
    THE STATE OF LOUISIANA v. THE UNITED STATES.
    [Nos. 15543, 15777.
    Decided January 30, 1888.]
    
      On the Proofs.
    
    These cases embrace two claims — one created by the Act February 20,1811, the other by the Acts September 28,1850, and March 2, 1855. The defendants contend that so much of the demand as embraces moneys deposited in the Treasury more than six years before the claim was filed is barred, and that the remainder is covered by a counter-claim. The claimant maintains that the funds are trust moneys for special purposes, and neither subject to set-off nor barred by the statute of limitations.
    
      I.The Acts 20th February, 1811; 28th September, 1850; 2d March, 1855 (2 Stat. L., 641; 9 id., 519; 10 id., 634), indicate that two funds are held in trust to he applied, the one to “ laying out and constructing public roads amd levees," the other “to reclaiming swamp, lands by means of levees and drains.”
    
    II.The United States, having executed their part of the trust by the sale of tho lands and by a calculation and separation of the amount belonging to the trust, and by depositing the same in the Treasury to the credit of the State (their successor in the trust), it became the duty of the executive officers to pay it over to the succeeding trustee.
    III.A trust being established, these funds are freed from the counterclaims, and are not barred by the statute of limitations. [Reversed in part, videpost.2
    
    
      Hie Reporters7 statement of the case:
    The case was appealed and submitted at the sáme term, and so far as relates to the counter-claim of the Government was reversed by the Supreme Court (vide post).
    The following are the facts as found by the court below, and upon which the case was considered by the Supreme Court:
    I. Of the 5 per cent, fund accruing to the State of Louisiana under the act of Congress approved February 20,1811 (2 Stat-L., 641), after deducting all sums paid to the State and the amount embraced in a certain judgment rendered by the Court of Claims in No. 15295, Louisiana v. United States (22 O. Cls-B., 284), there remains due from the United States to said State, as credited on the books of the Treasury Department, the following sums:
    May 8, 1879... $13,602.71
    June 8,1882.63.47
    February 7, 1884.•.. 22,773.51
    Total of 5 per cent, fund. 36,439.69
    Of the swamp-land fund accruing to said State under the Acts of September 28, 1850 (9 Stat. L., 519), and of March 2, 1855 (10 Stat. L., 634), after deducting all sums paid to the State and the amount embraced in said judgment, there remains due from the United States to said State, as credited on the books of the Treasury Department, the following sums:
    May 26, 1886 (Caso No. 15543). $3,803.02
    September 9, 1886 (Case No. 15777). 1,110.00'
    May 2, 1887 (Case No. IE 777). 1,730. 41
    May 4,1887 (Case No. 15777). 489.59
    Total swamp-land fui. d. 7,133. 02
    Total of bothfmids. 43,572. 7*
    
      II. Tbe First Comptroller of tlie Treasury, at the times and dates stated in Finding I, admitted and certified the sums aforesaid to be due to the said State on account of the 5 per cent, fund and the indemnity for swamp lands purchased by individuals within said State, but directed the said amounts to be credited on moneys due the United States as stated in Finding III. It does not appear that the State authorities had knowledge of this proceeding.
    III. The United States own coupon bonds issued by the State of Louisiana amounting to $37,000, payable in 1894, known as the Indian trust bonds. They also hold and own overdue coupons attached to these bonds, representing the interest from May 1, 1874, to May 1,1887, amounting to $29,970; additional interest from May 1,1887, to November 1,1887 (falling due after the last petition was filed), amounting to $1,110. Total interest to November 1, 1887, $31,080.
    
      Mr. William E. Earle and Mr. James L. Pugh, jr., for the claimant:
    From the language of the acts directing the application of these funds to specific purposes, it was manifestly the intent and object of Congress to impress them with a trust. The question has so clearly been determined, judicially, as to obviate the necessity of an argument upon it. (97 U. S. R., 339; 100 id., 67; 45 Gal., 359; 4 Wall., 143; 11 Wis., 448; 23 Mo., 449; 40 Iowa, 520; 11 id., 450; 18 How., 181.)
    Being a trust fund and not payable to the State in its own right, but to be used at the will of the legislature in “ constructing public roads and levees ” “and reclaiming swamp and overflowed lands within the State,” the application of it to an established debt of the State would be a palpable perversion of the fund.
    The alleged debt and this fund are not held in mutual right, and consequently the one can not be set off against the other. (29 Mich., 340; 11 Wend., 504 91U. S. R., 141; 22 Ind., 183; 43 N. H., 430; 12 Mich., 346; 3 McLean (C. O.), 229; 6 Conn., 14; 8 Gill, 195; 4 John’s Ch. R., 11; 18 Wall., 629; 104 U. S. R., 303; 102 id., 564; 17 Wall., 610; 114 U. S. R., 269; 13 Wall., 63.)
    It is not even pretended that the alleged bonds of the State of Louisana are past due; and if this fund was legally a subject of set-off, it could not be applied as such to an nnmatured debt.
    
