Case: The Union Pacific Railroad v. The United States
Abbreviation: Union Pacific Railroad v. United States
Decision Date: 1874-12
Docket Number: 
Citation: 10 Ct. Cl. 548
Volume: 10
Reporter: United States Court of Claims Reports
Court: United States Court of Claims
Jurisdiction: United States
Parties: The Union Pacific Railroad v. The United States.
Judges: Bichardson, J., was absent when this case was decided.
Pages: 548–584

Head Matter:
THE UNION PACIFIC RAILROAD CASE.
The Union Pacific Railroad v. The United States.
On the Proofs.
An act of Congress incorporates a railway oompmvy and provides that the defendants shall loan to it their bonds to,aid it in the construction of its road, upon condition that the “company shall j>ay said bonds at maturity ” and transport mails and military and other supplies at ordinary rates, and that “ all compensation for services rendered for the Government shall be applied to payment of said bonds and interest until the whole amount is fully paid.” A second act, passed before the company begins work, substitutes a half for the whole and assxwes to it the payment of the remainder. A third act “directs” the Secretary of the Treasury to pay this half, he having recently withheld the whole. A fourth act “ directs ” him to withhold “ all payments.” Meanwhile, the defendants pay the interest on their bonds, which largely exceeds the company’s earnings for them. The company brings its action to recover the half of its earnings, and the defendants set up a counterclaim and seek to recover the amount of their advances for interest.
I. For a valuable service rendered a present debt accrues unless the parties have expressly provided that payment shall be deferred or appropriated to a particular purpose. Therefore, when the Act July 2,1864, (13 Stat. ' L., p. 358, § 5,) provides that only half of the earnings of the Union Pacific Railroad shall be retained and applied to the payment of certain bonds, the company will have a. good cause of action for the remainder of its earnings; and any demand of the Government for interest advanced on the bonds must be asserted by a counter-claim in the nature of a cross-action.
II. Though a statute contain the elements of a compact between the Government and an individual, it nevertheless should he construed according to the rules for statutes aud not according to the rules for contracts. In cases of contract, a court gives effect to the real intent of the parties, and therefore adopts their own interpretation, as shown hy the contemporary construction they have mutually put upon it. In cases resting upon statute, there is no mutuality of agreement to he sought out. The only will is that of the legislative power. Therefore the contemporary construction given to a statute hy an officer intrusted with its execution, cannot he adopted hy the judiciary if contrary to the judicial construction.
III. Where an incorporated company has constantly recurring claims for services against the Government, and the Government has similar claims against the company for interest advanced to its use, an act of Congress {Act March 3, 1871, 16 Stat. L., p. 525, § ,9) which provides that “the Secretary of the Treastiryis hereby directed to pay over in money to the said company” the compensation agreed upon for its services, does not affect or change the rights or agreements of the parties. It merely directs the Secretary not to assert the Government’s right of set-off.
IV. The magnitude of the consideration, political or financial, which may operate upon the legislative mind as an inducement for grants and franchises conferred hy statute does not change the character of the legislation nor vary the rule of construction hy which the rights of the grantee must he measured.
'V. The Act July 1, 1862, (12 Stat. L., 489,) incorporating the Union Pacific Railroad Company and pledging the support of the Government, embodies in' itself both a charter and a compact. Those provisions which hind the Government to do something, and cast distinct obligations upon it and make it take a financial part in the enterprise, are something distinct from a Qharter and. are to he differently construed.
VI. The Act July 1, 1862, (12 Stat. L., 489,) which incorporates the Union Pacific Railroad Company and provides that the defendants shall loan to it their bonds to aid it in the construction of its road, upon condition that the “company shall pay said bonds at maturity ” and transport the mails and military and other supplies of the defendants at ordinary rates, and that “ 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,” and that “five per centum of the net earnings of said road shall also be annually applied to the payment thereof,” prescribes hy its terms a specific mode of payment prior to the maturity of the bonds. If the means thus designated exceed the advances for interest on the bonds, the loss ad interim will he the company’s; if they fall short, it will he the defendants’. And the defendants having the option of augmenting the supply from these sources hy increasing the employment to be furnished hy them to the company, the injury which they suffer is, in contemplation of law, of their own choosing.
The Reporters’ statement of the case:
The court found the following facts:
I. The claimant, between the 1st day of January, 1873, and the 1st day of March, 1874, both inclusive, at the request of the defendants, rendered to them certain valuable services in the transportation of their mails over the Union Pacific Eailroad, the same being transported at fair and reasonable rates of compensation, not exceeding the amounts paid by private parties for the same kind of service, as provided by the Act July 1, (12' Stat. L., 489,) amounting to $385,784.75. The claimant’s accounts, therefore, have been stated to and duly allowed by the proper accounting officers of the Treasury. After the rendition of these services the claimant consented and offered to the defendants’ officers that one-half part of its above earnings, to wit, $192,892.37, be withheld from it and applied to and on account of certain payments for interést made by the defendants upon the bond described in the second finding, and the claimant demanded payment of the remaining moiety of $192,892.37. Put the defendants’ officers paid to the claimant only $7,815.98, and refused to pay the balance of this moiety, to wit, $185,076.39, which still remains unpaid.
The claimant also, between the 1st day of February, 1871, and the 28th day of February, 1874, at the request of the defendants, rendered to them certain other valuable services in the transportation of military and Indian supplies upon said Union Pacific Eailroad. The fair and reasonable value of the services thus rendered amounts in the aggregate to the sum of $655,112.22, and the claimant’s accounts therefor have also been stated, audited, and allowed by the proper officers of the Treasury. But the defendants have not paid the same nor any part thereof. The claimant has consented that one-half part of its above earnings, to wit, $327,556.11, be withheld from it and applied upon the account of the payment for interest before referred to, and has demanded payment of the remaining moiety of $327,556.11; but the defendants’ officers have refused to pay such moiety, which still remains wholly unpaid.
II. The defendants, at the request of the claimant, and for its use and benefit, at various times since the 1st day of January, 1866, have issued and delivered to it the bonds of the United States authorized by the Act July 1, 1862, (12 Stat. L., 489,) which bonds are not coupon bonds, but are what is known as registered bonds, being in form and substance like the bond hereto annexed and forming part of these findings. All of such bonds were sold and disposed of by the claimant, and are held by third parties.
Between the 1st day of July, 1866, and the 1st day of January, 1871, both inclusive, the defendants have paid the interest accruing from time to time upon such bonds, to the parties holding the same, to the amount of $4,530,466.41. Up to the 1st day of February, 1871, the defendants’ officers withheld from the claimant the one-half part of all moneys due to it, the. claimant, for the transportation of mails and military supplies, over the Union Pacific- Railroad, and applied the .moneys so. withheld upon the account of interest paid by the defendants, upon these bonds. The officers of the Government also paid, the remaining moiety of such transportation-accounts to the-, claimant. The claimant has not otherwise refunded the $4,530,466.41 interest before mentioned, and a balance remains, unrefunded after the credit of the one-half part of such trans.,--portation-accounts.
