Switzer v. United States

delivered the opinion of the court:

The statute providing for the improvement of the channel of the Mississippi between South Pass and the Gulf of Mexico by means of “walls, jettees, dikes, levees, and other structures ” provides for details which are generally intrusted by the legislative to the executive branch of the Government. Act 3d March, 1875 (18 Stat. L., p. 468, sec. 4). It declares — •

“that the conditions herein prescribed being fully complied with, the United, Staten hereby promise and agree to pay to said Eads, or to his assigns or legal representatives, five million two hundred and fifty thousand dollars for constructing said works cmcl obtaining a depth of thirty feet in said channel, and the annual sum of one hundred thousand dollars for each and every year that said depth of thirty feet shall be maintained by the jettees and auxiliaiy works aforesaid in said South Pass during twenty years aften' first securing the said depthA

The statute, therefore, is in form as well as in substance a contract, in pursuance of which one party is to do the work and the other party is to pay for it.

■ The amount of §5,250,000, it will be observed, is for “constructing said works and obtaining a depth of 30 feet in said channel;” and the §100,000 for each and every year, it will likewise be observed, is for maintaining “said depth of 30 feet ” “ during twenty years after first securing the said depth. ”

*286The statute previously declares that the object of the agreement is to secure “a wide and deep channel.” There are subsequent provisions securing a width ultimately of 350 feet, but the $100,000 a year in the above general declaratory clause of the statute is for maintaining “a depth of 30 feet.” In other words, the parties contemplated the fact that after the work was constructed and a depth of 30 feet obtained the channel was liable to be more or less obstructed bjr the well-known enormous sediment of the river and that its depth must be maintained. The $100,000 a year, as above expressed, was to secure that depth for twenty years.

The statute also contemplated another fact, to wit: That the “walls, jettees, dikes, levees, and other structures” might go to pieces and the whole work, after a depth of 30 feet had been obtained, might be a failure. Accordingly, provision was made for security. Ordinarily such security would lie in the form of a bond with good and sufficient sureties. • In this case, however, Congress provided that the security should be the last or final $1,000,000 of the contract price which would become due to the contractor on the completion of his work. If a bond had been given, there would have been no loss of interest to the contractor; but if $1,000,000 of his money remained unpaid for a period of twenty years, a very serious loss would result to him. Accordingly, the statute provided that so long as the money should remain in the possession of the Government as security he should receive interest thereon and that the rate of interest be fixed at 5 per cent. The following are the words of the statute, and the determination of the present controversy depends solely upon the construction which shall be given them:

. “ When a channel thirty feet in depth and three hundred and fifty feet in width shall have been obtained by the effect of said jetties and auxiliary works aforesaid, the •.remaining one million dollars shall be deemed as having been earned by said Eads and associates; but said amount shall remain as security in possession of the United States for-the purposes hereinafter set forth, interest at fee per centum, pm' annum on same being payable to said Mads, his assigns and legal representatives, semiannually, from the date when a channel of thirty feet in depth and three hundred and fifty feet in width shall have been first secured, so long as said money, or any part thereof, is held by the United ¡States.

*287“That after said channel of thirty feet in depth and of not less than three hundred and fifty feet in width shall have been secured, one hundred thousand dollars per annum shall be paid in equal quarterly payments during each and every year that said channel of thirty feet in depth and three hundred and fifty feet in width shall have been maintained by said Eads and his associates bjr the effect of said jetties and auxili ary works aforesaid in said pass, for a period of twenty years, dating from the date on which said channel of thirty feet in depth and three hundred and fifty feet in width shall be first secured: Provided, however, Tlh&t noyxort of sioch annual compensation shall he paid for any period of time dvrring which the channel of said-pass shall'be less than thirty feet in depth and three hundred and -fifty feet in width, as hereinbefore specified.

‘ ‘ That the said channel of thirty feet in depth and three hundred and fifty feet in width having been maintained for ten years, one-half of the one million dollars hereinbefore mentioned shall be released and paid to said Eads, his assigns or legal representatives; and said depth and width having been maintained for ten additional years, the remaining half of the said one million dollars shall be released and paid as aforesaid. And if any of said money shall have been paid under the provisions of this act as hereinafter provided, then the residue shall be paid at the times above stated.

