This suit was brought by the plaintiff in error to recover of Smith County upon certain bonds issued to the Houston and Great Northern Railroad Company.
The substantial defenses were:
1. That the bonds were issued without the levy of a sufficient tax to pay annually the interest and at least two per cent of the principal as required by the statute then in force.
2. That at the time the bonds were issued, the H. G. N. R. R. Co. had been consolidated with the International Railroad Company and had ceased to have a corporate existence; and that the bonds were therefore void.
3. That if the bonds are valid, they have been in part paid by the collection of a tax to pay an annual installment of two per cent of the principal thereof, and the payment of the same into the treasury for the use of the bondholders; and,
4. That certain installments had matured more than four years before the institution of the suit and were therefore barred by limitation.
The trial court held the bonds void and gave judgment for the defendant. Upon appeal, it was held by the Court of Civil Appeals that the tax levy was insufficient in amount to pay in full the interest and sinking fund upon the indebtedness, but that the bonds were valid for such sum as the levy was sufficient to pay; and that the bonds were payable in annual installments of two per cent, and that sixteen of such installments were barred by limitations.
Each party has sought and obtained a writ of error, — the plaintiff claiming that the Court of Civil Appeals erred in holding that the bonds were not valid for the full amount, and in holding that the sixteen installments were barred, — the defendant assigning that the Court of Civil Appeals erred in not holding the alleged obligations void in toto.
The debentures in question were a part of a series of 400 bonds for $500 each, and purported to be issued pursuant to an Act of the Legislature, approved April 12, 1871, entitled "An Act to authorize counties, cities and towns to aid in the construction of railroads and other works of internal improvement." The Constitution of 1869 was then in force, and it contained the following provision: "The inferior courts of the several counties in this State shall have the power, upon a vote of two-thirds of the qualified voters of the respective counties, to assess and provide for the collection of a tax upon the taxable property, to aid in the construction of internal improvements: Provided, that said tax shall never exceed two per cent upon the value of such property." (Constitution 1869, art. XII, sec. 32.) Section 23 of the same article provided that "it shall be the duty of the Legislature to provide by law, in all cases where State or county debt is created, adequate means for the payment of the current interest, and two per cent as a sinking fund for the redemption of the principal; and all such laws shall be irrepealable until principal and interest are fully paid." The act cited above authorized the respective counties of the State to aid in the construction of railroads *Page 546 or other internal improvements, by taking stock or making a donation, upon the submission of the proposition to the voters of the county at an election, and upon a two-thirds vote in favor thereof. The act further prescribed that no bonds should issue until the County Court should have levied an annual tax to pay the annual interest and two per cent annually of the principal of such bonds. It was further provided that, in case the levy made by the County Court should prove insufficient, it should be the duty of the comptroller to see that a sufficient levy was made. We shall have occasion hereafter to discuss these provisions. We refer to them in this place merely for the purpose of showing that the Legislature in authorizing the creation of the debt, fully complied with the section of the Constitution, which required that provision should be made for the payment annually of the interest and at least two per cent of the principal as a sinking fund.
Upon a proper petition, on the 27th day of March, 1872, the County Court of Smith County ordered an election in pursuance of the statute, upon the proposition to donate $200,000 in bonds to the Houston Great Northern Railroad Company, — one-half to be delivered when the railroad should be completed to Tyler, and the other half when it should be completed to the northern or western boundary of Smith County. The election having been held on the 6th day of May next thereafter, the court declared the result in favor of the proposition. On the 26th day of May, 1873, the president of the company presented a petition to the County Court alleging a compliance with the terms of the proposition on part of the company, and asking that the bonds should be issued. Action was taken at that term of the court and an order entered levying an annual tax of three-fourths of one per cent upon the taxable values of the county, and directing an issue of the bonds. Certain recitals and the words "three fourths" were stricken out of the minutes, and the judge before whom this case was tried found that this was done by direction of the County Court at the same time at which the original entry was made. But we pass over this proceeding, since we do not find a determination of its effect necessary to a decision of the case.
