In the year 1857, on the third day of March, the congress of the United States made an extensive grant of lands to the territory to aid in the construction of railroads. It consisted of every alternate section of land, designated by odd numbers, for six sections in width, on each side of the roads specified, and their branches. The grant mapped out a complete system of roads for the territory, and provided that the land granted for each road should be applied exclusively to such road, and no other purpose whatever. The lines designated in the granting act were as follows:From Stillwater, by the way of St. Paul and St. Anthony to a point between the foot of Big Stone lake and the mouth of the Sioux Wood river, with a branch via St. Cloud and Crow Wing to the navigable waters of the Red River of the North, at such point as the legislature of the territory may determine.

From St. Paul and from St. Anthony via Minneapolis to a convenient point of junction west of the Mississippi to the southern boundary of the territory, in the direction of the mouth of the Big Sioux river, with a branch via Faribault to the north line of the state of Iowa, west of range 16.

From Winona via St. Peter to a point on the Big Sioux river, south of the forty-fifth parallel of north latitude.

Also from La Crescent via Target lake up the valley of the Root river, to a point east of range 17.

The territory or future state was authorized to sell one hundred and twenty sections of this land whenever twenty continuous miles of any of the roads or branches was completed,—the land so sold to be contiguous to the completed road. The right of way or road bed of any of the subsidized roads was also granted through any of the government lands. The roads were all to be completed within ten years, and if any of them were not finished by that time the lands applicable to the unfinished portions were to revert to the government. The lands granted by this act amounted to about 4,500,000 acres. An act was subsequently passed on March 2, 1865, increasing the grant to ten sections to the mile. Various other grants were made at different times, but they do not bear upon the subject I am about to present.

This grant came at a time of great financial depression, and when the territory was about to change its dependent condition for that of a sovereign state in the Union. It was greeted as a means of relief that might lift the territory out of its financial troubles, and insure its immediate prosperity. The people did not take into consideration the fact that the lands embraced in the grant, although as good as any in the world, were remote from the habitation of man, lying in a country absolutely bankrupt, and possessing no present value whatever. Nor did they consider that the whole country was laboring under such financial depression that all public enterprises were paralyzed; but such was, unfortunately, the monetary and business condition.

On the twenty-third of February, 1857, an act had passed the congress of the United States authorizing the people of Minnesota to form a constitution preparatory to becoming a state in the Union. Gen. Willis A. Gorman, who was then governor of the territory, called a special session of the legislature to take into consideration measures to carry out the land grant and enabling acts. The extra session convened on April 27th. In the meantime Governor Gorman's term of office had expired, and Samuel Medary of Ohio had been appointed as his successor, and had assumed the duties of his office. He opened the extra session with an appropriate message. The extra session adjourned on the 23d of May, and in accordance with the provisions of the enabling act of congress, an election was held on the first Monday in June for delegates to a constitutional convention, which was to assemble at the capitol on the second Monday in July. The constitutional convention is an event in the history of Minnesota sufficiently important and unique to entitle it to special treatment, which will be given hereafter.

An act was passed at the extra session, on the 19th day of May, 1857, by which the grant of lands made to the territory was formally accepted, "upon the terms, conditions and restrictions" contained in the granting act.

On the twenty-second day of May, at the extra session, an act was passed to execute the trust created by the land grant act, by which a number of railroad companies were incorporated to construct roads on the lines indicated by the act of congress, and to aid in the building of these roads, and the lands applicable to each were granted to it. The companies were to receive title to the lands as the construction progressed, as provided in the granting act. They also had conferred upon them powers to issue bonds, in the discretion of the directors, and to mortgage their roads and franchise to secure them.

These railroad companies were organized upon the hope that the aid extended to them by the grants of land would enable them to raise money sufficient to build their several roads. They had nothing of their own, and no security but the roads and lands upon which to negotiate loans. The times, and the novel idea of building railroads in unpeopled countries, were all against them, and, of course, nothing could be done.

The constitutional convention met and framed an instrument for the fundamental law of the new state which was very conservative, and, among other things, contained the following clause, which was enacted in section 5 of article IX.:

It was the intention of the framers of the constitution to prevent the legislature from ever using the credit or funds of the state in aid of any private enterprise, and these provisions effectually accomplished that end.

The people were deeply disappointed when they became convinced that the roads could not be built with the aid that congress had extended, and as this work was also looked upon as the only hope of financial relief, the case became a desperate one, which could only be remedied by the most extreme measures. The promoters of the railroads soon discovered one, in an amendment of the section of the constitution which prohibited the credit of the state being given or loaned to anyone, and at the first session of the first legislature, which convened on Dec. 3, 1857, an act was passed proposing such amendment, to be submitted to the people for ratification. The importance of this amendment, and its effect and consequences upon the future of the state, demands that I give it nearly in full. It changed section 10 as it was originally passed, and made it read as follows:

The amendment then prescribes that, whenever ten miles of railroad was graded so as to be ready for the superstructure, it should receive $100,000 of the bonds, and when ten miles should be completed with the cars running, the company so completing should receive another $100,000 of the bonds until each company had received its quota. The bonds were to be denominated "State Railroad Bonds," for the payment of which the faith and credit of the state was to be pledged. The railroad companies were to pay the principal and interest of the bonds, and to secure such payment they were to pledge the net profits of their respective roads, and to convey to the state the first two hundred and forty sections of land they received, and to deliver to the state treasurer an amount of their first mortgage bonds equal to the amount of bonds received by them from the state, and mortgage to the state their roads and franchises. This was all the security the companies could give, but the underlying difficulty was that it had no value whatever. There were no roads, no net or other profits. The lands had no value whatever except such as lay in the future, which was dependent on the construction of the roads and the settlement of the country. The bonds of the companies, of course, possessed only such value as the property they represented, which was nothing, and the mortgages were of the same character. The whole scheme was based upon hopes, which the slightest application of sober reasoning would have pronounced impossible of fulfillment. But the country was hungry, and willing to seize upon anything that offered a semblance or shadow of relief.