“That in case said Eads and associates, in order to maintain a channel of thirty feet in depth and three hundred and fifty feet in width, shall deem it necessary to expend on said works, during any one or more of said twenty years, any money in excess of the annual payments received by them during said year or years under this act, the Secretary of "V^ar shall, on satisfactory proof of such expenditures, authorize, as often as such extra expenditures may require, the payment of the same from the said money in pledge to said Eads or his legal representatives. And such payments shall be made from the five hundred thousand dollars to be released at the end of ten years before any payment shall be made from the five hundred thousand dollars to be released at the end of twenty years; and if any failure to maintain said channel of thirty "feet in depth and three hundred and fifty feet in width shall occur, the date for releasing the said money held in pledge shall be postponed for an equal period of time, and the compensation for maintaining said channel shall cease until said depth and width shall be again restored, the maintenance of a channel of thirty feet in depth and three hundred and fifty feet in width for twenty years, exclusive of all such periods of failure, being intended by this act. And at any time after said jetties shall have been completed, and said channel of thirty *288feet in, depth and three h,und/red and fifty feet in width shall hare been obtained, that the United States may elect to pay the said one million dollars, and stop the payment of said interest and said annual sura of one hundred thousand dollars- for the maintenance of said depth and width, said United States shall have the right to do so on payment of said money held as security and in pledge as aforesaid, together with the interest and annual compensation for maintenance which may be earned at the date of such final payment; and on such payment being-made by the United States the supervision and maintenance of said jetties and auxiliary works by said Eads and associates, and all liability on their part, shall cease and determine. ”

When Congress declared that this “remaining $1,000,000” should be “ deemed as having been earned by said Eadsf and provided that interest for the use of his money should be paid to him, and wrote into the statute the word “security” they brought this part of the transaction under the principle of the law of guaranty. Whether a bond was given by the contractor or his monej7 retained by the Government as securit}' was immaterial; the difference was merely in the form of the securitjn

The question immediately arises: What grounds have the defendants shown for maintaining an action on a bond of guaranty ? Or, what is the same thing, for appropriating and refusing to pay over money to the contractor which the statute declares to be his ?

The defendants have proved nothing. It does not appear that the channel was not maintained at the designated width of 350 feet; it does not appear that navigation was interfered with; it does not appear that any vessel ever grounded; it does not appear that the Government or the owners of any vessel navigating the river suffered one dollar’s injury by reason of the insufficient depth; it does not appear that the prescribed depth of 30 feet was ever encroached upon more than a single inch. No damage whatever, either to the defendants or to any other person, is alleged or shown or attempted to be shown.

By the defendants it is insisted that they did not enjoy during this prescribed period of twenty.years a channel of the depth of 30 feet. But that does not relieve them from the necessity of proving damages. Moreover, there are to that contention three answers:

*289First. The parties contemplated that very contingency of impaired depth, and the statute expressty provides for it. The amount of $100,000 was to be paid the contractor ‘ ‘ during- each and every year that said channel of 30 feet in depth and 350 feet in width shall have been maintained by the said Eads,” “dating from the date on which said channel of 30 feet in depth and 350 feet in width shall be first secured,” with a proviso “that no part of such annual compensation shall be paid for an}r period of time during which the channel of said pass shall be less” than the prescribed depth and width. In other words, as the contract has been construed and carried out by both parties, the contractor was bound, in consideration of $100,000 a year, to give to the defendants twenty years during which the channel was to be not less than 30 feet in depth and 350 feet in width; or, as likewise construed by the parties, whenever the channel was not of the prescribed depth and width the interval would not be reckoned as a part of the twenty years and, consequently, the prescribed period of twenty years,would extend beyond the calendar period of twenty years from the time when the annual compensation began to run.

Second. There is no such provision in the statute imposing-loss or liability5" upon the contractor as regards the $1,000,000 either as to principal or interest. On the contrary, the statute is explicit that when the prescribed channel “shall have been obtained” the u$l,000,000 shall be deemed as homing been earned,” and it is equally explicit in declaring that the interest thereon shall be paid to the contractor semiannually “ so long as said money, or any part thereof, is held by the United States.” The time of final payment of the principal is to be when the channel of the prescribed depth and width has been maintained for twenty jmars; but the payment of interest is to be made “so long as said money, or airy part thereof, is held.” Moreover, the statute expressly provides that at any time after the completion of the work “the United States may elect to pay the said $1,000,000 and stop the payment of said interest.”

