Case Name: The Denver Pacific Railway Company v. The United States
Court: United States Court of Claims
Jurisdiction: United States
Decision Date: 1876-12
Citations: 12 Ct. Cl. 237
Docket Number: 
Parties: The Denver Pacific Railway Company v. The United States.
Judges: Peck, J., was absent when this case was argued, and took no part in the decision.
Reporter: United States Court of Claims Reports
Volume: 12
Pages: 237–266

Head Matter:
THE DENVER PACIFIC RAILWAY COMPANY’S CASE.
The Denver Pacific Railway Company v. The United States.
On the defendants’ Demurrer.
Ihe Pacific Railroad Act, 1862, authorizes a loan in Government, bonds o/$16,000 a mile to the Kansas Pacific Railroad, an d imposes a statutory mortgage as security for such advances on the xohole road. It also authorizes the Government to with- ■ hold future freight-moneys earned by the road in carrying mails, $c., and apply them to the payment of the bonds. The company fail to complete the road. The Tranfer Act 1869 is passed authorizing a transfer of the franchise and rights to acquire public lands fromthe Kansas Pacific to the Denver Railway Company, as to that unbuilt portion of their route lying between Denver and Cheyenne. The Denver Company complete this portion of the route, receiving no part of the Government loan. Subsequently they earn freight-moneys in carrying the mails, 4-a. The Government refuses to pay, and insists that it has the right to apply the earnings of the Denver road upon the bonds loaned the Kansas Pacific. The claimants 'deny that their road is subject to the statutory mortgage, and bring their action, settingup) the foregoing facts intheir petition. The defendants demu/r.
I. The right of the Government under the Pacific Railroad Acts 1862, 1864, (12 Stat. L., 489; 13 id., 356,) to withhold freight-moneys earned in carrying the mails, &c., and apply them to the payment of the bonds loaned the companies to aid them in the contraction of the roads, is not a condition attached to the franchise nor an obligation springing out of the land-grants conferred upon the companies, but simply a specific mode of payment upon the mortgage created by those statutes.
II. The Denver Pacific Railway Transfer Act 1869, (15 Stat. L., p. 324, § 1,) wherein it authorizes the transfer of the Kansas Pacific Railroad’s franchises and right of way between Denver and Cheyenne to the Denver Railway Company, but provides that the grant be “ subject to all the obligations pertaining to saidpart of its line,” must be construed to relate to corporate obligations imposed by the original incorporating statutes, and not to the statutory mortgage resting on other parts of the grantor’s line. Therefore the Denver road is not subject to the mortgage-debt of the Kansas Pacific road.
III. A secondary purpose, which from the nature of things would have defeated the controlling purpose of a statute, will not be ascribed to Congress, especially when it rests on mere implication.
IV. The term “ subject to the conditions,” &o., as used in some of the Pacific Railroad acts, is properly referable to land and to a mortgage; but when this is dropioed and the term “ subjectto the obligations,” &c., is substituted, the latter is not properly referable to land nor to a mortgage, but to the personal or corporate duties imposed upon the party obligated.
Y. The Pacific Railroad acts contemplate a continuous line of road formed by local railroads owned by different companies; and they constitute a system of enactments, inpari materia, which are to be construed together as one act.
The Reporters' statement of the case :
The following is a statement of the statutory provisions and the fabts involved in the demurrer to the claimant’s petition :
I. By the Act July 1, 1862, (12 Stat. L., 489,) incorporating the Union Pacific Eailroad Company, that company was authorized to construct a railroad from a point in the Territory of Nebraska, on the one hundredth meridian of longitude, to the western boundary of the Territory of Nevada.
II. That act made four grants to that company, namely: 1. Of the right of way over public lands. 2. Of the right to take from the adjacent public lands earth, stone, timber, and other materials for the construction of the road. 3. Of alternate sections of the public lands along the line of the road expressed to be granted ‘ ‘ for the purpose of aidin g in the con struction of said railroad, * * * and to secure the safe and speedy transportation of the mails, troops, munitions of war, and public stores thereon.” And 4. Of sixteen bonds of the United States, of $1,009 each, for each mile of the said road completed and equipped by the company; which grant was expressed to be “ for the purposes * * # mentioned ” in the act. And in connection with this granted it was enacted that, “ 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 bv 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 so to do by the Secretary of the Treasury, in accordance witli the provisions of this act, the said road, with all the rights, functions, immunities, and appurtenances thereunto 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 the said company, may be taken possession of by the Secretary of the Treasury, for the use and benefit of the United States.”
III. By the sixth section of the act it was declared “ that the grants aforesaid are made upon condition that said company shall pay said bonds at maturity, and shall keep said railroad and telegraph-line in repair and use, and shall at all times transmit dispatches over said telegraph-line, and transport mails, troops, and munitions of war, supplies, and. public stores upon said railroad for the Government, whenever required to do so by any Department thereof, and that the Government shall at all times have the preference in the use of the same for all the purposes aforesaid, (at fair and reasonable rates of compensation, not to exceed the amounts paid by private parties for the same kind of service;) 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.” By the fifth section of the Act July 2, 1864, (13 Sbat. L., 356,) it was provided that only one-half of the compensation for services rendered for the Government by the companies named in the act of 1862 should be required to be applied to the payment of the bonds issued by the Government to those companies.
IY. Further to provide for the eventual payment by the com'pany of the bonds issued to it, the act required that, “after said road is completed, until said bonds and interest are paid, at least 5 per centum of the net earnings of said road shall also be annually applied to the payment thereof.”
Y. By the said act of 1862 the Leavenworth, Pawnee and Western Eailroad Company was authorized to construct a railroad from the mouth of the Kansas Eiver to the initial point of the Union Pacific Eailroad, on the one hundredth meridian of longitude, “ Upon the same terms and conditions, in all respects, as are provided in this act for the construction” of the Union Pacific Eailroad. The distance from the mouth of Kansas Eiver to the initial point aforesaid was 393 miles.