Between the 1st day of July, 1871, and the 1st day of July,-1874, both inclusive, the defendants also paid to the third parties, for and on account of such interest on the bonds aforesaid, the further sum of $5,718,667.52. The claimant has not paid or discharged such advances for interest, but has tendered to the defendants the one-half part of its accounts for transportation, as set forth in the first finding of fact, and the one-half part of any other transportation-accounts which it may have for other services rendered to the defendants. But the defendants, by their proper officers, have refused to receive such one-half part of such accounts in part payment of such interest, and, on the contrary, have insisted and claimed the right to retain the whole amount of such transportation-accounts, and apply it upon the advances made in payment of the interest accruing upon such bonds.
Mr. JE. W. Stoughton for the claimant:
This suit is brought to recover from the United States money due the company for transportation of supplies and mails under the contracts created by the acts of 1862 apd of 1864. The amount claimed is not disputed, but it is insisted in the answer, by way of set-off, that this is absorbed, and a large sum due the United States upon the ground that the company was bound to re-imburse all sums paid by them for interest upon the bonds issued to aid in the construction of its railroad, and that such payment of interest immediately constituted it debtor to the 'United States, so that the latter could, at pleasure, assert its claim therefor in any court having jurisdiction, and may here do so, and recover judgment for several millions of dollars. The questions presented by this case, therefore, are: 1st. By the contract between the Government and the company was the latter bound to re-imburse to the former interest due upon said bonds immediately on payment thereof? 2d. If , yea, can these amounts be here set off against the claim set forth in the petition ?
There has never been a time when the payments by the Government for interest upon these bonds has not been largely in excess of any sums due the companyfor transportation. If, therefore, the right to set off the one against the other, or to recover these sums paid for interest, exists now. it arose and existed upon payment by the Government of the first six months’interest due. But the Government for the period of six years never asserted such right, but, on the contrary, paid, upon the utmost deliberation, one-half the amounts due for transportation as they severally accrued. At the end of the fourth year the Secretary of the Treasury, upon the ground of a legal opinion by Mr. Alierman, Attorney-General, declined for a brief season to pay upon this basis, but the United States, by its act of Congress, ordered the payment to be made in money, and this command the Secretary obeyed, and up to March 3, 1873, $2,357,459.67 was paid to the company, running through a period of six years, in direct affirmance of our right to recover here, and in plain repudiation of the claim set up in the answer. Conduct, acts much less cogent than these, have been often held by courts of justice to fix unalterably the construction of ambiguous contracts. For the law on this subject the court is referred to Chicago v. Sheldon, (9 Wall., 50;) Stone v. Ciarle, (1 Met., 381;) Livingston v. Ten Brócele, (16 J. E., 22;) Railroad, Company v. Trimble, (10 Wall., 377;) see also Opinions of Attorneys-General, (Taney,) vol. 2, p. 558.)
But we do not rest in this case upon the conduct or acquiescence of even the Secretary of the Treasury; for when that officer, on the ground stated, declined, in January, 1871, to make the payment here claimed, the Government itself, by its supreme law-making power, took charge of the very question here raised, and it was considered in the Judiciary Committee of the Senate, as one of its members said, (Congressional Globe, p. 1775,) all winter, and finally, although Senator Thurman stated he did not approve of the acts of 1862 and 1884, yet he, in common with a large majority of that committee, could not resist the conclusion that by their clear construction the Government must pay the one-half due the company for transportation, and was not entitled to assert any claim to be re-imbursed for interest beyond what should be extinguished by the application of the other half and of the 5 per cent, upon the net earnings of the company until the maturity of the bonds.
On this report, which was adopted, the Act March 3,1871, was passed, expressly requiring the Secretary of the Treasury to pay the claim here sought to be recovered in moneyj and to that report and to the act thus passed the court is referred, as evidence not only that the agents of the Government had for years deliberately affirmed the construction of the contract now sought by the company, but that the Government itself, a party to [this contract, when its subordinates sought to change the interpretation so deliberately adopted, affirmed it in the most impressive manner, upon the gravest and most careful consideration. Under this rebuke and mandate the Treasury acted until] the 3d of March, 1873, when, under some influence not necessary to state, the act of that date was passed, not in any respect, even by inference, expressive of a legislative doubt as to the justice of the construction of the contract so long acted upon, but merely permitting the Secretary of the Treasury to retain the money here claimed until the questions involved could be judicially determined.
It is respectfully submitted that here the conduct of the Government has not been signalized by that liberality which citizens have a right to expect; and it may be further observed that, as no condition of the contract has been lately newly discovered by it, the language and conclusion of the Supreme Court, as expressed in 9 Wallace, 54, may be here adopted and judicially acted upon, that “ the interest of each (party to a con tract) generally leads bim to a construction most favorable to himself;” and where u the language used by the parties is indefinite or ambiguous, and hence of doubtful construction, the practical interpretation by the parties themselves is entitled to great, if not controlling, weight; and where its execution necessarily involves a practical construction, if the minds of both parties concur, there can be no great danger in the adoption of it by the court as the true one.”
And it may also be added, as was said by this court in Gilbert v. The United States, (1 C. 01s. E., 28,) that a contract between an individual and the Government should be construed in the same manner as contracts between private parties.
It will not, I suppose, be disputed that the contract now existing between the parties is to be found in the provisions of the acts of 1862 and 1864, and that this contract is wholly unaffected by the act of 1871 or of 1873. The act of 1871 was designed to declare that by force of this contract the company was entitled to receive from the Government in money, and not by way of offset or otherwise, the one-half due for transportation, and that the Secretary of the Treasury must so pay it, whilst that of 1873 was intended merely to relieve the Secretary from that duty until the right of the company to recover the same upon the law and the facts should be determined. This act did not attempt to define what those rights were, nor in any respect to modify or change them, nor had Congress power sci to do, or in any manner to declare to what relief either party was entitled. Their respective rights were left precisely as stipulated in the contract, nor could the effect of the conduct of the parties, so far as that was capable in law of interpreting the contract, be in any manner varied or impaired, nor was this attempted. The entire operation of the act was to authorize the Secretary of the Treasury to withhold payment as therein provided; for it may be suggested that authority for the company to sue the United States in this court already existed, and unless they could, independently of the act, interpose therein a claim by way of set-off, it is not perceived that the act authorized a proceeding in that form. Adopting these general views as sound, and assuming that the title of the company to recover must depend wholly upon the rights of of the parties under the contract, I proceed to present briefly the proposition that, by its terms and true construction, and as interpreted by surrounding circumstances and the acts of the-parties, the company may recover the amount here claimed entirely irrespective of the question of interest — a cjairn for which,, however re-imbursable, cannot be here interposed, either by way of bar, offset, or as ground of recovery in favor of the. United States.
