The Register of Pennsylvania : devoted to the preservation of facts and documents and every other kind of useful information respecting the state of Pennsylvania, Vol. IX, Part 47

Author: Hazard, Samuel, 1784-1870
Publication date: 1828
Publisher: Philadelphia : Printed by W.F. Geddes ;
Number of Pages: 440

USA > Pennsylvania > The Register of Pennsylvania : devoted to the preservation of facts and documents and every other kind of useful information respecting the state of Pennsylvania, Vol. IX > Part 47

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There is nothing in this act to interfere with the con- trol of the Company over the former lottery grant, as a bounty, or as a resource to be pledged for loans, except the implied pledge of it for interest on the new stock; but if this implication is unjust. to the Company, unless it be understood to be subject to their control, accord- ing to former acts,-if the provision made by this act for interest on the new stock is sufficient without such impli- cation; and, above all, if there be any clear expressions in the act which suppose the continuance of the former lottery grant for purposes distinct from the provision of the interest or. new stock,-then I conceive the impli- cation is to be wholly rejected, as not having been in contemplation of the Legislature.

After a careful examination of all the acts on this sub- ject, I am of opinion, that all the circumstances above mentioned, exist in the act of 1821, and concur to show that the lottery fund or grant of former acts re- mains under the control of the Company, to use for the purposes of their work, by pledging it for loans or the Like. 1. It is unjust to the Company unless it is so understood. The grant was, it is true, a voluntary gift by the Commonwealth; but such a gift is as much matter of contract as a grant upon valuable considera- tion. Such stockholders as acquired their shares ofter the date of the laws which conferred it, such also as pre- served their shares from forfeiture, by paying the requir- ed instalments, and even the new stockholders who, af- ter the twenty-five years, are to trust to the general re- sources of the Company; may all be considered as having parted with their money upon the faith of its application to their use. The charter of a corporation is in many instances nothing more itself than a free gift by the Commonwealth; this, however, has never been held to give a right to the public to resume the gift, or to ap- ply it in any way foreign to the original purpose. When given by the Legislature, it was of course parted with by the public, and received by the Company. The mo- ney raised, or to be raised by it, could in no just sense be termed public money. It was private property, de- stined to an improvement of great public use; and this was the case with all the money subscribed by the stock- holders. To take this money from the great mass of stockholders and to give it to new subscribers exclusively, ought not to be imputed to the Legislature, unless it is clearly expressed, and I can find no expressions to that effect which are not countervented by others still clearer.

2. The provision made by the act of 1821, for the payments of interest on the new stock is sufficient

UNION CANAL LOTTERY.

1832.]

167

without such implication. The act in terms authorizes the Company " to continue, during the term of twenty- five years, to raise, by way of lottery, any sums that may be wanted for the purpose of paying to the holders of said stock the six per cent. as aforesaid." llere is a new and unlimited power to raise money by lottery for this specific purpose.

3. There are clear expressions in the act which sup- pose the continuation of the former lottery grant for purposes distinct from the provision of interest upon the new stock :-

The first of these expressions is that which provides -that in order to avoid, as far as possible, all disability "to pay such interest, so much of the third section of the act aforesaid as pledges any portion of the avails or nett proceeds of the lottery aforesaid, to the payment of an annual interest to the holders of shares not forfeited in the late Delaware and Schuylkill, and Schuylkill and Susquehanna Company be, and the same is hereby ses- PENDED until the canal shall be completed." The word suspended, is of great influence on this question. That pledge is not repealed or extinguished, but on the contra- ry is left in force, the exercise of it being merely defer- red to a future day. Now it will follow that if the old lottery grant is used, or consumed for the interest on the new stock, the former pledge is effectually destroy- ed; whereas to bring the new power into operation for the interest on the new stock, is properly a suspension of the pledge, to meet which the old power may be re- sorted to on the completion of the canal.

