Court Opinion

ID: 9300421
Source: CourtListenerOpinion
Date Created: 2022-12-02 17:06:52.711334+00
Date Added: 2024-06-11T17:13:39.810309
License: Public Domain

SAWYER, Circuit Judge
(after stating the facts). Upon the facts of the case as found and' stated, two questions have been raised and fully argued: (1) At what point of time was the road so fully completed as to make it obligatory upon the defendant to apply five per centum of the net earnings of the road to the payment of the bonds issued by *359the government, and the interest thereon? (2) What constitutes net earnings-within the meaning of the act?
Upon the first question the government insists that the road was completed, and the obligation to set aside five per centum of the net earnings arose on July 15, 1869, the date of the provisional acceptance of the last section; while the defendant maintains that the road was not completed as a whole until October 1, 1874, the date at which the whole road was accepted by the president as having been fully completed.
The act of congress, and the acceptance by the defendant constitute a contract between the parties by the terms of which the defendant was required to build and complete such a road as is prescribed in the act—a road “supplied with all necessary drains, culverts, viaducts, crossings, sidings, bridges, turnouts, watering-places, depots, equipments, furniture, and all other appurtenances of a first-class railroad;” in other words, in all respects a first-class railroad, with all appropriate equipments and appurtenances. Such a road the defendant was bound to build and fully complete, and until so built and completed as a whole, it was not entitled to be discharged from the obligations of the contract to complete the road, or to receive the full consideration which the government, on its part, undertook to give. So, also, in addition to constructing the road, another obligation was imposed on defendant; for the act provides that “after the said road is completed, until said bonds (bonds issued by the government) and interest are paid, at least five per centum of the net earnings of said.road shall also be annually applied to the payment thereof.” And this is the clause under which this action is brought. It is plain that the point of time at which the defendant becomes liable to thus apply five per centum of the net earnings, is the point of time when it has fully completed the construction of the road as a whole, as an entirety, so that its contract is fully discharged so far as the construction is concerned, and the defendant has thereby become entitled to receive all the consideration therefor which the government undertook to give —the point of time when it becomes entitled to all the lands granted and all the bonds and other subsidies promised. The clause is “after said road is completed”—not a part or section, but said road. When the road is completed for the purpose of' casting the obligation upon defendant of applying five per centum of the net earnings of the road to the payment of the government bonds and interest, it is also completed for the purpose of entitling it to have the road accepted, and of exonerating it from any further liabilities for construction, and for the purpose of entitling it to receive all the lands and other aid given by the government. The construction of the statute as to the time when the road is completed, must be the same when it operates in favor of the defendant as when it operates in favor of the government. If the road was completed on July 15, 1869, so as tp make it the duty of the defendant to apply five per centum of its net earnings to the payment of the subsidy bonds and interest, it was completed for the purpose of exonerating the defendant from expending further sums in the construction of- the road, and for the purpose of entitling it to all the lands granted.
But the statute authorized the president, upon the report of commissioners appointed by him, to determine when the road should be deemed completed. Upon the completion of a section of forty, afterward twenty miles of road, the president of the United States was authorized by section 4 of the act “to appoint three commissioners to examine the same, and report to him in relation thereto; and if it shall appear to him that forty consecutive miles of said railroad and telegraph line have been completed.” etc., “patents shall issue conveying the right and title to said lands to said company,” etc. The commissioners were to report “to him”—the president—for his information, and if “it shail appear to him” that the section is completed, then the defendant is to be entitled to the corresponding part of the subsidy. This provision clearly devolves the duty upon the president of determining when the road is completed. This was so held by Mr. Attorney-General Evarts, in an elaborate opinion given to the president for his guidance in 1868, and I think correctly. 12 Op. Attys. Gen. 477. And this determination of the president I think conclusive, at least, upon the government. If so, it settles the question, for there can be no dispute as to what the action of the president and of the secretary of the interior, acting under his directions, actually was. The acceptance of sections from time to time, as constructed, was manifestly provisional—all the later ones being expressly so in terms upon their face. The whole action of the government is in harmony with this view, and utterly inconsistent with any other, as will be seen by a brief recapitulation of the facts, which speak for themselves. So early as September' 25. 1S68, the president appointed a commission of civil engineers to examine the entire road so far as then provisionally accepted, and to report wherein it was not completed up to the standard required by the statute. This commission made a thorough examination, and on May 20, 1869, which is subsequent to laying the connecting rail uniting the two roads, made a minute and exhaustive report, showing that it would require $4,493,3S0 to bring the five hundred and fifty-one miles of the provisionally completed road examined by them up to the required standard. Without waiting for the action of the commission, the secretary of the interior, on March 22, 1869. for the purpose of withholding the lands as security for the completion of the *360road according to the statute, issued an order suspending the issue of all patents to lands due on completion of the road. At this time hut a small portion of the lands belonging to the sections provisionally completed had been patented to the defendant, so that this order, in fact, withheld nearly all the lands to which the defendant was entitled, provided the road was so far completed.
