U.S. Supreme Court
Paup v. Drew, 51 U.S. 10 How. 218 218 (1850)
Paup v. Drew
1 U.S. (10 How.) 218
The decision of the Court in the preceding case of Woodruff v. Trapnall again affirmed.
But although the pledge of the state to receive the notes of the bank in payment of all debts due to it in its own right was a contract which it could not violate, yet where the state sold lands which were held by it in trust for the benefit of a seminary, and the terms of sale were that the debtor should pay in specie or its equivalent, such debtor was not at liberty to tender the notes of the bank in payment. And this was true although the money to be received from the debtor was intended by the legislature to be put into the bank and to constitute a part of its capital. The fund belonged to the state only as a trustee, and therefore was not, within the meaning of the charter, a debt due to the state.
By the terms of sale, also, to pay "in specie or its equivalent," the notes of the bank were excluded.
The same question was involved which was raised in the preceding case of Woodruff v. Trapnall, namely whether the State of Arkansas could refuse to receive the notes of the Bank of the State of Arkansas under the circumstances therein stated, and also the additional question whether she could refuse to receive the notes in her character of trustee under the following circumstances. chanrobles.com-red
On 2 March, 1827, Congress passed an Act, 4 Stat. 235, entitled "An Act concerning a seminary of learning in the Territory of Arkansas," by which two entire townships of land were directed to be set aside and reserved from sale, out of the public lands within said territory, for the use and support of a university within said territory.
On 23 June, 1836, Congress passed another Act, 5 Stat. 38, entitled "An Act supplementary to the act entitled An Act for the admission of the State of Arkansas into the Union,' and to provide for the due execution of the laws of the United States within the same, and for other purposes," by which the lands so reserved were vested in the State of Arkansas.
On 28 December, 1840, the Legislature of Arkansas passed an act entitled "An Act to authorize the governor to dispose of the seminary lands."
On 13 May, 1842, Archibald Yell, then Governor of Arkansas, sold to John W. Paup the right to enter and locate six hundred and forty acres of the above lands, and received from him five bonds, payable in one, two, three, four, and five years after date, in specie or its equivalent, with James Trigg and Richard Pryor as sureties. The amount of the bonds was $3,920.
In October, 1847, Thomas Drew, as Governor of the state, and successor to Archibald Yell, brought a suit upon these bonds in the Pulaski Circuit Court.
On 21 October, 1847, the defendants brought into court the sum of $6,050 in notes of the Bank of the State of Arkansas, and pleaded a tender of the same in discharge of the debt. The plea further set forth the act incorporating the bank as it is stated in the report of the preceding case of Woodruff v. Trapnall.
On 25 October, 1847, the plaintiff's counsel demurred to this plea, setting forth, amongst other causes of demurrer, the following:
"4th. That the proceeds of said bonds are part of a trust fund committed to the state by Congress for special purposes, over which the state has no power except to collect and disburse the same in pursuance of the objects of the grant, and the said state has no power to apply said funds to the payment of her ordinary liabilities, nor is the state bound to accept in payment of such bonds any depreciated bills, bank paper, or issues, even though she may be ultimately liable to redeem such depreciated bills, bank paper, or issues."
"5th. The said bonds sued on never constituted any part of
the capital stock of said State Bank, nor were the issues of said bank ever made receivable in payment of debts due the state in a merely fiduciary capacity."
On 23 December, 1847, the Pulaski Circuit Court sustained this demurrer, and gave judgment for the plaintiff in the sum of $3,920, together with $2,199.44 damages, with interest on said debt and damages at the rate of ten percent per annum till paid.
The case was carried to the Supreme Court of the State of Arkansas upon a bill of exceptions which court, on 24 July, 1848, affirmed the judgment of the Pulaski Circuit Court as follows:
"This cause came on to be heard upon the transcript of the record of the Circuit Court of Pulaski County, and was argued by counsel; on consideration whereof, this court doth adjudge and decide that the Act of the General Assembly of the State of Arkansas approved January 10, 1845, repealing the twentyeighth section of the act of said General Assembly of said state incorporating said bank of said state is not a law impairing the obligation of any contract involved in this case, nor contrary in any wise in regard to this case to the Constitution of the United States, which was one of the questions in issue and necessary to be adjudicated in this case, and that said state is in no wise bound by law to receive the bills and notes of said bank, issued before the passage of said Act of January 10, 1845, in payment of the debts due to said state, as laid in the declaration, which was one other question involved in and necessary to the adjudication of this case; wherefore there is no error in the proceedings and judgment of said circuit court in this cause."
"It is therefore considered by the court that the judgment of said circuit court in this cause rendered be and the same is hereby in all things affirmed with costs. It is further considered that said defendant recover of said plaintiffs all his costs in this court in this cause expended, and have execution thereof."
From this judgment, a writ of error brought the case up to this court. chanrobles.com-red