1st. It may be well to state at the outset that a claim byway of offset, especially against one not arising out of the same subject-matter on which suit is brought, is allowed, not as a defense, but only by statute, to save circuity of action, and then it is at the option of the defendant whether he will or will not resort to this mode of presenting what is in substance the demand of a plaintiff. He may elect not to resort to this, even when entitled so to do, and if he does not, he may delay prosecuting or sue upon his claim at pleasure. Whether this court-can entertain a claim by way of set-off, and decree judgment and affirmative relief in favor of a defendant, may be doubtful.. Clearly the act of 1873 confers no such authority; but, assuming the court can, I proceed to consider whether the claim here interposed by the Government can here be set up to defeat a recovery by the company.
2d. It is indisputable that such rights’as either party has in this court depehd upon and arise wholly out of the contract.. If by that contract the company may demand and receive from the Government one-half of the compensation due for transportation, not subject to the offset of any real or pretended, claim of the Government — and such an agreement it was perfectly competent for the parties to make — this court is bound so to determine. There might arise many reasons why such an agreement would be just and advantageous to both parties. If, for instance, the Government had become satisfied prior to-1864 that the road, which it was deeply interested in having constructed, could not be built without paying over to the corn-pay, as a means of paying interest to its other creditors, a part of the sum which in 1862 the parties had agreed should be retained and applied for that purpose by the Government, it was perfectly competent for them to have done so; and even in a case where the Government was entitled so to apply, an express agreement not to do so, but to pay the same over, could be enforced, and might or might not operate to that extent to-postpone payment of the portion of interest'which the sum thus to be paid over would otherwise have satisfied. It is enough to say, however, that the Government was perfectly •comptent then so to contract, and if it so contracted, this epurt must adjudge the company entitled to recover, regardless of the rights possessed by the United States under other clauses of the contract, enforceable by a direct proceeding in this or other courts.
3d. Looking now carefully to the provisions of the contract, we find that, by the fifth and sixth sections of the act of 1862, the United States were to issue at certain times to the company bonds payable in thirty years, bearing interest at 6 per cent., payable semi-annually, to secure the repayment of which to the United States, as therein provided, together with all interest thereon which should have been paid by them, these bonds were declared to constitute a first mortgage on the whole line of railroad, telegraph, &c.; and it was provided that a failure to redeem said bonds or any part of them, when required so to do by the Secretary of the Treasury, should subject all property, •&c., of the company to be taken possession of by him for the use and benefit of the United States. The grants of land, &c., in the contract were made upon condition that the company should pay the bonds at maturity, keep the road, &c., in repair and use, transmit dispatches, and transport troops, &c., over the railway, as required, giving to the United States a preference over all, others. Two, and only two, sources of income of the company were by it stipulated to be applied to the payment of bonds and interest, and these were all compensation for serv-ces rendered for the Government, and, after the road should be completed and until said bonds and interest should be paid, at least 5 per cent, of the net earnings of the road were to be applied to that purpose. I do' not, in considering this point, stop to inquire as to the effect of these clauses upon the alleged right of the Government to be immediately re-imbursed the whole amount of interest it should pay upon these bonds. That will be hereafter considered. I now proceed to briefly examine the statute of 1864, which, on being accepted by the company, became incorporated into the contract of 1862, which was thus materially altered. Prior to 1864 the managers of this great national work had ascertained that it was impossible to obtain the means necessary to accomplish it unless large sums in addition to those to be furnished by the Government could be obtained; and that they must also, in view of payments to be made for interest upon moneys thus to be obtained, be able to retain a part at least of the sums which would be earned for services to be performed for the Government. Eeduced to plain English, the parties said this: By the contract of 1862 the Government may hold and apply to the payment of bonds and interest the whole compensation due for transportation, but as modified in 1864 only one-half that sum. It is not pretended, it never has been pretended, that the Government has or ever had a right to payment of the bonds until the maturity thereof, unless from one or both the sources I have mentioned sufficient should be received to more than re-imburse it for the interest it might pay.
4th. At the time this agreement was modified, in 1864, it was of course unknown to both'parties what would be derived from either of the two sources I have mentioned applicable to the re-imbursement of the interest in question. One-half the sums earned by the company and payable by the Government, coupled with the 5 per cent., might or might not within a few years be sufficient to pay this, and the parties might well have supposed that before the bonds matured all interest paid by the Governmentwould bere-imbursed. And acting on that assumption and from other motives, and especially in view of the fact that without this and other changes in the contract the road could not be built, the Government might have been quite willing, and upon ample consideration, to agree to pay and to pay one-half the compensation hereclaimed instead of insisting upon the whole. Certain it is the one-half was agreed to be surrendered, and in such mode and form that an individual party to a contract would hardly dare urge that he could nevertheless, through the aid of a court of justice, get the exact relief which he had solemnly promised upon sufficient consideration not to require.
The final proposition I shall present is that by the contract between the parties, distinctly apparent from its language and by them most emphatically interpreted, the interest payable by the Government was not to be recoverable, except from the two sources mentioned, until the maturity of the bonds, when the company was bound to pay the amount thereof, with all interest which should then have been paid by the United States, and not from the sources mentioned repaid ,■ and to secure such payment by the company the bonds were declared to constitute a lien upon its road and property, to enforce wbicli the Government was authorized to resort to the most harsh and effective measures.
1st. It is hardly necessary to argue, what is quite apparent from the contract itself, that the Government was in no just ■sense a donor of these bonds. So far as is disclosed by the contract and by the history of the enterprise, the Government was to be largely benefited by the construction, equipment, and operation of this great national road, more vast and difficult ot accomplishment, more hazardous to capital than any public work ever before attempted, and not less beneficent in its purposes.
2d. It should be constantly borne in mind that the company was in no respect liable to pay the bonds or the interest due thereupon to the holders; and to get at its exact duty in reference thereto we must resort, not to any implied or unwritten obligation, but to the acts of 1862 and 1864. In these we find the bonds and interest secured and means of payment from the two sources I have mentioned specifically pointed out. It is well settled that where provision is thus made in an agreement, nothing inconsistent therewith upon the same subject is to be inferred, nor, indeed, in addition thereto, if it may be fairly presumed from the circumstances that no addition was intended. Apart from the inability of the company to make such payment, it is quite evident that the arrangement to pay 5 per cent, upon net profits annually on account of interest, payable every six months, is inconsistent with an implied promise to re-imburse the whole of it as it should be paid by the Government. So, too, an agreement that the entire sums earned by the company for transportation might be retained and applied to this re-imbursement is not consistent with an implied obligation to re-imburse it in full whenever paid. Such express stipulations very clearly show that they, and they only, are to be regarded, and that in their presence no implications on the same subject can be entertained.
