County, 92 U. S., 307; 23 L. Ed., 552. The text of Dillon above cited is as follows: “So it has been frequently held that, if a new corporation is created out of the ter- ritory of an old corporation, or if part of its territory or inhabitants is annexed to an- other corporation, unless some provision is made in the Act respecting the property and existing liabilities of the old corporation, CMAN PRE RRO — LERNER AL TLR INE IER LIED LOTT IIE cag NEY sn i 5 ee a ie easel AE RS TN creas Pe dale BES. SGDBODL ADT LOSER ARVADA pea he en eT ae 56 the latter will be entitled to all the property = be solely answerable for all the liabi- ities.” Likewise, the first point of the syllabus in the case of Mt. Pleasant v. Beckwith, supra, reads as follows: “Where a new town is formed from por- tions of an old one, the old corporation owns all the public property within its new limits, and is responsible for all the debts of the corporation contracted before the Act of separation was passed, unless the legisla- ture otherwise provide.” (Syl. L. Ed.) And the second point of the syllabus in the case of Laramie County v. Albany County, supra, reads: “Where the legislature does not pre- scribe any different regulations, the rule is that the old corporation owns all the pub- lic property within its new limits, and is re- sponsible for all debts contracted by it be- fore the Act of separation was passed, which debts it must pay without any claim for contribution from the new sub-division.” (Syl. L. Ed.) But, as further said by Dillon, “Upon the division of the old corpora- tion and the creation of a new corporation out of part of its inhabitants and territory, or upon the annexation of part to another corporation, the legislature may provide for — 57 an equitable appropriation or division of the property, and impose upon the new cor- poration, or upon the people and territory thus disannexed the obligation to pay an equitable proportion of the corporate debts.” (Dillon Mun. Cor. Sec. 189, Vol. 1, page 216; 3 ed.) It will be seen, therefore, that, under such cir- cumstances, an equitable division of the property and the payment of an equitable proportion of the debts go hand in hand, and it becomes quite evident that, when West Virginia promised to assume “an equitable proportion of the public debt of the Com- monwealth of Virginia prior to the first day of Janu- ary, in the year one thousand, eight hundred and sixty-one”, she meant that she should receive a like equitable proportion of the property owned by the old Commonwealth. In other words, and under the rule, if she paid no part of the debt, she should re- ceive no part of the property; but if, upon the other hand, she should pay an equitable proportion of the debt, she should receive an equitable proportion of the property. In the next place, it is stipulated in this case, and is a fact, that the stocks, securities and other properties presented in this case by West Virginia for valuation, to the end that the same proportion of such valuation may be applied as a credit upon her part of the debt as her part of the debt bears to the whole debt, were actually purchased out of the proceeds of the very bonds that evidence the debt to the payment of which she is compelled to con- tribute (New Record, Vol. 1, page 711); and it fol- bu POLE LEE PESO GLENN NEY IEE as VIN echo epee - CE PRIKG NIGEL I ; § DNR RAIN. nil ah. CO RS sl sarge ee nM) el PE RE NS ae ee tal rey tL ee eee eee ee 58 lows as a corollary that, if she is compelled to pay any part of a debt representing purchase money, she is entitled to receive a corresponding part of the value of the thing purchased. Again the assets in question here were devoted by the Legislature of Virginia to the payment of her public debt, and the same have, in consequence, be- come trust funds. Act of Gen. Assembly of Va. of 1838, new Rec., Vol. 1, p. 661-4. Sections 28, 29 & 30, Art. 4, Constitution of Va. 1851, New Rec., Vol. 1, p. 651. Act of Va. passed March 26, 1853, New Rec. Vol. 1, p. 652-6. Act of Gen. Assembly of Va., approved March 31, 1875, New Rec., Vol. 1, p. 656-8. Joint Resolution of Gen. Assembly of Va. of 1866, New Rec., Vol. 1, p. 705-6. Resolution concerning Canal Co., New Rec., Vol. 2, p. 198-9. Sec. 1 of an Act. of Gen. Assembly of Va., approved Feb. 18, 1870, New Rec., Vol. 1, p. 706. Message of Gov. Letcher of Va., New Rec., Vol. 1, p. 665-6. Message of Bas Walker of Va., New Rec., Vol. 1, p. 667-73. And, in the last place, the Supreme Court hav- ing held that West Virginia is compelled to pay 2314% of the debt, West Virginia should receive 2314% of the value of the assets. Virginia v. West Virginia, 220 U. S., p. 1; 55 L. Ed., 358 59 INTEREST. EQUITABLE REASONS WHY WEST VIRGINIA SHOULD PAY NO INTEREST. This is not a suit brought by the State of Virgin- ia against the State of West Virginia