The second expression referred to, is the proviso "that whenever the nett proceeds of the tolls shall amount to the said six per cent. the privilege hereby grant- ed of raising money by lottery shall, during such time be suspended, except so far as is authorized by existing laws." It follows from this language necessarily, that the Legislature contemplated the exercise of the new dlottery power, before the old one was consumed; for if the old power was to be first used and exhausted before the new power could be exercised, the exception is useless-there could not be under such a construction any lottery power in the Company at the time of such suspension, by the laws existing at the date of the act of 1821. But if the new power was to be used for the purpose of paying the interest, then the exception was reasonable, because the suspension of the new power, ought not to interfere with the exercise of a power pre- viously given. The reservation of the excess of any money raised by lottery beyond the said six per cent., and which is found in the same proviso, fortifies this construction. Had the former lottery power been re- garded as a resource for paying the interest, then doubtless the Legislature would have directed a reser- vation of its surplus monies to meet a deficien y. But the reservation is only of the monies arising from " said lottery," the antecedent to which is, " the privi- lege hereby granted of raising money by lottery;" so that the reservation is of the surplus monies raised under the act of 1821.

These views of the act last mentioned, may perhaps in- duce the opinion that the bearing of its different pro- visions have not been critically observed in penning the act; but it cannot be doubted, I think, that the interpre- tation adverted to by me, and which is in conformity with all that the Company have done and communica- ted to the Legislature since the date of that act, is the best and most reasonable.

This has in some respeets the weight of a contempo- rary interpretation; and when it is remarked, that the in- sertion of a single line would have made the contrary interpretation obvious, as for instance saying "that the New power should not be used until the old power was exhausted," the absence of such a clause, implies the absence of that intention.

1811, is termed the residue of the original sum not cx- ceeding 340,000 dollars, is left to the Company as a bounty, and as a property to be pledged for loans, as I am told it heretofore has been under the advice of counsel ;- and a new power is given to raise, during the twenty-five years, as much as with the nett tolls shall pay six per cent. per annum on the new stock: if the tolls at any time during that period shall be sufficient for this purpose, then the new power should be sus- pended; but nothing should interfere with the exercise of the old power under existing laws.

This interpretation is just to the Company, and no- thing more than just. It leaves them in possession of vested rights under former acts, and it limits the exer- cise of the new power given by the Legislature, to that necessity which the Legislature has itself created, of paying an interest to certain stockholders, instead of leaving all stockholders to dividends derived from the tolls. The interpretation favours moreover the great object; for without a fund to pay interest on loans, loans could not be made, and consequently, the work could not be completed. If it should be asked, why has the Legislature suspended the payment of interest on the old stock, if it did not mean the old lottery fund to be other- wise applied' I answer that there is a sufficient reason for the suspension, in the danger both to the public and to the profit of the lotteries, by requiring too large a sum to be raised from them in the year; and that there is no reason upon the construction adverted to, for call- ing that a suspension, which was by the same construc- tion a gradual destruction.

January 5, 1827.

COPY OF AN OPINION OF JOHN SERGEANT AND HORACE BINNEY, EsQ's.

The President and Managers of the Union Canal Company have desired our opinion upon the question, whether in making loans under the authority given to them by law, they are authorized to mortgage the tolls of the Canal to the lenders, as security for the money borrowed, and the interest that may accrue upon it-or whether there is any existing pledge of the tolls, or other incumbrance upon them, which would have a priority to the lenders, and thus take away or diminish their security ?

To this question we answer as follows :- The author- ity to raise money by way of loan, and to mortgage the tolls, among others things, for the fulfilment of the terms and conditions of such loan, is expressly given by the 26th section of the act of the 2d April, 1811. This authority is not repealed or taken away, in terms, by any subsequent act. It therefore remains in force, un- less there be some provision inconsistent with it in sub- sequent acts, which by making a different disposition of the tolls, amounts to a virtual repeal. After examin- ing carefully the several acts passed on the subject since the year 1811, we find no such provision. The act of 1821, it is true, does contain a clause which at first view might seem, perhaps, to have this effect. The words are these, "Provided that whenever the nett proceeds of the tolls shall amount to the said six per cent." (meaning the six per cent. upon stock, ) "the privilege hereby granted of raising money by lottery shall, during such time be suspended, except so far as is authorized by existing laws, &c." But we are clearly of opinion that neither this clause nor any other in the act, can be so construed. For in the first place, the words used by the Legislature are not "when the tolls shall amount," "but when the nett proceeds of' the tolls shall amount." By " nett proceeds," we understand the clear revenue from tolls after paying all charges to which they may be made subject under existing laws, including, of course, mortgages for loans. But in the next place, we would remark, that by this act the tolls are not pledged either to the state or to the subscribers to the stock of the

The meaning to be deduced from this act, then at once, reasonable and consistent with former laws, is this: that the old power of raising what in the act of | Company. Their amount is only made a condition up-

168

UNION CANAL COMPANY-CASE.