In April, also, congress authorized the appointment of another commission of eminent citizens to re-examine the road and report deficiencies, and in express terms authorized the president, as further security for the completion of the road, to withhold subsidy bonds, or require the delivery of first mortgage bonds, or the return of subsidy bonds already received, 'sufficient to insure a full performance of the contract. Under this authority, so late as June 28, 1869, more than six weeks after the laying of the connecting rail, and after the favorable report of the section commissioners upon the last section constructed liad been made, and only two weeks before its conditional acceptance by the secretary and approval by the president, the secretary required the defendant to deposit $4,000,000 of its first mortgage bonds, and to enter into an agreement that the bonds, together with the lands still unpatented, should be held as security for the completion of the road, and it was upon this deposit and agreement that the last section was conditionally accepted, and the subsidy bonds issued, as expressly appears in terms in the recommendation of the secretary, which was ■ approved by the president. In this condition matters stood till the “board of eminent citizens” re-examined the road and reported October 30, 1869, that it would require only $576,650 to complete the road according to the acts of congress. After this report, the secretary of the interior deeming one-half the lands ample security for the completion of the road, on November 3, 1869, modified the order of March 22, 1869, so as to permit the alternate sections of lands granted to be patented, retaining the other alternate sections as security; and soon after delivered to defendant the said bonds deposited and withheld as security. Subsequently, on March 24, 1871, the secretary of the interior denied an application of the defendant to modify the order of November 3, 1869, whereby one-half of the land was withheld as security for the completion of the work, on the ground that it did not yet appear that “the erroneous locations have been corrected and that the deficiencies have been supplied;” but he offered to appoint another commission whenever the defendant should desire it. Other applications for patents were denied. Again, so late as June 17, 1874, the secretary of the interior objected to any legislation by congress affecting his right to withhold these lands as security, until the executive should be “satisfied that all deficiencies reported by said ‘eminent citizens’ have been supplied, and that the roads are completed as required by law.” Upon application of the defendant another and, as it proved to be, a final commission was appointed September 21, 1874, to report upon the road, and if completed, the date of such completion, which commission examined the road, and on November 2, 1874, reported the deficiencies supplied and the road completed; and that the date of its completion was October 1. 1874. Upon the recommendation of the secretary of the interior, the president, on November 14, 1874, approved this report and the secretary's recommendation, and thereupon vacated the order of November 3, 1869, suspending the issue of patents to one-half the lands. This recapitulation of the facts shows that at the times mentioned, neither congress, nor the secretary of the interior, nor the president, regarded the road as completed; that the acceptance of sections was conditional and provisional only, for the purpose of issuing bonds and enabling the companies to proceed with the work; that the government required a subsequent completion up to the standard required by the statute, and at all times retained in its possession and under its control ample security for the completion of the road; that it was not accepted as completed up to the standard required by the statute till November 14, 1874; and that the date of the completion as fixed by the report of the commission accepted and approved by the president, is October 1, 1874. No argument can add force to this simple statement of the facts, or shake or qualify the conclusions resulting therefrom. If the road was completed on July 15, 1869, as now claimed by the government for the purposes of this action, then the government wrongfully withheld from the defendant all the lands granted to it (except the small portion before that date patented) from July 15, 1869, till November 3, 1869, together with $4,498,380 first mortgage and subsidy bonds deposited, in May and June, and otherwise withheld; and further wrongfully withheld, thereby depriving the defendant of their use, one-half or every alternate section of the lands due, till November 14, 1874—a period of more than five years after the completion ■of the road, as now claimed by the government. This is the necessary result, unless we adopt one rule of construction as to what constitutes a “completion of the road,” when it is beneficial to the government, and another when the rights of the defendant are considered. It results, then, that if the president of the United States was authorized to determine the question as to when the road was completed, that determination was not made till November 14, 1874, and the time of the completion 'was October 1. 1874, at which time the liability of the defendant to be called upon to apply five per centum of the net earnings of the road commenced.