upon interest- bearing securities. The suit is not upon bonds at all, —Virginia could not sue herself; but it is based upon a constitutional promise made by West Virginia to Virginia, and not to the bondholders. This promise was to assume an equitable proportion of the public debt of Virginia as it existed prior to January 1,1861. That public debt was evidenced by interest- bearing bonds, and the question at once arises wheth- er a promise to assume or pay an equitable proportion of an interest-bearing debt constitutes a promise to pay an equitable proportion of the interest accruing on that debt. Can there be an equitable apportion- ment of an interest-bearing debt without apportion- ing the interest upon the same basis as the principal? The answer to this question must depend upon the circumstances. What would have been equitable between the two States on January 1, 1861, in conse- quence of Virginia’s subsequent conduct, may not be equitable today. If the State of Virginia, by neglect or arbitrary conduct, has prevented the settlement of this debt, or the ascertainment of its principal, until the interest on West Virginia’s proportion thereof should be, if allowed to run from January 1, 1861, four times the principal, so that when a decree should be at last entered it would start with a new principal, composed of the origina! equitable pro- portion of the principal and fifty odd years of ac- SR AEE ET EE TLE NEE Te REN ra ee SPIEL ot 60 cumu!ated interest thereon, with interest to run upon the whole from the present time unti! paid, then, and in that event, Virginia wou'd be permitted to profit by her own wrong, and become the beneficiary of her own default. Let us see what has been the conduct of the two States with respect to the ascertainment of this debt, and answer our question in the light of that conduct. West Virginia has not been at fault, but has been helpless. Virginia, upon the other hand, has been and is, solely responsible for the present status of afiairs, and ought not to be permitted to reap mil- lions of interest as a reward for her misconduct. The equitabie proportion of this public debt was . a question for decision. The amount had to be ascer- tained, and it could be done oniy in one of two ways— either by the agreement of the parties, or by the decree of this Court. West Virginia couid not as- certain the amount for herself. Neither was it ap- propriate for her to sue her creditor. From January 1,1861, to June 20, 1865, she was not a State, and could do nothing. From 1863 to April, 1866, a state of war existed, and she could not negotiate with Vir- ginia. Even had she known what her just proportion of the debt was, and had had the money wherewithal to pay it, she could not have gone to the City of Rich- mond 2nd covered it into the treasury of Virginia. To have done so would have been an act of treason against the Government of the United States. From the Fall of 1866 down until! the 6th day of March, 1871, a suit was pending in this Court that had been instituted by Virginia against West Virginia, where- in the integrity of the latter’s domain was attacked, and, until that had been decided, she did not know FORD pe REP GIF ALLIS TIE LEI LEI SG BLE. LE LEGG. ELISE LO HS 61 her own territorial extent, and upon that territorial extent depended her equitable proportion of this debt. At the very first moment when the opportunity pre- sented itself, she sent a commission to treat with Vir- ginia about this matter. Her commission went to Richmond within a very few days after Mr. Justice Miller had delivered the opinion of this Court in the case of Virginia v. West Virginia, to which reference has been made, and which is reported in 11 Wallace, and there she was met with the statement that Vir- ginia had no commission to treat with her, aud that the statute upon which her former commission had been based had been repealed. Thereupon, the West Virginia commissioners went home, after having made a bona fide effort in the name of their State to settle this controversy of long standing. During and within fifteen days after the appointment of the West Virginia Commission, the same year (1871), Virginia passed her funding bill, wherein she arbi- trarily declared that she owed only 2/3 of this debt, and that West Virginia owed the residue; and, in all her efforts thereafter to negotiate with West Virgin- ia, she made the recognition of that fact upon the part of West Virginia a condition precedent to the negotiation, and there the matter stood until she, for the first time, took proper steps looking to the settle- ment of this conroversy. She brought this suit in 1906, that is to say, forty-five years after January 1, 1861. She could have brought this suit in 1866 when she brought her first suit against West Virginia, and, indeed, they were so closely related, West