3d. As we approach the contract, as modified by the act of 1864, all doubts, all ambiguity disappear. I have already stated the causes which, led to this change. Capitalists declined to advance means upon a security subordinate to that held by the United States, and so it was agreed this should be made second, whilst one-half the sums to become due from the Government for transportation were to be paid over to the company instead of being applied as agreed in 1862.
4th. It is difficult to understand what language of the contract can be relied upon to create an obligation on the part of the company immediately to re-imburse to the Government all sums it may pay for interest upon its bonds. ' It certainly cannot, with any force, be urged that this arises by implication merely, for the long-continued practical interpretation by the parties utterly repudiates such a suggestion. To raise the obligation here insisted upon, the construction adopted by the parties — so decisive as to be almost judicial — must be overturned, and one in utter hostility to it adjudged. Before so doing this court must find solid ground on which to stand, and must unhesitatingly conclude that the parties who for six years have, in the most deliberate manner, acted upon the theory that the Government had under the contract no right to the re-imbursement as now claimed were ignorant of their own purpose as therein expressed, and mistook their own meaning as therein written. No court will venture thus to adjudge upon mere implication, but will demand from the party who insists that for six years he has voluntarily paid moneys to the amount of millions under a mistaken construction of his own contract very clear evidence of the truth of the improbable assertion. Where, in what portion of this contract, is this evidence of delusion supposed to lurk ?
At every turn and corner of this contract we find it bristling with provisions, with implications, quite hostile to the construction here asked for by the Government, and in entire harmony with that put upon it by the parties. It is quite unnecessary, as well as unprofitable, to pursue into minute details an examination of these for the purpose of learning the intent of the parties to it. They have declared it, have acted upon it, and certainly the most learned, the most technical legal intelligence must fail in the attempt to overturn or even unsettle the construction thus adopted. In the language of the late Judge Nelson, in the case cited in 9 Wall. — a great magistrate, who possessed that remarkable common sense more rarely found, said Macaulay, than the faculty of writing good poetry— “ Where the execution of an executory contract involves a practical construction, if the minds of both, parties concur, there can be no great danger in the adoption of it- by the court as the true one.”
To this case that conclusion is especially applicable.
5th. In closing my observations upon this point, I will state that by the amendment of the sixth section of the act of 1862, by the fifth section of that of 1864, the contract promising the payment here asked reads substantially thus: That only one-half of all compensation for services rendered by the company for the Government shall be required to be applied to the payment of said bonds and interest: and by the act of 1871, which is merely declaratory of the true construction, the Secretary of the Treasury was directed to pay over the other half to said company in money. Can this court, by any fair reading of the contract, come to a different conclusion ? If this be the promise of the Government, and its promise be binding upon it, the case is disposed of, for it necessarily follows if it has no right to retain this one-half on account of interest, that amount is to be paid over to the company — irrecoverable certainly for the purpose for which the Government was bound not to retain it. And this conclusion is very decisive, not only in view of the covenants the contract contains, but from the arguments of Judge Curtis and of the Judiciary Committee, preceded and followed by the action of Congress, all which fitly expound the causes, motives, and considerations which led the Government to agree not to ask for any re-imbursement of the interest it should pay until the bonds should mature, except that obtainable from the two sources referred to, which might or might not before that date satisfy the sums thus paid. If they should not, then, by the express terms of the agreement, the Government was to-have a lien upon the road and all other property of the company as security for payment at maturity of the bonds and of all interest theretofore paid. Until then no personal obligation of payment as against the company was to arise, and then, if not met, the Government had the right to take possession of the road and its appurtenances and apply them to the use and benefit of'the United States.
Mr. Assistant Attorney-General Mill for the defendants:
An abstract of the statutes to be construed may be of use. By the act of 1862, chapter 120, section 1, certain persons are created a. body corporate and politic, by the name of the Union Pacific Railroad Company, to construct a railroad and telegraph line from a point designated in the Territory of Nebraska to the western boundary of Nevada Territory, (there to join the Central Pacific Eailroad.) By section 2 a right of way through the public lands is granted to the company for the construction, of its railroad and telegraph line, “ and the right, power, and authority is hereby given to said company to take from the public lands adjacent to the line of said road earth, stone, timber, and other materials for the construction thereof. Said right of way is granted to said railroad to the extent of two hundred, feet in width on each side of said railroad where it may pass over the public lands, including all necessary grounds for stations, buildings, workshops, depots, machine-shops, switches, side-tracks, turn-tables, and water-stations.”
By section 3 there is “ granted to the said company, for the purpose of aiding in the construction of said railroad and telegraph line, and to secure the safe and speedy transportation of the mails, troops, munitions of war, and public stores thereon, every alternate section of public land, designated by odd numbers, to. the amount of five alternate sections per mile on each side of said railroad, on the line thereof, and within the limits of ten miles on each side of said road,'not sold,” &c.
By section 4: “Whenever said company shall have completed forty consecutive miles of any portion of said railroad and telegraph line ready for the service contemplated by this act, [upon the report of commissioners herein provided for,] patents shall issue conveying the right and title to said lands to said company, on each side of the road as far as the same is completed, to the amount aforesaid ■, and patents shall in like manner issue as each forty miles of said railroad and telegraph line is completed upon certificate of said commissioners.”
Sections 5 and 6 are as follows :
“ Sec. 5. And be it further enacted, That for the purposes herein mentioned the Secretary of the Treasury shall, upon the certificate in writing of said commissioners of the completion and equipment of forty consecutive miles of said railroad and telegraph, in accordance with the provisions of this act, issue to said company bonds of the United States of one thousand dollars each, payable in thirty years after date, bearing six per centum per annum interest, (said interest payable semi-annually,) which interest may be paid in United States Treasury notes or any othpr money or currency which the United States have of shall declare lawful money and a legal tender, to the amount of sixteen of said bonds per mile for such section of forty miles; and 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 ha,ve been paid by 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 with the provisions of this act, the said road, with all the rights, functions, immunities, and appurtenances thereto 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: Provided, This section shall not apply to that part of any road now constructed.
“Sec. 6. And be it further enacted, 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, 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. Said company may also pay the United States, wholly or in part, in the same or other' bonds, Treasury notes, or other evidences of debt against the United States, to be allowed at par; and after said road is completed, until said bonds 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.”
By section 7 tbe company was to “file tbeir assent to tbis act” in the Interior Department within one year after the passage Of the act, and the railroad and telegraph line were to be completed before the 1st of July, 1874.
By section 17 this road and that of the Central Pacific Bail-road Company were to be finished from the Missouri Biver to the navigable waters of the Sacramento Eiver by the 1st of July, 1876.
