Court Opinion

ID: 8787929
Source: CourtListenerOpinion
Date Created: 2022-11-26 13:40:34.917182+00
Date Added: 2024-06-11T17:03:10.915697
License: Public Domain

SANBORN, Circuit Judge
(concurring). An act of Congress, which at the same time and in itself authorizes or creates a new liability and prescribes ■ the limitations thereof and of its enforcement, makes those limitations conditions of the liability itself. Such an *891act is not a statute of limitations, and a compliance with the conditions which it prescribes is indispensable to the enforcement of the liability it authorizes or creates (The Harrisburg, 119 U. S. 199, 214, 7 Sup. Ct. 140, 30 L. Ed. 358; Pollard v. Bailey, 20 Wall. 520, 526, 527, 22 L. Ed. 376; Bank v. Francklyn, 120 U. S. 747, 756, 7 Sup. Ct. 757, 30 L. Ed. 825; Boyd v. Clark [C. C.] 8 Fed. 849; Brunswick Terminal Co. v. National Bank of Baltimore, 99 Fed. 635, 638, 639, 40 C. C. A. 22, 25, 26), because such limitations are conditions of the liability itself and not limitations of the remedy only. They are excepted from the rule announced in Campbell v. Holt, 115 U. S. 620, 628, 6 Sup. Ct. 209, 29 L. Ed. 483, to the effect that the right to defeat a just personal debt for a common-law liability, in that case for a conversion of the plaintiff’s money, is not a vested right, which the Legislature may not overthrow at pleasure by extending the time for collecting it.
When these sureties made their contract the act of 1894 was no more. The act of 1905 had taken its place, and the provisions of that act were by operation of law written into and made an indispensable part of their contract. The contract for the construction of the canal and the contract of these sureties, their bond, were made on April 26, 1905, and the canal was dug and completed under the act of 1905. Conceding, without deciding, that the bank succeeded to the rights of the laborers whose time checks it bought, bearing in mind the fact that the United States brought no suit on the contract for the construction oí the canal, or on the bond, within six months after June 16, 1908, the date of the completion and final settlement of the contract, and having regard to the terms of the act of 1905, which were written into and became an indispensable part of the bond, this was the contract of these sureties: That (1) on condition that some laborer or materialman, or the bank, should bring suit on their bond in the name of the United States for his or its benefit in the District Court of South Dakota where the contract was to be performed, and not elsewhere; (2) on condition that such suit should be brought within one year after June 16, 1908, and not later; (3) on condition that only one suit of this nature should ever be brought against them on this bond, and that all creditors should be notified thereof and should be permitted to intervene within one year after June 16, 1908, and not later; and on no other condition — and not otherwise, these sureties would be liable to the amount of their bond for the claims of the laborers and materialmen employed in the construction of the canal, who either appeared or intervened in accordance with these conditions in such a suit. None of these conditions was ever fulfilled, no suit on the bond of these sureties was ever brought in the District of South Dakota, no suit upon this bond was brought within one year after June 16, 1908, and on June 17, 1909, no liability of these sureties to pay any laborer or materialman anything whatever existed. Because the conditions on which alone they had agreed to be liable to any laborer or materialman, or to the bank, on or after June 16, 1909, had never arisen, they were as free of liability to them after that date as they would have been if they had never signed the bond, and they so remain unto this day.
*892It is not claimed that they did not so remain for more than one year and eight months after that date, and until the passage of the act of March 4, 1911. It is said that the act of .1911 did not impair the obligation of their contract. Let that proposition be conceded. It did not impair any obligation of the sureties to the laborers, mate-rialmen, or the bank, or any obligation of the latter to the sureties, because subsequent to June 16, 1909, the sureties and these laborers, materialmen, and the bank were free from all obligation of any contract each to the other. The sureties were exempt from the obligation of any contract to the laborers, materialmen, or the bank after June 16, 1909, because they had not accepted the conditions on which alone the sureties agreed to stand liable. They owed them nothing and were under no liability to them-, and therefore the act of March, 1911, did not impair any obligation of their contract. The vice of that act, as it seems to me, is not that it impairs the obligation of a contract ; it is that it flies in the face of the inhibition of the fifth amendment to the Constitution that no person shall “be deprived of life, liberty or property without due process of law.” Its legal effect is by a mere act of a legislative body to deprive the sureties of $23,-693.44, the amount of the judgment against them in this case, of their property, and to transfer it to the bank, to which the sureties were in no way liable. It is familiar law that any change in the contract of a surety, or in the contract for the performance of which the surety agrees to be liable, whereby attempt is made to increase his contractual liability without his consent, releases the surety. Miller v. Stewart, 9 Wheat. 680, 6 L. Ed. 189; Smith v. United States, 2 Wall. 219, 17 L. Ed. 788; Reese v. United States, 9 Wall. 13, 19 L. Ed. 541. How, then, can a new and independent contract and liability be imposed upon sureties by the mere fiat of a legislative body ?