Vir- ginia’s equitable proportion of this debt being de- pendent somewhat upon the extent of her territory, that she should have presented this question for set- Senereenenenercnees es I OCT TLL OID CUES SACI Rat 62 tlement then. In other words, there has never been an hour that West Virginia could have done a thing, either through negotiation or by appeal to the courts, and, upon the other hand, there has never been an hour during the whole time when Virginia could not have made her appeal to this Court, and have brought this controversy to a close. She neglected to do it; she postponed her rights; she allowed the matter to sleep, evidence to be cst and complications to set in, and it would not be equitable to permit her, by acts of def2ult and neglect of this character, to multiply the principal of West Virginia’s debt four- fold. If by the decree of this Court at this time sev- en millions, without 2h otement, should be taken as the part of the principal of this debt that West Vir- ginia should contribute, and interest should be al- lowed thereon from 1861 until now, the interest, in round numbers, would amount to $23,000,000, which, when aided to the seven, would give a new principal of thirty millions, upon which interest would run. In other words, Virginia, by her own delay and de- fault, would be permitted to multiply West Virgin- ia’s debt by four. LACHES. it may be said that laches may not be attributed to the Crown, and that this doctrine cannot be invok- ed against a sovereign State. We take it, however, that that would depend altogether upon the language of the contract under which the Court was acting at the time, and we find here the word “equitable” used; and, if it would be inequitable to permit such a result in consequence of the helplessness of one 63 State and the delay of another, then, and in that event, would the principles of laches be invoked and applied. There is another reason why an exception to the rule might be allowed, and it is this: Virginia is acting for the most part here as a trustee for these bondholders, and, while the doctrine of laches might not be applicable to a sovereign, if the sovereign were acting in a fiduciary capacity, there is no rea- son why the doctrine might notwithstanding reach the cestui que trust. It might be suggested that West Virginia should have moved by way of the courts as well as Virginia, and that she would be equally chargeable with laches in consequence of her failure so to do; but the doc- trine of laches is never employed except to defeat a claim, and, as West Virginia had and has no claim against Virginia to enforce, the doctrine could have no application to her, because, if so applied, it would have only one result, and that would be to enable her to entirely escape from the payment of any claim. OTHER CIRCUMSTANCES SHOWING INTER- EST CHARGE AGAINST WEST VIRGIN- IA TO BE INEQUITABLE. There are other equitable reasons why West Virginia should not pay interest on her debt to Vir- ginia, except from the time of its ascertainment, ev- en if she should pay any interest from any date. Some of these will now be suggested and briefly out- lined, rather than discussed in detail. First: At the time West Virginia was cut off from Virginia and admitted into the Union as a sep- NPE SEI TIP NSS AEE RE EA one my meine Sawasia aris 64 arate and independent State, her territory was wilderness. Almost trackless forests stretched from the Alleghanies to the Ohio. Her lands were up. cleared, and in large part were uncultivated. Her minerals, for the most part, were undiscovered, and she had then no mining industries. Her population was sparse, and railroads she had none; neither had she canais. Mountain trails constituted almost her entire means of communication. She had no public buildings, and her State institutions had yet to be provided. She inherited none of these from Virgin- ia, but was under the necessity of providing them one and all for herself, without assistance or contri- bution from the mother State. Second: Virginia, upon the other hand. had left within her territory, constructed and eq. «pped out of the common funds of the undivided State, a commodious capitol, with its grounds and libraries; a penitentiary at the City of Richmond; a State asy- lum at Staunton, and one at Williamsburg, with their respective equipments; and a State university at Charlottesviile, established and equipped through the common contributions of the two sections extend- ing over the period of a century, and with an csvv- lished reputation that was not confined to the South, but extended throughout the Nation, and, in fact, was known throughout the world. All! these things West Virginia left behind and Virginia inherited, without making contribution of any kind or char- acter. Third: In addition to the foregoing institu- tions, the territory