Third. The defendants lost nothing- by the prolongation of the prescribed period of twenty years. The}" held in theii *290hands the contractor’s money, and, in contemplation of law, it was worth to them what they had agreed to pay for it so long as the}7 chose to hold it. From a legal point of view it would have been immaterial whether they used the money for their own purposes or whether they invested it in a trust companj7 and agreed to pay over to the contractor the interest which they might receive. In either case the interest would be equally the money of the contractor, and the defendants were free to make either bargain. When, through the statute, they entered into the present agreement, they elected to be borrower and to pay for the use of the money a prescribed interest. The retention of the principal after the expiration of twenty years was their own act, by their own election and for their own benefit. The interest which thereafter accrued was the contractor’s; and the defendants have shown no loss, in]ury, or damage, suffered by them or caused by him, which would authorize them to withhold his money and appropriate it to their own use.

The legal conditions of this case can be reduced to a very short story: (1) The defendants retained in their own hands 11,000,000 of the contractor’s money; (2) they reserved an election to pay this, the principal debt at any time; (3) their agreement, the statute, expressly provided that this interest shall be paid “ so long as said money, or any -part thereof.\ is held hj the United States.” Inferences and implications can not prevail against the express words of the statute.

The judgment of the court is that the claimants recover interest not barred by the statute of limitations up to the day of the rendition of this j udgment, to wit, the sum of $26,109.81.

dissenting:

I dissent from the conclusion of the court in this case and will briefly state my reasons:

During the lifetime of the claimant’s decedent he presented to the Secretary of War for payment a similar, if not the identical, claim in part now presented, and that officer, who was charged with the execution of the act presently to be cited, refused payment on the advice of Attorney-General Devens (16 Op. Atty. Gen., 420).

The Attorney-General, in respect of the annual compensation provided for by the act, had, as stated at page 421 of the *291opinion, previously given it as bis opinion that “the annual compensation could not be paid for periods during which the channel was not maintained, and that the times of those payments (which were termed quarterly) were necessarily postponed when such periods of failure occurred, so as to exclude such periods from the quarterly and annual payments provided for;” and with that opinion in respect to the annual compensation provided for b}' the act March 3,1875 (18 Stat, L., 463), and the amendatory act thereto of March 3,1879 (20 Stat L., 376), the Attornej'-General sajrs:

“I remain satisfied and now assume it to be correct.”

Then further along in that opinion, referring to the interest on the SI, 000,000 held as security for the performance of the contract on the part of the claimant’s decedent, and which is the subject of contention in this action, he says:

“The sum held in pledge is distinctly retained as security for the maintenance of the channel. How Mr. Eads could bo fairly entitled to interest upon the same during the periods when the channel is not maintained it is not eas3r to perceive. It is contended, however, that this is the precise language of the statute, and that any other construction violates the language. But any construction which would give to Mr. Eads interest during the periods of failure would violate the whole spirit of the act, and would lead to a result, if the act itself as a whole is - considered, so clearly at variance with it as to be inadmissible. According to this theory Mr. Eads, even if he failed to maintain the channel permanently, would still be entitled to these semiannual payments, and a securitj'- given for the maintenance of the channel would result only in this— that the party would not at the end of the twenty years receive the principal sum, but would be entitled to a claim against the United States for the interest on that principal sum for an indefinite number of years. The meaning of the legislature is to be ascertained not only by the precise words used in a phrase of the statute, but by the reason and motive upon which it proceeded, by the end in view, and by the purpose which was designed.” (The United States v. Freeman, 3 How., 556; Becke v. Smith, 2 Mee. & W., 195; Attorney-General v. Lockwood, 9 Mee. & W., 398.)

In that decision’the claimant’s decedent acquiesced, but after his death, and after a large part ■ of the claim was barred by the statute of limitations, his legal representatives filed their *292original petition in this court (September 9, 1901) more than twentjr years after that opinion by the Attornej'-General.

The claim in this case arises, not by reason of any default or failure on the part of the Government, but wholly by reason of the default and failure, on the part of the claimant’s decedent to keep the channel at the required depth and width as contracted for by him under the acts hereinbefore referred to.

