The opinion of the court was delivered by
Breaux, J.Hope & Co., a commercial firm, doing business in the city of Amsterdam, in the Netherlands, have brought suit to compel the funding, by the State Board of Liquidation, of nine thousand and forty-two bonds, each for the sum of four hundred'_and forty-four dollars and forty-four cents, dated the 1st day of February, 1836, and payable by series, respectively, on the 1st day of February, 1850, 1st *741day of February, 1859, 1st day of February, 1868, 1st day of February, 1877, and the 1st day of February, 1886, which aggregate four million eighteen thousand six hundred andtwenty-six dollars and forty-eight cents; the payment of these bonds was extended, and by agreement the series mature respectively on the 1st day of February, 1901, the 1st day of February, 1902, the 1st day of February, 1909, and the 1st of February, 1911.
They pray to fund the coupons of the bonds remaining unpaid, also for an order to the Board to issue and deliver~to them in exchange consolidated bonds of the State of Louisiana, to the amount of two millions four hundred and eleven thousand one hundred and seventy-five dollars and eighty-eight cents, bearing date the 1st of January, 1874, with all coupons from 1874 annexed, except the coupon due the 1st day of January, 1880, and with the interest coupons on said bonds reduced to 2 per cent, for five years from January 1, 1880, and to 4 per cent, thereafter.
The Board of Liquidation deny that these bonds are fundable, and that they are included in the terms of the act of the Legislature, approved January 24, 1874, and they aver that they can not be funded.
They have offered evidence to prove that the amount in contemplation at the time, to be funded, exceeded the limitation imposed by that act without including plaintiffs’ claim. They aver that the bonds were issued in aid of the Citizens Bank for its accommodation, and that the State bound itself as security for their payment; that they were issued by the bank, and indorsed by it in such form as to make it the principal debtor.
They allege that plaintiffs, the bondholders, had knowledge of the acts of the Legislature authorizing the indorsement, as it was made. That they dealt and treated with the bank, as principal, for many years, and as such received from it large sums of money on account of the principal and interest due on said bonds.
They, in their answer, further plead, that, on the 8th day of October, 1880, without the knowledge or consent of the State of Louisiana, the plaintiffs entered into an agreement with, their debtor, the Citizens Bank, by which they discharged said bank for and in consideration of certain things to be done. That the bondholders reserved their rights only upon the mortgages granted by the shareholders to secure their stock and upon the property acquired in foreclosure proceedings.
*742That by this discharge the State is released from all liability.
There was a judgment in favor of defendant, rejecting] plaintiffs’ demand.
The following are the agreed facts in the case:
The total amount of the bonds issued under Act of 1836 was $7,000,000. In October, 1880, the indebtedness on the bonds had been considerably reduced; at which time an agreement was entered into between the bondholders and the Citizens Bank. This agreement shows that on January 1, 1874, the following amount was outstanding, to-wit: $4,018,626.48, represented by bonds.
These bonds were issued by the State in aid of the bank.
They had coupons attached, of interest, signed by the bank, through its cashier.
On these coupons the bank defaulted.
Interest warrants for the amount of the past due coupons, including interest on the amount computed to the maturity of the warrants, were issued, signed by the Citizens Bank.
Subsequently, the bank again defaulted in the payment of interest; payment was again extended by agreement between it and Hope & Co. Interest warrants were again issued by the bank for past due coupons, with interest computed to the maturity of the warrants.
These warrants represent the sum of $921,129.26.
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With reference to these warrants, plaintiffs’ counsel, in one of their briefs, admit “that [plaintiffs’] coupons represented in such warrants were not fundable, is clear from the face of the [funding legislation, which nowhere provides for funding of coupons.”
We copy this admission for the reason that it accords with our view of the statute, from which we extract the following: Consols “ shall be exchanged for all valid outstanding bonds of the State, and all valid warrants drawn previous to the passage of the act by the Auditor on the Treasurer.”
These warrants are not drawn by the Auditor, and they are for past due coupons, for the funding of which Act 3 of 1874 does not provide.
There is due by the bank the sum of $133,333.33, which plaintiffs desire to have funded.