left to Virginia was not only OTM EI NEON ULATED a= AT A 65 traversed by public canals, built at the common ex- pense, but was grid-ironed by railways that trav- ersed, developed and enriched her counties, furnish- ing communication between her citizens, and add- ing taxable value to her property; and, independent- ly of any stock ownership she may have had thereir, the indirect benefit resulting to her remaining ter- ritory after the division outweighed by far any dir- ect investment she may have had in these roads. And, when we turn to the map filed in this cause (New Rec., Vol 2, page 283), we find that all the rail and water-ways were left with the old State, and that West Virginia did not have a single foot of canal in operation, and less than twenty miles of railway. Directly and indirectly, Virginia received many millions of value in this way, while West Vir- ginia received practically nothing. Her territory was blank and empty, and, if she were compelled to provide herself, as she was, single-handed and un- aided, with public institutions, and make public im- provements, and, at the same time, should be com- pelled to pay interest upon securities issued by Vir- ginia in the establishment and construction of pub- lic works, buildings and institutions in which she has no interest at all, she would be paying rather dearly for her right of separation.* She would be paying without consideration, and such payment would be inequitable. Fourth: Virginia herself has not paid one dol- lar of interest upon one-third of her own debt which has accrued since January 1, 1861. She was reliev- ed from this one-third, together with the interest thereon, by agreement with her creditors, the con- PPE E OE Sl Ae AAS et ATO Re - > MER LET EL LEER ATWO AGE Syne pe a es eC At PLS aa DLR D DEE ALLELE BI PLA ELISA ese 66 sideration being that she should turn over to them whatever she might recover on her claim against West Virginia in this suit. Why should West Vir. ginia pay Virginia interest on this third, or any part of it? LEGAL REASONS WHY WEST VIRGINIA SHOULD PAY NO INTEREST. I. CLAIM OF VIRGINIA AGAINST WEST VIRGIN. IA UNLIQUIDATED. By the very language of the contract upon which the present suit is based, Virginia’s claim against West Virginia is uncertain, indefinite and unliquidated. There has never been an hour since the adoption of the West Virginia Constitution of 1861 that West Virginia knew what portion of the debt of Virginia she should pay. The language of her promise was an “equitable” proportion. The very term indicates the necessity of investigation, evidence, ascertainment and decision. There has never been a time, although her treasury might have been full, that West Virginia could have drawn thereout a definite sum to meet a definite purpose. Whether it was one million, or would be ascertained to be five, she knew not. All she knew was that Vir- ginia had arbitrarily decided her own case, and fixed the amount at one-third. West Virginia knew, how- ever, that this was wrong, and without authority, and could not bind her or relieve Virginia, and she was compelled to go along in this way without know- ing on what sum, if interest should be charged, it would be calculated. She had no method or means 67 by which to stop this accumulation, if forsooth it can accumulate upon unascertained amounts. Had she known upon what principal she was to be charged, she could have negotiated her own bonds and paid Virginia off, leaving her own securities outstanding, and perhaps running only on a rate of interest one- half as great as the rate that is borne by the present bonds of Virginia. Unliquidated amounts do not bear interest, and it cannot be said that interest follows the principal as the shadow does the substance; for, until the amount is ascertained, there is no principal, and there is no substance. Redfield v. Ystalyfera Iron Co., 110 U. S., 174; 28 L. Ed., 109. Stevens v. Phoenix Bridge Co., 139 Fed., 248. I Sedgwick on Damages (9 ed.), 614. Barrow v. Reab, 9 How. (U. S.), opinion, p. 371. Wittenberg v. Mollyneaux, 59 Neb., 200; 80 N. W., 824. Swanson v. Andrus, 83 Minn., 505; 86 N. W., 465. Dady v. Condit, 209 IIl., 488; 70 N. E., 1089. Brownell Imp. Co. v. Critchfield, 197 IIl., 61; 64 N. E., 332. Excelsior, ete., Co. v. Harde, 181 N. Y., 11; 73 N. E., 494. Macomber v. Bigelow (Cal.), 58 Pac., 312. Bright v. James, 35 R. I., 492; 87 Atl., 316. Bennett v. Fed. C. & C. Co. (W. Va.), 74 S. E., 318. Courtney v. Stand. Box Co. (Cal. App.), 117 Pac., 778. 