After some further negotiations, the County Court on the 2nd day of October, 1873, entered an order directing that the bonds should bear date as of the 15th day of May, next preceding; and also levying an annual tax of one-half of one per cent upon the property of the county for the payment of the annual interest and two per cent annually of the principal of such bonds. The trial court found that the tax so levied was not sufficient to pay the annual interest and installment of the sinking fund provided for by the statute, and that therefore the bonds were void. That court also found that the tax rolls for the year 1872, in which the election was ordered, showed property in Smith County subject to taxation of the aggregate value of $2,665,426, and for the year 1873, during which the bonds were issued, of the value of $3,158,281.
The correctness of the court's ruling upon this point presents the leading *Page 547 question in the case. We will now quote such sections of the act under which the bonds were issued as bear upon the question:
"Section 5. A special meeting of the County Court shall be held on the first Monday after the return day of such election when the court shall ascertain and record the result of the election, and, if two-thirds of the qualified voters of the county shall have voted in favor of the proposition at such election, then it shall be the duty of the court to make such orders and adopt such regulations as will give practical effect to the proposition so voted for, and, for that object, the court shall have power to issue county bonds to draw interest not exceeding ten per cent per annum, and to levy a tax upon all real and personal property situated in the county, not to exceed two per cent on the assessed value of such property in any one year.
Sec. 6. All county bonds that may be issued in giving effect to such proposition shall be signed by the presiding justice of the court and shall be attested by the clerk with the seal of the court. But no such bonds shall be issued until the court shall have first levied an annual tax upon all real and personal property situated in the county, which shall be sufficient to pay the annual interest, and not less than two per cent annually of the principal of said bonds, besides the expenses of assessing and collecting the same, which levy shall continue in force until the whole amount of the principal and interest of said bonds shall have been fully paid; provided, that no bonds shall be issued or donation made under the provisions of this act except for such portions of the work, in aid of which it is proposed to issue bonds or make a donation, as shall have been completed at the time when the bonds are issued or donation made.
Sec. 14. If it shall be ascertained at any time that the tax which has been levied for the payment of county bonds issued under the provisions of this act is insufficient to pay the annual interest and two per cent annually of the principal of such bonds, besides the expenses of assessing and collecting such tax, it shall be the duty of the Comptroller to see that such additional tax is levied and collected as will be sufficient to make such payments, which levy shall be continued in force until the whole amount of the principal and interest of said bonds shall have been fully paid.
Sec. 15. No county shall aid in the construction of any one railroad or work of internal improvement to an amount exceeding ten per cent of the assessed value of the real and personal property situated in the county, to be ascertained by reference to the latest assessment of said property for State taxes; and no county shall aid in the construction of any such works of internal improvement to an amount exceeding, in the aggregate, at any one time, twenty per cent on the assessed value of all the real and personal property situated in the county, to be ascertained in like manner." General Laws Reg. Sess., 1871, pp. 30-31.
Section 15 contains the only express limitation found in the act as to the amount of the indebtedness which a county is empowered to create. *Page 548 It was not to exceed, for any one work of internal improvement, ten per cent of the taxable values of the county, as shown by the latest official assessment; nor twenty per cent on the aggregate, if there should be more than one. It was not shown, in this case, that aid was extended to any other work under the statute; nor did it appear that the indebtedness sought to be created by the proposition submitted to the voters of Smith County exceeded ten per cent of its taxable values as shown by the last assessment. Ten per cent of the amount shown by the assessment rolls of 1872 was largely more than the amount voted.
Section 5 contains an express grant of power to levy a tax, not exceeding two per cent, for the payment of the debt when created. The tax levied in this case was one-half of one per cent and the complaint is that it was not enough.