*743There is in possession of plaintiffs, or of their debtor, the bank, who holds for them, a large amount of mortgage stock assets of the Citizens Bank, consisting of stock mortgages, given under the Act of 1836, on the property of the shareholders of the bank, to secure their stock subscription; property which the bank has been unable to sell, acquired under foreclosure of stock mortgages; mortgages not collected given for mortgage stock; property acquired by the bank under such foreclosure, and afterward sold by the bank, and amounts due by shareholders on their stock subscriptions; the value of these assets were fixed at about §800,000; by agreement between the parties to this suit, they are “ applicable to the payment of the bonds.” Vide compromise of 1880.
There is, besides, cash on hand, in the Citizens Bank, the sum of •§85,000 “to be remitted to the bondholders.”
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At different dates, from January 26, 1881, to December 24, 1890, there was remitted by the bank to plaintiffs §2,060,466.35. On October 8, 1880, the Citizens Bank owned assets to the amount of §1,500,000, representing the capital contributed by the cash stockholders under Act 246 of 1853, and §500,000 of mortgage stock assets of actual value not exceeding §300,000, set aside for the alleged advances of what is termed the banking department to the stock mortgage department.
The cash stockholders made another contribution’to the bank, in 1883, of §350,000. The assets and property of the bank representing the .capital furnished by those termed its cash stockholders, i. e., the assets of the banking department proper, amounted in value on the 1st of January, 1889, to the sum of §300,000.
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Having made a statement of these amounts, we will consider questions relative to the bonds held by plaintiffs.
They are not made in the ordinary form of a bond, to the order of the bank, and by the latter only indorsed.
On the face of the bond reference is made to the endorsement, and in the endorsement special promise to pay is made, more direct and binding than are conditions of endorsements on negotiable paper in ■the ordinary course of commerce.
The State promises to pay to the president and directors of the bank the amount of the bonds with interest, at the rate of 5 per cent. *744per annum, payable half yearly, at the place and in the current money named in the endorsement.
There is an extension of time endorsed on each bond, and in addition, the bank obligates itself to reimburse the principal to the plaintiff at the place named, also to pay the interest half yearly.
The transactions are not of recent origin.
The original scheme bears the date of the bank’s original charter; for the bonds bear the impress of the act of 1833.
In accordance with its terms subscription to stock was received. The stock was secured by mortgages, which were to be security for loans.
It was prohibited to issue bonds before mortgages were executed to an amount exceeding the sum of bonds issued by one-fifth.
The paet de non alienando, was made by law a stipulation in every act.
The husband and the wife were authorized to contract and obligate themselves jointly and in solido.
The bank was not subject to insolvency laws; i. e., the insolvency proceedings on the part of its debtors did not affect its interest.
It was also exempt from the payment of taxes.
But this act did not offer sufficient security.
Only one hundred and thirty-three thousand three hundred and thirty-three dollars and thirty-three cents were borrowed ($133,-333.33).
* * * * * * *
To aid the bank, in 1836, another act was passed amending the charter.
The faith of the State was pledged for the security of the loan.
Bonds were issued by the State to the order of the bank.
The form of the bond was prescribed in the act, and it was provided, for the guarantee of the bond, to be emitted' by the State, in favor of the bank, that all the securities granted by the act of incorporation—
“Are transferred to the State and the holders of the bonds.”
These securities (the mortgages executed as security for stock) given by the stockholders were to remain a perpetual pledge, as contemplated in the original act of incorporation.
As inviting conditions, the State was to receive a fractional portion of the profits, and to have an open credit of $500,000. No *745profits were ever realized, nor do we know that the credit before stated, of §500,000, has ever proved useful to the State, or of the least avail.
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In 1842 the bank’s financial condition was not satisfactory. In six years, a moment in the history of a State, the bank was in a condition of insolvency. Large amounts had been mismanaged.
To prevent waste and expensive litigation, the State took sufficient-charge to secure better management. To this end, managers were appointed on the part of the State, and the responsibility of the incorporators toward the creditors was protected. Interests were paid during the time the State had supervisory control, and amounts realized, while under the preceding administration, of the shareholders, the bank had defaulted in the payment of interest.
The legislation with reference to this bank, from 1842 to 1853, was in the direction of the State retaining possession of the assets of the bank until the final payment of all State bonds issued for its benefit.
The act approved April 6, 1847, at a time when the State had supervisory control, through managers of her selection, inter alia, provides for the payment of interest upon the bonds' of the State issued for account of the bank.