By section 20 certain annual reports are to be made to the Secretary of the Treasury. (12 Stat. L., 489-498.)
By the act of 1864, chapter 216, section 4, the land grant to the railroad was greatly increased, and by section 5 it was enacted “that only one-half of the compensation for services rendered for the Government by said companies shall be required to be applied to the payment of the bonds issued by the Government in aid of the construction of said roads.”
By section 10 the two railroads were authorized to issue their first-mortgage bonds to an amount not exceeding the amount of the bonds of the United States; and the lien of the United States under the act of 1862 was subordinated to this new mortgage upon the road and telegraph line. (13 Stat. L., 358, 359, 360.)
The nature of the corporation created by the act of 1862 (supra) was somewhat considered by the Supreme Court in deciding whether it' was exempt from taxation by the State of Nebraska, and it was then declared to be a private corporation, though existing for the performance of public duties, and that the ownership was in the stockholders. (Railroad Company v. Peniston, 18 Wall., 31, 32.)
It will be perceived that the charter grants three distinct things:
1st. It grants the adventurers the franchise of a corporation.
2d. It gives a right of way across the public lands, and makes a very large grant of those lands in fee to the new company.
3d. It lends the new company bonds to a very large amount, redeemable in thirty years, and secures these by a mortgage of the road and in other ways. These two statutes thus constitute a legislative grant of corporate franchises, public lands, and of the public credit to a private corporation. That in case of ambiguity, the language of such a grant is to be construed in favor of the sovereign, and against the grantees, is too well settled to require discussion; but as these statutes are very loosely and obscurely drawn, and it is difficult in many respects to ascertain what the intention of Congress really was, I will quote from one case of the highest authority what I think constitutes the true rule for the court to follow in construing these statutes, and the reason which makes that rule just and equitable. In Ohio Life-Insurance and Trust Company v. Debolt (16 How., 435, 436) Chief-Justice Taney says:
“ The rule of construction in cases of this kind has been well settled by this court. The grant of privileges and exemptions to a corporation is strictly construed against the corporation and in favor of the public. Nothing passes but what is granted in clear and explicit terms. * * * Nor does the rule rest merely on the authority of adjudged cases. It is founded in principles of justice, and necessary for the safety and well-being of every State in the Union. For it is a matter of public history, which this court cannot refuse to notice, that almost every bill for the incorporation of banking companies, insurance and trust companies, railroad companies, or other corporations is drawn originally by the parties who are personally interested in obtaining the charter, and that they are often passed by the legislature in the last days of its session, when, from the nature of our political institutions, the business is unavoidably transacted in a hurried manner, and it is impossible that every member can deliberately examine every provision in every bill upon which he is called to act. On the other hand, those who accept the charter have abundant time to examine and consider its provisions before they invest their money.”
These principles were applied to a grant of land by Congress of for internal improvements in Dubuque <& Pacific Railroad Company v. Litchfield, (23 How., 88,89.) (See also the opinion Attorney-General Black, 9 Opins. Attys. Gen., 59, 60.) It is said that this grant was founded upon valuable consideration. In one sense it was. The only principle on which legislatures can give railroad companies exclusive privileges and the right of eminent domain is that, although, private property, they are of great public convenience, and indeed of public necessity, and that the public receives, in the facilities for travel and commerce which they furnish, a return for the privileges and franchises conferred upon them. It will never be presumed thatCon- gress needlessly gives away the public property. But all this applies to every grant of franchises, lands, and money, and this case does not differ in principle from ordinary grants. The public benefit to be derived from building the road was very great,- and the grant to it was of proportionate magnitude. The special privileges which the Government received in return were no more than follow from an ordinary grant, and tifie grant therefore was substantially an act of bounty. Applying, therefore, to the statutes the rule of construction so clearly and decisively stated by Chief-Justice Taney, it is submitted it will not be difficult to determine the legal rights of- the parties under it, although undoubtedly it was expected and understood that the company was to be most indulgently treated,, and that the strict legal rights of the Government were not. always to be enforced.
How carelessly the statute was drawn is shown by the fact: pointed out by Mr. Carpenter in his report from the Judiciary-Committee to the Senate on the 24th of February, 1871,' that there is no provision for the issue of bonds by the Government to the company except for the first forty miles of the road; the clause in section 4, providing for each successive forty miles in respect of land-patents, being omitted from section 5, which authorizes the issue of bonds. The sixth section of the act of 1862 does not, as the other side contends, create a condition-subsequent, a breach of which would be followed by a forfeiture of the entire grant, and therefore is to be construed strictly. Although the wordsi; upon condition ” are the most apt words to create a grant or estate on condition, courts of late years have shown extreme reluctance to so construe them, unless it appears from the entire instrument that such was the intention of the parties. There are numerous instances in which the rigid common-law rules have been thus modified in recent years. {Stanley v. Golt, 5 Wall., 119; Wright v. Witlcin, 2 B. & S., 232; Attorney-General v. Wax Chandlers7 Company, Law Eep., 6 H. L., 1; Sohier v. Trinity Church, 109 Mass., 1; Chapin v. Karris, 8 Allen, 594.)
The language of the late Mr. Curtis, in arguing Stanley v. Colt, (5 Wall., 142,) that “ words of proviso and condition will be construed into words of covenant when such is the apparent intention and meaning of the parties,” is particularly applicable to this statute. If the sixth section creates a technical condi tion, all the grants to this company would be forfeited by the failure, in any instance, to give the Government the preference provided for by the section. Such, clearly, was not the intention of Congress, still less of the adventurers. The provisions of this section are better construed as agreements or covenants on the part of the company, for failure to perform which an action for damage will lie. No narrow or restricted construction, therefore, is to be given to section 6.
1. No provision whatever is made in the act for the repayment of interest by the company to the Government, except it be in the provision in regard to the application of compensation for services rendered to the Government; which last provision will be considered hereafter. Much stress is laid upon the language of the fifth section, that the mortgage is “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 by the United States.” This language, however, only indicates that it was the intention of the draughtsman to make provision in regard to interest. It does not compel the court to find by construction, in the statute, what is actually not there. The absence of any provision on the subject must be regarded as a casus omissus, and, like a casus omissus in a deed or will, the ordinary principles of law applicable to the subject-matter must supply the omission. The learned counsel on the other side find that the interest is provided for by the stipulation in the sixth section that the company “shall pay said bonds at maturity.” But although the interest on the bonds is an incident to the principal debt, the contract to pay interest on a bond or note is an independent contract, distinct from the bond or debt itself, and on which an independent action may be maintained, even when the.two are made payable at the same time. (The City v. Lamson, 9 Wall., 477; SjparhawJc v. Wills, 6 Gray, 163.) The argument that the word “bonds” here includes interest is hardly reconcilable with the argument that the sixth section is to be strictly construed. But the decisive answer to this is that the words “ at maturity” have no natural application to interest, and in this section cannot, without some violence, be made to refer to it, because the interest matures — that is, becomes due and payable — semi-annually, whilethe bonds do not mature or become payable for thirty years. And a consideration of the nature of the grant of the bonds establishes, I think, the conclusion that these words in the sixth section do not include interest.
