Page images
PDF
EPUB

1

sues herein; that the statute and its acceptance by the de fendant constitute a contract between the state and the defendant; the terms and conditions whereof fix the rights of the parties herein; that the covenants or promises on the part of the defendant, in consideration of payments by the state of interest upon the bonds, were to transport and convey, “at all times when required,” all public messengers, convicts ordered to the state prison, lunatics sent to the insane asylum, materials for the construction of the state capitol, articles intended for exhibition at the fairs of the State Agricultural Society, and troops and munitions of war of the state, free of charge, and also within ninety days after receiving a patent therefor, to convey the land described, or to repay to the state the amount by it paid as and for interest upon the bonds mentioned in the act.

The proposition is, that the money to be paid by the state for interest on the bonds was, in effect, a loan by the state to the defendant, to be repaid in either one of two ways,—by doing for all time the things specially agreed to be done by defendant, or by paying back the money. It is claimed the promise of the defendant was in the alternative; the defendant having the option at any time to refuse to perform any of the things promised, and to pay the money advanced by the state in lieu of such performance.

But the language of the act does not bear out the suggestion that the money paid by the state for interest was a loan to the defendant. The act is entitled “An act to aid the construction of the Central Pacific Railroad Company, and to secure the use of the same for military and other purposes,” etc. The preamble recites that whereas war exists, and Congress “has granted aid” for the construction of the Central Pacific railroad, which is insufficient to complete the road, etc.; and “whereas it is important in view of the present state of war that the railroad be constructed as soon as possible," etc.

Neither in the title nor in tlie preamble is there any hint that it was the intent to provide for lending money to the defendant, although the general language employed might be held to include "aid” in the form of a loan, did the body of the act clearly provide for it.

The first section of the act authorizes the defendant herein to issue bonds of one thousand dollars each, the interest on the first fifteen hundred to be payable at the state treasury. The second section provides for the levy of a tax to pay the interest on the fifteen hundred bonds. The fourth section begins: “The said grant to said company is made upon the express condition and in consideration that the said company shall and do at all times when required, from and after the passage of this act, transport and convey,” etc. The fifth section appropriates the money to be paid as interest on the bonds. The fourth section also requires that the railroad company shall enter into an "agreement," promising to comply with the terms and conditions set forth in the act. At the close of the fourch section is the sentence that in case the company shall fail or refuse to perform any of such conditions, “it shall be liable to repay to the state the amount which shall have been paid by the state under this act.” The word “repay" purports a payment to the state of the moneys granted by the state, but does not of itself necessarily imply a promise to repay the moneys as moneys advanced by way of loan to the defendant. By the act, the state pledged its faith to pay, and provided for taxation to pay, the interest upon certain bonds; and defendant, by its acceptance and agreement filed, promised to carry public messengers free of charge, etc. The act does not provide for an agreement hy defendant promising to repay the moneys advanced by the state. The liability of defendant to pay money arises entirely out of the defendant's acceptance of the bene fits of the act, which fixes the penalty in case of default in

LXXVI. CAL.-3

case

the performance of these conditions, which the defendant is to agree to perform by written agreement filed. True, the acceptance of the grant bound the railroad company by all the provisions of the act, including the provision for "repayment" in case of default. But the foregoing state ment explains the nature of the defendant's obligations thus assumed.

The state grants, by appropriation, certain moneys to aid the construction of defendant's railroad; in consideration of the grant, the defendant promises to do certain things for the state, and for the benefit of oitizens of the state. The money for interest is appropriated, and the recurring payments of interest are to be made, even though the company shall fail to perform any of the conditions on its part. In

of failure to perform, however, the company is liable in damages at least up to the amount previously paid by the state.

But the amount which may have been paid by the state is either an amount stipulated to be paid as damages, or it is merely a penalty. The contract on the part of the defendant is not in the alternative; it is not an agreement to perform the conditions, or, at its option, to pay the amount. The promise to carry all public messengers free of charge, etc., is an absolute promise. The distinct and separate clause of the statute, that "in case the said company shall fail and refuse," etc., does not give to the defendant the right at its election to pay the amount stated instead of performing the conditions by it to be performed. If by accepting the benefits of the statute the defendant became liable to pay a stipulated sum, it was to be paid only in case of default in the performance of conditions otherwise absolute. The defendant, like any other contracting party, had power to violate its contract and take the consequences. But it was not authorized by the terms of a contract (derivable from its written agreement or from that agreement and the statute) to pay an agreed sum, and thus discharge itself. (1 Sutherland on Damages, 477.)

Had the act provided that the defendant should have the choice to perform specific acts or to pay to the state the anuount paid for interest, or that the defendant might pay the money in lieu of performing the other acts, the case might have been different. (Slossen v. Beadle, 7 Johns. 72; McNitt v. Clark, 7 Johns. 464.) But we think the statute cannot be construed to give such an election to the defendant.

The payment of interest is called in the statute a "grant." Although the money was not there actually paid, it was appropriated contemporaneously with the passage of the statute. In effect, the grant was in the present; the conditions were to be performed in the future.

That a loan, or mere advance in the nature of a loan, was not intended is rendered the more apparent, not only from the fact that neither of these terms is employed, but from the further circumstances that all the services were not to be performed for the state directly, and that there is no provision for credits in case of part performance, whatever the extent of such performance. Yet it must be presumed, the contrary not being alleged, that the defendant built the railroad within the times stipulated, and performed all other conditions which the complaint fails to ailege it did not perform.

The state must rely upon the statute, and the defendant's "agreement” so far as it complied with the statute. They do not provide for, nor do they contemplate, that the defendant shall pay money unless it shall fail to do some of the acts by it to be done. As we have said, the act provides either that the sum stated shall be the stipulated damages, or that the sum stated is a penalty. In the latter case the plaintiffs are entitled to recover only the actual damages proved.

No doubt parties may liquidate, by stipulation in advance, the amount to be paid as damages. But conceding a contract between the state and defendant, the intention

of the parties is always material. The intention should be apparent to liquidate the damages in the sense of just compensation; the intention to measure the damages is not satisfactorily shown when the amount stated varies materially from a just estimate of the actual loss. (1 Sutherland on Damages, 481.) If the act of the legislature is to be interpreted as claimed by appellants herein, it was intended, in case the defendant failed or refused to transport free of charge a single public messenger, convict or lunatic, or a single article intended for exhibition at a state fair, that it should

pay

all moneys paid out by the state under the act, amounting, when this suit was commenced, to nearly two million dollars. It has been said that the real question in such cases is not so much the actual intention of the parties, as whether the sum is in fact in the nature of a penalty, and that this is to be determined by the magnitude of the sum in connection with the subject-matter. (Jaqueth v. Hudson, 5 Doug. 123.) But this is only saying that under certain circumstances the law will impute an intention to the parties not derivable from the ordinary sense of the words.

In many cases it had been held that the parties could not have meant what they have apparently said; for instance, where a number of things are stipulated to be done, it has been held that the parties could not have meant that a large sum should be payable, as liquidated damages, for a failure to perform one or more of them. (Keating, J., in Lea v. Whitaker, L. R. 8 Com. P. 74.) In such cases the lump sum is to be regarded as a penalty. (Kemble v. Farron, 6 Bing. 141; Goodworthy v. Strutt, 17 L. J. Ex. 226; Betts v. Birch, 28 L. J. Ex. 267; Sparrow v. Paris, 7 Hurl. & N. 599.)

The tendency and preference of the law is to regard a stated sum as a penalty, except where the actual damages cannot be ascertained by any standard. But where the damages which must result from the breach of a single con

« PreviousContinue »