In 1852, by an act of the Legislature, it was proposed, on certain conditions, to relieve the bank from the decree of forfeiture, rendered against it in 1.842, and to reinstate its administration and restore the management to the stockholders, with allrights and privileges existing before the forfeiture.
“ To the same extent with the same restrictions as if the decree of forfeiture had never been rendered.” - Bank Act of 1852, No. 141.
The conditions were not complied with.
In 1853 new arrangement was made, and the bank resumed absolute control.
At the time great interest was felt in the affairs of the property banks.
It is historical that they gave occasion to issues which agitated the public mind. Parties divided, and questions of closing and the necessity of discontinuing their business were energetically and sharply presented throughout the State.
Their indebtedness was the subject of comments, debates and correspondence.
*746The pledge and aid of the State were not unanimously given. In the halls of the General Assembly the debates were anything but harmonious when legislation affecting these banks was under consideration.
It is not difficult at times to discover imperfect grants and privileges. 'An active minority has left the impress of its opposition, and has prevented legislation of a satisfactory character.
The laws passed with reference to these banks must have been well known to their respective creditors.
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In 1853, Act 246 authorized the Citizens Bank to convert shares secured by mortgage into cash shares to the amount of one million dollars, by obtaining in cash the payment of 10,000 shares composing the capital stock, and to that end the directors were given the right to set apart a portion of the stock held by each stockholder, not exceeding one in fifteen.
These shares, together with such proportion of the stock held by the bank, as made up the ten thousand shares, were limited to one million in amount, to be paid in full at the time and in the manner determined by the board, in order to constitute a cash department.
The mortgages against the stockholders holding these shares were to continue as they were before the adoption of the act.
The owners of these shares were to divide and receive profits. They were also to share in the losses.
The 10,000 shares of the cash department, set apart, were still subject to contribution as part of the original stock of the bank, secured by mortgages; they were designated as and had the right and quality of cash stock, instead of mortgage stock, but the former liability to contribute was unimpaired.
The inducements offered to the stockholders, to pay the full amount in cash of this stock, were a share in the profits of the bank, in the proportion of the amount of stock paid up, to the amount of available banking assets of the bank, to be estimated and fixed by the board of directors, and on such terms and conditions as shall be directed by said loan.
The act creating this cash department of the bank provided that it should only be enforceable, after having been accepted, .by a majority .in number and amount of the' stockholders of the Citizens Bank.
*747It was accepted by the required number, and as between these shareholders, i. e., the cash and th'e stock mortgage shareholders, a change was made in the constitution of the bank. There is no doubt that the mortgage stockholders and the cash stockholders were bound by the act of the majority. Pollock vs. Citizens Bank, 12 An. 230.
But how as to the creditors who took no part and were not consulted? They were not in any respect bound.
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Act 40, of 1874, authorized the bank to extend the payment of the bonds, and it was extended.
* .‘f: :¡= * * * *
.Act 79, of 1880, authorized the bank to make compromises, and settle the liability of the mortgage stockholders arising out of the stock mortgages granted by them to secure their subscriptions, and ordered that all sums realized under the compromise, and from foreclosure of mortgages, be applied, by the banking department, to the satisfaction of the bonds of the State, issued in aid of the bank, and to the legal liabilities of the mortgage department.
The bondholders consented to the liquidation on the terms proposed.
An inventory was made of the assets of the mortgage department subject to the payment of the debt.
We are not informed of the amount nor of the character of all those securities to be appropriated to the payment of the debt, under the acts of the General Assembly and the terms of the compromise.
The plaintiffs stipulated that no sale would be made by'the Citizens Bank, no compromise or settlement whereby their security would be diminished, nor any discharge granted without full payment to them.
We copy the following, as it contains the declaration that “ these parties consent to the fulfillment of the objects of the Acts of the General Assembly, approved 9th April, 1880, because the same was, designed to release the State and the bank, and because the liquidation of the mortgage stock department, and the application of the sums to arise from such liquidation to the payment of the bonds and interest thereon seem to be demanded under the conditions which exist.”
In consideration of certain engagements of the banking depart*748ment, Hope & Co. bind themselves never to claim or demand any payment of the bonds from it as a debtor.
The indebtedness of the State, to the bank, was fixed by the latter with Hope & Co.
