#### THE EASTERN EXTENSION, AUSTRALASIA AND CHINA TELEGRAPH COMPANY (LTD.) v. THE UNITED STATES.1

[No. 30767.

Decided April 7, 1919.]

*On the Proofs.*

*Treaties; International laic.*— At tlie time of the cession of the Philippines to the United States a British corporation has secured from the Spanish Government for a period of forty years grants and concessions for the establishment of submarine cables to be worked by the company at its own expense for an annual subsidy of £4,500. After the cession of the islands the United States use the cables in their public business and pay therefor. The company brings this suit to recover the subsidy assured to it by Spain, claiming that under the treaty of Paris or under the rules of international law the United States are liable therefor.

*Contracts.*— Plaintiffs having received payments from the United States Government for the services rendered could not, by its own system of bookkeeping, vary the effect of the transaction or impose an obligation upon the Government which it had not assumed. See 48 O. Ols., 33; 231 U. S., 326.

*The Reporter's*statement of the case:

*Mr. Louis Marshall*for the plaintiff. *Guggenhehner, ünt&rmyer (& Marshall*were on the briefs.

After considering various propositions affecting the jurisdictional aspects of the case and holding that this court does not possess jurisdiction of claims against the United States based on treaty stipulations, the Supreme Court on reviewing the decision of this court which dismissed plaintiff’s original petition herein because of want of jurisdiction, held, nevertheless, that this tribunal has jurisdiction of claims based on contracts originally made with a former sovereign of ceded territory and assumed by the United States arising after the cession, either expressly or by implication.

*109The petition was amended in accordance with the suggestions made by the Supreme Court, 231 U. S., 333, and presents a cause of action coming directly within the jurisdiction of this court as defined by the opinion of the appellate court in this cause.

On the acquisition by the United States of sovereignty over the Philippine Islands, the claimant’s private rights of property were in no manner affected by the change of sovereignty, and the rights vested in it, both contractual and otherwise, and executory as well as executed, remained enforceable in accordance with the principles of international law.

Although this proposition seems almost axiomatic, it will nevertheless be useful to cite the various decisions of our courts which sustain it, and which, it is believed, are the foundation for the subsequent propositions which are to be presented on behalf of the plaintiff.

It is well settled in international law that a mere change of sovereignty does not produce any change in private rights of property, whether the interest was acquired under a grant from the State, or by individual contract. *Mutual Assurance Society*v. Watts, 1 Wheat., 279.

In *United States*v. *Perchonan,*7 Pet., 51, it was held that, even if Florida had changed its sovereign by an act containing no stipulation respecting the property of individuals, the rights of property would not be affected by the change of sovereignty.

It has been held in numerous cases that a sovereign who acquires inhabited territory acquires full dominion over it, but this dominion does not divest the vested rights of individuals to property. *Delassus*v. *United States,*9 Pet., 117; *Mitchell*v. *United States,*9 Pet., 711; *United States*v. *Perchonan, supra.*

By the law of nations, the rights and property of the inhabitants of a conquered country are protected and held inviolable, irrespective of treaty. *Strother*v. *Lúeas,*12 Pet., 410. i

When New Mexico was conquered by the United States, it was only the allegiance of the people that was changed; their relations to each other and their rights of property *110remained undisturbed. *Leitensdorfer*v. *Welib,*20 How., TT6.

The cession of California to the United States did not impair the rights of private property. These rights were consecrated by the law of nations. *United States*v. M&reno, 1 Wall., 400.

By the law of nations, a change of government does not affect pre-existing titles. Titles which were perfect before the cession of Louisiana to the United States continued so afterwards, and were in no wise affected by the change of sovereignty. Such is the effect of the principles of the law of nations irrespective of treaty. *United States*v. Roselius, 15 How., 36; *Strother*v. *Lucas*12 Pet., 412; *Dent*v. *Emmeger,*14 Wall:, 308.

In *Cessna*v. *United*States, 169 U. S., 186, it was said:

“ It is the duty of a nation receiving a cession of territory to respect all rights of property as those rights were recognized by the nation making the cession.”

In *Soulard*v. *United*States, 4 Pet., 511, it was decided that the term “ property,” as applied to lands, comprehends every species of title, inchoate or complete; it is supposed to embrace those l'ights which lie in contract; those which are executory; as well as those which are executed, and that in this respect a new government which receives territory by cession takes the place of that which has passed away.

Under the established doctrines of international law, where a part of the territory of one nation is annexed by cession or otherwise to the territory of another, the latter, by the act of annexation, becomes bound to fulfill all the obligations which pertained to the former in respect of the territory acquired and the property therein. It practically inherits the rights and obligations of the ceding state.

This proposition must necessarily be largely based on general principles of international law, and upon the customs and usages of civilized nations as indicated in the works of jurists and commentators of recognized authority.