[MARCH

on which the enjoyment of the new lottery right grant- ed by this act is made to depend, which cannot be con- strued to take away or impair the pre-existing power to mortgage for the purpose of obtaining loans. This power to borrow, is indeed so essentially necessary for the interest of all concerned, the old stockholders, the new stockholders, and the commonwealth, that it is not to be supposed the Legislature would interfere with it, or render its exercise more difficult or disadvan- tageous. There can be no tolls till the Canal is com- pleted, and its completion might be impossible without the aid of loans.

We are therefore of opinion, that the President and Managers have the power to mortgage the tolls as secu- rity for loans, and that there is no existing pledge of the tolls or incumbrance upon them, (except mortgages for prior loans if any,) which will have a priority to the lenders, or impair their security.

Signed,

JOHN SERGEANT, - HORACE BINNEY.

Philadelphia, Sept. 15, 1826.

CASE.

A Report recently made to a meeting of citizens upon the subject of the Lottery grants to the Union Canal Company, appears to bring into question the validity of Lotteries now drawing under the authority of that Com- pany, and consequently to affect the contract made by the Company with Archibald M'Intyre, who is repre- sented by the subscribers. You are therefore request- ed to give your opinion upon the following points arising out of that report.

1. Is the authority granted to the Company by the act of 26th March, 1821, to raise by way of lottery, any sums that may be wanted for the purpose of paying to the holders of the new stock an annual interest of six per cent. an authority that can be exercised only after the power to raise money under the act of 2d April, 1811, has been exhausted for the same purpose; or may the authority given by the act of 1821, be exercis- ed for the purpose of paying that interest, while the power given by the act of 1811, is at the same time ex- ercised for other purposes of the company, or postpon- ed to a future time to raise the residue of the sum au- thorized by that act?

It may be remarked, that if the power given by the two acts are concurrent, and that given by the act of 1821, is not, as the report supposes, a mere supplement to the previous power, to be used when the previous power shall have been exhausted, it follows that the ba- lance of 203,750 dollars, which the company on the se- cond of April, 1821, was still entitled to raise by vir- ture of the act of 1811, remains at present to be raised as the company shall direct or authorize; whereas if the power derived from the last mentioned act must be first exhausted before that under the act of 1821 can be used, then, as the amount raised since the 2nd of April, 1821, is more than 203,750 dollars, it is alledged, that the grant under the act of 1811 is now at an end, and that the lottery power of the company is confined to raising so much money as the tolls of the canal may fall short of the interest on the new stock.

2d. Is the authority of the company under the act of 1821, confined to raising by way of lottery, within the year, the money wanted for the purpose of paying the interest due in that year; or, have they a reasonable dis- cretion as to the time or times of raising what the pro- bable state of the tolls for some time to come may ren- der necessary?

3d. In estimating the amount raised by the company under the lottery grants, are they to be charged with what they have bona fide received for the privilege of drawing lotteries; or are they chargeable with the no- minal amount of deduction from prizes, generally fixed at 15 per cent., or with the actual profit made by the Managers of the lotteries, be it more or less?

In connexion with this inquiry it is proper to state,

that under the act of 1811, the Union Canal Company have never drawn a lottery at their own risk. They have sometimes for a certain per centage sold and assign- ed the right of drawing a lottery of given amount, accor- ding to a particular scheme or plan; and at other times they have sold for certain sums, the right of drawing lotteries for a term of time according to schemes to be approved by them.