The right of way and the lands were an absolute gift, but the bonds were a loan. Whether or not hereafter Congress might remit the debt thus incurred by the company, all the provisions in regard to the mortgage, with its clause of forfeiture, and the undertaking of the company to pay the bonds at maturity, show, beyond all doubt, that a legal obligation, at least, to pay them was contemplated by both parties. And not only were the bonds a loan, but they were a loan of credit, and not a loan of money. The company was to pay them at maturity. . It was no more a loan of money than the loan of a merchant’s name or note to his friend is a loan of money. The mortgage clause, indeed, speaks of repayment, but the mortgage is only security taken against the emergency of the company’s being unable to meet the obligations that the Government had assumed for it. It does not change the nature of the loan or the legal obligation of the company to provide the Government with money to meet as it falls due the debt incurred for its .benefit. But if the petitioners’ construction be correct, a loan of credit, with an agreement that the borrower is to pay the debt at maturity, and without any provision - or agreement on the part of the lender to provide for the interest as it falls due, is construed to include an agreement by the lender to pay out annually a large sum of money for interest, in the aggregate exceeding the principal debt, without any liability on the part of the borrower to repay him until the debt itself matures. If the proposition above stated be sound, it follows that the payment of the interest by the Government created a debt upon which the Government can sue, or which it can set off against any claim of the company. There being.no contrary provision in the statute, the law implies a promise to repay the interest, when it is paid by the Government. (Chit, on Con., 11th Am. ed., 889, 890.)
2. This construction is not changed by the provisions in the sixth section of the act of 1862, that “ all compensation for services rendered for the Government shall be applied to the payment of said bonds and interest, until the whole is fully paid,” and that “ after said road is completed, until said bonds and interest are paid, at least five per centum of the net earnings of said road shall be annually applied to the payment thereof,” amended by the fifth section of the act of 1864, “ that only one-half of the compensation for services rendered for the Government by said companies shall be required to be applied to the payment of the bonds issued by the Government in aid of the construction of said road.”
These are provisions inserted to increase the security of the Government by creating a fund in the nature of a sinking-fund' for the ultimate payment of the bonds. This is shown by the fact that, for aught Congress knew, the time might come when the amount thus set aside by the first statute would greatly exceed the interest due on the bonds, in which case it would be credited to the company against subsequent liabilities to the Government, and all above the interest be applied eventually to the payment of the bonds themselves.
The amendatory section in the act of 1864 is a more plausible and perhaps stronger argument in favor of the petitioners’ construction, but nevertheless it indicates the same purpose as the original section. I do not attach any particular weight to the omission in this section of reference to interest. So far, however, as the omission has significance, it aids the construction I have placed upon the two sections, that, they provide for a sinking-fund for the ultimate redemption of the bonds, and thus add to the security of Government. It may be that the reason why the amount to be added to the sinking-fund was-reduced from the entire to one-half of the compensation due the company for Government business is to be found in the-fact that the act of 1864 authorizes the company to negotiate a mortgage of equal amount with that of the Government, and which was to have priority of the latter, and it was thought but right, therefore, to reduce the sinking-fund one-half, the better to enable the railroad to meet this new obligation.
3. If, however, the court construes the provision of the sixth section, “ that said company shall pay said bonds at maturity,”' as providing for the payment of the interest as well as the principal of the debt, then it is submitted that the words u at maturity” must be construed secundum subjectam materiam, and have the force of “when due,” and thus refer to one date in respect of the bonds and to another in respect of the interest.
I have already said that this section ought not to be construed as creating a technical condition-subsequent, but must have a fair and reasonable interpretation. Giving it this interpretation, if the words a said bonds” include the interest payable on them as well as the bonds themselves, then the words “ at maturity” must, as applying to these two distinct undertakings, be given that meaning which makes them appropriate to each undertaking. They cannot naturally have the force of postponing the obligation to pay the interest till the bonds themselves .mature. The courts every day, in construing written instruments, give the same words different meanings as they apply to different subjects, as to real and personal property, the sea-shore, and the upland. In the present case there are two distinct contracts to pay money, one at the end of thirty years, the other in semi-annual payments meanwhile, and the company agrees to pay these at maturity. It would seem to be the natural and sensible construction to say u maturity ” means-when each becomes due; and I cannot doubt that in an ordinary contract between private parties courts would give it this construction rather than any other. The agreement is directly analogous to that of a bond payable by installments, and where the debt, therefore, matures at distinct periods of time.
4. If the petitioners’ construction be correct, the Government, while paying out annually a large amount of money for the Pacific Railroad, will not be entitled to interest thereon, as there will be no breach of contract by the company in regard thereto.
The semi-annual payments themselves are interest, and therefore, even -when represented by coupons, do not draw interest unless “ payment of them is unjustly neglected or refused,” when interest is allowed as for breach of contract to pay money on a given day. (Aurora City v. West, 7 Wall., 82; Fergusson-v. Fyffe, 8 Cl. & Fin., 121; Shaw v. Norfollc County Railroad, 16 Gray, 407; Chit, on Bills, 11th Am. ed., 679, et seq.) In this case, if the Government should neglect to make these payments, when due, the holder thereof might be entitled to interest; and if it is the duty of the railroad company to find the money wherewith to pay them, the Government can recover interest on the amount so paid for the company from the date of payment, and this is but right and equitable. But if the company is not obliged to re-imburse the Government for interest until, the bonds mature, no interest on the coupons can be due the-Government.
Some reliance is placed by the learned counsel for the petitioners on the contemporaneous action of the parties, and on the fact that for six years no claim was made that the company were bound to repay the interest as it was paid by the Government. But this action was continued for too short a time, and may be ascribed to too many different reasons, to be entitled to much weight in construing the statute. (Savings Barilc v. United States, 19 Wall., 227.)
Mr. Sidney Bartlett in reply:
I submit—
1. That the right of the Government to claim immediate repayment of all interest paid on its bonds issued to the company must rest entirely on the provisions of the two acts of 1862 and 1864, which acts are to be construed together. No implied contract as to the repayment or the time of such repayment can have place where provisions in that regard are contained in the contract. The entire right must rest upon those provisions and their just construction. There is no more of an implied contract of repayment in relation to the bonds than there is in relation to the land-grant.
2. These acts are to be construed as contracts founded on valuable consideration, and not as acts merely conferring bounty on the corporation.