YI. By the terms of the second proviso in section 9 of the Act July 2, 1864, (13 Stat. L., 356,) amendatory of that of July 1, 1882, any company authorized to construct its road from the Missouri Eiver to the initial point aforesaid was authorized to construct its road so as to connect with the Union Pacific Eail-road at any point westwardly of the initial point aforesaid; and in connection with this authority it was enacted that “in aid of the construction of so much of its road * * * as shall be a departure from the route hereinbefore provided for its road, such company shall be entitled to all the benefits and be subject to all the conditions and restrictions of this act: Provided, however, That the bonds of the United States shall not be issued to such company for a greater amount than is hereinbefore provided, if the same had united with the Union Pacific Eailroad on the one hundredth degree of longitude; nor shall such company be entitled to receive any greater amount of alternate sections of public lands than are also herein provided.”
YII. The Act July 2, 1864, further authorized the eastern division company to issue its first-mortgage bonds upon its road to the amount of $16,000 per mile, and declared that “ the lien of the United States bonds shall be subordinate to that of the bonds” of said company, thereby authorized to be issued, “ except as to the provisions of the sixth section of the act to which this act is an amendment, relating to the transmission of dispatches and the transportation of mails, troops, munitions of war, supplies, and public stores for the Government of the United States.^ Those provisions are shown above in paragraph III.
YIII. An act further amendatory of the act of 1862 was passed July 3, 1866, (14 Stat. L., 79,) authorizing the eastern division company to designate the general route of its road, and to file a map thereof, at any time before December 1,1866; and enacting that, “ upon the filing of the said map, showing the general route of said road, the lands along the entire line thereof, so far as the same may be designated, shall be reserved from sale by order of the Secretary of the Interior: Provided, That said company shall be entitled to only the same amount of the bonds of the United States to aid in the construction of their line of railroad * * * as they would have been entitled to if they had connected their said line with the Union Pacific Eailroad on the one hundredth degree of longitude, as now required by law: And provided further, That said company shall connect their line of railroad and telegraph with the Union Pacific Eailroad, but not at a point more than fifty miles westwardly from the meridian of Denver in Colorado.”
IX. Tbe petition alleges that on tbe 3d of March, 1869, tbe Kansas Pacific Eailway Company (meaning thereby tbe Union Pacific Eailway Company, eastern division, by its present name) had completed a line of railroad to Sheridan, a distance of 440 miles from the Missouri Eiver and 225 miles from Denver, and had received from the United States bonds to the amount of $6,303,000, being at the rate of $16,000 per mile for 393‡| miles, and all that that company was entitled to.
X. At the last-named date the claimants were engaged in constructing a railroad from Denver to Cheyenne, in Wyoming Territory, a distance of 106 miles, but had no aid from the Government, either in lands or bonds. The Act March 3,1869, (15 Stat. L., 324,) was then passed in the following terms:
“ Sec. 1: That the Union Pacific Eailway Company, eastern division, be, and it hereby is, authorized to contract with the Denver Pacific Eailway and Telegraph Company, a corporation existing under che laws of the Territory of Colorado, for the construction, operation, and maintenance of that part of its line of, railroad and telegraph between Denver City and its point of connection with the Union Pacific Bailroad, which point shall be at Cheyenne, and to adopt the road-bed already graded by said Denver Pacific Eailway and Telegraph Company as said line, and to grant to said Denver Pacific Eail way and Telegraph Company the perpetual use of its right of way and depot-grounds, and to transfer to it all the rights and privileges, subject to all the obligations, pertaining to said part of its line.
“ Sec. 2. That the said Union Pacific Eailway Company, eastern division, shall extend its railroad and telegraph to a connection at the city of Denver, so as to form with that part of its line herein authorized to be constructed, operated, and maintained by the Denver Pacific Eailway and Telegraph Company, a continuous line of railroad and telegraph from Kansas City, by way of Denver, to Cheyenne. And all the provisions of law for the operation of the Union Pacific Rail/road, its branches and connections, as a continuous line, without discrimination, shall apply the same as if the road from Denver to .Cheyenne had been constructed by the said Union Pacific Eailway Company, eastern division; but nothing herein shall authorize the said eastern division company to operate the road or fix the rates of tariff for the Denver Pacific Eailway and Telegraph Company.
“ Sec. 3. That the said companies are hereby authorized to mortgage their respective portions of said road, as herein defined, for an amount not exceeding thirty-two thousand dollars per mile, to enable them respectively to borrow money to construct the same; and that each of said companies shall receive patents to the alternate sections of land along their respective lines of road, as herein defined, in like manner and within the same limits as is provided by law in the case of lands granted to the Union Pacific Railway Company, eastern division: Provided, That neither of the companies hereinbefore mentioned shall be entitled to subsidy in United States bonds under the provisions of this act.”
XI. In pursuance of the authority given by this act, a contract in conformity therewith was entered into between the two companies therein named, and the eastern divisiou completed its road from the mouth of Kansas River to Denver, and the claimant completed its road from Denver to Cheyenne, and received the grant of alternate sections of land along its line, under the assignment from the former company.
XII. On the 3d of March, 1873, an act was passed (17 Stat. L., 608) whereby the Secretary of the Treasury was “ directed to withhold all payments to any railroad company, and its assigns, on account of freights and transportation over , their respective roads, of any kind, to the amount of payments made by the United States for interest upon bonds of the United States issued to any such company, and which shall not have been reimbursed, together with the 5 per centum of net earnings due and unapplied as provided by law.” By the same section, “ any such company may bring suit in the Court of Claims to recover the price of such freight and transportation; and in such suit the right of such company to recover the same upon the law and the facts of the case shall be determined, and also the rights of the United States upon the merits of all the points presented by it in answer thereto.”
XIII. Previous to the year 1873, and during the whole of the years 1873,1874, and 1875, the claimant transported over its road the mails of the United States, and for the transportation thereof prior to 1873 was paid in full, but since the beginning of that year the Government has refused to pay anything for such transportation.
Mr. 0. E. Bretherton for the claimant:
What is the status of the claimant in relation to the Government? We contend that no pecuniary obligations of any kind subsist between them, and that the claimant is liable neither directly as a debtor or surety, nor indirectly as assignee of property subject to a lien, to pay anything toward the debts of the Kansas Pacific. The Attorney-General held that the claimant was bound to carry the mails, and that the compensation payable in respect of such carriage was to be credited .on the debt due by the Kansas Pacific to the Government.
