ATLANTA - obligation bonds that defaulted 153 years ago, a Canadian bondholder has filed suit in a state court to force repayment of the debt.
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On Feb. 3, Montreal investor Peter Cundill brought his complaint before the Chancery Court of Hinds County, demanding that Mississippi repay him $263,000 for the defaulted GOs issued by the state, plus 153 years of back interest.
Cundill's bonds are a portion of $7 million in debt sold by Mississippi in the 1830s to fund two banks that financed railroad projects in the region. The bonds defaulted in 1841, following the collapse of the banks. In 1875, the state amended its constitution to ban repayment.
Cundill's suit names as defendants the state of Mississippi, Gov. Kirk Fordice, Treasurer Marshall Bennett, and Attorney General Mike Moore.
In demanding repayment, Cundill charges that the 1875 constitutional amendment violates both the Mississippi and the U.S. constitutions.
The suit also alleges that the ban on repayment is an "unconstitutional impairment of contract by the state of Mississippi," violating numerous sections of the U.S. Constitution. These violations include: the limits on state powers spelled out in Article 1, Section 10; the ban on taking of property without compensation outlined in Amendment 5; and the due process and equal protection clauses of the 14th Amendment.
In addition, the suit charges that Mississippi's nonpayment runs afoul of a 1794 friendship treaty between the United States and Great Britain.
"My client has filed this suit because he feels strongly that the state ought to stand by its obligations," said Barry Powell, Cundill's lawyer.
Mississippi officials could not be reached for comment yesterday.
The Canadian complaint follows the filing in 1993 of two separate lawsuits - one by a group of 15 European bondholders and the other by a trio of Americans - seeking to overturn the 1875 amendment. The suits, which were virtually identical to Cundill's, were later consolidated.
In October 1993, the consolidated lawsuit was swatted down. While Hinds County Chancery Court Judge Chet Dillard declared the 1875 amendment unconstitutional, he also held that a seven-year statute of limitations law passed by the state in 1873 applied to the bonds, preempting the lawsuit.
Dillard's decision has been appealed both by the plaintiffs and the defendants. The bondholders seek to reverse the court's denial of their claim, while Attorney General Mike Moore hopes to reverse Dillard's ruling that the 1875 amendment is unconstitutional.
Powell said that he hopes a "fresh hearing" of the matter will result in a different ruling from the Chancery Court. He also noted that the case cannot be heard by Dillard, following Dillard's unsuccessful bid for reelection last November.
Paul Neville, lawyer for the bondholders in the consolidated lawsuit, said he expects the appeal of his client's suit to be heard in the next several months. He said it could be assigned to an intermediate appeals court the state recently set up as an intermediary between the Chancery Court and the state's Supreme Court.
Neville hailed the filing of Cundill's lawsuit.
"We welcome it. It's important that the word get out" on the defaulted bonds, he said.
In the 153 years since the debt defaulted, many bondholders - including the poet William Wordsworth, Queen Isabella II of Spain, and the Prince of Monaco - have tried and failed to force the state to repay.
The latest efforts began in 1992 after the European Association of Mississippi Bondholders, a London-based group of investors who had bought some of the defaulted bonds at an auction in 1990, decided to launch a lawsuit on behalf of its members.
