Charles Evans Hughes

“ In 1838, the general assembly of Virginia, in authorizing the engotiation of loans, provided that the stock of any joint stock company purchased with the money so borrowed, together with the dividends and other net income which might accrue therefrom to the commonwealth, should be, and were, 'appropriated and pledged' for the payment of the interest and for the final redemption of the principal borrowed. ”

“ West Virginia was to take upon herself a just share of the public burden represented by the bonds, and we cannot regard this provision as subject to an unexpressed limitation that interest should be excluded. A contract to assume an interest-bearing debt means the taking over of the liability for interest as well as principal. ”

“ As it appeared that even under the measure of 1871 Virginia had assumed a heavier burden than she felt able to bear, other plans were attempted for the settlement of the state debt. By the act of March 28, 1879, the effort was made to accomplish a refunding upon the basis of 50 per cent of accrued interest and 100 per cent of principal (of Virginia's estimated share) in new bonds payable in forty years (and redeemable after ten years) with interest at 3 per cent for ten years, 4 per cent for twenty years, and 5 per cent for ten years. ”

“ Despite repairs and renewals, a suitable allowance for depreciation may not have been made. It would be too much to say that there is any controlling presumption, and it clearly would not have been just to value the shares on a statement of book cost and surplus without taking into consideration the earning capacity. It is also complained that if the dividends for fifteen years (from 1850 to 1864) had been taken, the average would have been higher; but this included dividends after 1861, paid in Confederate currency. ”

“ In the light of the origin and nature of the investments which the master has reviewed and valued, and of the provisions of the Constitution and statutes of the state, it is clear that these particular assets must be regarded as a fund specially devoted to the payment of the debt to be apportioned. ”

“ Upon this record, it certainly cannot be assumed that the loan to the Virginia & Tennessee Railroad Company was worth par, and in fact West Virginia has claimed on this item not par, but $886,685, the amount which was subsequently paid in Confederate currency. Apart from this payment, we find no basis whatever for an estimate of value as of January 1, 1861. The payment itself cannot be taken for more than it was worth in gold, and the master, in making his allowance on that basis, went as far as the proof justified. ”

“ West Virginia excepts to the finding upon the ground that the book value of 150 per share should have been taken. This would make a difference in the total value of the stock of $89,632.64, or in the amount of West Virginia's credit of $21,063.68.
The exception is not well taken. It is urged that the book value represents actual value where books are correctly kept. This is not necessarily true, as books may be said to be correctly kept, in a sense, when they truly state the items set forth. But cost carried forward may not be the same as present value. ”

“ By the act of March 15, 1856, it was provided that every railroad corporation in which the commonwealth was interested as a stockholder or creditor should annually make report to the board of public works, showing the condition of the property, and containing full information with respect to capital stock, indebtedness, details of cost, physical characteristics, equipment, statistics of transportation, and a detailed statement, with an appropriate classification of earnings and expenses. ”

“ It is unquestioned that, in proving the fact of market value, accredited price-current lists and market reports, including those published in trade journals or newspapers which are accepted as trustworthy, are admissible in evidence. ”

“ All the questions thus raised may be resolved by the determination of the fair intendment of the contract itself. If liability for interest is within the scope of the agreement no objection can lie on the ground of uncertainty in amount, as the promise attaches to the amount found to be payable. ”

“ The master estimated the value at $35,096.85, that is, taking the amount as of January 1, 1861, which would produce the above stated sum of $49,662.05 at the date of sale.
The evidence, as West Virginia concedes, is meager. There are no market quotations. It does not appear that any dividends had ever been paid or that any profits had ever been earned. There is no statement of assets and liabilities, of traffic conditions, or of the results of operation. There is little knowledge of the physical condition of the road. ”

“ The exception of West Virginia in this instance merely relates to the deduction of 5 per cent. The master treated the book value as virtually a 'liquidation value,' and held that to arrive at a fair estimate of the actual value there should be some deduction for the expense of realization, and this, upon the testimony of the expert for West Virginia, he fixed at 5 per cent. ”

“ A settlement was effected under the act of May 27, 1902 (32 Stat. at L. 235, chap. 887) , by which February 11, 1894, was selected as the date of adjustment and the interest was calculated to that date on each side at 6 per cent. In the case of Virginia's bonds, the interest ran from January 1, 1861. The total claim of Virginia amounted to $1,723,582.53, and that of the government (after certain credits of interest received and with the addition of $16,923.70, which had been paid to the Restored State of Virginia) amounted to a total of $1,723,577.03. ”

“ There are quotations of two sales in November, 1860, at 50, but without details as to amount sold or character of sale. There are no other quotations of actual sales down to 1863, but simply references to 'Last sales,' as in the other cases above noted. The book value per share in 1860 was 131.16. ”

“ Item 3.-3,856 shares (par value $100) of the Richmond & Petersburg Railroad Company. Dividend bonds amounting to $33,408 were allowed at face value.
There are no quotations under the head of 'Sales,' but simply references under 'Quoted' to 'Last sales' (from 64 to 57 1/2) , without particulars. The road had been incorporated in 1836, and its outstanding stock in 1860 amounted to $835,750. The book value at that time was 121.86. The dividends for four years had averaged nearly 6 per cent. The yearly profits averaged more, or $53,627.66, which, capitalized, gave a share value of 106.95. ”

“ But we do not think that the exception is well taken. The suggested value is reached by capitalizing the net operating revenue of a single year; that is, by taking the return for 1860 at the amount above stated, $151,000.14, which on a 6 per cent basis would give a value of $2,516,666. This, however, makes no allowance for the interest charge of $11,940 ”

“ On that date an act was passed by the general assembly which provided for the refunding of these bonds on the basis of nineteen twenty-eighths of the principal and accrued interest (as of July 1, 1891) in new bonds bearing 2 per cent interest for ten years and 3 per cent until paid. The bonds were to be for one hundred years, and were redeemable after July 1, 1906. ”

“ There is no such presumption of law, and common experience negatives rather than raises such an inference of fact. We took this view in Fogg v. Blair, 139 U.S. 118, 127, 35 L. ed. 104, 107, 11 Sup. Ct. ”

“ Class D, Interest and dividends accruing prior to January 1, 1861, and subsequently received (20 items) .............. 345,554. Class E, Bank stocks ................................ 3,802,357. Class F, Stocks sold to Atlantic, Mississippi, & Ohio Railroad Company ..................................... 204,688. Class G, Stock of James River & Kanawha Company ............. 1,664,333. ------------ Total ................................. ”