The Railroad Bonds Stanly County Tried Not to Pay
In 1890 the county borrowed $100,000 to bring a railroad to Albemarle. Seven years later it stopped paying, and the fight that followed went all the way to the United States Supreme Court.
Volume 190 of the United States Reports contains a case with a familiar name: Board of Commissioners of Stanly County v. Coler. It was argued in Washington on April 27 and 28, 1903, and decided on June 1. The question was whether Stanly County had to pay $100,000 in bonds it had issued thirteen years earlier to help build the Yadkin Railroad from Salisbury to Norwood. North Carolina’s own Supreme Court had said the bonds were void. The United States Supreme Court said the county had to pay anyway.
It is an old case about an obscure point of legislative procedure, but it explains a great deal about how Stanly County got its first railroad, what that cost, and how a rural county found itself across the courtroom from the best-known bond lawyer in America. This account is drawn from the published court opinions. It is history, not legal advice.
A county that wanted a railroad
In 1880 Stanly County had 10,505 people and not a mile of railroad. Cotton, grain and lumber went out by wagon, and everything a store sold came in the same way. A company called the Yadkin Railroad had held a state charter since April 5, 1871, with authority to build from Salisbury toward the lines near Wadesboro, but in nearly twenty years it had laid no track.
The idea revived in the mid-1880s. A history of the line records that a group of businessmen and railroad men met in Salisbury on August 31, 1886 to discuss a road to Albemarle, and that the meeting was cut short when the Charleston earthquake shook the building that night. The following winter the promoters went to the legislature. An act ratified on March 3, 1887 amended the old charter so that counties, towns and townships along the route could buy stock in the company, paying with bonds, if their voters approved.
That was the standard way to finance a branch railroad in the nineteenth-century South. The county issued bonds and handed them to the railroad in exchange for shares. The railroad sold the bonds to investors for cash and built the line. The county taxed its property owners each year to pay the bondholders their interest, and hoped the railroad would raise land values and trade by more than the tax cost.
The vote and the bonds
Stanly County voted on August 15, 1889. The question was whether to subscribe $100,000 to the capital stock of the Yadkin Railroad Company, and a federal judge later described the result as an overwhelming majority in favor. Rowan County’s townships voted the next month. Salisbury approved its $50,000 share by 703 votes to 7, Gold Hill and Morgan townships also approved, and Providence Township refused, 121 to 10.
The Stanly bonds were dated July 1, 1890. There were 120 of them: eighty for $1,000 each and forty for $500 each. They paid six percent interest, due each July 1 at the First National Bank of Salisbury, and the principal was due on July 1, 1920. Each bond carried a printed statement, which lawyers call a recital, that it was issued under the act of March 3, 1887 and sections 1996 to 1999 of the North Carolina Code and had been approved by the voters on August 15, 1889. Those few lines of print would decide the case.
The county delivered the bonds to the railroad and received stock certificates in return. The railroad sold the bonds on the open market. Among the buyers, the federal court later noted, were the trustees of the University of North Carolina. A large block ended up with W. N. Coler & Company, a New York firm that dealt in municipal bonds.
The railroad arrives
With the subscriptions in hand, the Richmond & Danville Railroad, the system that would become the core of the Southern Railway, took control of the Yadkin company and paid for construction. Work ran from November 1890 to September 1891. The first ticket on the line was sold at the new depot in Rockwell on December 20, 1890, and by the end of 1891 trains were running the whole distance from Salisbury through Gold Hill, New London and Albemarle to Norwood. The state Railroad Commission’s first annual report listed the line at 41.15 miles. A planned extension to Wadesboro was never built.
The county levied a special tax, collected it, and paid the interest. Then, in 1897, it stopped.
The flaw in the journal
The trouble lay in how the 1887 act had passed the legislature. North Carolina’s constitution of 1868 contained a strict rule in Article II, section 14. No law allowing the state, or any county, city or town, to borrow money or levy a tax for it could pass unless the bill was read three separate times in each house, on three different days, and unless the yeas and nays on the second and third readings were entered on the journal. The point was to force a recorded vote, so that every legislator who voted to put the public in debt could be named.