3. That they are to be construed like all other contracts, by the aid of the surrounding circumstances.
4. That wheresoever they contain conditions the non-performance of which will defeat a grant, they are to be construed strictly. *
Before displaying the surrounding circumstances which throw light on the construction of the acts, or adverting to other provisions which bear upon that construction, it may be well to examine carefully the two sections of the act of 1862 which are relied on to show that the purpose was to require the immediate re-imbursement by the company, of the interest paid from time to time by the Government. In doing this it is my purpose to give to each word its natural force and meaning, but to construe the same strictly, excluding conjecture, on the ground .that in both sections the words relied on create con■ditions that, if broken, defeat the grant.
The sections relied on are the fifth and sixth of the act of 1862. The fifth section is as follows:
u That, for the purposes herein mentioned, the Secretary of the Treasury shall, upon the certificate in writing of said commissioners of the completion and equipment of the forty consecutive miles of said railroad and telegraph in accordance with the provisions of this act, issue to said company bonds of the United Statés of one thousand dollars each, payable in thirty years after date, bearing six per centum per annum interest, (said interest payable semi-annually,) which interest may be paid in United States Treasury notes, or any other money or currency which the United States have or shall declare lawful money and a legal tender, to the amount of sixteen of said bonds per mile for such section of forty miles, and 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 by 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 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 with the provisions of this act, the said road, with all the rights, functions, immunities, and appurtenances thereunto belonging, and also all lands granted to 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.”
The sixth section I extract the material parts of:
“ That the grants aforesaid are made upon condition that said company shall pay said bonds at maturity, * * * and all compensation for services rendered to the Government shall be applied to the payment of said bonds and interest until the whole amount is fully paid; * * * and after said road is completed, and until said bonds 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.”
1. Now, the whole purpose of the fifth section is to make pro vision for securing- repayment of its bonds issued by Government to tbe company, with the interest, and to provide for forfeiture or absolute foreclosure on the failure of such repayment. We should, therefore, naturally look to find it in the period of repayment of both principal and interest fixed and defined. But the only provision in reference thereto is contained in the words “ to secure the repayment to the United States as here-nafter provided,’7 and the further provision, “ 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, n accordance with the provisions of this act.”
The words “in accordance with the provisions of this act” must be construed as if they immediately followed the words “ bonds or any part of them,” since there are no provisions in the act regulating the conduct of the Secretary of the Treasury as to making any demand of either principal or interest. We must look, then, to find in what part of the subsequent provisions of the act “ repayment as hereinafter provided ” is-to be found.
2. This brings us to the sixth section, which declares that the grants aforesaid are made upon condition that the company shall pay said bonds at maturity. We have now for the first time in the act a clause which fixes the time of payment, and which will satisfy the words of the fifth section, “ repayment as hereinafter provided;” and thus is raised the inquiry,, how are the words “shall pay said bonds at maturity” to be construed, having regard to the fact that they form part of a condition the breach of which is attended by forfeiture of grants for valuable consideration ? It is not now contended by the petitioner that the word “bonds” as thus used would not include the interest, if any, which the transportation for the Government and the five per centum of net profits had failed to pay, although it will appear in the sequel that 0 on-gress anticipated that probably all the interest would be paid from those sources. We assume, therefore, for the purposes of this case, that the interest is to be included in the “ payme nt to be made at maturity.”
The single question is, the maturity of what? and the answer,, giving the natural interpretation of the language, is, “maturity of the bonds.” The word “ maturity” has not, according to its-ordinary use, any application to the interest. The maturity used as single. If it were used to embrace interest, it would be “ their several maturities.” The law will not, we submit, in construing the words of a condition which may go and defeat such a grant, interpolate the words which are vitally necessary to establish the construction that the word maturity includes the payment of interest each sis months as it becomes due; and it is worthy of note that if the interest was to be paid each six months after its payment by the Government by force of this word “maturity,” no provision is made as to how soon after or upon what notice it was thus to be paid, which would seem natural and necessary if such had been the intent. If the contemporaneous action of both parties can be allowed to aid in the construction, then the record shows that for six years no claim was made by the Government that under the true construction of the act the company were bound tó repay the interest as it was paid by the Government. On the contrary, the Government went on making payments to the company without suggesting any such claim. There has been no intimation by the company that any such obligation was known to or feared by it, and yet if the obligation had existed they permitted a series of complete forfeitures of all their rights and property during the period above named. Thus far as to the legal construction of the sixth section, considered in connection with the fifth. We do not now discuss the probabilities that the Government would or would not submit to any such supposed accumulation of interestthat belongs to the class of surrounding circumstances, which will be adverted to hereafter.
3. But there are two other provisions contained in this sixth * section which should be referred to as also embraced by the clause “ repayment as hereinafter provided.” They are those which provide that “ all compensation for services rendered to tiie Government shall be applied to the payment of said bonds and interest until the whole amount is fully paid,” and the further provision “that until said bonds and interest are paid, at least five per centum of the net earnings of said road shall be annually applied to the payment thereof.” Now, it is clear that there is nothing in either of these clauses that, even by remote implication, shows that it was the intent of the .act that the company shall repay the interest semi-annually, as it was paid by the Government; on the contrary, the fair result to be derived from them is repugnant to any such construction. The sums thus to be retaiued by or paid to the Government are not to be so retained and paid in the event of a default in payment of principal or interest, but are to be paid and u applied ” constantly, from time to time, as they accrue. Had the act designed that each six months’ interest should be paid by the .company, some provision as to the mode of applying at the time the sums thus received by the Government, and the adjustment of such semi-annual interest, would have been natural and almost necessary. The lack of any such provision points to a general credit of the sums in account to be adjusted at some future period, namely, the maturity of the bonds.
Although Congress, subsequently to the act of 1864, subordinated its mortgage to one made by the company, and also surrendered half of the sums earned by transportation to the Government, yet that change has no influence on the construction. and intent of the original act of 1862, which is now under discussion.
1. The road contemplated by the act was to be two thousand miles long. The period limited for its completion was twelve years. Through its entire length it was to be built through a wilderness. From what resources, if the payment of semiannual interest on the bonds was contemplated by the act, could Congress have anticipated that such payment could be made % Eunning through a desert, it would have little or no income until completed; that is to say, during the twelve years prescribed by the act. From the sales of its lands (after the same should, in parcels, on the completion of each forty miles, be conveyed to it by the Government) nothing could have been fairly expected until the certainty of the completion of the road should induce subsequent immigration and settlement, and then only in limited amounts, spread over long periods of credit. The act contemplates that the subsidies of the Government in bonds and land would be inadequate to its construction, yet the only apparent absolute means of the company to complete the enterprise were the subscriptions to stock. Could the framers of the act have hoped that parties would be found to invest their substance in the stock of this quasi public corporation in the face of a provision that during the whole twelve years to be employed in the construction of a road from which no income could be expected until its completion they were in some way to find the means each six months to pay to the Government interest on the amount of its bonds, and that a failure to do so would involve the forfeiture of all past expenditures, and of the grants, rights, and franchises, in reliance on which they had embarked in the adventure ?
