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a disclaimer of further liability but with a covenant positive and uncon ditional to make that income adequate, would not, on failure to fulfil such covenant, give a right of action ? The parts of the agreement might not be very consistent; and questions might arise which should prevail But as to the moral obligation to repay the money, especially if the reduction of the income was subsequently made from considerations of policy and interest, could a doubt remain : The state cannot be compelled to pay. It can assume no obligation but that of honor and morality—and if this provision is to be considered as the inducement to the advance, and public expediency or necessity should hereafter requirea reduction of the canal tolls, and this revenue should prove insufficient, L what reputable man would say that the state was not bound by as high an obligation as it could assume, to refund the moneys applied, under this agreement, to its benefit If there is the constitutional power to make this contract, whether the revenue pledged be sufficient or not, the money must be repaid. It is a debt; to refuse to pay it by such resources as the state shall possess, is repudiation.

CONCLUSION.

My letter has already extended so far beyond my intentions, that I cannot discuss, as I desire, the questions of expediency, administrative policy and public morality involved. I can scarcely allude to them.

This anticipation of the surplus revenues is without the pretence of necessity. The canal, well administered, is more than amply adequate to do all its business. If we have not now the enlarged locks and other improvements contemplated by the committee and the convention, and are not actually using the boat of 120 tons instead of 80, it is simply because those who have expended the Four millions which have been applied to the completion of the public works since the new constitution, and which were far more than adequate to these purposes, have chosen to expend it in the improvident and inefficient manner which characterized the disastrous policy of 1841.—How far a reduction of freight would result from this new expenditure of nine millions, beyond what would be effected by the use of the boat of one hundred and twenty tons, is conjecture. No sufficiently reliable estimates or evidences have been adduced; nor have we any reason to hope from former experience or from the mode in which the four millions have been recently expended, that there would be much wisdom in the application of the proposed loan. We have, therefore, no inducements to re-enter upon the debtor system that proved so ruinous before. It is dangerous to part, as the bill does, with our discretion in the regulation of the tolls —a discretion which the Convention dared not to tamper with, and more so to establish a fixed rule, as the bill also does, which, if it have any effect, must introduce fluctuations, vexations to the transporters and hazardous to the revenues. It is of very doubtful morality for the state to obtain money on mortgages for which it disavows its general liability, inducing the lender to take the securities under the promise to afterwards invest in them moneys which it holds as trustee. Thére are other not less grave objections to this bill.

It would be a calamity to the state, and to the country, to break down the barriers with which our new constitution has surrounded the credit of the state— to reverse the example which we have set, and, returning to a career of individual oppression and social dishonor, inflict the inevitable consequences, not only upon ourselves, but upon other states and our posterity. It is pleasant to borrow. It is easy to spend. It is hard to pay. Stringent as the present constitution was said to be in providing for our debt, we have reduced its amount, in four years of prosperity, but four hundred thousand dollars In the first moment of expansion and of speculative feeling, we propose to increase that debt nine millions ! Constitutional obligations, formed after years of controversy—and in the bitter experience of errors, against the repetition of which they were intended to secure us—agreed to by a vast majority of all parties in the Convention assembled to enact them, and adopted by the vote of nearly the whole people, have not the slightest power to restrain us. The consequences I cannot now trace. If folly and madness are to guide our councils, I study not the future they will form for us. I do not believe that it is inevitable. I look confidently to our true-hearted friends in the Senate. I rely upon the people—their wisdom, honor and morality.

Very truly, your friend,
WM. CASSIDY, Esq. S. J. TILDEN.