16 Am. & Eng. Enc. Law (2 ed.), 1016, cit- ing many cases. PIR OAT ANA LL AEN OTN RAT SATE ROS IN st 68 The Virginia authorities upon the subject are: Auditor of Pub. Accts. v. Dugger & Foley, 3 Leigh (Va.), 241. Phillips v. Williams, 5 Gratt. (Va.), 258. M’Connico et al., Exrs. of Holloway, v. Cur- zen, 2 Call (Va.), 358. Skipwith v. Clinch, 2 Call (Va.), 253. Waggoner v. Gray’s Admrs., 2 H. & M. (Va.), 603. Stearns v. Mason, 24 Gratt. (Va.), 484. a v. Amherst County, 115 Va., sites Hot, tit " — i a , ’ pel T ED ident RS coi aba ne add Kata. Se eet Sar Bs II. NO PROMISE ON THE PART OF WEST VIR- GINIA TO PAY INTEREST. IRL BGs Bante asc It was urged in argument on behalf of West Virginia that, if the Legislature of this State must ascertain the equitable proportion of the debt as- sumed by the defendant, and this constituted a part of the contract between the two States, the Court was without jurisdiction, and that this part of the contract was binding upon both parties, and that the question of the amount of this debt assumed by West Virginia must be referred to her own Legis- lature as the sole body to ascertain the extent of West Virginia’s liability. The Court, in answer to this argument, used the following language: “But again, it was argued that, if this contract should be found to be what we 69 have said, then the determination of a just proportion was left by the Constitution to the Legislature of West Virginia, and that, irrespectively of the words of the instru- ment, it was only by legislation that a just proportion could be fixed. These arguments do not impress us. The provision in the Con- stitution of the State of West Virginia that the Legislature shall ascertain the propor- tion as soon as may be practicable was not intended to undo the contract in the preced- ing words by making the representative and mouthpiece of one of the parties the sole tribunal for its enforcement. It was sim- ply an exhortation and command from su- preme to subordinate authority to perform the promise as soon as might be, and an in- dication of the way.” 220 U. S. 1. It is now beyond discussion that the Court re- gards the first clause of section 8 of article VIII, Constitution W. Va., as constituting the terms of the contract between the parties to this controversy, and, as this clause makes no mention of interest, it is idle to contend that there is any promise upon the part of West Virginia to pay interest. To hold a State to the payment of interest upon an obligation which she has contracted there must be an express promise to pay interest. In the absence of such express promise there is no liability for in- terest. This is the settled law of this country as an- nounced by the Federal and State Courts. PARAS IEE REVS PIM LI IS OLGA NE TREN a Ors At i — 70 United States v. North Carolina, 136 U. S., 211, 216, 34 L. ed., 336. This case was followed in South Dakota v. North Carolina, 192 U. S., 268, 48 L. ed. 448, the Court declining to allow inter- est on the decree rendered therein. } See also Molineaux v. State, 109 Cal., 378, 50 Am. St. Rep., 49. “ Carr v. State, 127 Ind., 204, 22 Am. St. Rep., i 624, 11 L. R. A., 870. a eo v. Hoyt, 34 Or., 266, 75 Am. St. Rep., 1 Board of Co. Com’rs v. Kaul (Kan.), 96 Pac., 45,17 L. R. A. (N. S.), 552. eat In Seton v. Hoyt, supra, quoting from the re- port thereof in 75 Am. St. Rep. at page 643, the Court said: ati As Tt ET E'S 2 “There is some conflict in the authori- ; ties upon the question whether a sovereign ; State is required to pay interest unless self- : imposed, but the weight thereof seems to : support the contention that it is not. The Supreme Court of the United States has adopted the rule that interest is not allow- able on claims against the government, whether they originate on contract or tort, or arise in the ordinary business of adminis- tration, or under private Acts for relief, passed by Congress on special application. But it recognizes the existence of two well established exceptions—one wherein the government has stipulated to pay interest, and the other where interest is given by Act of Congress, either expressly as such, or under the name of damages; United —, 71 States v. Bayard, 127 U. S., 251. In a sub- sequent case of United States v. North Car- olina, 136 U. S., 211, Mr. Justice Gray says: ‘Interest, when not stipulated for by con- tract or authorized by statute, is allowed by the Courts as damages for the detention of money, or of property, or of compensa- tion, to which the plaintiff is entitled; and, as has been settled upon the grounds of pub- lie convenience, is not to be awarded against 4 sovereign government, unless its consent to pay interest has been manifested by an Act of the Legislature, or by a lawful con- 999 tract of the executive officers. The authorities are nearly all to the effect that a State cannot be made liable for interest on its debt, in the absence of an express promise OF undertaking to pay interest. Ill. WEST VIRGINIA NOT CHARGEABLE WITH INTEREST AS DAMAGES. In the absence of a promise to pay interest, un- der certain circumstances, it is sometimes recover- able as damages. This subject is considered in a work of recog- nized