By a cursory reading of the act of compromise, it will be seen that the parties did not limit themselves to the terms and requirements of the law approved 9th of April, 1880.
They declared that they have an immediate interest in all the securities granted by the bank.
They obtained statements of the securities to be applied by them to the payment of the debt.
They released the cash department.
They consented to a “ set off” of an interest of $500,000 against a claim said to be due by the mortgage department to the bank.
They declared that they have an immediate interest in all the securities of the bank and provided for the application of the amounts realized.
With reference to the funding of the bonds:
The funding law has for object the consolidating and reducing the floating and bonded debt of the State.
The bonds were to be exchanged by the Board of Liquidation for all valid outstanding bonds of the State and all valid warrants issued.
This funding is subordinated to the condition that the limitation of the indebtedness of the State should be observed and not exceeded.
It remains for our determination, whether the total of the claims plaintiffs have a right to fund exceeds the limitation.
The question is not res nova.
We will revert to the different decisions, 'in pari materiae.
The ease of Solomon vs. Graham, 23 An. 402, decides that these bonds are a part of the indebtedness of the State, in summing the total of $25,000,000 as her indebtedness.
This decision was rendered in 1871.
It is argued by the defendant that the State’s debt was $24,283,-886 in January, 1874, as found m the case of State ex rel. New Orleans Pacific Railroad Company vs. Nicholls, Governor, 30 An. 982, and that it was impossible for plaintiffs’ amount to have entered into the plan, for in funding it with other liabilities, it will produce a sum total exceeding that fixed by the act and the amendment to the Constitution.
*749Prior to this decision, bonds of the Consolidated Association of the Planters of Louisiana were funded in obedience to decrees of this court. Lessassiér & Binder vs. Board of L., 30 An. 613; 30 An. 1151; 34 An. 770.
The question of the limitation of the State debt is not shown by the decisions to have been expressly considered, but the fact remains that in each case the funding of the bonds was ordered.
The limitation has not been reached, for the bonded indebtedness is $11,279,780.66.
These bonds were originally fundable.
But it is argued that plaintiffs have, by their own acts, precluded themselves from the offer of the statute to bond.
We have not reached that conclusion. The plaintiffs have kept their claims alive and have extended their payment with the State’s consent.
Had the funding taken place in 1874, the mortgage securities held by them would have been chargeable, as they are now.
With legislative consent, the plaintiffs retained these securities and made collections. Vide, act approved April 9, 1880.
They account for the cash received on the mortgage securities, and which are to be applied'as they would have been in 1874.
The plaintiffs had the right to fund in 1874.
The time within which to fund is not limited in the act.
Prescription is not pleadable against the right to fund, nor the time that has elapsed.
The bonds were issued in conformity to law.
They were not issued in violation of the Constitution of the State, or of the Constitution of the United States.
They were issued for a valid consideration.
Having the just stated essentials, they are fundable.
The delay is as much of the State as of Hope & Co.
It is stated that the settlement, from the necessity of imputing payment, is exceedingly difficult, if not impossible.
It is admitted by all parties that prior to funding, the balance due by the State must be established. The evidence is all before the court. It only remains to calculate the interest and to deduct the credit to which the State has a right.
*750The defendants argue, with great earnestness, that the plaintiffs have been paid; that the large amount remitted to and received by them must be credited on the bond, also the uncollected assets, and the $85,000 in bank. [This will receive further attention hereafter in our decision.]
It is admitted that the coupons and the interest warrants are not fundable.
* -* *- * 3* * *
Plaintiffs, assuming that there is absolute similarity between the obligation on the bonds issued by the Consolidated Association of Planters of Louisiana, and those held by them, the decisions rendered affecting the latter are quoted as applying to the former.
The similarity is not complete. The bonds are not entirely similar, at any rate in so far as relates to the indorsement.
The indorsement of the Citizens Bank bonds was made with reference to the responsibility of the bank, and binds it to pay principal and interest. The special indorsement on the bonds of the Association of Planters is limited to interest.
But this is' not the only difference; that just mentioned is of. minor importance.
There is a special admission by plaintiffs “that the bonds were issued by the State .of Louisiana in aid of the Citizens Bank, under Act of January 30, 1836.”
Thus making part of, and reading into, the contract that “the faith of the State is hereby pledged for the security of the said sum.” Act of January 30, 1836.