The vital phrases, on the construction of which the controversy between the parties turns, are the expression “ subject to all the obligations pertaining to said part of its line,” in the act of 1869, and the direction “ to withhold all payments to any railroad company and its assigns,” “to the amount of payments made by the United States for the interest upon bonds of the United States issued to any such company, and which shall not have been re-imbursed, together with the five per centum of net earnings due and unapplied as provided by law,” in the act of 1873.
Their interpretation calls for the examination of two questions :
What were the obligations pertaining to the part of the road of the Kansas Pacific lying between Denver and Cheyenne on March 3, 1869?
What is an “ assign ” of a company which had received bonds from the United States? Is the Denver Pacific Company an assign of the Kansas Pacific within the meaning of the act of 1873 ?
We contend that the obligations pertaining to the road between Denver and Cheyenne were not all the obligations of the company to the United States, but only those which directly affected the property as well as the contracting party, and were in the nature of a lien or servitude upon the property itself; that although the Kansas Pacific corporation might be under a personal obligation, enforeible by action or set-off, to pay or apply half-charges for transportation, or five per cent, of the earnings of the entire railroad belonging to it, to the liquidation of its debt to the Government, yet such obligations only followed the property in the hands of a transferee to the extent to which the lien to secure them existed, and that a lien existed for the pecuniary advances only upon the portion of the road in consideration of the construction of which the advauces were made. Such a view assumes that the Kansas Pacific could transfer or assign its road in parcels, and whether this be true as a general rule or not is immaterial, for clear authority is given by the Government, the other contracting party, for assignments of its original road, in at least four fractions.
The Government could not without impairing the obligation of the original contract securing the $16,000 per mile first-mortgage bonds, even had such been the intention of the framers of the act, water down the security of the original mortgage bonds issued on 400 miles of road at the rate of $1.6,000 a mile by a further issue under one and the same security at the rate of $32,000 per mile on 200 miles. Indeed, the language of the act of 1869 is unmistakable. It does not purport to authorize a further issue of bonds under an existing security, but a new mortgage of the extension defined. It is also obvious that the lien of the $16,000 per mile first mortgage did not extend over the whole of the company’s railroad, but only over the number of miles in respect of which they were issued. If their lien extended over the whole road, the Government could not of course release it, without the bondholders’ consent, over the part uncompleted on March 3, 1869, so as to authorize another mortgage of that portion.
Kor does there seem room for any possible discussion as to whether the liens of the mortgages authorized by the act of March 3, 1869, were paramount to that of the Government. It has been sometimes contended that the lien of the Government extended over the whole road, subject only to the prior lien of the $16,000 per mile first-mortgage bonds. Such a position is clearly untenable. The act of 1864 contemplated afirst mortgage to third persons, (subject to the retention of half-transportation charges,) and a second to the Government. The rate of subsidy was fixed on a mileage basis. Row the act of 1864 authorized theKansasPacificand the other branches of the system to extend indefinitely westward, and yet restricted the loan by the Government to an amount computed on the length of their roads to the initial point, (in case of the Kansas Pacific under 400 miles,) and it restricted the amount of first-mortgage bonds to an amount not exceeding that of the Government bonds. It could not be expected that a further extension westward into what was then styled the A merican desert would render the construction of the road less expensive, and yet such an interpretation would deprive the company of any power to raise money for the extension of its road as soon as the part for which a subsidy was granted was finished. Had any possibility of such a construction ever been even suspected by the capitalists of the country, when the Government subsidy was exhausted, no further funds could possibly have been raised on a third mortgage, subject to prior liens of the first-mortgage bonds and of the Government, and the- road would be unfinished to this day.
On the other hand, the contention that the lien for the sum advanced by the Government to those roads which received assistance for part only of their line, is confined to that part of their line, is more consistent with the exact language of the act of 1864, by which the lien is given. It reads : “ 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.” The expression “on the whole line” was intended to exclude the idea that each installment was a' separate lien on the forty-mile section in respect of which it was issued, and to cover the whole loan by one single lien, which, however, was only to extend over the part of the railroad in respect to which issues of bonds were made.
On the opposite theory the absurd consequence ensues that the more a corporation relied on private enterprise, the more hardly it was treated by the Government. If the Kansas Pacific constructed its road to the initial point on the main stem, a length of about 400 miles, it was to receive an advance on second mortgage at the rate of $16,000 per mile, subject to a first lien of like amount, but if it built a road farther west of over 700 miles, it was only to receive the same amount, or an advance at the rate of some $8,000 or $9,000 per mile, with power only to create a prior lien not exceeding the amount of the Government bonds. In the case of the Kansas Pacific, the total amount of capital raised by these issues as actually made or purporting to be made by the company was, in round numbers, six millions of first-mortgage bonds on the subsidized portion of about 400 miles, six millions of second or Government bonds on the same portion, six millions on first mortgage of the extension to Den ver or unaided portion, over 200 miles more, and upwards of three millions on the part from Denver to Cheyenne. Can it be a reasonable construction of the act that would give the first six millions and the Government bonds a lien over the entire road, leaving the other nine millions secured by a third mortgage only ? There is nothing whatever in the act to force the adoption of such an oppressive construction.
The length of road, therefore, in respect of which Government aid was given must have, at the date of the act of 1869, been deemed to be mortgaged by itself, and therefore liable to separate sale and foreclosure.
And similar considerations show that the Lea ven worth branch, constructed without Government aid, was not subject either to the lien of the $16,000 per mile bonds or that of the Government, and .that it could be mortgaged by the company under the' general powers given to its State charter.
It is obvious that transfers of portions of the original Kansas Pacific road were contemplated that would result'in its passing into the hands of four distinct ownerships, and such transfers would necessarily involve some adjustment or distribution of its obligations to the Government.
These obligations are of two entirely distinct kinds. The first are the regulations of the user of the road, requiring its operation without discrimination, giving preference for Government transportation, fixing the charges for such transportation, &c., which equally affect all parts of the Pacific system and which may be considered partly as regulations of public commerce, partly as servitudes imposed on the property in favor of the United States. These obligations are in their nature applicable to any part of the road, and no difficulty would arise, so far as they are in question, by a division of the road.. But the obligations of the second kind are entirely different, and consist of the pecuniary obligation to repay the money lent, with the various subsidiary stipulations as to the application of part of the charges for transportation and net earnings to such purposes. They are secured by a lien, and any transfer of the road in sections necessarily contemplates some localization or distribution or apportionment of this lien.
