United States v. Union Pacific Railroad Company (91 U.S. 72)

APPEAL from the Court of Claims.

Under the authority of the second section of the act of Congress of March 3, 1873, the Union Pacific Railroad Company filed its petition in the Court of Claims, alleging that it had rendered services to the government in the transportation of the mails, troops, supplies, and public stores of the United States, between the dates of February, 1871, and February, 1874, both inclusive, and praying for judgment that the United States pay the company one half part of the amount due for such services, and give credit to the company on account of the bonds issued by the United States in aid of the construction of the road to the amount of the remaining half part of said amount.

The United States filed an answer and counterclaim denying their indebtedness, and alleging that they had issued to the company their coupon bonds to the amount of $100,000,000, bearing interest at the rate of six per cent per annum, payable semi-annually, pursuant to the acts of Congress of July 1, 1862, and July 2, 1864, and paid to the holders of said bonds, at the stated semi-annual periods, the interest due thereon; and that the company, although bound by law to reimburse them for payments so made for such interest, had never paid any part thereof; and they prayed judgment against the company for $12,000,000.

The provisions of the acts of July 1, 1862, and the amendatory act of July 2, 1864, which bear upon the questions at issue, are as follows:--

Act of July 1, 1862, 12 Stat., p. 489. 'SECT. 5. The Secretary of the Treasury shall, upon the certificate in writing of said commissioners,. . . issue to said company bonds of the United States of one thousand dollars each, payable in thirty years after date, bearing six per centum per annum interest, said interest payable semiannually,. . . to the amount of sixteen of said bonds per mile;. . . and to secure the repayment to the United States, as hereinafter provided, of the amount of said bonds so issued and delivered to said company, together with all interest thereon which shall have been paid by the United States, the issue of said bonds and delivery to the company shall ipso facto constitute a first mortgage on the whole line of the railroad and telegraph, together with the rolling stock, fixtures, and property of every kind and description; and, in consideration of which, said bonds may be issued; and on the refusal or failure of said company to redeem said bonds, or any part of them, when required to do so by the Secretary of the Treasury, in accordance with the provisions of this act, the said road, with all the rights, functions, immunities, and appurtenances thereto belonging, and also all lands granted to the said company by the United States which at the time of said default shall remain in the ownership of said company, may be taken possession of by the Secretary of the Treasury for the use and benefit of the United States.

'SECT. 6. The grants aforesaid are made upon condition that said company shall pay said bonds at maturity;. . . and all compensation for services rendered for the government shall be applied to the payment of said bonds and interest until the whole amount is fully paid. Said company may also pay the United States, wholly or in part, in the same or other bonds, treasury notes or other evidences of debt against the United States, to be allowed at par; and after said road is completed, until said bonds and interest are paid, at least five per cent of the net earnings of said road shall also be annually applied to the payment thereof.'

Act of July 2, 1864, 13 Stat., p. 356. 'SECT. 5. Only one-half of the compensation for services rendered for the government shall be required to be applied to the payment of the bonds issued by the government in aid of the construction of said road.'

The Court of Claims found in favor of the company, and adjudged that it recover from the United States $512,632.50, and that the counterclaim of the United States be dismissed.

The United States appealed to this court.

Mr. Attorney-General Pierrepont for the appellant.

The primal question is, whether the railroad company is bound to reimburse the interest as the same falls due, or whether it may postpone the payment thereof (which the government advances half-yearly) until the maturity of the bonds.

Should the decision on this question be adverse to the appellant, then the only other question is, whether the government can retain all the earnings of the company made in the service of the government, or only half thereof.

In 1862, Walter S. Burgess and his associates obtained a charter from the United States to build the Union Pacific Railroad, subject to the conditions, inter alia, that the company shall do the government's transportation at rates not to exceed the amounts paid by private parties; that all compensation for services rendered for the government shall be applied to the payment of the bonds and interest; and that after the road is completed, until the bonds and interest are paid, at least five per centum of the net earnings shall be annually applied to the payment thereof.

Two years went by. This corporation then procured the passage of the act of 1864, which confers large additional donations and privileges. Sects. 5 and 10 grant an extension of one year for completing the road, and require that only one-half of the compensation for services rendered the government shall be applied to the payment of the bonds. They authorize the company, on the completion of each section of the road and telegraph line, to issue its bonds to an amount not exceeding the amount of those issued to it by the United States; and they give to the mortgage for securing its bonds priority over that of the United States.

In 1871, Congress required the Secretary of the Treasury to pay over to the company, in money, one-half of the compensation for services to the United States theretofore or thereafter rendered; but declared that this provision should not affect the legal rights of the government or the obligations of the company, except as therein specially provided.

In 1873, Congress passed the act of March 3.