merit, where the authorities are examined and cited, and, after discussing the principles governing the subject and giving many illustrations of their application, the following conclusion is reached as to the requisites authorizing the recovery of interest by way of damages for the breach of a contract: ae oo SRP EBIRF TNS: 72 “In order to recover interest by way of damages for the breach of a contract to pay snery b express or implied, it is necessary that both the amount to be paid and the time for payment be reasonably certain or susceptible of ascertainment. With these essentials established, the default of the debtor will render the right of recovery of interest complete. It is obviously necessary that the amount due should be certain, or at least susceptible of ascertainment, because with- out this the debtor cannot be in default.” 16 Am. & Eng. Enc. Law (2nd ed.), 1014. In Bright v. James, 35 R. I., 492, 87 Atl., 316, the suit was in equity for specific performance, and involved a question of the allowance of interest on a decree for purchase money, and, in the course of the opinion, the Court, quoting with approval from 22 Cyc., 1496, said: “Before interest, as damages, will be al- lowed for the breach of a contract to pay money, there must in general be a default in the payment of the principal debt; but interest is usually allowed from the time of such default. Obviously a party cannot be in default in the payment of a debt until the debt is ascertained; and hence default, so as to render a party liable for interest, cannot occur unless the sum due is certain. There must also be certainty as to the time of payment before there can be a default in ayment for which interest as damages will be allowed.” 73 IV. UNEARNED INTEREST NO PART OF PUBLIC DEBT OF VIRGINIA EXISTING PRIOR TO JANUARY 1, 1861. The promise of West Virginia upon which this suit is instituted is based upon the first part of Sec- tion 8 of Article 8 of her Constitution of 1861, which reads as follows: “8. An equitable proportion of the pub- lie debt of the Commonwealth of Virginia prior to the first day of January, in the year one thousand, eight hundred and sixty-one, shall be assumed by this State * * * * .” This is the full measure of her promise and her obligation, and the equitable proportion assumed by her relates to a debt created prior to January 1, 1861, not to a debt and its interest thereon afterwards accruing. Interest can in no sense be treated as or called a debt until it has been earned. While the debt itself may be interest-bearing, the interest which the debt has not earned cannot be treated as a part of the obligation itself in the ordinary and usual acceptation of the word “debt”. A judgment cannot be entered for unearned interest. Illinois Steel Co. v. O’Donnell, 156 IIl., 624; 47 Am. St. Rep., 245. This Court, in fixing the basis for ascertaining the amount of the debt as of January 1, 1861, did not treat the interest as any part thereof, except = Oe “Sey Dery: PONE ELOER TEE MIR I I a On a ad ; 14 that which had accrued and remained unpaid. Al. though this debt was interest-bearing, the Master, the parties to the suit and their counsel, as well as the Court, treated the aggregate amount of the in. terest-bearing bonds, exclusive of the unearned in- terest, as the debt of which West Virginia assumed an equitable proportion. It has never at any time been suggested by any person connected with this case that the unearned interest constituted any part of the debt of Virginia as of January 1, 1861, with reference to which West Virginia is liable for an equitable proportion. ix as ase, “In determining the total amount of a corporate liability for the purpose of ascer- taining whether its constitutional limit has been reached, unearned interest coupons at- tached to legal and outstanding bonds are not considered a part of its indebtedness within the meaning of the constitutional limitation.” OR ti RS Di SDR RnR REA Ri a CME MS Be RAN Ut LN LRAT IN al iE 1 Abbott. Munic. Corp. pp. 354, 355, § 160. See also Epping v. City of Columbus, 117 Ga., 263, 43 S. E., 803. Herman v. City of Oconto, 110 Wis., 660, 86 N. W., 681. Jones v. Hurlburt, 13 Neb. 125, 13 N. W., 5. ee ae Vaughn, 54 Minn., 331, 56, N. -» 49, City of Ashland v. Culbertson, 103 Ky., 161, 44 S. W., 441. Kelly v. Cole, 63 Kan., 385, 65 Pac., 672, 675. — v. Mobile & G. N. R. Co., 36 Ala., 0. In Epping v. City of Columbus, supra, the fifth — 75 and sixth points of the syllabus, as the case is re- ported in 43 S. E., at page 803, is as follows: “5. The debt of an individual, corpora- tion, State, etc., when the word is taken in the sense that it ordinarily conveys to the opular mind, is the principal and accrued interest on a given date. Unearned interest is not, in such a sense, a part of the debt. 6. The debt of a municipal corporation, within