“ Where there is no treaty and no controlling executive or legislative act or judicial decision, resort must be had to the customs and usages of civilized nations; and, as evidence of these, to the works of jurists and commentators, Avho by *111years of labor, research, and experience have made themselves peculiarly well acquainted with the subjects of which they treat. Such works are resorted to by judicial tribunals, not for the speculations of their authors concerning what the law ought to be, but for trustworthy evidence of what the law really is.” *Hilton*v. Guyot, 159 U. S., 113, 163, 215; *The Paquete*Habana, 175 U. S., 677, 700.

See *HalVs International*Law, 5th Ed., p. 99; *Wheaton’s International*Law, 4th Ed., p. 46; *HaTleck's International Law*(Baker’s 1878 ed.), Yol. II, p. 504; 1 *Phillmore on Int.*Law, 3d Ed., p. 204, 210, 211.

Under general principles of jurisprudence the proved facts create an obligation on the part of our Government to the plaintiff to pay the subsidy provided for in the concession so long as it shall continue to avail itself of the general and special rights and privileges which have accrued to it under the terms of the concession.

That the Government has derived and continues to derive the benefits and advantages from the cables constructed by the plaintiff under its concession, which have been above enumerated, is admitted. The existence of the cable itself has not only been of inestimable benefit to our Government, during the past twenty years, but, when the United States first came into possession of the Philippine Islands, it was practically indispensable to the proper and efficient conduct of the affairs of the newly acquired territory. That is a matter of history.

Viewed in the light of these facts, this case must be treated precisely as it would be if the questions now presented had arisen as between private individuals. *People*v. Stephens, 71 N. Y., 549.

See also *Rhode Island*v. Massachusetts, 12 Pet., 737, 738.

It has been decided by a multitude of authorities that where a lessee assigns his estate in demised premises, the assignee is liable to the lessor for the rent reserved in the lease, the assignee becoming liable by reason of privity of estate, even though there be no privity of contract. *Stewart*v. *Long Island Railroad*Go., 102 N. Y., 607.

Where, therefore, an assignee utilizes the demised premises, privity of estate is established, and as a sequence the *112assignee, so long as he remains in possession, becomes liable, not for use and occupation or upon a *quantum meruit,*but upon the covenants of the lease. *Walton*v. *Stafford,*14 App. Div., 312; *Cameron*v. *Nash,*41 App. Div., 532.

The United States succeeded Spain in sovereignty over the ownership of the Philippine Islands, and succeeded to all of the rights acquired by Spain under its concession to the plaintiff.

We will assume, for the present, that the United States was under no obligation to avail itself of any of the rights or privileges conferred by the terms of the contract between Spain and the plaintiff, and that it might have declined to make use of the benefits and advantages accruing under such contract. Instead of pursuing that course, however, the United States, immediately on taking possession of the Philippine Islands, assumed control over the cable lines constructed and operated by the plaintiff, “ availed itself of all of the benefits and privileges thereof,” and used, and has ever since continued to use, the cable lines for its governmental and other purposes, under the terms of the concession, all the conditions of which have been actually fulfilled and performed by the plaintiff.

Hence, even though it might be argued that there was no privity of contract between the United States and the plaintiff, there has arisen a privity of estate which, so long as that privity continues, obligates the former to perform the covenant contained in the contract between Spain and the plaintiff.

Independently of the obligation which springs from the principle thus far considered, growing out of the analogy suggested by the doctrine deduced from the law of landlord and tenant, the same result would follow under the principles of *quasi*contract, resulting from the circumstance that the United States has, ever since it succeeded to the Spanish sovereignty, availed itself of the benefits and advantages of the plaintiff’s contract and has enjoyed the special advantages which it conferred and which have been fully explained above.

As between individuals, such a state of facts would result in the implication of a contract by the recipient of these *113benefits, to be bound by tlie terms of the agreement from which these advantages are derived. The acceptance of benefits so secured involves the obligation of bearing the correlative burden imposed by the same contract.

No more than an individual will the Government be permitted to blow hot and cold; to adopt and renounce at one and the same time; to affirm that part of an arrangement which is advantageous, and to disaffirm that portion which is onerous. When it sees fit to accept benefits it must be deemed to have elected to take them *cum onere.*

It has been held that even where a State has been induced to enter into a contract by fraud, if it nevertheless, with knowledge of the fraud, continues to take the benefits of the contract it is not thereafter permitted to repudiate it but is bound to perform its provisions; thus placing it in this regard on a parity with private individuals. *People*v. Stephens, 71 N. Y., 527; *Masson*v. Bovet, 1 Denio, 69; *Vernol*v. Vernol, 63 N. Y., 45; *Mills*v. *Hoffman,*92 N. Y., 181,190; *Baird*v. *Mayor, <&c., of N. T.,*96 N. Y., 589.

In *Gobi) y. Hatfield,*46 N. Y., 536, the doctrine ivas thus expressed:

“The taking of a benefit is an election to ratify it and concludes him. He can not be allowed to deal with the subject matter of the contract and afterward disaffirm it. The election is with the party defrauded to affirm or disaffirm; but he can not do both.”