If the Government can retain part of the money due the Denver Pacific to pay the debts of the Kansas Pacific, it can continue to do so till all that debt is paid. It is quite within tbe bounds of possibility that the bond-hoíders of the three other fractions of the original Kansas Pacific may foreclose. After any such foreclosure, all that the Government would receive from the new ownership would be one-half of the transportation ovár their respective parts of the road. These sums would not probably be sufficient to keep down the interest, much more to liquidate the principal. What remedy would the Denver Pacific have against these purchasers under the foreclosure, so as to get back what the Denver Pacific had paid in this way on account of the Kansas Pacific debt? Against the Kansas Pacific corporation it is possible such a right to re-irn-bursement might exist, but the purchasers would be under no such obligation, and the Denver Pacific would simply go on paying 810,000 or 820,000 per annum ctcl infinitum, and would lose the money.
With regard to the construction to be put on the word “assigns,” in the act of 1873, we contend that that expression refers to assigns of the executory contract between the Government and the respective Pacific .companies, and not to assigns merely of parts of the property or rights of the subsidized companies. Thus, for instance, the Western Pacific Company and the 'Union Pacific, Central Branch, are such assigns; with the consent of the Government, each of them was substituted for the original contracting company, received the benefits to which it was entitled, and assumed its obligations. But the Denver Pacific was in no sense an such assign. The position assumed by it under the act of 1869 was not an assumption of the contract of the Kansas Pacific. The pecuniary obligations of that company to the Government remained unaltered, the amount .continued the same, and that, company remained certainly the principal, and, according to any fair construction of the act, the only debtor. The transaction between the Government and the two companies was not a transfer in globo of the Kansas Pacific contract to the Denver Pacific, but a novation by delegation of the original contract between the Kansas Pacific and the Government, by which it was extinguished, and new contracts with the two companies severally substituted in its place. It is a familiar principle that such a novation puts an end to the original contract, with all its liens, pledges, and collateral obligations. “ Novatione legi-time facta liberantur Ivypotlieem? (L. 18, ff, Be Novat; Domat, Civil Law, vol. 1, p. 515; Pothier Des Obligations, tom. 2, p. 713; Civil Code of California, sec. 1430; Addison, (Ed. Morgan,) sec. 372; Parsons, J, 217.)
Thus the original obligation to apply half-charges for transportation over the road between Denver and Cheyenne to reduction of the loan to the Kansas Pacific was at an end by the novation, of the contract, and the existence of such a stipulation must in the innovated contract arise from a “ fair interpretation” of the act of 1873; and as that act was in the nature of an offer to the undertakers of the Denver Pacific enterprise to invest á large sum of money in the construction of the road between Denver and Cheyenne, the act ought not to be interpreted so as to spring upon them enormous and unlimited obligations, of which the act itself gave them no clear warning.
Ko extended discussion of the principles of construction that should be applied to the act of 1869 seems necessary. The ground is fully covered by the opinion of Judge Davis in The United States v. Union Pacific Railroad Company, 1 Otto, 72. His expressions that “ The act * * * must be considered in the nature of a proposal to enterprising men to engage in the work. * * * It (the [Government) proffered the terms on which it would lend its aid. * * * It would have declared its purpose in unequivocal language.” * * * (The words used) “do not give notice that this exaction was intended,” are relevant to the present case.
Mr. Henry Beard for the claimant:
As to the lien of the United States to secure repayment of the bonds, it appears to have been the intention of Congress to limit it to the identical road or portion of road and equipments in respect of or in consideration of which bonds were to issue. This is the fair meaning of section 5, act 1862, in the body of that section; and this meaning is fixed by the proviso that the section should not apply to that part of any road now constructed. (See same proviso to sec. 11, act 1864.)
It was not the intention of Congress to assert the lien of the issued bonds on a road or part of a road built without their aid.
We infer this also from an examination of section 13, act 1862, by which bonds and lands were given .the Saint Joseph branch for 100 miles next the Missouri River, subject to the terms and conditions of the law, but that extension might be longer than 100 miles, and as to any distance beyond this 100 miles, if other conditions applied to such extension by force of other provisions of the laws, (as sec. 15, act 1864,) it appears to be clear that no lien of issued bonds could exteud beyond 100 miles. We infer the same from the fact that all those companies which received bonds were required to report to the Government, annually, their financial condition and operation. But this requirement is not made of the Denver company in the act of 1869. The act of 1869, fairly construed, places the entire line of transportation therein mentioned, from Kansas City by Denver to Cheyenne, in the attitude of three separate divisions, each liable to its own creditors, and having distinct financial obligations, and burdened or to be burdened with separate and distinct mortgages.
In this view, it is a fair offer to the capitalists to loan money to complete the through line then incomplete. The amount of credit- to be obtained by loans on the several sections would be ratably equal; otherwise no money could be borrowed upon the roads to be constructed, and the condition of the Denver company after the passage of the act of 1869 would have been worse than before.
We have not before us the question, what would have been the obligations of the Kansas company to the United States had it built the entire through line of transportation under the act of 1866. The fact is, that the claimant company’s road and the unsubsidized portion of the Kansas company’s road were built under the act of March 3,1869, and all the bonds received by the last-named company had been issued to it before that date.
Prior to the location of route by the Kansas company under the act of 1866, its road was exact in length and location, having two well-fixed termini on a defined probable route. (Sec. 9, act 1862; sec. 12, act 1864.) Then came the act of July 3, 1866; and under that the identity of the Kansas company’s road was nearly obliterated. A portion was constructed, and the Government subsidy issued thereon ; and then came the new law of 1869. This act of 1869, in the title and its three sections, (loosely drawn,) defines two railroads to Denver to be aided by its passage; the two, when built, to constitute a through-transportation line from Kansas City, by Denver, to Cheyenne. If the assignment provided for in section 1 should be made, section 3 then provides that the two companies may thereafter be separately dealt with by capitalists and by the United States, as the owners of their respective portions of the continuous line, in aid of building the unconstructed parts of which the law was passed. On each sep irate portion respectively, the owner had authority to borrow money, and to receive its patents direct from the United States.