the meaning of that provision of the Constitution which prohibits such a corpor- ation from incurring a debt which exceeds 7 per centum of the assessed valuation of all the taxable property within the municipal- ity, is to be ascertained by adding to the principal of all outstanding indebtedness the amount of all accruing interest that may be past due and payable on the date the amount of the debt is to be fixed. In ascer- taining the amount of such debt, future in- terest which is not due on the day it becomes necessary to fix the sum of indebtedness is not to be counted. Unearned interest is not, within the true intent and meaning of the Constitution, a part of the debt of the mu- nicipality.” In the course of the opinion in this case the Court says: “The question to be determined is, what is the meaning of the word ‘debt’ as used in this paragraph of the Constitution? Does it mean principal only, or principal and ac- crued interest, or al and all interest that is to accrue between the date of the in- —_—_ rearscavarscren: PC I BRR 76 curring of the debt and the date the princi- pal matures? The word is to be taken in its ordinary, natural, common sense, popular meaning, unless the context requires that it should be treated as used in a technical sense. Con- stitutions are the result of popular will, and their words are to be understood ordinarily as used in the sense that such words convey to the popular mind. 6 Am. & Eng. Enc. Law (2nd Ed.), pp. 924-5. There is nothing in the paragraph under consideration which indicates that the term ‘debt’ was used in any other way than in its ordinary and popular sense. If a person unversed in the technical niceties of the law is asked what is the amount of his debts, his answer to the question in every instance would be an amount which would represent the present liability that he was under at the moment the question was answered. A farmer who had been so unfortunate as to be compelled to place a long time loan upon his farm, if asked what was the amount of the debt upon his farm, would unhesitatingly answer by giving the amount which would represent the principal of the debt and any interest that was past due and payable at the time the inquiry was made. * ** *** * The law deals at al] points with the man of ordinar prudence and average capacity as the stand- ard, for the simple reason that communi- ties and commonwealths are made up of per- sons of this class. * * * * Generally the meaning given to words by the learned and technical is not to be given to words appear- ing in a constitution. * * * * It may be con- ceded that the terms ‘debt’, ‘bonded debt’, ‘mortgage debt’, ‘floating debt’, and all sim- SLE RAN aE NN IEE TOOL IS OPM TIL ARS PRE AR INIT TF, OF GN NE PNR 77 ilar phrases include, in a_ technical and strictly legal sense, both the principal and interest oF the debt; but, when such terms are taken in their usual and popular sense, they never refer to anything but the prin- cipal and interest that may be past due at the time it becomes necessary to state the amount of the indebtedness.” And so the court held as the meaning of the word “debt” in this case, and as used in the Consti- tution of the State of Georgia, that it included only the principal and any interest that was past due at the time the debt of the State or county was to be ascertained. In Herman v. City of Oconto, supra, the court in its opinion makes these pertinent observations. “Another claim made is that, in ascer- taining the State’s indebtedness, interest should be computed on the State loan and outstanding bonds for the entire period they are to run, and added to the principal. This is upon the theory that, when interest is expressly reserved in a contract it be- comes a part of the debt. * * * * But is it a debt before it is earned? If so, then the most cases in the books relating to the as- certainment of municipal indebtedness have been wrongly decided. * * * * * * In- terest is not a debt, within the meaning of the constitution, until it is earned and be- comes due. When the money was borrow- ed the State became indebted for the prin- cipal sum stated, and agreed to become in- debted each year in the future to a sum equal to the interest thereon. * * * * There may exist an obligation to pay * * * under ieee ea fame te 2 RET NSS RLY Me 78 the constitution, the indebtedness as inter- est comes into existence each year as the obligation matures. It cannot be said to be present indebtedness, under any reas- onable construction of the constitution.” In City of Ashland v. Culbertson, supra, the fol. lowing appears in the opinion: “If this new indebtedness of $10,000 be deducted from the amount of increase permitted by the two per centum clause of the Constitution, it appears that there still remains a margin large enough to author- ize the issual of