Source: https://supreme.justia.com/cases/federal/us/227/382/case.html
Timestamp: 2017-06-27 15:43:27
Document Index: 677517347

Matched Legal Cases: ['§ 35', '§ 15', '§ 15', '§ 15', '§ 18', '§ 30', '§ 16', '§ 17', '§ 15']

Porto Rico v. Title Guaranty & Surety Co. (full text) :: 227 U.S. 382 (1913) :: Justia US Supreme Court Center Log In
› Porto Rico v. Title Guaranty & Surety Co.
Porto Rico v. Title Guaranty & Surety Co. 227 U.S. 382 (1913)
U.S. Supreme CourtPorto Rico v. Title Guaranty & Surety Co., 227 U.S. 382 (1913)Porto Rico v. Title Guaranty & Surety CompanyNo. 154Argued January 30, 1913Decided February 24, 1913227 U.S. 382ERROR TO THE CIRCUIT COURT OF APPEALS
The facts, which involve the liability of a surety company on a bond given for faithful performance of a contract, are stated in the opinion. Page 227 U. S. 383
By an ordinance of March, 1903, Porto Rico granted to the Vandegrift Company the right to build and operate an electric railway and also a power plant in specified places in the island. Within one year from acceptance of the grant, the grantee was to have its roadbed completely graded between the Island of San Juan and the urban portion of the municipality of Caguas, and the foundations and approaches of a certain bridge completed. Section 15. Within two years, it was to have the parts of the railway lying between the urban portion of San Juan and Caguas and certain other points finished and ready for service. Section 16. Within three years, it was to have the whole line completed and in operation. Section 17. It was stated to be expressly understood and agreed that, upon the grantee's failure to have the line in full operation within the time limited, i.e., three years, the grantee's right to operate any part of it or to sell electric light and power should cease unless the failure should be declared by the executive council to be due to one of certain excuses, such as the Act of God. Section 16.
A power dam at Comerio Falls was to be completed in one year and the greater part of the electric apparatus Page 227 U. S. 384 contracted for; the whole power plant and transmission lines necessary for operating the railway to be completed within three years. Section 18. The grantee was to pay the government two percent of its gross receipts from the sale of light and power to private consumers, Section 23, was not to charge above certain maxima fixed for passengers and freight, Section 25, and was to carry certain persons, such as prisoners and police on duty, free of charge, Sections 27, 28. The rights, privileges, and concessions granted by the ordinance were expressed to be subject to amendment, alteration, or repeal by the executive council. Section 30. Then it was provided that the rights granted
§ 35. Finally, the ordinance is to "take effect immediately upon the acceptance by the grantee of the terms and conditions hereof, as above provided." Section 38. Page 227 U. S. 385
"duly perform within the said period of three (3) years, all other terms and conditions in said ordinance required to be performed by the principal within the said period. * "Page 227 U. S. 386
The principal failed to do within the year the work required by § 15 to be completed in that time, as has been stated, and, a little more than two months after the year elapsed, in July, 1904, the executive council passed an ordinance amending §§ 15, 18, and 30 of the former one, the amendment being approved by the President on August 2. The time allowed in § 15 was extended to January 1, 1905, provided that the number of men employed on or before August 7 should be not less than 250, and that the number should be increased up to 500 or thereabouts, the intent expressed being that as many men should be engaged as was necessary to complete the work, and provided that the men should be paid weekly, and provided further that, upon failure to comply with the terms and conditions of the amendment, the franchise should be subject to immediate forfeiture. The requirement in § 18 as to the power dam at Comerio Falls, etc., also was extended to January 1, 1905. Finally, to the provision in § 30 as to amendment, &c., of the concession, there was added the express requirement of the approval of the Governor of Porto Rico and of the President of the United States, and the statement that it was subject to the power of Congress to annul or modify the same. This amendment seems to have been sought and accepted Page 227 U. S. 387 by the principal, but was not known to the defendant surety company, so far as appears.
After some hesitation, we have come to the conclusion that the court was right. It is true that the bond is to be read in connection with the original ordinance, and that the latter contained terms that were not complied with. But the ordinance only required a bond for the full completion of the work within three years, and in accordance with the conditions therein contained and the plans. Section 34. In the ordinance, the only condition properly so called, the only fact that warranted a revocation of the grant apart from the general power to repeal, was, by § 16, a failure to have the whole railway in operation, as required by § 17. There was no forfeiture for falling short of the requirements in §§ 15 and 16 as to the progress to be made in one and two years. The bond in like manner has for its principal condition the completion of the work within Page 227 U. S. 388 three years. It is true that the completion was to be in accordance with the terms contained in the ordinance, but this clause cannot mean that, if the road and works were in satisfactory operation within three years the obligee could recur to the history of events and, if it found that some item was not finished within the time allowed for it, could set up that fact as a breach, and, by its interpretation of Porto Rican law, recover the whole penalty of the bond. The subordinate requirements were simply means to an end, and if the end was reached, their importance disappeared. The very contentions of the plaintiff as to the liability incurred upon any breach are arguments against supposing that such incidental failures to be on time had such a consequence attached.
This, perhaps, affords the plaintiff its strongest argument. But this is a residuary clause to cover matters that may have escaped consideration. The building of the road and works already have been dealt with, and this clause as to "other" terms hardly can be supposed to have reference to them. If it does, however, it would seem to us that the limitation of time should be construed as looking to the end of the three years, and allowing that period, rather than distributively, and as meaning from time to time during three years. The same considerations that apply to the construction of the principal condition apply to this, and it appears to us that the provision for the cancellation of the bond upon certificate showing the completion of the work, "and upon the full compliance with the terms of this ordinance to the satisfaction of the executive council," is not enough to change what we understand to be the import of the instrument upon its face. Finally, the proviso that no extension of the time or times limited for Page 227 U. S. 389 the completion of the work "or any part thereof" shall discharge the surety at most merely recognizes that the principal, by accepting the ordinance, contracted to do the parts of the work as required, as well as the whole, and with natural caution saves the rights of the obligee against the surety in case of any extension of time, a matter that obligees have learned to fear.
If our construction of the bond is right, it does not need much argument to show that the plaintiff is not entitled to recover, seeing that, within three years, it took the franchise back. It was said at the bar, though not admitted, that the principal had given up work. But there had been no repudiation of the contract, and the plaintiff could not accelerate the forfeiture simply on the ground that it was likely to come about. If, within the time allowed for performance, the plaintiff made performance impossible, it is unimaginable that any civilized system of law would allow it to recover upon the bond for a failure to perform. 2 Bl.Com. 340, 341; United States v. Arredondo, 6 Pet. 691, 31 U. S. 745-746.