The History of Minnesota and Tales of the Frontier

by Charles E. Flandrau

The proposed amendment was to be submitted to the people for adoption or rejection, at an election to be held on the fifteenth day of April, 1858. In order to fully comprehend the condition of the public mind, it should be known that the constitution, with all the safeguards that I have mentioned, had only been in force since Oct. 13, 1857, a period of about six months, and had been carried by a vote of 30,055 for to 571 against its adoption.

The campaign preceding the election was a very active one. The railroad people flooded the state with speakers, documents, pictures, glee clubs singing songs of the delights of "Riding on the Rail," and every conceivable artifice was resorted to to carry the amendment. It was carried by a vote of 25,023 in favor of its passage, to 6,733 against.

To give an idea of the intense feeling that was exhibited in this election, it is only necessary to state that at the city of Winona there were 1,102 votes cast in favor of the amendment and only one vote against it. This negative vote, to his eternal honor be it said, was cast by Thomas Wilson, afterwards chief justice of the state, and now a citizen of St. Paul.

In the execution of the requirements of the amendment, the railroad companies claimed that they could issue first mortgage bonds on their properties to an indefinite amount and exchange them with the state for its bonds, bond for bond, but the governor, who was Hon. Henry H. Sibley, construed the amendment to mean that the first mortgage bonds of the companies which the state was to receive must be an exclusive first lien on the lands and franchises of the company. He therefore declined to issue the bonds of the state unless his views were adopted. The Minnesota & Pacific Railroad Company, one of the land grant corporations, applied to the supreme court of the state for a writ of mandamus, to compel the governor to issue the bonds. The case was heard, and two members of the court holding the views of the applicants, the writ was issued. I was a member of the court at that time, but entertaining opposite views from the majority, I filed a dissenting opinion. Anyone sufficiently interested in the question can find the case reported in Volume II. of the Minnesota Reports, at page 13. This decision was only to be advisory, as the courts have no power to coerce the executive.

The railroad companies entered into contracts for grading their roads, and a sufficient amount of grading was done to entitle them to about $2,300,000 of the bonds, which were issued accordingly, and went into the hands of the contractors to pay for the work done. It, however, soon became apparent that no completed railroad would ever result from this scheme, even if the whole five millions of bonds were issued. What should have been known before was made clear when any of these state bonds were put on the market. The credit of the state was worthless, and the bonds were valueless. The people became as anxious to shake off the incubus of debt they had imposed upon their infant state as they had been to rush into it.

Governor Sibley, in his message, delivered to the second legislature in December, 1859, said, in speaking of this issue of bonds:

"I regret to be obliged to state that the measure has proved a failure, and has by no means accomplished what was hoped for it, either in providing means for the issue of a safe currency, or of aiding the companies in the completion of the roads."

At the election, held on Nov. 6, 1860, the constitution was again amended, by expunging from it the amendment of 1858 authorizing the issue of the state railroad bonds, and prohibiting any further issue of them. An amendment was also made to section 2 of Article IX. of the constitution at the same time, by providing that no law levying a tax, or making any other provisions for the payment of interest or principal of the bonds already issued, should take effect or be in force until it had been submitted to the people, and adopted by a majority of the electors.

It was very proper to prohibit the issuance of any more of the bonds, but the provision requiring a vote of the people before those already out could be paid was practically repudiation, and the state labored under that damaging stigma for over twenty years. Attempts were made to obtain the sanction of the people for the payment of these bonds, but they were defeated, until it became unpleasant to admit that one was a resident of Minnesota. Whenever the name of Minnesota was heard on the floor of congress as an applicant for favors, or even for justice, it was met by the charge of repudiation. This was an era in our history very much to be regretted, but the state grew steadily in material wealth.

On March 2, 1881, the legislature passed an act, the general purpose of which was to adjust, with the consent of the holders, the outstanding bonds, at the rate of fifty cents on the dollar, and contained the curious provision that the supreme court should decide whether it must first be submitted to the people in order to be valid or not, and if the supreme court should not so decide, then an equal number of the judges of the district court should act. The supreme court judges declined to act, and the governor called upon the district court judges to assume the duty. Before any action was taken by the latter, the attorney general applied to the supreme court for a writ of prohibition to prevent them from taking any action. The case was most elaborately discussed, and the opinion of the supreme court was delivered by Chief Justice Gilfillan, which is most exhaustive and convincing. The court holds that the act of 1881 is void, by conferring upon the judiciary legislative power, and that the amendment to the constitution providing that no bonds should be paid unless the law authorizing such payment was first submitted to and adopted by the people was void, as being repugnant to the clause in the constitution of the United States, that no state shall pass any law impairing the obligation of contracts. With these impediments to a just settlement of this question removed, the state was at liberty to make such arrangements with its bond creditors as was satisfactory. John S. Pillsbury was governor at that time. He had always been in favor of paying the bonds, and removing the stain from the honor of the state, and finding his hands free, it did not take him long to arrange the whole matter satisfactorily, and to the approval of all the parties. The debt was paid by the issue of new bonds, at the rate of fifty per cent of the principal and interest of the outstanding ones and the surrender of the latter. This adjustment ended a transaction that was conceived and executed in folly, and was only prevented from eventuating in crime by the persistent efforts of our most honorable and thoughtful citizens throughout the state. The transaction has often been called by those who advocated repudiation, "An old Territorial fraud," but there was nothing in it but a bad bargain, made under the extraordinary pressure of financial difficulties.