The vice of the Act of 1911 is that it makes a new contract for these sureties where they had been for months before its enactment free from all liability to this bank, to the materialmen, and the laborers, a contract of which they had no notice, and to which they never assented, whereby they are made liable to the bank for $23,693.44. There is no practical or legal difference between an act of Congress which declares parties who are free from liability to a bank to have made a contract which they never made to pay it $23,693.44, and to be without defense to an action to recover that amount, and an act that declares that $23,693.44 of the money or property of such parties shall be transferred to the bank. If the act of 1911 has any effect, it has the effect to deprive these sureties, who were free from all liability to the bank, of $23,693.44, and to transfer that amount of their property to the bank. This was done, if it was done at all, not by any process of law, but by the arbitrary act of a legislative body, without notice, trial, or hearing. An act of Congress which has such an effect not only violates the fifth amendment to the Constitution, but is beyond the powers of the legislative department of a republican government, and void. In Calder v. Bull, 3 Dall. 386, at page 388 (1 L. Ed. 648), Mr. Justice Chase said:
“There are acts which the federal or state Legislatures cannot do, without exceeding their authority. There are certain vital XJrinciples in our tree re*893publican governments, which will determine and overrule an apparent and flagrant abuse of legislative power; as to authorize manifest injustice by positive law, or to take away that security for personal liberty, or private property, for the protection whereof the government was established. An act of the Legislature (for I cannot call it a law), contrary to the great first principles of the social compact, cannot be considered a rightful exercise of legislative authority. The obligation of a law, in governments established on express compact, and on republican principles, must be determined by the nature of the power on which it is founded. A few instances will suffice to explain what I mean. A law that punished a citizen for an innocent action, or, in other words, for an act which, when done, was in violation of no existing law; a law that destroys or impairs the lawful private contracts of citizens; a law that makes a man a judge in his own cause; or a law that takes property from A. and gives it to B.: It is against all reason and justice, for a people to intrust a Legislature with such powers; and therefore, it cannot be presumed that they have done it.”
See Pritchard v. Norton, 106 U. S. 124, 132, 135, 1 Sup. Ct. 102, 27 L. Ed. 104; United States Fidelity Co. v. Struthers Wells Co., 209 U. S. 306, 312, 28 Sup. Ct. 537, 52 L. Ed. 804; Tyrell v. Rountree, 7 Pet. 464, 468, 8 L. Ed. 749; Gunn v. Barry, 15 Wall. 610, 622, 21 L. Ed. 212; Fletcher v. Peck, 6 Cranch, 87, 135, 3 L. Ed. 162; Hepburn v. Griswold, 8 Wall. 603, 623, 19 L. Ed. 513; Tillotson v. Millard, 7 Minn. 513 (Gil. 419), 82 Am. Dec. 112; Grinden v. Nelson, 9 Gill (Md.) 299, 307, 52 Am. Dec. 694; Regents v. Williamson 9 Gill & J. (Md.) 365, 408, 31 Am. Dec. 72; Bank v. Ballou, 98 Va. 112, 32 S. E. 481, 483, 44 L. R. A. 306, 81 Am. St. Rep. 715; Wade, Retro. Laws, §§ 159, 191; Gilman v. Tucker, 128 N. Y. 190, 28 N. E. 1040, 13 L. R. A. 304, 26 Am. St. Rep. 464; Ratcliffe v. Anderson, 72 Va. 105, 31 Am. Rep. 716; Murphy v. Gaskins’ Adm’r, 69 Va. 207, 222; McCarty v. Hoffman, 23 Pa. 507; Greenough v. Greenough, 11 Pa. 489, 51 Am. Dec. 567; Wap, Attachm. (2d Ed.) §§ 17, 736; Bergman v. Sells, 39 Ark. 97, 101; Cole v. Cunningham, 133 U. S. 107, 116, 10 Sup. Ct. 269, 33 L. Ed. 538; Richardson v. Adler, 46 Ark. 49; Wade, Retro. Laws, §§ 171. 173.
