Case ID: sc-eq_31/html/0573-01.html
Source: Caselaw Access Project
Author: {"author": "Wardlaw, Ch.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Mary Blanding, Executrix vs. The Corporation of Columbia.
    
      Contract — Corporation.
    A contract by a Municipal Corporation having a perpetual charter, stipulating to pay a certain sum in town stock, bearing five per cent interest, payable quarterly, and that “the said stock shall be redeemable at the pleasure of the corporation after” a day fixed, is lawful, and gives the corporation the right indefinitely to postpone payment of the principal sum after the day fixed.
    BEFORE JOHNSTON, OH., AT RICHLAND,
    JUNE, 1857.
    Johnston, Ch. The bill was filed by the executrix of the late Abram Blanding, against the City Council of Columbia, praying that they should be required to redeem certain stock which they issued in favor of her testator on the 10th July, 1835. The case made is as follows : On the 13th June, 1835, the corporation of Columbia entered into articles of agreement with Abram Blanding, to purchase from him the water works he had erected in the said town, to supply the inhabitants with water, at an expense to him of seventy thousand dollars. The contract reads thus: “ In consideration of which the said A. Blanding expects that the Town Council will pay him on the 1st day of July next, twenty-four thousand dollars in town stock, bearing an interest of five per cent, per annum, payable quarter yearly — that is to say, on the 10th of each of the months of January, April, July and October — the first payment of interest to be made in the month of October next. The said stock shall be redeemable at the pleasure of the corporation, after the 10th July, 1855.”
    On the 23d July, 1835, Mr. Blanding executed a release oí the water works to the corporation ; the consideration of the release is thus stated: “ For and in consideration of the sum of $24,000 to me secured to be paid by the said corporation, I have granted and released, &c.”
    The corporation accepted the release, and thereupon issued to him certificates of stock for $24,000 in the whole, though varying in amounts. The following is a sample of the certificates issued: “ 5 per cent. Town Stock. Town of Columbia, July 1, 1835. Be it known that there is due from the corporation of the Town of Columbia unto Abram Blanding, or his assigns, the sum of $2,000, bearing interest at the rate of five per cent, per annum, from the 10th day of July, instant, payable quarterly, being stock created in pursuance of a contract entered into by the corporation of the said Town with Abram Blanding, for the purchase of the water works, dated the 13th June, 1835, the principal of which stock is reimbursable at the pleasure of the said corporation after the 10th July, 1855.” Part of the stock has been disposed of by the plaintiff, who is the executrix of Abram Blanding, but she retains certificates to the amount of $15,500. About the 10th July, 1855, she demanded of the corporation to redeem the stock, or to issue new stock, bearing legal interest, and payable at a reasonable time, suggesting ten years as such limit. The corporation refused to redeem, and insist that they are not bound to redeem the stock at any time whatever, and that it is their privilege, under the contract, to redeem at their pleasure, or not to redeem at all; and meanwhile that they are bound only to pay five per cent, interest quarterly. They suggest that “ the proviso, that after twenty years the Town should have the privilege of redeeming the stock, may have been regarded as proper to guard against the contingency of the Town being compelled to remain in debt, when an overflowing Treasury, or other circumstances might render it expedient to extinguish the debt.”
    What was the meaning of the parties to this contract? The corporation insists that by the terms used, it is discharged forever from the payment of the principal, if it sees fit, and has only incurred a liability to pay five per cent interest per annum, payable quarterly, so long as it chooses to withhold payment of the principal. The plaintiff on the contrary insists that the words “ the said stock shall be redeemable at the pleasure of the corporation after the 10th July, 1855,” import that until that period the corporation could not compel her testator to receive payment of the principal. After that time, they could reedem the stock, whether he would or no; and were bound to redeem it, if he demanded it; and this is the rational construction of the contract.
    The terms in which the certificates are couched, confirm this view: “ There is due from the corporation to A. Blanding the sum of $ bearing interest at five per cent.” This, if the instrument stopped here, would be payable presently, if he demanded it. On their side the corporation had a right to redeem forthwith, if they saw fit. But these words follow: “ the principal reimbursable at the pleasure of the corporation, after 10th July, 1855.” That is to say, they shall not reimburse before, unless the holder of the stock consent.
    Government stocks, those issued by States and cities, where the security is undoubted, owe their market value in part to the length of time they have to run. If redeemable at short periods, the lender is exposed to the recurring trouble, expense and risk of a new investment. Capitalists seek a permanent stock, provided the security is good. On the other hand, it is a great disadvantage to a Government or State, whose resources are bound by a long deferred or irredeemable stock, “ to be compelled to remain in debt,” according to the language of the defendant’s answer, “when an overflowing Treasury, or other circumstances, might render it expedient to extinguish the debt.” It is thus clearly seen why this language was employed in the contract, and to use it for the purpose of malting' the stock irredeemable forever, at the will of the debtor, is a perversion- of the meaning.
    The corporation valued the water works'at $24,000; this they agree to pay. The scrip acknowledges the debt. As a convenient mode of payment, they stipulate to pay in scrip, to bear five per cent, iuterest while the contract lasts. The parties contemplated a period when the contract was to expire. At the end of that period see what was the condition of the parties; the one was bound to pay, the other to receive payment, if tendered. How can a clause, inserted manifestly for the purpose of ascertaining the period after which the corporation might redeem their scrip obligation, be converted into a covenant to restrain the creditor from collecting his debt forever? In construing contracts, the purpose is Jo ascertain the intent of the parties. A literal interpretation, a strict exegesis of the words used, may not always accomplish this. It is a safer rule, more consonant to justice and better calculated to meet the real intent of the parties, to look to the whole contract, to examine its purpose and scope, and to subject- to this test particular expressions, which, strictly interpreted, might be found incompatible with the general intent of the parties, and even with the nature of such obligations.
    Judged by this rule, the corporation were bound to pay this debt,- if demanded by the complainant, on or after the 10th • July, 1S55. It was so demanded, and they failed to comply with their obligation, which they are now bound to fulfil, with interest at seven per cent as upon any other debt.
    ■ It is ordered and decreed that the corporation of the city of Columbia, S. C., do pay to the plaintiff, Mary C. Blanding, the sum of fifteen, thousand five hundred dollars, (¡f 15,500) being the principal of the certificates of stock still belonging to the estate of Abram Blanding, with interest on the said sum from the eleventh (l 1th) day of July, A. D., (1855,) eighteen hundred and fifty-five, at the rate of seven per cent per annum; any payments which have been made on account of interest, to be allowed as credits pro tanto thereon.
    It is further ordered and decreed, that upon such payment of principal and interest being made, the plaintiff do deliver to the defendant the said certificates of stock still- remaining in her possession.
    The defendants appealed upon the following grounds:
    1. Because by the contract with the late Abram Blanding, the defendants are not bound to pay the principal of the five per cent, stock issued to him, before such time as in their pleasure they may determine.
    2. Because at least the defendants are not bound to pay the principal of the stock at the present time, or to pay interest thereon at the rate of seven per cent.
    The Equity Court of Appeals, after hearing argument, ordered the case to this Court where it was now heard. '
    