In the act in aid of the Consolidated Association of the Planters of Louisiana, “the faith of the State was pledged for the reimbursement of the capital,” and their bonds were made accordingly.
The holders of the last bonds did not enter into transactions and compromise, and did not make admissions virtually embodying the statute in the contract.
The State never was called upon for the payment of these bonds.
No appropriation was made to pay these bonds, nor has there ever been, at any time previously, in legislative proceedings, any statement made of a principal obligation.
With reference to interest which, by time and by calculating in*751terest upon interest, without authority from the State, has increased to a large amount:
If this had been a strictly principal obligation, on the part of the State, there would not have been the least right, on the part of the security, to calculate interest on interest; to make settlements; fix amount of the indebtedness, and issue warrants covering unpaid coupons. These are acts of a principal, not of a surety.
The authority of the bank to compute interest, as was done, is not at issue, and therefore there is no necessity of discussing its legality and binding effect. It is only mentioned as an evidence of the individual settlement made by the bank with Hope & Co.
The plaintiffs, by those transactions and the compromise made, carried out the express terms of the statute of 1886, “ that both the capital and interest of said bonds shall be paid by the bank, at the time they shall become due.”
It is not out of place to now mention that the provisions of the act in this respect wás carried out in the indorsement.
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It is contended by plaintiffs that the State, in exacting, in 1842j better management on the part of the bank, assumed thereby the responsibility of a principal.
That the surety who takes possession of the property of his principal to pay the creditor, becomes the principal debtor.
The bank’s assets remained under the State’s supervisory control from 1842 to 1858 (not to the present time, as stated by counsel).
The bank’s condition, at the time, made this control necessary.
The State only enforced its laws relative to insolvent banks.
It was an act of administration which the court, at that time, char- ' acterized as conservative and proper.
The Citizens Bank has been in possession of all its assets all these years.
Plaintiffs are its correspondents.
They have transacted with it and have made important agreements. They are estopped from alleging that the State is in possession of the bank’s assets.
* * * * * * * *
The amount of the State’s responsibility must be determined.
In the act of compromise of 1880, plaintiffs assumed that the State had released the cash department. In this there was error.
*752She only granted certain rights and privileges to certain shareholders.
Acting upon, this erroneous assumption, plaintiffs consented never to sue for, nor recover, any sum from the bank on its indorsement or on account of the bonds, other than that realized from the mortgage department.
The plaintiffs have elected to be paid from the amounts realized, and to be realized, by the mortgage department. They consented in 1880 to transfer the $500,000 of mortgage stock assets of actual value, not exceeding $300,000, to the cash banking department.
This amount should have been applied to the payment of plaintiffs’ bonds. By their instrumentality it was not paid.
The plaintiffs and the bank applied to another purpose an amount Which should have been applied to the release pro tanto of the State’s obligation. The bank itself was released from accounting for or paying any but the amounts realized from the mortgage stock department. Both these values were fixed at $300,000.
To the extent of the release and the loss to the State, the plaintiffs should be charged.
It is contended that the bank department advanced $682,430.61, which stood as an offset, at the time of the compromise and by its terms.
Keeping due account of the bank’s responsibility to its cash shareholders, there remains a release and consequent discharge at least equal to the $300,000. To that amount the State has a right to credit. The debits and credits of neither department could be changed, so as to result in $500,000 stock mortgage being applied to any purpose other than that agreed upon.
To the extent of the change made to the State’s loss credit must be given. 11 An. 179; 13 An. 57; 16 An. 357; 29 An. 844; 42 An. 266; Laurent, Vol. 28, Sec. 306; Troplong, verbo Cautionment, Sec. 527.
* * * * *
An admission is made with reference to the assets now in bank, viz., $800,000 in securities and $85,000 cash, which binds all parties, viz., “ that there is still on hand applicable to the payment of the aforesaid bonds,” and “that the value of said assets and property applicable to the payment of said bonds is about $800,000.” This includes the mortgage securities.
*753The plaintiffs not only asssumed the control, but the ownership of these assets.
The cash, $85,000, should be at once remitted.
Relative to these assets, it is admitted that there is still on hand applicable to the payment of the aforesaid bonds “ a large amount of mortgage stock,” etc. These should also be charged.