For the reason which has now been stated I concur in the opinion and conclusion that the demurrer to the complaint in this suit for the benefit of the bank should have been sustained. This case, however, has been tried, and the question which has been discussed was raised, not only by demurrer, hut also by a request for a directed verdict at the close of the trial, and by a motion for a judgment in favor of the sureties notwithstanding the verdict, pursuant to section 4362 of the Revised Laws of Minnesota of 1905; and as it appears from the entire record that the facts in this case do not constitute a legal cause of action against these sureties, and that no amendment to the complaint may avoid that result, it seems to me that in the interest of the speedy conclusion of this litigation a judgment in favor of the sureties notwithstanding the verdict should now be directed.
There is another reason for my conclusion that the judgment against the sureties should be reversed. It is that over their objection the cashier of the bank was permitted to testify, as against Mr. Eberhart, one of the sureties, that in 1905, before the bank bought the time checks, Eberhart said to the cashier that the bank would be perfectly *894safe in buying them, because the effect of section 35 of the contract between the Widell-Finley Company and the United States was to make the sureties liable to the bank for the moneys owing on the checks it bought. This conversation took place long before the contract was completed, so that it could not have had the effect of estop-ping Eberhart from defending on the ground that the contractual conditions of his liability, which were to be complied with subsequent to the completion of the work, were not fulfilled. His conversation consisted merely of a statement of his opinion of the legal effect of a written provision of the contract between the Widell-Finley Company and the United States for the performance of which he had given his bond. Before his conversation was received in evidence the cashier had testified that he had consulted and obtained the opinion of the bank’s attorney upon this very question, so that it did not appear that he relied upon Eberhart’s opinion, and it seems to me that the statement of a surety under these circumstances of his opinion upon the question of the legal effect of a clause of a written contract, a question that is plain and fully open to all parties, cannot have the effect to estop him from insisting that his liability as a surety is measured by the true legal effect of that clause. I think the admission of this conversation was for this reason erroneous.
In the case of the United States for its own benefit against these sureties the government alleged in its complaint that in the completion of the contract with the Widell-Finley Company it necessarily expended $59,009.06 more than the contract price for the work, and it demanded judgment against the sureties for $21,500, the penalty of their bond, and interest. The sureties answered that the contract of the Widell-Finley Company was conditioned by a plan of the route of the canal, drawings and specifications of the work in reliance upon which the contractor was requested to bid and did bid and subsequently agreed to do the work, and the sureties gave their bond for the contractor’s performance, but without their knowledge or consent the United States radically changed the route and location of the canal and the specifications therefor, so that the cost to the contractor in proportion to the contract price and the risk and hazard assumed by the sureties were vastly and wrongfully increased. It is assigned as error that:
“The court err.ed in holding and deciding that paragraph 24 of the specifications did not authorize changes in the plans of the canal, and that if changes were made as claimed by defendant it was sufficient to release the sureties.”
Turning to the charge of the court on this subject, the record discloses the fact that it covers two printed pages. It was, in substance, that the contract was made upon the basis, .not only of the specifications, but of a plan which had been offered in evidence and was marked Exhibit 2, that the sureties signed the bond to guarantee the performance of a contract ^íade to do the work in accordance with this plan, that these sureties "were entitled to have the canal built substantially upon the route indicated by that plan, that if the jury found that at the Vulcan cut the route, according to the plat referred to in the contract, went around the hill so as to make the construction a side hill *895proposition and that it was afterwards changed by the government, without the knowledge or consent of the sureties, so as to make a cut through the hill, with high ground on each side of it, and this change made the contract less profitable to the contractor in the amount of $10,000 or $12,000, as testified to by the witnesses for the defendant, or if they found that .a like change of the route at the Atlantic cut, as testified to by defendants’ witnesses, made the contract less profitable to the contractor in the amount of $10,000 or more, then the provision of paragraph 24 of the contract that “the Secretary of the Interior reserves the right to make such changes in the specifications of work or material at any time as may be deemed advisable, without notice to the surety or sureties on the bond given to secure compliance with the contract, by adding thereto or deducting therefrom at the unit prices of the contract.” constituted no answer to this defense of the sureties, and they were released from liability to the United States on their bond.