      Adams, Gregg, for appellants,
    cited 9 Ves. 177; 6 East, 153; Com. Dig. Stock.
    
      Blanding, DeSaussare, contra,
    cited, Chit on Con. 80, 95; 1 McM. 305; 2 Pars, on Con. 1, 3, 6 note f. 13 note r, 47, 368, 405 ; 3 McC- 480; Harp. 397 ; 1 N. and McC. 67; 2 Bos. and P. (N. R.) 205 and notes; Chit on Con. 778, note 1; Shep. Touch. 369,373; Vin. Ab. Condition B, Sec. A, C: Sec. 6 ; Bac. Ab. obligation E. 2; 1 Poth. on Ob. 101, 106, 118; 2 McC. Ch. 471; 1 Swanst, 339 note; 2 Barn, and Aid. 802; 1 P. Wms. 392.
   The opinion of the Court was delivered by ,

Wardlaw, Ch.

The question presented for judgment in this case is strictly a legal question, dependent on the construction of a contract; and I suppose the case was referred to this Court because the Chancellors desired the advice and aid of their brethren of the Law bench in deciding a matter of common law.

It is a narrow question, to be settled by the determination of two points; the intention of the parties in stipulating that the principal of an acknowledged debt should be payable at the pleasure of the debtor after a fixed day, the debtor contracting to pay a certain rate of interest for detention of.the debt; and the lawfulness of a stipulation on the part of a local corporation for such postponement for an indefinite time of the payment of its debt.