The proposed amendment was to be submitted to the people for adoption or rejection, at an election to be held on the fifteenth day of April, 1858. In order to fully comprehend the condition of the public mind, it should be known that the constitution, with all the safeguards that I have mentioned, had only been in force since Oct. 13, 1857, a period of about six months, and had been carried by a vote of 30,055 for to 571 against its adoption.

The campaign preceding the election was a very active one. The railroad people flooded the state with speakers, documents, pictures, glee clubs singing songs of the delights of "Riding on the Rail," and every conceivable artifice was resorted to to carry the amendment. It was carried by a vote of 25,023 in favor of its passage, to 6,733 against.

To give an idea of the intense feeling that was exhibited in this election, it is only necessary to state that at the city of Winona there were 1,102 votes cast in favor of the amendment and only one vote against it. This negative vote, to his eternal honor be it said, was cast by Thomas Wilson, afterwards chief justice of the state, and now a citizen of St. Paul.

In the execution of the requirements of the amendment, the railroad companies claimed that they could issue first mortgage bonds on their properties to an indefinite amount and exchange them with the state for its bonds, bond for bond, but the governor, who was Hon. Henry H. Sibley, construed the amendment to mean that the first mortgage bonds of the companies which the state was to receive must be an exclusive first lien on the lands and franchises of the company. He therefore declined to issue the bonds of the state unless his views were adopted. The Minnesota & Pacific Railroad Company, one of the land grant corporations, applied to the supreme court of the state for a writ of mandamus, to compel the governor to issue the bonds. The case was heard, and two members of the court holding the views of the applicants, the writ was issued. I was a member of the court at that time, but entertaining opposite views from the majority, I filed a dissenting opinion. Anyone sufficiently interested in the question can find the case reported in Volume II. of the Minnesota Reports, at page 13. This decision was only to be advisory, as the courts have no power to coerce the executive.

The railroad companies entered into contracts for grading their roads, and a sufficient amount of grading was done to entitle them to about $2,300,000 of the bonds, which were issued accordingly, and went into the hands of the contractors to pay for the work done. It, however, soon became apparent that no completed railroad would ever result from this scheme, even if the whole five millions of bonds were issued. What should have been known before was made clear when any of these state bonds were put on the market. The credit of the state was worthless, and the bonds were valueless. The people became as anxious to shake off the incubus of debt they had imposed upon their infant state as they had been to rush into it.

Governor Sibley, in his message, delivered to the second legislature in December, 1859, said, in speaking of this issue of bonds:

"I regret to be obliged to state that the measure has proved a failure, and has by no means accomplished what was hoped for it, either in providing means for the issue of a safe currency, or of aiding the companies in the completion of the roads."

At the election, held on Nov. 6, 1860, the constitution was again amended, by expunging from it the amendment of 1858 authorizing the issue of the state railroad bonds, and prohibiting any further issue of them. An amendment was also made to section 2 of Article IX. of the constitution at the same time, by providing that no law levying a tax, or making any other provisions for the payment of interest or principal of the bonds already issued, should take effect or be in force until it had been submitted to the people, and adopted by a majority of the electors.

It was very proper to prohibit the issuance of any more of the bonds, but the provision requiring a vote of the people before those already out could be paid was practically repudiation, and the state labored under that damaging stigma for over twenty years. Attempts were made to obtain the sanction of the people for the payment of these bonds, but they were defeated, until it became unpleasant to admit that one was a resident of Minnesota. Whenever the name of Minnesota was heard on the floor of congress as an applicant for favors, or even for justice, it was met by the charge of repudiation. This was an era in our history very much to be regretted, but the state grew steadily in material wealth.

On March 2, 1881, the legislature passed an act, the general purpose of which was to adjust, with the consent of the holders, the outstanding bonds, at the rate of fifty cents on the dollar, and contained the curious provision that the supreme court should decide whether it must first be submitted to the people in order to be valid or not, and if the supreme court should not so decide, then an equal number of the judges of the district court should act. The supreme court judges declined to act, and the governor called upon the district court judges to assume the duty. Before any action was taken by the latter, the attorney general applied to the supreme court for a writ of prohibition to prevent them from taking any action. The case was most elaborately discussed, and the opinion of the supreme court was delivered by Chief Justice Gilfillan, which is most exhaustive and convincing. The court holds that the act of 1881 is void, by conferring upon the judiciary legislative power, and that the amendment to the constitution providing that no bonds should be paid unless the law authorizing such payment was first submitted to and adopted by the people was void, as being repugnant to the clause in the constitution of the United States, that no state shall pass any law impairing the obligation of contracts. With these impediments to a just settlement of this question removed, the state was at liberty to make such arrangements with its bond creditors as was satisfactory. John S. Pillsbury was governor at that time. He had always been in favor of paying the bonds, and removing the stain from the honor of the state, and finding his hands free, it did not take him long to arrange the whole matter satisfactorily, and to the approval of all the parties. The debt was paid by the issue of new bonds, at the rate of fifty per cent of the principal and interest of the outstanding ones and the surrender of the latter. This adjustment ended a transaction that was conceived and executed in folly, and was only prevented from eventuating in crime by the persistent efforts of our most honorable and thoughtful citizens throughout the state. The transaction has often been called by those who advocated repudiation, "An old Territorial fraud," but there was nothing in it but a bad bargain, made under the extraordinary pressure of financial difficulties.

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