By the provisions of the original act referred to it was, among other things, provided that—

“ When a channel thirty feet in depth and three hundred and fifty feet in width shall have been obtained by the effect of said jetties and ■ auxiliary work aforesaid, the remaining one million dollars shall be deemed as having been earned by said Eads and associates; but said amount shall remain as security in the possession of the United States for the purposes hereinafter set forth, interest at five per centum per annum on the same being_ payable to said Eads, his assigns, and legal representatives, semiannually, from the date when a channel thirty feet in depth and three hundred and fifty feet in width shall have been first secured, so long as said money or any part thereof, is held by the United States.”

It was further provided in said original act that—

.c* * Jf any failure to maintain such channel of thirty feet in depth and three hundred and fifti’' feet in width shall occur, the date for releasing said money held in pledge shall be postponed for an equal period of time, and the compensation for maintaining said channel shall cease until said depth and width shall be again restored, the maintenance of a channel thirty feet in depth and three hundred and fifty feet in width for twenty years, exclusive of all such periods of failure, being intended by this act.”

From the act it will readily be seen that if the claimant’s contention be correct, his condition would be better by reason of delay, to the extent of the interest earned on the money, than it would had he complied with his contract; for in the latter case he would have only received interest on the money up to that date. Certainly the Government was not benefited bj' the default of the claimant’s decedent, and yet the claimant’s contention is that no matter how long the releasing of the “ money held in pledge shall bo postponed” by reason of such default the}^ are, nevertheless, entitled to the 5 per cent *293interest, “so long as said money or any part thereof is held by the United States.” That is to say, they claim damages growing out of the default of their decedent. It is no answer to say that the Government had the money in its possession during the period of delay, for the money was not held by way of a loan, but as security for the performance of the contract, and therefore by reason of such default the Government, and not the one in faiilt, was damaged at least to the extent of the interest during the period of such dela3r.

The act provides that, on failure to maintain the channel at a specified width and depth, “the date for releasing said money shall be postponed for an equal period of time;” and, further, in case of such failure it is provided that “the compensation for maintaining said channel shall cease until said depth and width shall be again restored.” And, then, that the purpose of the pledge, as well as the annual compensation, should not be misunderstood, it is provided that “the maintenance of a channel 30 feet in depth and 350 feet in width for twenty years, exclusive of all such periods of failure, being-intended by this act. ”

Now, to hold that the contractor is entitled to the same interest when he fails to comply with his contract as when he complies with it would be to defeat the purpose of the act in postponing “the date for releasing said money * * * for an equal period of time.”

That construction assumes that the Government is not damaged b3r the contractor’s default, and yet it is manifest that if the Government is required to pay interest on the securhy so held for a longer period of time than “twenty 3rears, exclusive of all such periods of failure,” that it will be damaged to that extent, at least.

If in law an3r interest was accruable under the contract during the period of such delay, it was a fixed sum, therefore not in the nature of a penalty, for a penalty recoverable under a contract is not the sum named, but the damages aetuaUy incurred, which latter is the subject of ascertainment In' proof.

In this case the interest is a fixed sum, and the period of dehiy being- conceded b3r the claimants, the aggregate amount *294of interest during that period is ascertainable without proof on the part of the Government.

Where a time was specified for performance, the common law held such time to be “of the essence of the contract,” and such is now the mercantile conception of a contract (Norrington v. Wright, 115 U. S., 188), but under the contract in the present case provision is made in case of failure to perform within the time specified, not, however, for the payment of damages to the party in fault, but for postponing the date for releasing the money, and during such period of delay the party in fault and not the innocent party should suffer.

If the contractor had abandoned the maintenance of the channel, as stated by the Attorney-General in his opinion—

“It certainly would not be unjust, nor would it be at Arariance with the veiy intent of this act, to hold that the United States might, by proper legislation, devote the sum thus held in pledge to the maintenance of the channel, by the expenditure of it through its own officers, or by any new contractor that might be selected.”

The whole statute must be construed together, and not a few words which seem to support the claimant’s contention that interest should be paid “ so long as said money, or any part thereof, is held by the United States.” Those words are found in the provision quoted, reciting that the 11,000,000 “shall remain as security in the possession of the United States for the purposes hereinafter set forth,” during which time interest at 5 per cent shall be paid; but when we examine the contract embodiedin the statute, further along we see the purposes for which the security ivas held and under what conditions the same was to be released.

I am, therefore, of the opinion that the Attornej^-General was correct in his view of the law, and that construction having been acquiesced in by the claimant’s decedent during his lifetime, the Government should not now be held liable to pay damages, especially when it is without fault, and therefore in my view of the case the petition should be dismissed.