Now it must be borne in mind that section 6 contains a proviso that no bonds should issue, except for such portions of the work as should have been completed, according to the terms of the proposition, at the time of their issue. The power to issue the bonds was made dependent upon a compliance on part of the company with the terms of the proposition submitted by the County Court and approved by the vote of the people. When the work was completed a debt was created, and it became the imperative duty of the County Court, or the Police Court, as it was then called to issue the bonds or make the donation, as the case might be. The statute had limited the amount of the indebtedness. It had also fixed a limit to the tax to be levied, and had provided for the levy of a tax to pay the annual interest and installments upon the bonds. Under such circumstances it is unreasonable to presume that the Legislature intended to make the validity of the bonds dependent upon the sufficiency of the tax levied for the payment of the annual interest and installments, or, in other words, to provide that, in case the court should, either intentionally or through error of judgment, make an insufficient levy, the bonds should be absolutely void. It is true that the words "no such bonds shall be issued, until the court shall have first levied an annual tax," etc., make it the imperative duty of the court to levy what they should deem a tax sufficient in amount for the purpose. They are words of command and in a sense mandatory. But they are not necessarily mandatory, in the sense that the bonds should be void in the event the tax for any reason should not be sufficient. We should be loath to hold that any such result was ever intended, even had section 14 been omitted from the act. In determining the amount of indebtedness which the county could create under section 15, it is provided that the court is to be guided by the assessed values as shown by the latest rolls. There is no such provision in section 6 and the omission is significant. If it had been intended, that the County Court should not exercise their best judgment as to the amount of the tax to be levied, — that they should have no discretion, it seems to us that words would have been inserted in section 6 so as to make it read "no bonds shall be issued until the court shall have first levied an annual tax upon all the real and personal property *Page 549 situated in the county, as shown by the last official assessment rolls of the county, which shall be sufficient to pay," etc. In such a case, the doctrine announced in the case of the Citizens Bank v. The City of Terrell, 78 Tex. 450, would have applied. But such is not the language of the section. It does not confine the court to the assessed valuation. The court in determining the amount of the levy is left, as we think, to act upon their own judgment, and to consider any probable increase or decrease on the taxable values of the county. The fact that section 15 provides, in effect, that in creating a debt for internal improvements and in fixing the limits of the amount to be created, as that it should not exceed ten per cent of the value of the property situate in the county, the County Court was to be governed by "the latest assessment of said property for State taxes," is not an argument that they should be controlled by the previously assessed official valuation in determining the rate of tax to be levied for the payment of the bonds. On the contrary, the mention of the final assessment in section 15 and its omission in section 6 tend rather to show that the court was not bound to take the assessment as the basis of the levy. We are of opinion, therefore, that the section must be construed as if it had read that the court should levy a tax which in their judgment shall be sufficient to pay the annual interest and an annual installment upon the principal of at least two per cent. If there were any reasonable doubt as to this construction, it is swept away by the fourteenth section of the act. That section provides for the contingency of an insufficient levy by the court, and evidently contemplates that in the exercise of their discretion in determining the amount they might commit an error. It is unreasonable to presume that the Legislature intended that the bonds should be invalid if a sufficient levy was not made, when in the same act it is provided, that the Comptroller should see that an additional tax was levied in the event that such contingency should happen.
It is next insisted that the Houston and Great Northern Railroad Company had consolidated with other companies, and that, because of the alleged consolidation, the purported obligations were void. On the 8th day of May, 1873, which was probably a few days before the work contemplated in the proposition submitted to the voters of the county had been fully completed, the Legislature passed an act which incorporated three other companies into the Houston Great Northern Railroad Company. Since much stress is laid upon this statute, we copy it in full It reads as follows:
"An Act to consolidate the Houston Tap and Brazoria Railway, the Huntsville Branch Railway, and the Victoria Columbia Railroad with the Houston and Great Northern Railroad.