      M:\ Heber J. May (with whom was Mr. Assistant Attorney-General Howard) for the defendants:
    We maintain that the counsel for claimant transpose the Government and the State from their rightful positions. By presentation the donor becomes the trustee, and the real trustee the cestui que trust.
    
    This question was presented to the Supreme Court in the case recently appealed and decided (123 U. S. R.), but was passed over without notice.
    The proper construction of the law upon this subject will be found in the opinions of the Supreme Court in ¡Emigrant Go. v. County of Wright (97 U. S. R., 339) and ¡Emigrant Go. v. County of Adams (100 U. S. R., 66-691).
    The items of the claim consist of donations made to the State upon certain conditions expressed in the statute. The Supreme Court has held that the legislature of Iowa could divert the funds to other purposes than those named in the act of Congress, in the exercise of its discretion; that Congress alone has the power to enforce the conditions of the grant, either by revocation or other suitable action, for the violation thereof. The fund is therefore, in effect, the individual fund of the State.
    It is not necessary to discuss at length what is a fundamental principle of law, namely, that the debts of the respective parties must be mutual or the legal right to set off one against the other does not exist.
    The defendant, by attorney, contends that, although the demands that exist between the parties may not have arisen under ordinary circumstances and in an ordinary transaction, yet the debts are mutual obligations, held in mutual right, and that the defendants’ set-off is a proper and legal one.
   Scofield, J.,

delivered the opinion of the court:

These cases as consolidated embrace two claims] one arising under the Act February 20,1811 (2 Stat. L., 641), known as the 5 per cent, fund, amounting to $36,439.69; the other arising under the Acts September 28, 1850 (9 id., 519), and March 2, 1855 (10 id., 634), known as the swamp-land indemnity fund, amounting to $7,133.02. There is no contest about these amounts.

The defendants contend that the court has no jurisdiction, under section 1089 of the Be vised Statutes, over so much of the claim as was deposited in the Treasury more than sis years before the petition was filed, and that the remainder of the claim is covered by a counter-claim, consisting of overdue coupons on bonds issued by the claimant.

The amount of the counter-claim and the claimant’s liability thereon are not contested; nor is it denied that the item of $13,602.71 was deposited in the Treasury to the credit of the State more than six years before the petition was filed.

The claimant, however, meets these defenses with the allegation that the funds claimed are trust moneys, to be held for special purposes, at first by the United States and by the State after transfer.

The origin and purpose of the 5 per cent, fund is found in Section Y of the Act February 20,1811 (2 Stat. L., 841), which provides:

“ That five per centum of the net proceeds of the sales of the lands of the United States, after the first day of January, shall be applied to laying out and constructing public roads and levees, in the said State, as the legislature thereof may direct.”

The origin and purpose of the swamp-land fund appears by the Act September 28, 1S50 (9 Stat. L., 519), entitled “An act to enable the State of Arkansas and other States to reclaim the swamp lands within their limits.” This act, after directing the manner of conveying such lands to the States, provides:

“ That the proceeds of said lands, whether from sale or by direct appropriation in kind, shall be applied exclusively, as far as necessary, to the purpose of reclaiming said lands by means of the levees and drains aforesaid.”

Some of the land included in the foregoing' act was purchased from the United States by individuals through mistake of the Land Office. Thereupon the Act March 2,1855 (10 Stat. L., 634), was passed, and provided :

“ That upon due proof by the authorized agent of the State or States, before the Commissioner of the General Land Office, that any of the lands purchased were swamp lands, within the true intent and meaning of the act aforesaid, the purchase-money shall be paid over to the said State or States.”

These statutes indicate very clearly that these two funds are held in trust, to be applied, the one “ to laying out and constructing public roads and levees,” and the other “ to reclaiming swamp lands by means of levees and drains.” (Emigrant Co. v. Wright County, 97 U. S. R., 339; Same v. County of Adams, 100 id., 66; Mills County v. R. R. Co., 107 id., 564; State of Louisiana v. The United States, 22 C. Cls. R., 284.)

Whether the courts have power to enforce this trust against ingenious devices of the State for its diversion, and whether Congress has power to revoke or annul it, are not questions for our consideration. There is no allegation that Congress has attempted to disavow or annul the trust, nor that the State is attempting to misapply the funds. The United States having-executed their part of the trust, by the sale of the lands and by a calculation and separation of the amount belonging to the trust, and by depositing the same in the Treasury to the credit of the State (their successor in the trust), it became the duty of the executive officers temporarily charged with the custody of thqi'unds to hand them over to the succeeding trustee. The credit given to the State, on its bonded indebtedness to the United States, in the Treasury Department was without authority of law. Neither Congress nor the State had given consent to such a misapplication of the funds.

The trust beiug established, it follows that these funds are freed from the counter-claim, and that no part of them is barred by the statute of limitations.

Judgment will be altered in the sum of $43,572.71.  