In 1896 the state Supreme Court held that this rule meant what it said, and that a bond act passed without the recorded votes was no law at all. Lawyers across the state went to the legislative journals. The journal for 1887 showed that the Yadkin Railroad bill had its yeas and nays recorded on the second reading, on February 26, but not on the third, on February 28. The original 1871 charter was worse: it had passed its second and third readings on the same day, April 3, with no recorded vote on either.
Round one: the county sues its own treasurer
In 1897 the Board of Commissioners, joined by two taxpayers, James P. Nash and G. K. McCain, went to Stanly County Superior Court. The defendant was the county treasurer, Isaiah W. Snuggs, who was holding the tax money collected for the interest due on July 1, 1897 and was about to pay it out. They asked the court to forbid him.
Snuggs was one of the best-known men in the county. Born near Norwood in 1846, he had joined the Confederate army at seventeen and lost a leg at Spotsylvania Court House in May 1864. He had been register of deeds and sheriff before he was treasurer, and his house on North Third Street in Albemarle is now a museum. In the lawsuit he stood in for the absent bondholders, and distinguished counsel argued his side. But the people with the most to lose, the investors in New York and elsewhere, were not parties to the case.
The Supreme Court of North Carolina decided Commissioners of Stanly County v. Snuggs at its September term, 1897. Justice Walter A. Montgomery wrote that the constitutional rule was mandatory, that the journal could be used to prove it had been broken, and that the omission was, in the court’s words, “absolutely fatal to the validity of the Act.” Nor could the bonds be saved by the general law in the Code that let counties aid railroads, because the court read that law as covering only the completion of roads begun before 1868. Chief Justice William T. Faircloth dissented. He pointed out that the county had issued the bonds, taken the stock and paid interest for years without complaint. The injunction stood. As far as North Carolina’s courts were concerned, Stanly County owed nothing.
Rounds two to four: the bondholders go federal
The bondholders had a different court available. Because Coler & Company were citizens of New York suing a North Carolina county, they could sue in federal court, and in 1898 they did. They asked the U.S. Circuit Court for the Western District of North Carolina to order the $6,000 of tax money in the treasurer’s hands held for the coupons, starting with the $3,870 due on their own bonds.
Judge Charles H. Simonton ruled for them on August 12, 1898. The bondholders had not been parties to the state suit, he reasoned, and so were not bound by it. They had bought their bonds on the open market before the state court changed course, relying on what the bonds said on their face. He appointed Kerr Craige as receiver to hold the money. A year later, on August 11, 1899, the Fourth Circuit Court of Appeals reversed him. Judge Nathan Goff wrote that a federal court must follow a state’s highest court on whether that state’s statutes were validly enacted.
Then the ground shifted again. In 1901 the U.S. Supreme Court decided a sister case from the northwestern part of the state, Wilkes County v. Coler, involving the same New York firm and the same constitutional flaw. The Fourth Circuit reheard the Stanly case, and in 1902 it changed its mind and affirmed Judge Simonton’s original decree. Stanly County took the last step available and asked the Supreme Court of the United States to hear it.
Commissioners v. Snuggs, 121 N.C. 394
The 1887 act never validly passed because the yeas and nays on its third reading were not entered on the journal. The Code did not authorize the bonds either. The treasurer is enjoined from paying interest. Chief Justice Faircloth dissents.
Coler v. Board of Commissioners, 89 F. 257
Judge Simonton holds that out-of-state buyers who were not parties to the state case are not bound by it. He freezes the tax fund and appoints Kerr Craige receiver.
Board of Commissioners v. Coler, 96 F. 284
Judge Goff reverses. Federal courts must accept the state supreme court’s ruling that the act is void. The bill is to be dismissed.
On rehearing, 113 F. 705
After the U.S. Supreme Court’s decision in Wilkes County v. Coler (1901), the court of appeals rehears the case and affirms the original decree for the bondholders.