But if the decision of the president and action of the government are not conclusive upon the United States upon this point, it is still found as a fact that the said railroad *361was not, in point of fact, completed and equipped up to the standard of a first-class railroad, .as required by the statute, till October 1, 1874. Five hundred and fifty-one miles of railroad were constructed eastward from the Sierra Nevada Mountains during the five months ending May 11,1869, to a great extent through a desert, and during the greater part of the .year, including all except the earlier part of the period of construction, a rainless region. The testimony of the engineer shows, as also does the report of the engineers appointed by the president to recommend a standard for the construction of the road, that to bring a railroad up to first-class, as a practical business proceeding, requires time after the mere laying of the rails; that a road of one or two thousand miles’ length cannot, as a practical business transaction, be completely ballasted, equipped and supplied with all the conveniences and accommodations of a first-class road as a whole, in sections of twenty miles each, hastily constructed, so that each section, when so constructed,- shall be so complete in construction, equipment and appointment, as to fill its place as a part of the whole completed first-class road; that in such cases ordinary practical business economy requires temporary structures to be gradually replaced ns they become unfit for use; and ballasting to be a progressive work, affording time for the embankments to settle by use, and to be rendered compact by rains. As a practical business undertaking it would manifestly be preposterous to expect that five hundred and fifty-one miles of road should be constructed up the Humboldt river, through a rainless desert, in the year 1869, and prior to the fifteenth day of July of that year, and be properly ballasted, and “supplied with all necessary drains, culverts, viaducts, crossings, sidings, bridges, turnouts, watering-places, depots, equipments, furniture and all other appurtenances of a first-class railroad;” and no such feat was in fact performed. It is true that this number of miles of road was constructed, so as to be capable of use; and it was in fact in constant use from that time on; but the law requires something more than a road capable of use. It requires in all particulars a first-class road, and the government was not bound to accept anything short of a first-class railroad.
The construction of this road was pushed forward with unprecedented energy and haste for the purpose of getting it open for trafile. When this object was accomplished, the defendant, subsequently, acted upon sound, practical, economical business principles, and brought the road up to the standard required, by correcting locations, widening cuts and embankments, substituting permanent for temporary structures, ballasting, fumishin'g water stations, depots, sidings, equipments, •etc., by degrees, in the same mode as the testimony shows is usual in the construction and equipment of other extensive first-class roads. The defendant was at that time under no legal obligation to make any greater haste in bringing the road up to the proper standard than was required by sound, practical, economical business principles. The law gave defendant nearly seven years after July 15, 1869, within which to complete the road; and the government held in its own hands ample securities to insure its completion, and lost by the delay nothing to which it was entitled under the law or the contract; and the road is, doubtless, better for being gradually brought to the required standard. The road was finally completed and accepted nearly two years before the time required by the statute, and the government'cannot complain that the completion was not in due time. It is earnestly urged on behalf of the government that the road was so far completed as to enable the defendant to make a profitable use of it, and, since this is so, it ought to be held to be completed, for the purpose of requiring the defendant to apply five per centum of the net earnings to the payment of the subsidy bonds and interest. Unfortunately for the argument and the government, the statute does not make the point of time at which the road is ‘ capable of use the one at which the liability of the defendant to apply five per centum of the net profits to the payment of the subsidy bonds attaches; but the completion of the road— such a road, and no other, as the statute required and the defendant undertook to build-such a road as the government was bound to accept in full satisfaction of this part of the contract. And the defendant is entitled to stand on the terms of the contract. A very inferior road is capable of use, and sometimes of a profitable use, and this road, although as good as could reasonably be expected under the circumstances at that stage of its progress toward completion, was certainly in many particulars an imperfect one on July 15, 1869, and for a considerable time thereafter. It was not then completed up to the standard required by the act of congress, and was not' such a road as the government was bound to accept as completed. It was not, in fact, a road completed in any just sense. It is manifest, from the testimony, that the report of the “eminent citizens,” of October 30, 1869, is extremely favorable to the defendant; yet this report required the sum of $576,650 to be expended to complete the road; and the government very properly insisted upon the expenditure being made before it would accept it as completed; and it retained in its hands ample means to insure a full performance of the contract on the part of the defendant.'