WHEREAS, The Houston and Great Northern Railroad Company are the owners, by purchase at sale on foreclosure of mortgage by the State, and otherwise, of the Houston Tap and Brazoria Railway; and
WHEREAS, said Houston and Great Northern Railroad Company own *Page 550 all the stock of the Huntsville Branch Railway, and are operating eight (8) miles of road under the charter thereof; and
WHEREAS, said Houston and Great Northern Railroad Company are the owners of the stock of the Columbia and Victoria Railroad Company; therefore,
Section 1. Be it enacted by the Legislature of the State of Texas, that the Houston Tap and Brazoria Railway, and the Huntsville Branch Railway, and the Columbia and Victoria Railroad, are hereby made and declared to be, to all intents and purposes in law, a part of the Houston and Great Northern Railroad, and shall be under the control and management of the said Houston and Great Northern Railroad, in like manner as every other part of their railroad; and all rights, privileges, and franchises granted or secured in the charter of either or all of the aforesaid corporations shall inure to and be exercised and enjoyed by the said Houston and Great Northern Railroad Company, as fully and to the same extent as they could have been by either of said companies; provided that nothing herein contained shall have any effect to relieve said consolidated company, or said Houston Tap and Brazoria Railway, from any debt or liability whatever, to which either of said roads may be liable without this act.
Sec. 2. Be it further enacted, that this act shall take effect from and after its passage.
Approved May 8, 1873." (Special Laws 1873, p. 399.)
Did this act have the effect to absolve Smith County from the obligation entered into in its behalf by virtue of the authority conferred by the voters of the county? It has been held by the Supreme Court of the United States, that where the County Court had been authorized by a vote of a township to subscribe to a certain railroad company and where the company, before the subscription was made, consolidated with another company, thus forming a third, that the extinction of the company in favor of which the subscription was valid, worked a revocation of the power; and that the subscription to the new company was void. Harshman v. Bates County, 92 U.S. 569. But in subsequent cases it is held by the same court that, where a subscription by a county is authorized when made, the subsequent consolidation of the company to which it is made does not release the subscription, unless the consolidation works a material and fundamental alteration in the organization and purpose of the company. East Lincoln v. Davenport,94 U.S. 801; Calloway Co. v. Foster, 93 U.S. 567; Scotland County v. Thomas, 94 U.S. 682. See also Kennecott v. Supervisors, 16 Wall., 464; Smith v. Clark County, 54 Mo., 58; Branch v. Charleston, 92 U.S. 677; Bates County v. Winters,112 U.S. 325. It is to be inferred from the act itself and from facts of which we have judicial knowledge, that the companies which were absorbed by the Houston and Great Northern Railroad Company owned short and insignificant lines, remote from Smith County, the operation of which by the principal company could in no manner have affected detrimentally the interests of the people of the *Page 551 county. If there was any result, flowing from the consolidation in question, which was calculated to impair in the slightest degree the consideration which may be presumed to have induced the favorable vote upon the proposition, we may safely say that this record does not show it. For the reasons given, we think the consolidation effected by the act last cited did not release the county from its promise to donate the bonds.
The bonds were issued on the 2nd day of October, 1873. Two days before their delivery articles of agreement for the consolidation of the Houston and Great Northern Railroad Company and the International Railroad Company were adopted by each of those corporations in a meeting of their respective stockholders, and were signed by the president and secretary of each. Now it is also insisted, not only that by this action the contract to deliver the bonds was released, but also that the bonds were void, because of the fact that they were issued to a purported corporation which, by reason of its consolidation with another company, had ceased to exist at the time of their delivery. This contention involves the proposition that the consolidation attempted to be accomplished by the action of the two companies on the 30th day of September was legal. Was it a lawful consolidation?
