Smith v. Jennings

Background

A receiver for a long-defunct South Carolina state bank sued the State Treasurer to stop him from removing $37,000 of old Blue Ridge Railroad bonds from the treasurer’s books. The bank had originally owned 100 of the 1859 bonds; 63 were later recovered and paid or funded by the State, while 37 remained outstanding and unknown. The State legislature had passed an 1896 law limiting funding of certain bearer coupon bonds after twenty years from maturity, and a 1903 resolution told the treasurer to write these old bonds off the books.

Reasoning

The central question was whether the 1903 resolution (and the earlier law) unlawfully impaired the State’s contract with bondholders or otherwise took away the bank’s remedy to recover payment. The state supreme court rejected the receiver’s claims that the enactment violated the state constitution and that it impaired contract obligations. The United States Supreme Court dismissed the federal writ of error, noting that questions about conformity with the state constitution are for the state courts and holding that the bookkeeping change did not in any way reduce the State’s obligation or the bondholder’s remedy.

Real world impact

The practical result is that the treasurer may remove these old bearer bonds from the official debt records without diminishing the State’s contractual duty or a holder’s legal right to seek payment. The state court’s judgment stands, and the federal court declined to reopen the matter.