In a report made to the Legislature by the Company on the 3d of February, 1819, the amount received from time to time by these sales was communicated, and the different contracts before that date stated; so that it was manifest, that the Company had not in any instance after 1811, taken the risk of a lottery upon themselves, nor debited themselves with the 15 per cent. usually deducted from prizes. . It was after this report that the act of 29th March, 1819, was passed, in the 3d and 9th sections of which, these receipts by the Company are referred to under the description of "avails and nett proceeds" of the lottery; and the very funds derived from them, and then, on hand, were re- cognized by the 12th section of the act and directed to be vested in some safe and productive fund for the Company.

Since that report, the company have from time to time reported to the Legislature the sums received by them under their different contracts with A. M'Intyre, so that the character of these receipts has been distinctly made known. At no time have they been questioned by the Legislature; on the contrary, after examination of the circumstances attending them, they have been reported by committees of the House of Representatives without an objection.

It may be proper further to remark, that the fifteen per cent. usually deducted from the prizes, is a very imperfect index of the amount raised by a lottery. It would not be a proper one even if all the tickets in a scheme were sold, for there are charges and expenses, numerous and heavy, bad debts, &c., which must be set against this per centage. But the non-sale of a large portion of tickets, which is an invariable and unavoida- ble attendant of lotteries, necessarily involves the pro- prietor of a lottery in the hazard or chances of a scheme, by which he may lose an amount equal to, or greater than the whole deduction. The risks of a lottery which are thus adverted to, if thrown upon the company, might put in jeopardy not only the value of the grant, but in the end, the Canal itself, which the grant was in- tended to promote. There cannot, therefore, be as- signed any good reason for believing that the Legisla- ture intended that these risks should be borne by the Company, as the very condition of the grant. It is more reasonable to suppose, that they meant to give them the power of raising money without risk; and yet it may be demonstrated, that no money can be certainly and effec- tually raised by way of lottery, (unless by receiving a sum certain for the privilege of drawing it, ) without, at the same time, encountering risks which may involve the proprietor in loss, instead of raising any thing. The exaggerated statement of profits which the report be- fore referred to, assigns to the managers, requires no other comment than this, that it has happened in the course of their contracts with the Company, that the pre- sent managers have frequently lost upon a single scheme more than the whole amount paid to the Company for the privilege of drawing it. If the Company receive $10,000 from a lottery, nominally competent to raise $30,000, and give the chance of $20,000 to the mana- ger on the condition of his paying all expenses, taking all trouble and running all risk of debts as well as of the drawing; the $10,000, if it be a fair and bona fide con- sideration of the sale, subject to the charges and risks, is in truth, all that the lottery raises. It is the nett pro- ceeds of the lottery. If any more is raised, it is raised by the managers adventuring in the lottery, as the hold- ers of unsold tickets; or, it is fairly applicable as a part of the gross proceeds of the lottery to the charges,

169

DELAWARE AND RARITAN CANAL, AND CAMDEN AND AMBOY RAIL-ROAD.

1832.]

expenses, labor, and losses, unavoidably incident to the operation.

You will please to take these remarks into considera- tion, in connexion with the fact, that the practice of the Company was known to the Legislature before the act of 1819, and constantly since.

4th. If the Company are chargeable under the lotte- ry grants only with the amounts bona fide received by them for the different schemes, docs it or does it not fol- low, that whatever the assignees may have made or lost, that circumstance does not affect the validity of their contract with the Company›

The importance of sustaining our contracts and of counteracting the influence of a report, which so far as it regards most of the facts stated, we know to be inac- curate, has induced us to ask your opinion on the fore- going inquiries in point of law.

If our apprehensions of them shall be confirmed by your opinion, we trust that the probity of this communi- ty will not countenance an assault upon our Jegal rights, derived from, and sanctioned by the Legislature of this Commonwealth.

YATES & M'INTYRE.

HORACE BINNEY,

JOHN SERGEANT.

Esquires.

JAMES C. BIDDLE,

Philadelphia, Dec. 24, 1831.

OPINION.