Before two corporations can consolidate, both must have legislative authority for their action. Let us first inquire, did the Houston and Great Northern Railroad Company have the power? It is not claimed that such authority was conferred upon it by its original charter. But it is contended that the power was acquired through the consolidation of the Houston and Great Northern Railroad Company with the Houston Tap Brazoria Railroad Company and other companies, which was effected by the Act of May 8, 1873. The charter of the Houston Tap and Brazoria Company contained the following provision: "And said company is hereby authorized, by the vote of a majority of the stockholders, to unite with any other railroad company, converting the stock assets and property with that of any other company into one railroad company, and said road so united, or any portion of the same, may be managed and controlled by one Board of Directors, and as one road, and under such name and style as may be fixed upon by agreement; provided, the name of one of said companies, so uniting, shall be retained." (Special Laws 1856, p. 269.) The argument is that this power of consolidation passed to the Houston and Great Northern Railroad Company by virtue of that provision in the Act of May 8, 1873, which reads as follows: "And all rights, privileges, and franchises, granted or secured in the charter of either or all of the aforesaid corporations, shall inure to and be exercised and enjoyed by the said Houston and Great Northern Railroad Company, as fully and to the same extent as they could have been by either of said companies." The power of consolidation may be conceded to be a right or privilege within the meaning of those words as there employed. But the question arises: Did the power of consolidation granted to the Houston Tap and Brazoria Railroad Company continue, after it had once been consolidated with another company? Was it intended *Page 552 to confer upon the company a continuing authority to make successive consolidations? A fair construction of the provision heretofore quoted from the company's charter does not admit of an affirmative answer. The authority is "to unite with any other railroad company." This means any one company, and not any one or more companies. Such meaning cannot be given to the language, save by a very liberal construction; and it would require a still more liberal construction to imply an authority to unite first with one company and then with others in succession. The rule is that where there is a reasonable doubt as to the extent of the privilege conferred in a charter of a private corporation, it is to be construed most favorably to the public. 4 Thompson, Corp., sec. 5345. But, even had the language under consideration been more favorable to the construction claimed by the defendant in error in this case, we should gravely doubt whether the Legislature had ever intended to give to any company the power, by successive consolidation with other companies, to acquire all the railroads of the State and to organize them into one vast monopoly of its carrying trade.
Our conclusion being that the Houston Tap and Brazoria Railroad Company had the power to make but one consolidation, it follows, that when it was consolidated with the Houston and Great Northern Railroad Company, its power was exhausted, and that the right did not pass to the consolidated company.
The discussion of this branch of the case might appropriately end here; for if the Houston and Great Northern Railroad Company did not have the power to consolidate with the International Company, there was no lawful consolidation when the bonds were issued. But there is still another view of the question which, under the decisions of this court, leads to the same result. It has been held that the power given to one railroad company to consolidate with any other like company, without naming any, authorizes any other company to consolidate with it. (Matter of P. P. C. I. R. R. Co., 67 N.Y. 371.) But a contrary rule is recognized in this State. Railway v. Rushing, 69 Tex. 306. See also Railway v. Morris, 67 Tex. 699 [67 Tex. 699]. It does not follow that, because the charter of a railway company empowers it in general language "to consolidate with any other railroad company," these words should be construed as conferring the power upon any other company to consolidate with it. They reasonably admit of the construction that the company named is empowered only to unite with any other company which has a like power, and it would seem that, under the general rule previously announced, the construction least favorable to the corporation should control; at all events, when we attempt to adopt the construction insisted upon on behalf of Smith County, in respect to the grant in the charter of the Houston Tap and Brazoria Railroad Company, we encounter a grave constitutional difficulty. The contention is that the special charter of the company not only confers power upon the company to consolidate with any other railroad company, but also upon any other such company to consolidate with it. The title of the act (already *Page 553 quoted) is clearly sufficient to embrace the grant of any powers to the company incorporated which were appropriate to its purposes. But is there anything in the title that indicated that it was one of the objects of the act to confer power upon all the railroads of the State to consolidate with that company? That involved a distinct grant and enlargement of power to every other railroad company in the State, and it seems to us that, if such was the intent of the Legislature, it comes within the scope of the very evil which was intended to be suppressed by that section of the Constitution which required that the object of every act be expressed in its title. Giddings v. San Antonio, 47 Tex. 548; Peck v. San Antonio, 51 Tex. 490.