The 6th section of the act of 1862 required that “ all compensation for services rendered for the G-overument shall be applied to the payment of said bonds and interest, until the whole amount is fully paid.” The act of 1876, section 5, says : “ Only one-lialf of the compensation for services rendered for the Government by said companies shall be required to be ap-. plied to the payment of the bonds issued by the Government in aid of the construction of said roads.” Section 7 enacted that the failure of any one company to comply with the conditions of the law should not work a forfeiture of the rights, privileges, or franchises of any other company that had complied therewith; and construing all this together, the meaning is plain, viz, that the compensation, or one-lialf compensation, for services by each company should be applied to the indebtedness of the same company; and where there was no indebtedness by any company, these provisions would not operate. .But each company stood or fell on its own performances; one did not suffer by another’s default.
In conclusion, we remark that the Denver compauy, as a corporation, has not received property cum onere by transfer. It is not indebted to the United States directly. It has made no promises to pay the debt of the Kansas company or any part of that debt, and, looking for a practical construction of the act of 1869, we find it in the conclusion that, whether or not the Kansas company is bound to apply its earnings by services rendered to the Government on any and all roads owned by it and embraced in the general scheme of the acts under review, the Denver Pacific company is not, by any act of Congress, bound to release its earnings of the same kind in the present, past, or future. On the contrary, Congress, in the act of I860, must be regarded as having abandoned in favor of both companies the right it formerly may have had to have service performed by the Kansas company between Denver and Cheyenne, and the half-compensation therefor applied to the debt of that company to the United States.
The object sought by the law of 1869 was one of national interest and importance, “ to expedite the completion of railroads to Denver,” and for that purpose the Government could readily abandon the small advantage which it is now claiming in the defense of this suit. .
Mr. Assistant Attorney-General Simons and Mr. Joseph K. Mc-Oammon for the defendants:
The demurrer requires the defendants to show that on the facts pleaded there can be no recovery, and as the claim is based on the act of 1869, we contend, in the first place, that under this act no such privity of contract was created between the parties to this suit as will sustain the claim ; that the circumstances preceding and which led to the passage of the act show that no alteration of the existing relations between defendants and their grantee, the Kansas company, was intended to be made; that it was intended merely to sanction a subsidiary arrangement between their grantee and a third party to promote the object of the grant which should be binding as .between the two parties thereto, but should establish n'o privity between the third party and the defendants, such as to raise any obligation toward that party on the defendants’ part. The defendants had madespecifie engagements with a presumably responsible party to construct and operate a certain line of railway. They had no more interest in the arrangement thereafter made than a landlord would have if requested by a tenant to permit a subletting to help him in earning the rent. On such permission could the subtenant maintain an action against the landlord on the lease ?
Having no motive, then, to introduce a new contracting party, what, in fact, did Congress enact, and with what intent? The first section reveals their purpose. It authorizes the Kansas company to contract with the claimant for the construction, operation, and maintenance of that part of the line from Denver to Cheyenne, and to that end permits a transfer of its rights and privileges as held under the original grant.
The second section sustains this view in providing that the Kansas company shall extend its line, &c., “ so as to form with that part of its line herein authorized to be constructed, operated, and maintained by the Denver Pacific Railway and Telegraph Company,” a continuous line from Kansas City, by Denver, to Cheyenne.
If, however, this construction of the act is deemed inadmissible, and the claimants are held to be assigns of the rights of the Kansas company with privity of action against the defendants, there are other, and perhaps stronger, objections to the legal position on which the claim is based. That position is, in substance, that defendants’ lien on the Kansas company’s road for its loan of $6,303,000 was confined to that part of the line extending about 394 miles from Kansas City, on the completion of which, in sections, the bonds were issued; hence, the part of the line transferred to claimants came to them unencumbered by any servitude or obligation respecting the said bonded debt; that defendants’ security for such debt, aside from the said limited lien, rested only on the personal obligation of the Kansas company, which was not an obligation “ pertaining to said part of the line,” and so did not pass to the transferee under the act. The conclusion is, that never having assumed any obligation respecting the bonded debt, no part of their earnings can be applied to its reduction.
The fundamental statement here, that the lien of defendants’ bonds is confined to a part only of the line, seems in direct contradiction of the statute as heretofore cited; and no amount of argument can make the case plainer than the legislative words, “ shall ipso facto constitute a first mortgage on the whole line,” &c.
But it is urged that the last phrase of the clause just mentioned, namely, “ and in consideration of which said bonds may be issued,” supports in some way the limitation claimed. To this it may be answered, first, that the consideration for issuing the bonds must needs be something done or conceded by the company for the defendants’ benefit, and the act or concession contemplated was probably the submission of all the company property to the lien as prescribed. But, secondly, supposing that this phrase relates to the extent of the lien, it clearly included the entire line and nroperty of the Kansas company at the time of enactment, and if the company thereafter chose to extend its line and accept additional grants therefor, it took these grants with the conditions annexed by the act, and among these was the condition which made the whole line and its earnings subject to the reduction and discharge of the Government lien; and this, also, meets the suggestion that it was a provision for cases like that of the Hannibal and Saint Joseph Company, (section 13,1862,) having already a road built to Saint Joseph, but authorized by the act to extend it to meet the Kansas road, or the main trunk, “ upon the same terms and conditions in all respects for one hundred miles,” &c.
Here the conditions are expressly limited to the hundred miles. It follows that there was no road existing or contemplated by the act of 1862 to which such a provision as that contended for by claimants was then applicable, and that would seem to render their construction futile.
Section 6, 1862, declares that the grants aforesaid are made upon condition that said company shall pay said bonds at maturity, and at all times transport mails upon said railroad and apply the compensation as prescribed. The “grants” include much more than the bond loan, and the obligation to pay the bonds and to transport the mails under the prescribed condition as to compensation rests as much on the grant of way or the land-grant as on the loan. How, then, can a company which took these grants for the entire route claim that any part of its line is not subject to the said and every other condition ? How, indeed, can it be maintained that the said obligations do not pertain to that part of its line in controversy, when the object of the act was to enable the claimant to obtain the grants which are charged with these obligations, and which have never been conceded without annexing them ?
