Excerpt from Mississippi Law Journal, Vol. 7: December, 1934

These bonds had been donated to South Dakota as a gift by Schafer Brothers, New York brokers who held most of the North Carolina bonds then outstanding and which had not been turned in for adjustment following the attempt of the state, in 1879, to rehabilitate its credit. In anticipation of the gift the South Dakota legislature had passed an act authorizing the acceptance of such donations from private individuals and the right of the state to bring suit to enforce collection if this should be necessary.

The bonds in question had been issued in 1867 by authority of the legislature of North Carolina for the primary purpose of providing funds for the completion of the Western North Carolina Railroad, a venture in which the state had an interest by reason of the ownership of stock. In 1849, the state had chartered the North Carolina Railroad Co. With shares of stock at $100 each, two-thirds of which were subscribed by the state. Bonds secured by the stock were issued in payment. The bonds of the second series, issued in 1867, were secured by a mortgage on the stock which, the state held in the North Carolina Railroad. With each several bond a deed of mortgage for an equal amount of stock was executed and delivered.

In 1879, the credit of the state had become so poor that commissioners were appointed to call in the outstanding bonds and make an equitable, adjustment. Most of the bonds had been compromised and the holders had taken losses. Schafer Brothers held the majority of the original bonds still outstanding and had given ten of these, of the 1867 issue, to the State of South Dakota. Issued for a term of thirty years they were now past due. North Carolina in its answer to the bill denied both the jurisdiction of the Court and) the title of the plaintiff.

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