The first point must be decided on the words of the contract. Abram Blanding agreed with the Corporation of Columbia, June 13, 1835, to sell to the city the water-works he had erected, at great expense, “for $24,000 in town stock, bearing an interest of five per cent, per annum? pa]mble quarter-yearly, i. e. on the tenth of each of the months of January, April, July and October; the first payment of interest to be made in the month of October next. The said stock shall be redeemable at the pleasure of the Corporation after July 10, 1855.”

The scrip issued and accepted in fulfilment of this agreement pursues substantially the terms of the agreement, employing different words: “The principal of which stock is reimbursable at the pleasure of said Corporation, after July 10, 1855.” The difference between redeemable and reimbursable can hardly be appreciated, and both words manifestly relate to the principal of the stock. The recital in the release from A. Blanding to the town, that $24,000 was secured to be paid to him, cannot vary the construction of the actual contract, because such recitals of consideration are always referential. In the form of release prescribed by statute, payment of the purchase money is acknowledged; and in practice, it is not usual in the recital of consideration in releases to proceed, beyond the acknowledgment of receipt of the price, to describe the particulars of the contract concerning the time and manner of payment. What, then, is the meaning of the contracting parties in stipulating that the stock for the price of water-works should be redeemable after twenty years at the pleasure of the Corporation responsible for the price. In the construction of a contract in writing, it is the rule to consider the whole instrument, and to give effect to all the words in it which are not nonsensical, inconsistent, nor superfluous. It is indisputable, that if any effect whatever be given to the words, “at the pleasure of the Corporation,” they must refer to the exercise of the Corporation’s discretion after July 10, 1855; for before that date the Council could not compel the creditor to accept payment, and the stipulation as to the pleasure or discretion of the Corporation was in terms utterly inapplicable.

Are, then, the words, “at the pleasure of the Corporation,” mere surplusage? Certainly not, if we can give them a sensible meaning, bearing on the intention of the parties. They seem to have an important bearing in this respect, and to express the agreement of the parties that the principal of the stock should not be paid after July 10, 1855, before such time as in its pleasure the Corporation should determine. A motive for such agreement on the part of the creditor may be readily conjectured. He may have speculated that the rate of interest would be reduced below five per cent, in this State in 1855, as the event was in relation to the Banks of England and France. But whatever may have been the motive of the creditor, we must give effect to his stipulation, unless it be unlawful; and this brings us to the second point.

The Corporation of Columbia, by its charter and amendments, is perpetual in duration, and possesses the power of contracting such debt as is in controversy by issuing stock. It is conceded that a sovereign power may contract debt, redeemable at its pleasure, as in the present case, such as the consols in England and our own Revolutionary 3 per cents.; but it is urged that a subordinate Corporation lacks the element of perpetuity, which gives value to such stock, and consequently has no power to contract in the form in controversy. The force of this distinction is not apprehended by us. Probably, by general law, and certainly under the Act of 1841, the charter of Columbia is liable to modification by the Legislature of the State; but prima facie the charter is perpetual, and the town may contract, and others may contract with it, on the hypothesis that the charter now perpetual, will never be repealed. In fact, some of the sovereign States in Europe and America have been suppressed, but it was never supposed that their liabilities were cotemporaneously submerged. It is certainly possible that the charter of Columbia may be repealed; but we have no reason to suspect that it will be repealed in such form as will enable it to defraud its creditors. It is suggested, however, apart from this distinction between sovereign and local corporations, that the condition to pay the principal sum at'the pleasure of the debtor is void, because essentially inconsistent with the obligation to pay at some time. Undoubtedly, an inconsistent condition may be void, and the obligation remain single, as any condition in violation of the policy of the State declared by its legislation would be; and a condition against alienation or liability for debt in a conveyance in fee would be void by the common law. So, too, if by fraud or mistake, the instrument of agreement does not express the intention of the parties, as where one after acknowledging a debt, says he will never pay it, the instrument may be reformed. But in the present case, no fraud, mistake, nor inconsistency is perceived. At the utmost, it is an engagement of-the debtor to pay a perpetual annuity, and that is not unlawful. On the construction of the whole instrument, we adjudge that the Corporation of Columbia has a discretion as to time to redeem or reimburse the principal of the debt for the water-works.

It is ordered and decreed that the circuit decree be reversed, and the bill be dismissed.

O’Neall, Wardlaw, Withers, Whitner, Glover and Munro, JJ., and Dunicin, Ch., concurred.

Decree Reversed.