It is submitted, First, The question before the court is, whether the United States are entitled to retain the whole value of the service which they have received from the company, and apply the same towards payment of the interest advanced from time to time by the government upon the bonds loaned to the company,-a question not embarrassed by the acts of 1864 and 1871, as they were repealed by the act of 1873.

The whole question of the liability of the company to pay the interest on the government bonds before their maturity is raised by the counterclaim set up by the United States, and is before the court.

Second, That the Union Pacific Railroad Company is a private corporation has been settled. The Company v. Peniston, 18 Wall. 31.

A grant of privileges and exemptions to a corporation is strictly construed. Ohio Life & Trust Co. v. Debolt, 16 How. 435; Dubuque & Pacific R.R. v. Litchfield, 23 id. 88, 89; Opinion of Attorney-General Black, 9 Opinions of Attorneys-General, 59, 60.

Third, Applying these and other well-settled principles of construction to the statutes relating to the company, there is no difficulty in arriving at their true meaning.

There is nothing ambiguous about the fifth section of the act of 1862. The government proposed to advance to the company bonds bearing interest at six per cent, 'said interest payable semi-annually;' and, to secure them according to their terms, the company agreed to give a first mortgage, and also to give additional security for the interest as well as the principal. The mortgage was executed when the company received the bonds.

Fourth, By the act of 1864, the company is required to assume nothing; but the absolute right to amend or repeal is reserved.

Fifth, The fact that the company, under the act of 1864, issued its mortgage to secure the same amount of bonds as it was entitled to receive from the government, and made the interest thereon payable half-yearly, is conclusive as to the understanding of the company when it filed its assent to the provisions of the act.

The Attorney-General referred at some length to the consequences to the government should the decision be against it, and cited the debates in Congress on the passage of the act of 1862 as furnishing the clearest proof of the purpose of that body to require the immediate repayment by the company of the interest advanced by the government.

Mr. Sidney Bartlett and Mr. E. W. Stoughton for appellee.

The rule, that, where the entire purpose of a charter is to confer bounties on corporations, the construction of any provision therein about which there is doubt must be in favor of the government, does not extend to charters where there are stipulations for services, or pecuniary returns by the party endowed. Charles River Bridge v. Warren Bridge, 11 Pet. 420; Ohio L. & T. Co. v. Debolt, 16 How. 435; Dubuque & P. R. Co. v. Litchfield, 23 id. 88. That the charter of the Union Pacific Railroad Company contains such stipulations, either by condition or contract, cannot be controverted.

The only sections having a direct bearing upon the question at issue-the right of the government to have the immediate reimbursement of the interest paid by it-are five, six, and seventeen of the act of July 1, 1862, and five of the act of July 2, 1864. Under them, we submit, that while conditions are imposed on the company, a breach of which would work a forfeiture, there is no assumpsit or covenant, express or implied, on which, by action at law or set-off, the company can be compelled to reimburse the principal or interest of the bonds issued to it; but should we concede that such a covenant or assumpsit could be found in the charter, then the covenant or assumpsit to pay the interest is to pay the same as each bond or class of bonds matures, and not from time to time, each six months, as it shall have been paid by the government.

Upon an analysis of the charter as to the time at which the interest was to be reimbursed, it will be seen that the earliest clause is the mortgage clause set out in the fifth section of the act of 1862. It contains two provisions, neither of which fixes, in terms, the period at which either the bonds or the interest thereon is to be reimbursed. The words are, the 'grants aforesaid are made on condition that the company shall pay said bonds at maturity.' Will the court, then, import into the statute the words 'and each semi-annual payment of interest as it accrues'? Unquestionably not. If such had been the purpose of Congress, why was it not so stated? One thing would seem clear from the terms used,-namely, that, whatsoever payment was to be made, the period of such payment is definitely fixed at the maturity of the bonds; and, if words are to be interjected so as to include interest, why should further alterations be made by the insertion of a new and different period for its payment? These are the only provisions which apply to the time of payment.

The clauses as to the mode of payment are found in the sixth section.

Sect. 5 of the act of 1864 provides 'that only one-half of the compensation for services rendered for the government by said companies shall be required to be applied to the payment of the bonds issued by the government.' The act of March 3, 1871, sect. 9, and the proviso thereto reserving the rights of the government, were designed to leave open for legal construction the question of when and how interest was payable; and the purpose of the act of 1873 was not to repeal the charter, or any part of it, since it authorized the suit to be brought by the company against the United States to recover the price of freight and transportation due under existing laws. If Congress meant to repeal the provision for the payment of one-half of the transportation, it would have been an empty mockery to authorize a suit to recover for that very transportation. The right of the company to be paid in some form is indisputable; but its right to recover without its being subject to set-off was the one matter in controversy. The purpose of the act was to remit to judicial determination the question, whether, upon the true construction of the charter, the government was legally bound to pay the company for one-half the transportation; or whether it might retain that half, and apply it towards interest on the bonds.

MR. JUSTICE DAVIS delivered the opinion of the court.