The pretense that Congress intended to give the claimant the right of way, land-grant, and other rights and privileges under the Pacific Eailroad acts, discharged of any obligation to which the Kansas company was bound in respect of the same grants, can hardly be sustained or need discussion. We insist, therefore, that, as transferee, the claimants are bound to pay the bonds, &c.. to the extent that such obligations pertain to its part of the whole line subjected to them. The possible complications and even hardship to the claimants that this doctrine may involve are, strictly speaking, of no consequence, and do not require consideration here. The claimants must- be presumed to have contemplated such liabilities before assuming their present obligations.
The claimants vehemently insist that they are not “ assigns ” within the meaning of said act, and that their suit is not brought under it, but under the ordinary jurisdiction of the court; as to which defendants’ counter-position is that there is no distinction possible between the assign (if any) created by the act of 1869 and the assigns contemplated by the act of 1873; that tbe claimant, as such assign, must bring suit under the act of 1873, as a prescribed statutory remedy supersedes the ordinary jurisdiction.
The defendants further contend that, as the act of 1873 requires the Secretary of the Treasury to withhold all compensation to the amount of payments for interest on the bonds issued not re-imbursed, “ together with the five per centum of net earnings due and unapplied, as provided bylaw,” the petition, in order to show that the amount claimed is not rightfully withheld by the defendants, should show that there have been no net earnings or none unapplied, as provided by law, on which point there is no averment, and hence, we submit, no sufficient statement of a cause of action under said act.

Opinion:
Eott, J.,
delivered the opinion of the court:
This is an action brought by the Denver Pacific Eailway to recover for services rendered in carrying the defendants' mails •from Denver to Cheyenne. The defendants have demurred to the petition, but it is conceded by their counsel, the Assistant Attorney-General, that the claimants are entitled to recover a portion of their demand, and hence that the demurrer must be overruled. The resulting question, elaborately argued on the hearing, is as to the amount for which judgment should be entered, it being mutually conceded that the petition presents fairly the law and the facts involved in the ease.
The position which the defendants occupied on the argument, briefly stated, is this: (1.) That no privity of contract exists between them and the claimants. (2.) That the claimants are nothing more than the assignees or successors pro hac vice of the Kansas Pacific Eailroad. (3.) That the Government ma,y withhold one-half of the freight-moneys earned by the claimants in carrying the mails, as if the service had been performed by their assignors, the Kansas Pacific Eailroad, and may apply the .money thus withheld to the payment of the bonds issued in aid of the construction of that roach (See the Pacific Railroad Acts 1862, 1864, 12 Stat. L., 489, § 5, 6, 9; 13 Stat. L., 356, § 5.)
It was determined by the decision of the Supreme Court in the Union Pacific Railroad Case (11 C. Cls. R., 1) that this half of the earnings of these roads, which the Government is authorized to withhold, is not a condition attached to the franchise, nor yet an obligation springing out of the land-grants conferred upon the companies, but simply a specific mode of payment upon the mortgage which the Pacific Railroad Act, 1862, (12 Stat. L., 489, § 5, 6,) created. In the work of construing the uncertain statutes brought before us by this suit, that much may be taken as settled. Whatever words of obligation they contain referring to the subject-matter of this controversy must be taken as restricted to the subject-matter of the statutory mortgage. The vital question, and, indeed, the only question now to be determined, is, whether the property of the Denver Pacific Bail way was acquired and taken subject to the incum-brance or mortgage which rests upon the Kansas Pacific road. That inquiry involves a. brief review of the statutory history of both roads.
The Pacific Railroad Act, 1862, (12 Stat. L., 489, § 5, 9,) authorized a loan of Government bonds to the Kansas Pacific Bail-road, (then known as the Leavenworth, Pawnee and Western Bailroad Company,) and at the same time imposed upon the •road as security for such advances a statutory mortgage. The loan authorized by the act was not of an amount in gross, but was to be dependent upon the length of the road, the advances being limited to $16,000 a mile, and made as sections of twenty miles were completed. (Amendatory Act, 1864,13 Stat. L., 356, § 10.) It was therefore essential to the security of the Government that some limitation be set upon the length of the route; and accordingly it was provided that the projected railway, starting from an eastern terminus at the mouth of the Kansas Biver, should end by connecting with the Union Pacific Bail-road at the one hundredth meridian. The act contemplated, on the one hand, that every mile of this road should be aided by the loan, and provided, on the other, that the delivery of the bonds to the company should " 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." (Act 1862, 12 Stat. L., 489, § 5.)
But before the work of constructioa begau it was discovered that the point where the one hundredth meridian would intersect the Union Pacific Eailroad would not form a desirable junction for the branch roads that were to diverge from the main or trunk line. Accordingly, by a general provision in the Amendment Act, 1864, (13 Stat. L., 356, § 9,) these companies were authorized to connect their roads with the Union Pacific "at any point westwardly of such initial point," the loan, nevertheless, being restricted to the same amount which the roads would have been entitled to receive in bonds if they had connected at the one hundredth meridian. And by the Amendment Act, 1866, (14 Stat. L., 79, § 1,) a similar provision was enacted, which specially authorized the Kansas Pacific Eailroad (then known as the Union Pacific Eailroad, eastern division) to extend their line to a point of junction not "more than fifty miles westwardly from the meridian of Denverbut, nevertheless, with the same restriction, that the amount of bonds "to aid in the construction of their line" should be no greater than "they would have been entitled to if they had connected their said line with the Union Pacific Eailroad at the one hundredth degree."
Here it may be noted that the length of the original route from the mouth of the Kansas to the one hundredth meridian, for which bonds were subsequently issued, is 394 miles; that the length of the road constructed by the Kansas Pacific company from the mouth of the Kansas to Denver is 665 miles; that the length of the remaining link of road constructed by the claimants, from Denver to the intersecting point at Cheyenne, is 106 miles j and that the amount of the mortgage on the bonds advanced to the Kansas Pacific company is $6,303,000. In other words, a route of 771 miles of road has been constructed, and the Government loan has contributed to 394 miles thereof.