Letter from John A. Dix,

NEw York, April 3rd, 1851. Dear Sir—Your favor addressed to me here, was received while I was at my residence in Westchester county, and I regret that it did not reach me in time to enable me to state in detail my opinion in respect to the bill “to provide for the completion of the Erie Canal Enlargement, and the Genesee Valley and Black River Canals.” I have examined the bill, together with the report of the Committee on Canals and the opinion of Mr. Spencer, with as much care as the little time at my disposal would permit. My first impression, when the proposition was originally made, was, that the creation of a debt by the issue of certificates to be paid out of the surplus revenues of the canals hereafter to accrue, was a debt within the scope of the constitutional prohibition; and nothing contained in the papers referred to, has changed or weakened that impression. That these certificates constitute a debt, no one, it seems to me, can deny, excepting upon the narrowest verbal distinctions. The canals are declared by the constitution to be “the property of the state;” the Legislature is expressly forbidden to “sell, lease, or otherwise dispose of any” of them. The bill proposes a scheme for raising money to enlarge one of these canals, and to complete two others; and the revenues to be derived from them are pledged to the reimbursement of the money so to be raised. The money is to be expended for the improvement of the public property, and with a view to the augmentation of its productiveness; and yet it is denied that a debt is created, and more than intimated, that if the revenues on which the ultimate payment of these certificates are charged, should prove insufficient for the purpose, the only remedy for the leaders would be, an equitable claim to the benevolence or charity of the Legislature. These views strike me as exceedingly narrow, and altogether inconsistent with any fair construction of those portions of the constitution which concern the payment of existing, or the creation of future, debts. The certificates authorized by the bill to be issued, acknowledge the deposit of given sums, and entitle the depositor to receive the interest, and ultimately the principal, out of the surplus revenues of the canals. Every condition essential to the creation of a debt is fulfilled. There is a lender, a sum loaned, and a borrower; and, what is not absolutely essential, a fund belonging to the borrower, pledged to the re-payment of the loan. The state stands, in every legal and equitable relation, excepting as respects the remedy, upon the ground of a private borrower, hypothecating the income of a specific fund for the payment of his debt. If the state were to receive deposits of money in the manner authorized by the first section of the bill, and were to issue certificates to the depositors, payable out of any moneys in the Treasury, after a limited time, would it be contended that no debt was thereby created ? Certainly not. With what propriety, then, can it be contended that no debt is created, merely because the depositors are to be reimbursed from the proceeds or income of a particular fund ! The fallacy of Mr. Spencer's argument arises from the fact of treating the hypothecation or pledge of the canal revenues as a sale, in violation of all reasonable analogies. If an individual were to borrow, or receive on deposit, (to use the crafty phraseology of the bill,) a sum of money, and were to give the lender or depositor a certificate of indebtedness, payable out of the interest of a bond and mortgage, or

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rents and profits of a farm, there would, according to Mr. Spencer's reasoning, be no debt, but a mere sale, creating no indebtedness. Moreover, if, as is contended, it be a sale, the very grave question arises, whether a sale of the revenues of the canals is not a virtual sale, for the time being, of the canals themselves, and therefore in conflict with that provision of the constitution which prohibits the Legislature from selling or otherwise disposing of them. You have, no doubt, observed, that it is a common mistake in lawyers, whose intellects (if I may so express myself), have been oversharpened by keen practice to apply to the great business of states, the same technicalities which govern individual transactions. Partaking strongly, as the argument in favor of the bill does, of this fallacy, it seems to me, even upon the narrowest technical view of the subject, to have failed in its purpose. It is well known to the people of the state (for the circumstances which led to a revision of the constitution are too recent to be forgotten) that the two great objects in view, were to provide for the payment of existing debts, and prevent the contraction of new pecuniary liabilities, without the previous sanction of a popular vote. Both these objects were supposed to have been accomplished. The debts of the state were provided for, by setting apart specific portions of the canal revenue for their liquidation; and no further debts, excepting such as were particularly specified, were to be contracted without, submitting to the people a law imposing a tax for their payment. After making provision for these and other kindred objects, the surplus revenues of the canals were to be applied to the completion of the Erie Canal enlargement, and the Genessee Valley and Black River Canals. All these provisions are to be taken together, and to receive a reasonable interpretation ; and I feel justified in saying, from my own knowledge of the events out of which the amended constitution grew, and of the debates in the convention which revised it, that a proposition to anticipate the revenues of the canals by pledging them in the manner proposed by the bill, to the payment of moneys to be borrowed or received on deposit, for the more speedy enlargement of the Erie Canal, or the more speedy completion of the Genesee Valley and Black River Canals, would have been rejected by at least as large a vote as that by which the restrictions on the power of the Legislature to borrow money were adopted. It is eminently to be desired, that all these works should be completed at the earliest day practicable, consistently with a faithful adherence to the requirements of the constitution—those especially which concern the preservation of the public faith, and the fulfilment of its pecuniary obligations. But I doubt exceedingly, viewing the question in that light alone, whether either of those works would be benefitted in the end, by the measures proposed. On the contrary, apart from all constitutional impediments, there is reason to apprehend that a further increase of the pecuniary liabilities of the state, direct or indirect, legal or equitable, absolute or contingent, would defeat the very ends in view, by impairing the credit of the state, and diminishing the value of its public securities. There is another point of view under which the subject is to be considered. It is contended that the state, by the issue of the proposed certificates, will incur no obligation, excepting that of applying the surplus revenues of the canals to their redemption. In other words, the state is to receive money from individuals, and apply it to its own use, without incurring any obligation to refund it, if the revenues should fail. In an individual transaction, a court might not hold the party thus benefitted responsible, if he had taken the precaution to fence himself in with the disclaimers of liability contained in the bill. But in a public transaction, there can be no doubt as to the general judgment which would be pronounced upon it. The state would be liable, under any fair and equitable view of the subject. It is difficult to conceive how a statesman should take a different view of the rule of public obligation. For all practical o. the disclaimers contained in the bill, as to the state's liability, may be regarded as near akin to those declarations which railroad and steamboat companies sometimes make: that they will not be answerable for articles transported by them, though the law holds them responsible as common carriers. Will it be admitted that the state is equitably, though not legally, bound to refund these loans or deposits 2 This admission would involve the absurd conclusion, that the restrictions in the constitution were designed to prevent the contraction of legal,