Stanly County v. Coler, 190 U.S. 437
Justice McKenna: the 1887 act is void, as the state court said, but the Code independently authorized the subscription, and honest purchasers were entitled to rely on the recitals printed on the bonds. Decree affirmed.
| Decided | Court | Citation | Opinion by | Winner |
|---|---|---|---|---|
| Sept. term 1897 | Supreme Court of North Carolina | 121 N.C. 394 | Montgomery, J. | County |
| Aug. 12, 1898 | U.S. Circuit Court, W.D.N.C. | 89 F. 257 | Simonton, J. | Bondholders |
| Aug. 11, 1899 | U.S. Court of Appeals, Fourth Circuit | 96 F. 284 | Goff, J. | County |
| 1902 | U.S. Court of Appeals, Fourth Circuit (rehearing) | 113 F. 705 | — | Bondholders |
| June 1, 1903 | Supreme Court of the United States | 190 U.S. 437 | McKenna, J. | Bondholders |
Round five: Washington, 1903
The lawyers who stood up in the old Senate chamber of the Capitol, where the Supreme Court then sat, were a measure of what was at stake. For the county appeared James E. Shepherd, a former chief justice of North Carolina, and Alphonso C. Avery, a former associate justice of the same court, with C. M. Busbee of Raleigh on the brief. For the bondholders appeared John F. Dillon of New York. Dillon had been chief justice of Iowa and a federal circuit judge, and his treatise on municipal corporations was the book every court in the country consulted on questions of local government debt. The rule that local governments have only the powers a legislature gives them is still called Dillon’s Rule.
Justice Joseph McKenna delivered the opinion on June 1, 1903. On the first question the county won. The Supreme Court accepted, as it had in the Wilkes County case, that North Carolina’s judges had the last word on whether a North Carolina statute had been properly enacted. The act of March 3, 1887 was void.
But the bonds had recited a second source of authority: sections 1996 to 1999 of the Code, the general law allowing counties to subscribe to railroad stock after a vote of the people. The state court had read those sections narrowly, after the bonds were sold. The Supreme Court held that on that question it was entitled to read the statute for itself, and it read the sections as broad enough to cover the Yadkin Railroad. And it held that people who had bought the bonds in good faith, for value, before any court had questioned them, were entitled to take the county at its printed word. “We may rest the validity of the bonds,” McKenna wrote, “on the right of a bona fide holder, from their recitals.” The decree was affirmed.
What it cost, and what it bought
The arithmetic of the bonds is simple. Six percent on $100,000 is $6,000 a year. Over the thirty-year life of the bonds that is $180,000 in interest, on top of the $100,000 of principal due in 1920, for a total of $280,000. When the bonds were issued the county had 12,136 people, so the principal alone came to a little over eight dollars for every man, woman and child.
The bond clock
Drag the slider through the life of the bonds, from 1890 to 1920, to see how the interest added up at six percent a year.
Simple arithmetic on the terms stated in the court record: $100,000 at six percent, interest payable annually, principal due July 1, 1920. It does not show what the county actually paid in any year.
What the county got for it is harder to put a number on, but it was not small. The railroad reached Albemarle in 1891. Wiscassett Mills was founded there in 1898, and other mills followed. The county’s population, which had grown by about 1,600 in the 1880s, grew by more than 3,000 in the 1890s and by nearly 4,700 in the decade after that. By 1927 the Yadkin line was hauling 414,000 tons of freight a year, including 38,000 bales of cotton to the Albemarle mills.
The railroad itself had a quieter end. Passenger trains stopped on December 2, 1928 and were replaced by a bus. The section from Albemarle to Norwood, which by then ran alongside the newer Winston-Salem Southbound, was abandoned in August 1938 and taken up by that November. The rest of the line passed back into the Southern Railway system in 1951, and in recent years a remnant has still carried freight south from Salisbury. Our pages on gold, railroads and industry and the history of Albemarle pick up the story from there.
The law in plain words
The case turns on a handful of legal ideas. Tap each card for a short explanation.
For lawyers the Stanly case is a small landmark in a large and long-settled field. For the county it meant that a promise printed on 120 pieces of paper in 1890 had to be kept, even though the legislature had made a procedural mistake the county knew nothing about when its voters went to the polls.
Quick quiz: Stanly County v. Coler
What were the bonds for?
Why did the state court call the bonds void?
Who won at the U.S. Supreme Court?
Questions and answers
What was Stanly County v. Coler about?
It was a 1903 U.S. Supreme Court case, reported at 190 U.S. 437, over whether Stanly County, North Carolina had to pay $100,000 in bonds issued in 1890 to buy stock in the Yadkin Railroad. The court held that good-faith purchasers could enforce the bonds.