So far the rights and equities of the Government as mortgagee remained unimpaired by legislation. The terms of the mortgage continued unchanged; the amount of the loan was not enlarged; the security pledged by the mortgage was considerably augmented. At the same time there was nothiug in either of the statutes to prevent the Kansas Pacific company from transferring the whole or a portion of their projected road to third parties, subject, of course, to the operation of the mortgage. Unquestionably the Kansas Pacific company could not have shaken off by any act of their own the incumbrance from any portion of their property, and a purchaser of the equity of redemption would have been no better off than the mortgagor, save, perhaps, in the remote equitable right of having the grantor's residue of the property first exhausted if the mortgage should be brought to a foreclosure. The point, therefore, to be determined is whether Congress by.any subsequent act have severed the franchise of the Kansas company, and permitted the claimants to construct this portion of the line unincumbered by the prior mortgage that otherwise would have attached.
That point' necessarily depends upon the construction which should be given to a single statute, the Transfer Act, 3d March, 1869. (15 Stat. L., 324.) But, for the better interpretation thereof, the circumstances existing at the time of its enactment should be understood.
In the first place, the Pacific Railroad acts relate to three distinct subject-matters: 1. To the incorporation of the companies with the obligations and conditions imposed upon the franchise. 2. To certain grants of portions of the public lands, intended as a gift, or bonus, conforming with the policy known as the land-grant railroad-system. 3. To the loan of Government bonds to aid in the construction of the roads, and the statutory mortgage therefor, which have already been described.
In the second place, the Kansas Pacific company had then constructed their road to Sheridan, a distance of 440 miles from its eastern terminus, and had received all of the Government loan which they would ever be entitled to receive. But they had remaining unconstructed a line of 225 miles from Sheridan to Denver, and of 106 miles from Denver to Cheyenne, or some other point of junction with the Union Pacific Road.
In the third place, the Denver Pacific company had acquired a right of way from Denver to Cheyenne, presumably under the Acts 4th August, 1852, (10 Stat. L., 28,) 3d March, 1855, (id., 683,) and 15th July, 1862, (12 id., 577,) and had partially constructed this road-bed without a land-grant and without a Government loan. Conversely, they had not assumed any of the obligations imposed by the Pacific Railroad acts, nor was their franchise restricted by any of those conditions.
The Transfer Act, 1869, (15 Stat. L., 324,) now to be construed, is in these words:
" An act to authorize the transfer of lands granted to the Union Pacific Railway Company, eastern division, between Denver and the point of its connection with the Union Pacific Railway, to the Denver Pacific Railway and Telegraph Company, and to expedite the completion of'railroads to Denver, in the Territory of Colorado.
"Seo. 1. That the Union Pacific Railway Company, eastern division, be, and it hereby is, authorized to contract with the Denver Pacific Railway and Telegraph Company, a corporation existing under the laws of the Territory of Colorado, for the construction, operation, and maintenance of that part of its line of railroad aud telegraph between Denver City and its point of connection with the Union Pacific Railroad, which point shall be at Cheyenne, and to adopt the road-bed already graded by said Denver Pacific Railway aud Telegraph Company as said line, and to grant to said Denver Pacific Railway and Telegraph Company the perpetual use of its right of way aud depot-grounds, aud to transfer to it all the rights and privileges, subject to all the obligations pertaining to said part of its line.
"Sec. 2. That the said Union Pacific Railway Company, eastern division, shall extend its railroad and telegraph to a connection at the city of Denver, so as to form with that part of its line herein authorized to be constructed, operated, aud maintained by the Denver Pacific Railway and Telegraph Company, a continuous line of railroad and telegraph from Kansas City, by way of Denver, to Cheyenne. And all the provisions of law for the operation of the Union Pacific Railroad, its branches and connections, as a continuous line, without discrimination, shall apply the same as if the road from Denver to Cheyenne had been constructed by ths said Union Pacific Railway Company, eastern division; but nothing herein shall authorize the said eastern division company to operate the road or fix the rates of tariff for the Denver Pacific Railway and Telegraph Company.
" Sec. 3. That said companies are hereby authorized to mortgage their respective portions of said road, as herein defined, for an amount not exceeding thirty-two thousand dollars per mile, to enable them respectively to borrow money to construct the same; and that each of said companies shall receive patents to the alternate sections of land along their respective lines of road, as herein defined, in like manner and within the same limits as is provided by law in the case of lands granted to the Union Pacific Railway Company, eastern division: Provided, That neither of the companies hereinbefore mentioned shall be entitled to subsidy in United States bonds under the provisions of this act."
As to the construction which should be given to this statute a majority of tlie court have reached the following conclusions:
1. The controlling purpose of the statute was to exempt the Kansas Pacific company from building a competing road between Denver and Cheyenne, and to enable the Denver Pacific company to participate in the land-grants which had been assured to all of the companies engaged in the enterprise of building the Pacific roads, and at the same time to secure to the Government or to the public the continuous lines of railway which the Pacific Railroad acts contemplated. A secondary purpose which from the nature of things would have defeated the controlling purpose of the statute should not be aseribed'to Congress. To compel a road of 106 miles in length to become liable for the mortgage indebtedness of 394 miles of another road at $16,000 per mile, and, moreover, to compel it to contribute immediately from its earnings toward paying the interest on the mortgage-debt, seems to us such an inconsistent purpose. Congress, we think, could not have intended by mere implication to have continued a condition that would have defeated the end which all parties had in view.
2. Express words of relinquishment were not necessary in the statute as if there had been a thing in esse actually bound and incumbered by the statutory mortgage. It had been created ipso facto by the issue of the bonds, (Pacific Railroad Act, 1862, § 5,) and doubtless was intended to operate prospectively so as to embrace property subsequently acquired, such as ex. gr. the rolling-stock; but, nevertheless, as a matter of fact, when the Transfer Act passed, the mortgage was not resting upon any of the property now possessed by the Denver company. The mortgagors had not acquired title to the public lands west of Denver, they had not constructed a railroad there, nor did they possess anything beyond their franchise. The thing transferred was their naked right to acquire property to which the mortgage might attach, and not property already possessed .and incumbered. Amid such circumstances it seems to us that if Congress, when consenting to the transfer of the right, had intended that the thing subsequently to be acquired under it should be bound for a specific debt of the grantors the intent would have been clearly expressed in the statute.