This principle applies *a fortiori*where there is no pretense of fraud; where no attack is made on the *bona fides of the contract;*where there is no pretense that it was the result of collusion, undue influence, or of the taking of an unfair advantage, and where the beneficial nature of it is conceded. In such a case it would seem as though when one, whether an individual or a government, undertakes to enjoy the benefit of such a contract it is tantamount to an adoption of its provisions, and that even in the absence of an express contract, an obligation *ex aequo et bono*to undertake the performance of the burdens, which are reciprocal to the advantages derived, will be implied.

*114The underlying principle has been well stated in *Anderson*v. *Caldwell,*242 Mo., 201, 207; 146 S. W. Rep., 444:

“ Under the common law system of pleading, one form of civil action was assumpsit. In that form an action could be maintained upon a state of facts from which a contract would be implied by law. It was not essential that there was in fact a contract in the sense that the parties had entered into an agreement, either express or implied, as to the subject matter of plaintiff’s cause of action. All that was necessary was that defendant had 'received benefits which imposed upon him a duty to the plaintiff, so that, upon equitable grounds, a promise was implied by law that the defendant should respond to the extent of the benefits received. Such a relation between the parties, because of the promise which had not been made in fact, but which the law implied, has been termed a quasi contract.”

This doctrine was very fully considered in *Board of Highway Commissioners*1. *City of*Bloomington, 253 Ill.,, 164, and was applied by the court in *United States*v. Bussell, 13 Wall., 623; *Hollister*v. *Benedict <£ Burnham Mfg. Co.,*113 U. S., 59; *United States*v. Palmer, 128 U. S., 262; *Coleman*v. *United*States, 152 U. S., 99.

It proceeds on the same equitable considerations, as the civil law doctrine of enrichment, which has been accepted as applicable to cases like the present.

*Mr. William F.*Norris, with whom was *Mr. Assistant Attorney General William L. FHerson,*for the defendants.

1

 Affirmed, 251 U. S. —.

Campbell, *Chief*Justice,

reviewing the facts found to be established, delivered the opinion of the court.

The petition in this case as originally filed was demurred to, and the case was dismissed for want of jurisdiction, 48 C. Cls., 33. This ruling was affirmed by the Supreme Court, 231 U. S., 326. It was definitely held that section 153, Judicial Code (R. S., sec. 1066), providing that the jurisdiction of this court shall not extend to any claim against the Government “growing out of, or dependent on, any treaty stipulation entered into with foreign nations” remains in effect, notwithstanding the broadening of the court’s jurisdiction by the Tucker Act of 1887. It was, however, considered by the Supreme Court that the petition might be *115subject to amendment so as to present a claim that the United States is liable to the claimant as upon implied contract. The court said:

> “If the petition can be fairly said to present the claim that the United States, not simply by virtue of succession to sovereignty under the treaty of cession, but through its subsequent transactions with the appellant, and by contract to be implied from such transactions, has become indebted to the appellant, we think that the claim, as thus limited, would be within the jurisdiction of the court below under the act of 1881.”

The case was remanded to this court for further proceedings upon the theory of implied contract.

The plaintiff has filed an amended petition, to which the defendant has not demurred, though we think it may be said, accurately, of the amended petition, as was said by the Supreme Court of the original, “that the averments of the petition lack definiteness.”

Upon the hearing of the case in this court the plaintiff’s argument principally consists of an effort to show that the United States Government is responsible to the plaintiff because of its succession to sovereignty in the Philippines. This theory has been rejected by the Supreme Court.

The claim that the United States Government has accepted the benefits of the cables, and has “ assumed and adopted all of the obligations, and the performance of all of the conditions, accepted by the Kingdom of Spain,” is not sustained by the evidence. It appears that soon after the occupancy of said islands by the United States, its authorities refused to recognize the claim of the plaintiff, and insisted upon paying the rates established by the plaintiff. The Government did not assume to fix the rates. It also appears that the cables themselves were changed and relocated for the benefit of the plaintiff and its customers, and for which the United States Government assumed no responsibility.

The plaintiff having received payments from the United States Government for the services rendered, could not, by its own system of bookkeeping, or by what it called a “ Suspense account,” vary the effect of the transaction or impose *116an obligation upon the Government which it had not assumed. By this suspense account the plaintiff credited the United States Government with what it paid, and debited it with items which plaintiff was insisting upon; and statements of this account were rendered each year to some authority in the Philippines. But, manifestly, this would not make a contract between the parties to this action.

It appears that in 1905, after considerable correspondence with some of the authorities in the Philippines, the plaintiff pnid into the treasury there several thousand pounds. The receipt at Manila of that money was inconsistent with the position which the Government’s representatives at Washington had taken, and it can not be said that the receipt of the money by the auditor of the government of the Philippines was a receipt by the United States Government. The authority to bind the United States under such circumstances is not shown.'

We are of opinion that the plaintiff has shown no contract with the United States, and the petition should therefore be dismissed.

Hay, *Judge,*Downey, Judge, and Booth, Judge, concur.