Before we dismiss this subject, we may add, that the Act of the 8th of May, 1873, indicates that neither the managers of the corporations named in the act, nor the Legislature which passed it, seemed to have given the charter of the Houston Tap and Brazoria Railroad Company the construction here contended for in behalf of the county. For if the charter gave it the power of successive consolidation, and gave all other companies the power to consolidate with it, no legislation was necessary to accomplish that which the statute in question was evidently intended to effect.
But it is also claimed that, by virtue of section 14 of its charter, the International Railroad Company had an independent power of consolidation with any other company. That section is as follows: "Said company shall have the right to connect itself with any other railroad company, within or without the State, and, under such terms as it shall deem best, to operate and maintain its said railroad in connection or consolidation with any such other railroad company." Special Laws 1870, p. 109. Does this mean that the company is authorized merely to operate its road in connection with that of another company, under such arrangements for a division of profits as may be agreed upon, or that it may merge its corporate existence with another company, and thus become a new corporation? By a very liberal construction it may be held to confer the power of corporate consolidation; but here, again, the rule that in case of doubt it must be resolved against the corporation applies. By a literal and strict construction, the section authorizes merely a traffic consolidation, and, under the rule announced, that construction should prevail.
Upon this branch of the case our conclusion is that no lawful consolidation was effected between the Houston Great Northern Railroad Company and the International Railroad Company, prior to the execution and delivery of the bonds.
But the proposition is also asserted that there was a de facto consolidation, and that the parties are estopped from disputing the fact in a collateral proceeding. It may be gravely doubted whether the de facto consolidation had gone into effect when the bonds were issued. It is true that the agreement between the two companies was not an agreement to consolidate in future, but an agreement of present consolidation. *Page 554 But, at the time it was entered into, a resolution was passed by the Houston Great Northern Company that it should not take effect until the directory of the new company was organized. The fact that two days after this the bonds were issued to the Houston and Great Northern Railroad Company would indicate that the consolidation was not then complete. However this may be, we are of opinion that the plaintiff in this case is not estopped to show that the consolidation was ultra vires, and hence invalid as to her. If the bonds had in fact been issued to the consolidated company, and if there had been an attempt on part of the original company, with which the county had contracted, to ignore the consolidation and to claim that the bonds should be issued to it, then the county might well claim an estoppel. But if there be an estoppel here it must be upon the other part. The county has issued the bonds to the original company, and it may be seriously doubted, at this late day, whether it should be permitted to deny that at the date of the issue the obligee was an existing corporation. See Bank v. Trimble, 6 B. Mon., 599; Receivers v. Renick, 15 Ohio, 322; John v. Bank, 2 Blackf. (Ind.), 367; Cong. Society v. Perry, 6 N.H., 164.
Our conclusion is that the bonds, as issued, were valid obligations against the county for the full amount for which they were executed.
This brings us to the question whether the two per cent, which was annually collected for a payment upon the principal of the bonds, and which was paid into the State treasury for that purpose, should be credited upon the bonds. The eighth, tenth and eleventh sections of the statute under which the bonds were issued provided, in effect, that a sufficient sum should be raised annually by taxation to pay for each year the interest and at least two per cent of the principal of the bonds; that the money so raised should be paid to the Treasurer of the State, and should be paid by him to the parties entitled to receive the same, upon a warrant drawn for that purpose by the Comptroller. Any surplus, not necessary to pay the interest and the two per cent, was to be used in the purchase and cancellation of the bonds. It was made the duty of the Comptroller and of the Treasurer to see to the proper disbursement of the fund.