What changes did the parties intend to permit by the provision of paragraph 24 cited by the court: below without notice to the sureties? The words of the contract answer: Such changes in the specifications of the work and material as might: be reasonably and justly paid for by corresponding additions to or reductions of the unit prices therefor. Did they ever intend to agree by this provision that such a radical change in the route, location, or plan of the canal might be made that, although the contractor should be paid the unit prices for the work done and material removed, the profit of his contract would be diminished, or his loss upon it increased, $10,000 or $20,000? If the route of the canal designated by the plan had been along ground easily removed between a high and rocky mountain and a deep lake, could the government have changed its route under this provision so as to have required the contractor to make a tunnel through the mountain or an excavation for the canal in the bed of the lake? The provision and the entire contract must receive a reasonable, sensible interpretation, and a construction which would permit an affirmative answer to these questions would be neither rational nor permissible. It never was, it never could have been, the intention of the parties to this contract, that changes in the route and plan of the work which were neither just nor reasonable, which would change the character of the work so that the unit prices became neither remunerative nor fair, and which entailed loss upon the contractor out of all reasonable proportion to the contract price of the undertaking and greatly increased the liability of the sureties, should be made without releasing them. United States v. Freel, 186 U. S. 309, 312, 316-319, 22 Sup. Ct. 875, 46 L. Ed. 1177; United States Fidelity & Guaranty Co. v. United States, 194 Fed. 611, 616. 617, 116 C. C. A. 187.
The court charged the jury that if they found that the government made a change without the knowledge or consent of the sureties in the location or route of the canal portrayed in Exhibit 2, either at the Atlantic cut or at the Vulcan cut, which made the contract less profitable to the contractor in the sum of $10,000 or more, as testified by the witnesses for the defendant, the sureties were released from their liability *896to the United States upon their bond. There are two reasons why this court may not adjudge this instruction erroneous. The first is that a change of plan or route of the canal which so modified the character of the work to be done that the work under the changed plan and route, when paid for at the unit prices, was $10,000 less profitable to the contractor than the work required according to the original plan and route, a change which thus increased the risk of the liability of the sureties $10,000, or almost oné-half of the penalty of their bond, which was $21,500, was neither intended to be nor was it authorized by the contract without their knowledge and consent, and that change necessarily released the sureties. In other words, the charge on its face was right.
The second reason is that this is a court for the correction of the-errors of the court below. The legal presumption is that its rulings ' were just and right, and the burden is on the plaintiff in error to prove by the record presented to this court that any ruling it challenges was erroneous. Sipes v. Seymour, 76 Fed. 116, 118, 22 C. C. A. 90; Lesser Cotton Co. v. St. Louis, I. M. & S. Ry. Co., 114 Fed. 133, 143, 52 C. C. A. 95. The charge was that if the government, without the consent of the sureties changed the plan and route of the canal from that shown on Exhibit 2, either at Atlantic cut or at Vulcan cut, so as to make the contract less profitable to the contractor in the amount of $10,000 or more, as testified by the defendants’ witnesses, the sureties were released. The correctness of this charge is conditioned by the character of the change from the route portrayed by Exhibit 2 to which the defendants’ witnesses testified. But the plaintiff in error has not brought to this court, by bill of exceptions or otherwise, either the plan shown by Exhibit 2 or the testimony of defendants’ witnesses, and therefore it has failed to establish any error in the charge of the court, and has failed to present the criterion by which alone the correctness of this charge may be measured. The pleadings inform that the contract price of the work done was in the vicinity of $200,000 or $250,-000, that the government claimed that the cost of it was $59,009.06 more than the aggregate of the unit prices, and that the defendants claimed that the changes in the route and plan made by the government without their knowledge or consent greatly increased the cost of the work, and that, instead of the contract’s entailing a loss of $59,009.06, it would have brought a profit of $10,000 to the contractor if it had been lawfully performed according to the plan and route specified before it was made. Here was a difference of over $69,000. Whether the witnesses for the defendants testified that all this increased cost was caused by the changes in the route of the canal this court is not informed. What changes in the character of the work done, of the materials removed, and in the cost thereof, the defendants’ witnesses testified resulted from these changes, we know not. It was the original plan and' route, and the testimony of the defendants’ witnesses in reference to the changes of them and their effect, that induced the court below to give this instruction, and this court may not, in ignorance of this'plan and this testimony, adjudge this instruction erroneous.
