Page:Federal Reporter, 1st Series, Volume 3.djvu/686

 6TBVEN8 V. L. & N. E. CO. 679 �the bond holders; or, more fuUy stated, that the legislation and action of the state under it were effectuai to fix upon the raiiroads respectively a lien not merely for the indemnity of the state of Tennessee, but also to seeure the payaient of its bonds to their holders; that the state became trustee of this lien for the benefit of the holder of the bonds, which lien inured to their benefit as cestuîs que trustent of the state, by force of the express con tract to that effect in the law oreating the security, as well as by necessary legal implication from the relations of the parties, which no subsequent dealings between the raUroad companies and the state could discharge. Again, it is said "the first or primary object of the act was to compel each aided company to pay its debt directiy to its true creditor, the lender on the bonds. This was effected by the usual and proper process — a lien pure and simple for the pay- ment of the bonds upon the estate of each aided conlpany, enforceable in equity in case of default." �On the other hand, defendants' answers state the opposing view thus : "That the said statutory mortgage was taken by the state in its own behalf, and for its own benefit, and not as trustee for its bond holders, and that said statutory mort- gage was conditioned solely for the payment by the company to the state of the company's indebtedness to the state for the bonds loaned to it, and in respect of both principal and inter- est such payment was conditioned to be made by the com- pany to the state before the corresponding amount of interest or principal would become due or payable by the state to the holders of the state bonds; • » * that by the statute two entirely independent and distinct debts were created, — one from the state to the bond holders upon its bonds payable to bearer, resting upon the faith and credit of the state; the other, an indebtedness from the raiiroad company to the state for the amount of the state bonds loaned to it, — and that the statutory mortgage was given to seeure this latter direct obligation from the raiiroad company to the state, with which the bond holders had no connection or concern." �It is further said that whether the engagement of the com- pany was to pay to the state or to holders of the bonds isnot ����