these bonds; unless, as con- tended by appellee, we are to estimate the interest to be earned on the bonds as part of the indebtedness incurred by their is- sual. This, we think, cannot be done. The indebtedness created by the issue of bonds to the amount of $50,000.00 is the face of the bonds. The term. ‘Indebtedness’, as used in the Constitution, was not intended, as we think, to include future interest. The law makers were not looking at this inci- dent of the indebtedness, but to the indebt- edness proper.” In Kelly v. Cole, supra, there appears, in the course of the opinion, the following: “As interest earned upon a principal bond, represented by past due coupons, from its very nature inheres in and forms a part of the bond itself, by force of neces- sity such interest becomes a part of the ‘actual existing bonded indebtedness’. But as to the unearned interest represented by coupons attached to the aid bonds sought 79 to be refunded in this case, the holder of the principal bond has a present right neither to demand nor to receive the same. It is only by his forbearance of the use of the a sum, evidenced by the face of the bend e holds, for a given length of time in future that the amount expressed in such coupons becomes the demandable property of the holder, or the ‘actual bond- ed indebtedness of the county.’ This is not only the natural and reasonable definition of the term ‘bonded indebtedness’, but it is the rule adopted by all courts in estimating the amount of indebtedness that may be lawfully incurred under constitutional] and statutory limitations upon the power of municipal corporations to incur indebted- ness. The face value of the obligation and the accrued interest thereon are alone con- sidered as the debt. Interest to become due thereon in the future is not reckoned in- debtedness.”’ The language of the Constitution of West Vir- ginia is specific, definite and unmistakably clear in declaring that the State assumes an equitable pro- portion of the public debt existing prior to January 1, 1861, and the conclusion is irresistible that the equitable proportion of the debt assumed by West Virginia was the aggregate amount of the various interest-bearing bonds issued and negotiated by Vir- ginia prior to January 1, 1861, not counting the un- earned interest thereon. The matter of the payment of interest in no wise enters into the obligation of the State in the first clause of Section 8 of Article 8 of the Constitu- tion. If there be any such obligation upon West Vir- en —— : SELGE PS SRIRAM AR Wo SO pe amen te SE si hl OCS BASEL SM eet RLS. 80 ginia at all, it must be found in the second clause of the 8th Section of this Article; but, when we come to read this second clause, it becomes perfectly clear that the words “accruing interest” therein used in connection with the establishment of a sinking fund relate only to the new principal that has been de. clared by the ascertainment of West Virginia’s equitable proportion, and for the payment of which, with the accruing interest thereon, the sinking fund was to be provided. It is, therefore, respectfully submitted that the exceptions of West Virginia to the Master’s report should be sustained; those of the State of Virginia and her bondholding creditors overruled: West Vir- ginia given the credits allowed by the Master, in- creased by the exceptions interposed by her, and that upon the principal thus ascertained no interest should be charged or decreed. A. A. LILLY, Attorney General for West Virginia, CHAS. E. HOGG, JOHN H. HOLT, Associate Counsel for West Virginia. April 19, 1915. ADDENDUM. Table Showing Increase in Values Over Master’s Report Contended for by West Virginia. Richmond, Fredericksburg & Potomac eR TT Orange & Alexandria R. R. Stock............. 358,894.80 Richmond & Danville R. R. Stock......... 60,000.00 Richmond & Petersburg R. R. Stock... 28,765.7 Virginia Central R. R. Stock... 197.1 Alexandria, Loudoun & Hampshire SG TR RT GM Virginia & Tennessee R. R. Loan........... 801,885.10 Norfolk & Petersburg R. R. Loan... 191,584.55 U. S. Government Loan. 966,287.01 Farmer’s Bank of Virginia............. 48,130.00 Bank of Virginia Stock... -107,181.00 Bank of the Valley Stock... 24,195.00 Exchange Bank Stock....______.__ 43,775.00 Atlantic, Miss. & Ohio R. R......- 4,071,355.97 Manassas Gap R. R. Stock 2,105,000.00 James River & Kanawha Canal Co. Stock alals 852,333.00 _: ne $10,797,318.16 West Virginia’s 231%... $2,537,369.76 Moneys paid to Virginia by W. Va. Counties after 1868.00.00. 180,264.45 Moneys improperly charged to W. Va. —_170,771.46 West Virginia’s Increase................. $2,888,405.67 Credits heretofore allowed by Master.. 2,868,839.49 West Virginia’s Total Credits.......... $5,757,245.16 a --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386020_0257%3A28. Public record. Not legal advice.