3. The vital words of the statute, " to grant to said Denver Pacific Railway and Telegraph Company the perpetual use of its (the Kansas Pacific company's) right of way and depot-grounds, and to transfer to it all the rights and privileges, subject to all the obligations pertaining to said part of its line, (§ 1,) do not necessarily imply that the " grant " was to be taken subject to the debts of the grantor; for, in the first place, the term " obligations " does not necessarily relate to the mortgage, inasmuch as an obligation to pay does not ipso facto spring out of an incum-brance or mortgage; and, in the second place, .the term is abundantly satisfied by the obligations which were personal, i. e., not running with the land, but growing out of and relating to the franchise and corporate, duties of the Kansas Pacific company; and, in the third place, the provision is expressly limited and confined to obligations "pertaining to said part of its line? To say that obligations pertaining to a specific portion' of the Kansas Pacific company's line should be construed to read, (in the language of the Pacific Railroad Act, 1862, § 5,) the " mortgage on the' whole line of railroad and telegraph, together with the rolling-stoeh, fixtures, and property of every hind and description j" or that " obligations pertaining" to this portion of the line should be construed to mean participation in the payment of a debt incurred on a distinct and different portion of the line, seems to us a forced and artificial construction, foreign to the plain purpose of the act. Ko " obligation " to contribute to a special fund for the payment of a specific mortgage-debt of the other company antecedently rested on the Denver company; and none would be implied generally at law unless the grant had been in terms made subject to the mortgage. What the Denver company are required by the statute to assume are those things which the Kansas company were required by law to do pertaining, relating, belonging exclusively to this portion of the line, and not those things which appertained, related, or belonged generally to the whole of their line. In our view of the statute, the " obligations pertaining " to that part of the line which was to be transferred to the Denver Pacific company were corporate obligations — to complete the road, to equip it, to operate it, and to transport the Government mails and supplies at fair and reasonable rates, not exceeding the rates paid by private parties for the same kind of service.
4. The second section of the Transfer Act appears to us to be in harmony with the construction which we have given to the first. It manifestly relates to those provisions of the Pacific Railroad Acts which require the different companies forming the system, while continuing distinct and independent corporations, nevertheless to unite in forming a continuous line. The purpose of the section manifestly was to make the Denver road a link in the chain, but yet to leave it free from all dictation on the part of the Kansas company. If it had been intended that the former company should immediately contribute toward the payment of the debt of the latter, some provision would have been necessary for an adjustment and settlement of the accounts between the companies, or some declaration to the effect that the Denver company should have no right of action over against the other. Standing in the position which the United States have seen fit to occupy toward these roads, it manifestly was for their interest that no such complications should arise, and that every member of the system should have clearly-defined rights and responsibilities, and that the enterprise both as a whole and in each of its corporate parts should be crowned with success.
5. In like manner, the third section of the Transfer Act appears inconsistent with the liability which the defendants now seek to throw upon- the Denver company. The Amendment Act, 1864, provided for-and contemplated two mortgages upon the roads. The first of these was to be in favor of third persons for $16,000 a mile, and the second, the statutory mortgage in favor of the Government, also for $16,000 a mile,' making the aggregate of the incumbrances $32,000 a mile. The Transfer Act adopts the same limitation, authorizing the Denver company to mortgage their road "for an amount not exceeding $32,000 per mile." It does not seem possible that Congress could have intended in a vague and roundabout way to diminish the mortgage on the Kansas road by shifting practically a proportionate part of the debt to the Denver company, nor to have imposed upon the Denver company a mortgage which would practically amount to more than $8,000 a mile in excess of the $32,000 a mile expressly designated by the statute as the limit of their mortgage incumbrances.
6. It must also be noted that if the Transfer Act was intended to make the franchise and property of the Denver company subject to the mortgage of the Kansas company, it will not only give to the Government the right of withholding from the former company one-half of such moneys as may be owing to them for mail-transportation, but will also compel them to apply "at least 5 per centum of the net earnings" of their road upon this indebtedness of the other company, (Act 1862, § 6,) for that additional source of payment is equally a condition of the mortgage. In like manner the.incumbrance must be extended not only to the lands granted, but also to the rolling-stock and personal property of the company, i. e.. in the words of the mortgage, "to property of every Mud and description" which the claimants may possess. (Act 1862, § 5.) That such could not have been the intent of Congress we think is clear, not only for the reasons before stated, but also for the reason that, in the previous legislation affecting roads benefited by the loan, Congress made the grants in terms subject to the "conditions" imposed upon the Union Pacific company, (Act 1862, § 9; Act 1864-, § 9,) (a term properly referable to property and to a mortgage,) while in the Transfer Act the term "condition" is dropped and "obligation" is substituted for it" — a term not properly referable to land nor to a mortgage, but imposing personal or corporate duties upon the party obligated.
7. The acts relating to the Union Pacific Railroad and its branches contemplate a continuous line of road formed by local railroads belonging to different companies, and they thus constitute a system of enactments in pari materia which are to be construed together without reference to their dates and as one act. And the Amendment Act of 1864, (§ 7,) provides as follows: "And the failure of one company to comply fully xoith the conditions and requirements of this act, and the act to which it is amendatory, shall not worlc a forfeiture of the rights, privileges, or franchise of any other company or companies that shall have complied with the same."
This as it stands is a general provision relating to all the acts up to its date, and by the rules of construction it is applicable to subsequent acts in pari materia and branch roads subsequently created and forming a part of the continuous line of road. We think that, by force of the provisions, the Denver company is not liable for the mortgages or debts of the Kansas company.
It was understood on the argument that the decision upon this demurrer would be regarded as final in this court, neither party caring to present facts which do not appear on the record; but the judgment of the court will be in the usual form, viz, that the demurrer be overruled with leave to the defendants to answer over. If no such answer be filed within thirty days the claimants may move that judgment be entered for the amount demanded in the petition, or for such other amount as may be agreed upon by stipulation.