*897The other specification of error in this case is that the court—
“erred in its charge wherein it instructed the Jury that paragraph 8 of the specifications was not effective after the government took over the work to render the engineer’s decision on the question of classification final.”
The contract was between the United States and the Widell-P'inley Company, which was to do the work. The engineer was the Chief Engineer of the Reclamation Service, or one of his authorized assistants or inspectors, an officer of the United States. The parties to this contract: agreed by paragraph 8 that upon all questions concerning the classification of the material in accordance with the specifications the decision of this engineer should be binding on both parties, and by paragraph 21 that upon the failure of the contractor to proceed with reasonable celerity to perform the agreement the Secretary of the Interior might “suspend the operation of the contract, * * * employ other parties to carry the contract to completion,” or complete it himself. The legal effect of paragraph 8 was to choose the engineer as an arbiter or judge of the classification of material to be handled in a work in which each of the parties was engaged, a classification of material the character of which each of the parties necessarily knew as it was handled, so that each could, with full knowledge and great facility, present its claims to the arbiter before he decided. When, however, the Secretary suspended the operation of the contract, the Widell-Finley Company was no longer doing the work, was no longer aware of the character of the material removed, and was no longer in a position to present its claims as to its character and classification be [ore the engineer rendered his decision, so that all his subsequent decisions were necessarily made ex parte.
Moreover, the Secretary was given the power to employ other parties to carry the contract to completion or to complete it himself. This authority necessarily included the power to make a contract for its completion for 'different prices and on different terms from those named in the original contract. In other words, the government was not bound, in making the contract with other parties for the completion of the original undertaking, or in hiring men to finish it, by the provision of the old contract that the engineer should be the final arbiter of the classification of the material, or by any other like term of the original contract, and as the government was not bound, neither was the contractor, the' other party to the agreement, bound by any of these stipulations. The engineer ceased to be an arbiter of the classification of the material between the parties to the original contract when the government suspended its operation, and there was no error in the charge of the court upon this subject.
For the reasons which have now been stated, I concur in the af-firmance of the judgment below in this case.
Supplemental Opinion.
TRIFBFR, District Judge.
Since the filing of the opinion in this case the Supreme Court, in an opinion filed April 21, 1913, in Slocum, Executrix, v. New York Life Insurance Co., 228 U. S. 364, 33 Sup. Ct. 523, 57 L. Ed. -, which was tried in a Circuit Court of *898the United States in the state of Pennsylvania, has held that a statute of a state or rule of practice prevailing in a state court authorizing a court to enter a judgment notwithstanding the verdict cannot be followed in the national courts, being in conflict with the seventh amendment to the Constitution of the United States. The Circuit Court of Appeals for the Third Circuit upon writ of error had decided that upon the undisputed evidence the trial court should have sustained a motion of the defendant to enter a judgment in its favor notwithstanding the verdict of the jury was for the plaintiff, and reversed the case, with directions to enter such judgment. The Supreme Court, by a divided court (four of the justices dissenting),'held that the conclusion reached by the Court of Appeals that the trial court should have directed a verdict in favor of the defendant, as the evidence failed to show that the plaintiff had a cause of action, was right, but that it erred in directing the trial court to enter a judgment for the defendant notwithstanding the verdict of the jury, as that is not permissible in the courts of the United States, but that it should have reversed the case, with directions to grant a new trial, in order that the parties may have the case resubmitted to a jury. In view of that decision we are of the opinion that the judgment heretofore entered in this cause, reversing the judgment of the lower court, with directions to enter judgment for the defendants, notwithstanding the verdict of the jury was for the plaintiffs, should be modified, and the cause reversed, with directions to grant a new trial and proceed in conformity with the opinion.