In pursuance of the act the bonds, which were to run for twenty years, provided for the payment of the interest and of the two per cent of the principal annually. The interest payable was evidenced by coupons. The money which was collected by taxation for the payment of the debt was paid into the State treasury, as required by the statute. From the sum so collected and turned into the treasury, the interest was paid, but the two per cent, which it was contemplated should be paid to the bondholders, was not in fact paid. The eighth section of the act under which the bonds were issued provided that any excess which might remain, after the payment of the interest and two per cent of the principal for the current year, should be used in the purchase and cancellation of the bonds. But, instead of paying the installment of two per cent to the bondholders, the Comptroller treated all that remained after the payment of the *Page 555 interest as such excess, and used it in the purchase of bonds, presumably for cancellation. The purchases began in the year 1880, and were continued during the remainder of the twenty years for which the bonds were to run. Some of the purchases were made at the instance of the County Court, and presumably all were made with their concurrence and, so far as appears by the record, with the acquiescence of the bondholders. In fact, the parties at interest, as well as the Comptroller, seem to have treated the two per cent installment as a sinking fund, and not as payments on the bonds. If the payment of the two per cent of the principal had been optional with the county or with the Comptroller, this course would have been proper; and, although the law required the installment to be paid to the bondholders, it worked no injustice to any party, provided the bonds so bought were purchased at par, and the installments which did not in fact come to the holders of the other bonds were not considered discharged. As to the county it was all one debt, though, by reason of the transfer of the several evidences of parts of the indebtedness to different holders, it became payable in part to different parties. That the use of the money which should have been applied to the payment of the principal in the purchase of bonds at par was all the same to the county, becomes apparent when we treat the question as if all the obligations had been in the hands of one holder. But we think that it is true, as is contended, that the collection of the tax for the payment of the several installments and its payment into the State treasury was, as to the county, a payment of such installment and a discharge of the obligation of the county pro tanto. The installments so paid became the money of the bondholders, and the statute made the Comptroller and Treasurer their trustees, and when the one, by drawing his warrant for that money, and the other, by paying it, invested the trust funds in bonds, the bonds, to the extent of the funds so invested, became in equity the property of its owners. It is true that a trust of this character is ordinarily created by an investment of the fund by the trustee in property in his own name and for his own benefit. It is also true that, in this case, the Comptroller did not buy the bonds for his own use, but bought them in the interest of the county for the purpose of cancellation. But we think the same principle applies. In so far as the two per cent, which had been paid into the treasury and which belonged to the bondholders, was invested in bonds purchased for the purpose of cancellation the bonds, in proportion to the amount so invested, became the property of the bondholders, and neither the Comptroller nor the county had the right to cancel them. The mere fact of the physical destruction of the evidences of debt did not destroy the right of those whose money had been used in the purchase; nor did it affect the debt. To the extent that the money properly under the control of the Comptroller for that purpose — that is to say, the excess over a sufficiency to pay the interest and two per cent of the principal — was invested in the bonds which were purchased, they should have received a credit, but they should not have been wholly canceled. Therefore, the bondholders upon the first purchase *Page 556 became entitled to so much of the bonds so purchased as was paid for with their money, and were entitled to a sufficiency of the tax collected each year thereafter to pay two per cent of the balance due upon the purchased bonds, and their rights were the same upon each successive purchase. To further illustrate the rights of the parties, we will say that, if all the bonds that were bought had been purchased at par, the original principal of each outstanding bond would have represented the exact amount due its holder. But some of the bonds were purchased at a discount, while for others a premium was paid. It results from the view we take of the case that the holders of the outstanding bonds should receive the benefit of the discount upon the bonds purchased below par, and must bear the loss where a premium was paid.
The judgment must be reversed; but we are not inclined to undertake to make a calculation so as to render judgment here. Besides, the pleadings of plaintiff, though setting up the facts above stated in a general way, do not seem to be drawn with a view to claim an equity in the purchased bonds. The facts of the investment of plaintiff's money in the purchase of bonds should have been averred in an original petition and not in a supplemental petition as was done.
Since we hold that the annual payments of the tax money, when sufficient to pay the annual interest and installment, discharged the installment, and the rights of the holders of the securities were transferred to the bonds which were purchased for cancellation, we are of opinion that the statute of limitations does not apply to the case.
For the reasons given in the foregoing opinion, the judgment of the District Court and that of the Court of Civil Appeals are reversed and the cause remanded.
Reversed and remanded.