It is argued, by plaintiffs’ counsel, that the indebtedness of the State has not yet matured on the bonds, and that, in consequence, the amount in plaintiffs’ possession should not be applied to their payment, except the balance, after the matured debts will have been paid.
In electing to avail themselves of the offer' to fund, their claims have been made to mature.
The exchanges of old bonds for the new can be made only on the basis of matured claims.
The plaintiffs, by granting time for payment, which they now wish to revoke, can not thereby be placed in better position than if no time had been given.
The Board of Liquidation can only be concerned about the claims to be funded.
They can require proper credits to be made on the claims offered, otherwise they would be placed in the position of having to fund claims regardless of payments made.
They can not apply the amounts received to other bonds or claims than those offered to be funded.
These assets can not be retained or applied to the payment of debts other than those for which they are held.
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In the articles of compromise of 1880, the amount of $133,333.33 figures as an item of indebtedness of the State.
That amount can not be charged against the State. The State is not obligated to its payment.¡
For the guarantee of the bonds remitted by the State, all the securities granted by the act of incorporation of the bank are transferred to the State and the holders of the bonds.
This amount was due when the State loaned its credit, and is, therefore, not included in the second amount, i. e., the amount for which the State became bound.
The State loaned its name for the payment of all sums loaned *754under the act of 1836, provided all stock mortgages issued were held for its protection. This excludes an amount loaned prior to the pledge of these securities to the State. The pledge of the securities and the rights of the State in this respect were fixed and upheld.
* sfs :j: :f:
The warrants for extended coupons can not be funded under the statute, nor should part of the amounthn plaintiffs’ hands, not applied, be imputed to their payment.
To all intent and purposes the funding shall be made as if the parties had presented themselves in 1874 to fund their claims.
The State did not have at the time the needful cash for payment. A large sum was realized years afterward.
Owing to plaintiffs’ act in applying to fund, they placed the funded indebtedness on a better basis for collection than the other (the claims not fundable).
. The payment should be imputed to the debt which the debtor had at the time of payment most interest in discharging. O. O. 2165.
During the'eighties, when the remittances'were made, the State had the most interest in discharging the consols and the coupons accompanying.
We recapitulate as follows:
Capital, January 1, 1874, $2,411,175.88; interest thereon, to be calculated from said date to January 1, 1880, less interest coupons due 1st of January, 1880, at 7 per cent.; from last mentioned date, interest to be calculated at 2 per cent, to January, 1885; and from that date at 4 per cent.
Three hundred thousand are credited.
The bonds and the interest thereon are subject to other credits, aggregating $2,060,466.35, remitted at different dates, from January 25, 1881, to December 25, 1890. R., pages 81, 82, 83 and 84.
Another credit of $885,000, from date of funding.
Under this view of the case, the claim should be settled on the following basis: Plaintiffs should be credited with the total amount of the consolidated bonds which they would have received for their bonds on January 1, 1874, being $2,411,175.88, in principal, and the interest thereon, according to the terms of the bonds and the law, calculated up to the date of actual funding.
Against this they should be charged with the following debts, viz.:
1. With the total amount of cash collected by them, $2,060,466.35, *755■with legal interest calculated thereon from date of each payment to the day of funding.
2. With the $300,000 (applied differently, by compromise of April 8, 1880, .from the requirement of statutes and terms of agreements made).
3. With the $85,000 cash on hand in the bank; and—
4. With the eight hundred thousand dollars ($800,000) values of the securities remaining, as admitted by the parties.
When a balance is struck between these credits and debits, this balance will be the amount for which the Board of Liquidation should issue to plaintiffs’ consolidated bonds, with all coupons for interest prior to date of funding cut off and cancelled upon the surrender to the State by plaintiffs of the bonds held by them. It is, therefore, ordered, adjudged and decreed, that the judgment appealed from be annulled, avoided and reversed, and it is now ordered, adjudged and decreed, that the Board of Liquidation be ordered to settle and liquidate the claim of plaintiffs in accordance with the foregoing statement, and, on surrender of the bonds presented and held by plaintiffs, to issue to them consolidated bonds for the resulting balance, without the coupons attached thereto prior to date of funding, which shall be cut off and cancelled; and that on the issuance of said bonds to the plaintiffs, the State be subrogated to the rights of the plaintiffs of whatever nature against the Citizens Bank.
Appellees to pay costs of both courts.