Why did Stanly County stop paying its railroad bonds?
In 1897 the county commissioners argued that the 1887 state law authorizing the bonds was void because the legislature had not recorded the yeas and nays on its third reading, as the North Carolina constitution required. The state Supreme Court agreed.
Who was Coler?
W. N. Coler and Company was a New York firm that dealt in municipal bonds. It held 48 of the $1,000 bonds and 33 of the $500 bonds and sued the county in federal court in 1898.
When did the railroad reach Albemarle?
The Yadkin Railroad was built from Salisbury to Norwood between November 1890 and September 1891, passing through Albemarle.
Is the Yadkin Railroad still there?
Part of it. The Albemarle-to-Norwood section was abandoned in 1938. A remnant of the northern section still carries freight south from Salisbury.
Sources
- Board of Commissioners of Stanly County v. Coler, 190 U.S. 437 (1903). Cornell Legal Information Institute; official report, govinfo.gov.
- Commissioners of Stanly County v. Snuggs, 121 N.C. 394, 28 S.E. 539 (1897). Harvard Caselaw Access Project.
- Coler v. Board of Commissioners of Stanly County, 89 F. 257 (C.C.W.D.N.C. 1898).
- Board of Commissioners of Stanly County v. Coler, 96 F. 284 (4th Cir. 1899); on rehearing, 113 F. 705 (4th Cir. 1902).
- Wilkes County v. Coler, 180 U.S. 506 (1901).
- J. D. Lewis, “North Carolina Railroads: Yadkin Railroad,” Carolana, citing the First Annual Report of the North Carolina Railroad Commission (1891) and Rowan County records.
- Tony Hill, “Stanly County and Its Railroads,” Frograil Rail Tours; Dan Robie, “Yadkin Railroad: Southern Railway Albemarle Branch,” WVNC Rails.
- Stanly News & Press, “Throwback Thursday: Isaiah ‘Buck’ Snuggs”; National Register of Historic Places, Isaiah Wilson Snugs House and Marks House, listed March 9, 1995.
- Stanly County Museum, “Maps showing the Land Owned by the Yadkin Railroad in Stanly County, North Carolina” (1890), via the Digital Public Library of America.
- U.S. Census Bureau, decennial population counts for Stanly County, 1870–1920.
The court reports do not give the vote totals from Stanly County’s election of August 15, 1889, and they describe the years in which interest was paid in slightly different ways: the state court says interest was paid regularly until the installment due July 1, 1897, while the federal courts say a tax was levied and paid for four years. The county commissioners’ minutes for 1889 to 1903 would settle both points. If you have worked with them, we would like to hear from you through the About page.
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Photo and image credits (12)
The Fuller Court, U.S. Supreme Court justices, about 1904 — Unknown photographer, about 1904 / Wikimedia Commons, public domain
Blueprint map of Yadkin Railroad right-of-way in Stanly County, 1890 — Stanly County Museum via Digital Public Library of America / Wikimedia Commons, public domain
Second blueprint sheet of Yadkin Railroad maps, 1890 — Stanly County Museum via Digital Public Library of America / Wikimedia Commons, public domain
Railroad map of North Carolina, 1900 — H. C. Brown / Library of Congress via Wikimedia Commons, public domain
Interior of the 1908 Salisbury passenger station — State Library of North Carolina / Wikimedia Commons, public domain
Panoramic view of Albemarle around 1915 — Unknown author / Wikimedia Commons, public domain
Stanly County Court House on a 1923 postcard — Stanly County Museum via Digital Public Library of America / Wikimedia Commons, public domain
Isaiah Wilson Snuggs House, Albemarle — Jerrye & Roy Klotz, MD / Wikimedia Commons, CC BY-SA 3.0
Justice Joseph McKenna — Wikimedia Commons, public domain
John Forrest Dillon — Annals of Iowa, 1909 / Wikimedia Commons, public domain
James E. Shepherd — The Green Bag, 1892 / Wikimedia Commons, public domain
Alphonso Calhoun Avery — The Green Bag, 1892 / Wikimedia Commons, public domain
Charts, tables, timelines and map overlays: original work by The Stanly County Guide. Basemap tiles © Esri and data partners.