and not equitable, debts. There is one view, indeed, under which the state would not be liable to repay those loans or deposits—that the certificates were issued in violation of the constitution. This is my view of the subject. I should, nevertheless, hesitate long, before I could consent to place the defence of the state against them, on a ground which would call in question the intelligence or good faith of the Legislature. The reputation of the state is vitally concerned in the maintenance of its credit; and it would be a painful alternative, to escape a pecuniary liability for money expended for its own benefit, by impeaching the deliberate action of the Legistature, as unwarranted by the unconstitutional compact. Under any point of view in which it can be considered, I cannot doubt that the people of the state, when they shall have had time to examine the measure under review, will regard it as a device to evade the salutary restraints of the constitution, by embarking in a system of disbursements, against which those restraints were expressly designed to guard. And it is worthy of the serious reflection of every legislator who is to pass judgment upon the measure, that the restrictions referred to were pressed upon the convention by Mr. Hoffman, who framed them, for fear, to use his own language, that “the Legislature might, without them, in some way or other, by some contrivance, take these [canal] revenues, instead of resorting to direct taxation.” “Unless we make some provision of the kind,” he added, “there will be large debts, and these debts will fasten themselves upon the future surpluses of the canals.” The very “contrivance” which he deprecated, and against which the proposed restrictions, adopted by the convention, under the influence of his reasonings, were intended to protect the revenues of the canals, has, after the lapse of five years, found form and vitality in the bill before you. There is one point more on which I cannot forbear to say a single word. It is the opinion of every sound financier with whom I have conversed, that the use authorized to be made of the proposed certificates as a basis for the circulation of bank paper, is uncalled for by any public necessity, and dangerous in its tendency. The paper currency is already greatly inflated—so much so that a disastrous reaction, at no distant day, is regarded by many as highly probable, if not certain. Under these circumstances, fair business men deprecate all further expansion. Indeed, I believe very few persons in this section of the state, excepting speculators, regard this provision of the bill with favor. I regret that I have not time to elaborate or enlarge on these views, as I am just going again into the country. I can only add, that the friends of a sound and solvent system of finance, seem to be periodically called on to resist schemes to involve the state in new expenditures, to the great detriment of its interests and credit. What: ever may be the fate of the bill, I earnestly hope our political friends may be united and firm in resisting it. How much cause should we not have to congratulate ourselves, seeing that our opponents have the majority in both branches of the Legislature, if the sound men of both parties, disregarding minor distinctions, would range themselves on the side of the constitution, and of a prudent administration of our finances, and maintain for our great and noble state, the high character she has earned, of late years, as a carful guardian of her own caredit, and a regulator, by the influence of her example, of the financial systems of her sister states. I am, dear sir, in haste, truly yours, Hon. D. C. L.E ROY, JOHN A. DIX.

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