That this report was not unjust to the defendant is evident from the circumstance that defendant did in fact, between the date of said report and October 1, 1874—the date at which the road was accepted by the government as complete—expend the sum of $5,-657,854.40, being more than four millions over the sum reported. It is by no means probable that this large sum was unnecessarily expend*362ed, and the testimony shows that is was, in fact;, required, to. bring the road up to the standard of a really first-class road, as required by the statute. This is much more than the amount sought to be recovered by the government, and so far as the mere discharging of the contract to build the road is concerned, independent of other considerations, the defendant might well have afforded to pay the $1,800,000, now claimed as five per centum of net profits, if the government bad accepted the road as completed on July 15, 1869, and relieved the defendant from the payment of these five millions of dollars and over to complete the road, and had delivered up the bonds and patented the lands withheld as security, to which it would then have been entitled. It was manifestly not contemplated by the statute that the defendant should be called upon to apply five per centum of the net earnings of its road to the payment of the subsidy bonds, so long as it required any portion of its resources to be expended in the work of construction so as to complete the road up to the standard required by the act. The fact that the defendant, by an energetic prosecution of the work, so far constructed the road as to enable it to be used profitably several years before the time provided for its completion, and before its actual completion up to the required standard, has no bearing upon the question at issue. If it did, it would, also, be found thatthe gevernment was equally benefited, for it had the use of the road for all the purposes contemplated by congress in passing the act during the whole time it was available to the defendant, and as an entirety for more that six years earlier than was called for in the act of congress; and this direct pecuniary profit to the government, by reducing its expenditures in various ways, if the official reports of the railroad committees of congress are to be relied on, amounted to several millions of dollars per year—nearly or quite enough to pay the interest on the subsidy bonds. The government, therefore, has lost nothing by this early use of the incom-pleted road, but, on the contrary, has been the gainer of several millions of dollars a year during the whole period of such use. But the question here is not as to the comparative advantages derived by the parties from the building and use of this road; or whether the government did not make a more liberal grant than was necessary; or whether it might not have made a better bargain in other respects; or whether the defendant has. or has not, obtained a more profitable contract than it ought to have had. Whatever considerations of this character may be urged elsewhere, when the parties-come into a court of justice to sepk an adjudication of their rights, they stand upon their contract as it is, and the simple dry question is, what is the contract, in fact and in law, and what are the rights of the parties under it? If this were a contract between two natural persons—private citizens— it does not seem possible that there could be any controversy as to the construction to be given to the words “after said road is completed,” in relation to the question under consideration; and that the construction would be, completed as a whole up to the standard prescribed by the contract, so as to require an acceptance from the other party and a discharge of the party building from any further liability for the purposes of construction. If this would be the natural and proper construction, as between private parties, a different- one certainly cannot be claimed, or, if claimed, admitted, because the government on the one side and a corporation on the other happen to be the parties to the transaction, and the contract chances to be found in a statute.
It has been further urged, with some earnestness- and apparent sincerity, that the defendant is estopped from denying the completion of the road on July 15, 1869, in consequence of presenting its statements of completion, and its claim to have the road accepted as completed; and because it has accepted so much of the consideration from the government as it was able to obtain. But many elements of an estoppel are wanting. The government did not rely upon this statement, and accept the road. The statement was only filed in pursuance of the statute, as a basis to set in motion the commissions appointed under the act to examine and report to the president. It was the examination and report of the commission upon which the president was authorized to act, and upon which he did in fact act. In this case he not only acted, but refused to accept the road as completed in accordance with the statute until November 14, 1874, when he, for the first time, accepted the road as complete, and released the securities held to insure completion, which had till that time been withheld from the defendant, and which were fully ample to protect the government in ease of defendant’s default.
My conclusion is, that the defendant’s liability to apply five per centum of the net earnings of the road to the payment of the subsidy bonds issued by the government and the interest thereon, did not accrue till October 1, 1874; and that the government is not entitled to recover any portion of the net earnings accrued prior to that date. The five per centum of the net earnings accrued since October 1, 1874, had not become due at the time this action was commenced. They are to “be annually applied” only. The demand in this case, made by the secretary of the treasury on defendant, was on November 14, 1874, and the suit itself was commenced on April 20, 1875, the former within two, and the latter within seven months after the completion of the road. As to the portion of the net earnings now due, therefore, this action is premature.
There is, also, a wide difference between the claims of the parties on the other point suggested, as to what constitutes “net earnings’* *363.within the meaning of the statute. When it becomes necessary to determine this question, it is quite probable that neither party will be found to be wholly right in its construction of the words “net earnings.” But under the view I take, it will be unnecessary to consider that point now.
[Taken by writ of error to- the supreme court, where the judgment aboye was reversed, and the cause remanded for a new trial. 99 U. S. 449.]
Let there be a finding and judgment for the defendant.