We have deliberately considered this case, and are of the following opinion:

1. That the lottery grant under the act of 1821, is not merely supplementary, but is a grant of the power to raise any sums that may be wanted to pay the inte- rest on the new stock, concurrently, if the Company think proper, with the balance of $340,000 authorized to be raised by the act of of 1811; and not only after that balance has been raised and expended upon the interest. Although the act of 1821 is by no means clear, we think certain of its provisions decidedly sustain this interpretation, particularly that clause which suspends the right to raise money under the act of 1821, when- ever the nett proceeds of the tolls shall amount to 6 per cent. per annum, with an express saving of the right, under existing laws. If the grant under the act of 1821 was not to come into operation, until the grant by form- er laws had been exhausted, this saving would be inope- rative. We think also that this interpretation is sus- tained with equal effect by another provision, which professes merely to suspend a previous pledge of the lottery grant for the benefit of the old stockholders, un- til the canal should be finished. If the grants were not meant to be cumulative, then an intention is imputed to the Legislature, to destroy this pledge: and the facts stated show that it has already been destroyed, instead of being suspended: and destroyed just at the time when, by finishing the canal, the act declares that the suspen- sion shall terminate. The good faith of the state more- over appears to consist better with this than with any other construction of the act. The lottery grant of 1811 was not merely a bounty to the Company generally, in which sense it was as irrevocable as a grant for a valuable consideration; but the Company were expressly author- ized to morgage it as a security for loans. This author- ity has not been revoked. No such revocation is to be found either in the language or the plain meaning of any subsequent act. The power has been exercised, and lenders to the Company to a large amount, now rest in part upon that security. Without such clear expres- sions as would make a different interpretation wholly in- admissible, it appears to us against the good faith of the Commonwealth, to impute the intention of destroying the uses of the old grant to the lenders, by applying it in the shape of interest to the new stockholders.

2. That a reasonable discretion as to the amounts to be raised, and the time of raising them, under the act of 182], exist in the Company. It cannot have been in- VOL. IX. 22

tended that they should defer raising money to pay the interest until the tolls were proved to have been insuf- ficient, and the interest had already accrued. A rea- sonable provision in anticipation of the probable defi- ciency of the tolls, and to the extent of it, must have heen intended by the act. No other course is reconcil- able with prudence, or the usual method of conducting similar operations. In our opinion, the Company are not bound to raise what is necessary within the year. The language of the act is an express warrant for this construction. The Company are required to reserve any excess of the sum raised over the 6 per cent., to meet a future deficiency, and not to divide it; it is consequently no violation of the law to raise an excess, if there is a rea- sonable probability that it will be required in future.

3. The facts stated under the third inquiry, furnish a strong ground for giving such an interpretation to the acts of 1811, 1819, and 1821, as will charge the Com- pany only with the price by them received for the lot- tery privilege. Cotemporaneous construction seems entirely to favour it: and there are intrinsic difficulties in the way of a charge on any other principle. The money paid to the Company has undoubtedly been re- ferred to in the act of 1819, as the nett proceeds of the lottery; and the nett proceeds are all that can be equit- ably charged. The amount received by the Managers, under the deduction of 15 per cent. are the gross pro- ceeds, against which all the expenses of the lottery, all the charges of the agency, and bad debts, are to be placed; and the fate of unsold tickets also, if any re- main unsold. The uncertainty of any rule of charge except that adopted by the Company, induced the Le- gislature to receive it as a reasonable one, and at this time of day we think it inadmissible to disturb it, by re- sorting to a strict interpretation.

4. We are clearly of opinion, that the amount made or lost by the assignees is a matter of no consequence. If they were ruined by the lotteries, the Company would still be chargeable under the lottery grants with the sums received by them. If the Company are chargea- ble with these receipts only, then the lottery grants not being exhausted, the existing contracts for raising fur- ther sums are valid: and if the first lottery grant is ex- hausted, which we have already said, we do not think, then the right to raise money for the interest on the new stock would give validity to these contracts.

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The Register of Pennsylvania : devoted to the preservation of facts and documents and every other kind of useful information respecting the state of Pennsylvania, Vol. IX, Part 47

Author: Hazard, Samuel, 1784-1870 Publication date: 1828 Publisher: Philadelphia : Printed by W.F. Geddes ; Number of Pages: 440

Author: Hazard, Samuel, 1784-1870
Publication date: 1828
Publisher: Philadelphia : Printed by W.F. Geddes ;
Number of Pages: 440