2. Perhaps the consideration that has the greatest apparent weight upon the construction of the act is, that national as was the object to be obtained by the Government in procuring •the construction of this great public work, and pressing as its immediate execution for political reasons then was, it was not to be expected that the United States would agree to advance its bonds to the company, and to go on paying the interest on those bonds for thirty years, looking to the ultimate re-imbursement of both principal and interest at the maturity of the bonds. 25ow, if there were nothing to explain this seeming improbability, nothing to show that the above-stated result was foreseen and discussed at the time of the passage of the act, although it would not alter the legal construction of unambiguous language involving condition and forfeiture, yet if the terms used were of doubtful interpretation, it would be a consideration of weight.
. But it is clear from the provisions of the act itself that Congress anticipated no such' accumulations of interest, and that not only might the interest, but a portion at least of the principal, be paid in re-imbursements from two funds provided to go into effect so soon as the road could be utilized by the Government, and when it should from its traffic have an income. Thus the sixth section provides that the compensation for services rendered “ shall be applied to the payment of the bonds and interest until the whole, amount is fully paid.” Again: “And after said road is completed, until said bonds and interest are paid, at least five per centum of the net earnings * * * shall be annually applied to the payment thereof.” This leaves no doubt that the framers of the act anticipated that from those two sources not only might the interest be paid, but a surplus exist which is made applicable to the payment of the bonds due or not due.

Opinion:
Nott, J.,
delivered the opinion of the court:
This case comes before the court in two distinct forms : First, in that of an action brought by the Union Pacific Eailroad Com pany to recover one-half of certain freight-earnings withheld from it by the Government. Second, in that of a cross-action brought by the United States to recover back the interest which they have paid to third persons upon their bonds heretofore loaned to the company to aid it in the construction of its road. The company admits that the Government has the right to withhold one-half of such moneys as the road may earn by .the transportation of mails and military and other supplies. The United States insist that they may withhold all of these earnings and apply them in payment of their advances already made, or maintain their action for the interest on the instant that it is paid to the holders of the bonds.
The statutory history of the case, briefly stated, is this : The act of 1862 provided that the United States should loan to the company Government bonds upon condition that the Government have the right to withhold all of the moneys that might become due to the company for the transportation of mails and military and other supplies, and apply the amounts thus withheld to the principal and interest of the debt. The act of 1864 substituted a half for the whole and assured to the company the right of present payment to the extent of one-half of its earnings.. The act of 1871 " directed" the Secretary of the Treasury to pay this half as provided by the'act of 1864, he having then recently withheld the whole. The act of 1873 u directed" the Secretary to withhold " all payments" " to the amount of payments made by the United States for interest," and provided for testing judicially the right of the company 11 to recover the same" and the right of the United States to recover back its advances.
It is to be noted at the threshold of the case that these two rights, if they' exist, are distinct and independent. The company may have a valid cause of action agaihst the Government and the Government may have a valid cause of action against the company, and the validity of either will not necessarily impair the validity of the other. When both of these rights can be asserted in the same suit by action and cross-action, the greater will practically swallow up the less, but will not in a legal sense defeat it. The court in such a case simply credits to each party what he is entitled to recover, and renders judgment in favor of one for the balance.
So far as the company's side of the case is concerned, it is manifest that its right of action must be maintained. For a valuable service rendered, a present debt accrues, unless tbe parties have expressly provided that payment shall be deferred or appropriated to a particular purpose. In this case that purpose was declared by the act of 1864, which authorized the withholding of half, but assured the payment of the remainder. Under that act, and prior to any subsequent legislation, the whole of the railway was constructed by the one party and all of the bonds were issued by the other. Therefore that statute, in every legal and moral sense, measures the rights and the liabilities of the parties. The real and important question in the case is whether the United States can maintain their action to recover back the interest which they have advanced; and its importance is magnified (as was suggested by the learned Assistant Attorney-General) by the possibility of this resulting consequence: that if they cannot maintain this action now, they may not be able hereafter to charge interest upon their advances.
In approaching the decision of the case, the court has considered, but cannot adopt, the proposition maintained by the learned counsel of the claimant, that the payments made for several years by Secretary McCulloch constituted a contemporary construction of a contract by the parties such as courts are ordinarily bound to adopt. The Secretary was not the contracting agent of the Government, but simply its administrative officer for carrying out the provisions of the law. Moreover, there' was no express contract in' these transactions to be the subject of contemporary construction. A statute may contain the elements of a compact by pledging the public faith ; but it is nevertheless to- be construed according to the rules for statutes, and not according to the rules for contracts. In cases of contract, it is the purpose of courts to ascertain and give effect to the real intent of the parties. Ordinarily this is to be deduced from the words of the instrument; but where the parties, at the time of their performing, by their mutual acts give their own meaning to their own words, courts adopt it as the true meaning, however illogical or foolish it might otherwise be deemed. The mutual understanding and agreement of the two opposite minds is the one thing to be found, and when it is ascertained, the work of interpretation is ended. In cases resting on statutes there is no mutuality of agreement to be sought out. All the terms of the compact are dictated and accepted by one side, and the only intent which judicial construction can make certain is the intent of the legislative power.
Neither do we think the court precluded from going to the merits of the case by the doctrine of estoppel invoked by the same learned counsel. It was urged with great earnestness that the Government is now estopped from setting up a doubtful construction, because, by its former policy of paying, it misled the'company into subjecting itself " to ten- forfeitures, carrying its entire rights and, property." But the Government is not now asserting a forfeiture. An equitable estoppel only precludes a party from asserting that which in good conscience he ought not to assert. If this money be owing to the Government, good conscience does not require it to refrain from collecting the debt; for enforcing collection of a debt due works no legal' wrong to the debtor. When the Government attempts to enforce these ten forfeitures the doctrine of estoppel may be applicable. To apply that doctrine to a suit for the collection of the debt without asserting forfeiture would be carrying the doctrine beyond its well-settled and rational bounds.
Neither do we attach to the act of 1871 the conclusiveness attributed to it by the claimant's counsel. As before shown, the company had a demand against the Government for services rendered, and the Government had a demand against the company for money advanced to its use. It was perfectly consistent with the reservation of its rights for the Government to pay its debts to the company without compelling the company to pay its debts to the Government. In 1871 a Secretary of the Treasury asserted this right of set-off, which up to that time had lain dormant, and refused to pay the debt of the Government to the company. By the act of 1871 Congress interposed, and directed the Secretary in effect not to assert this right of set-off, but to go on paying the debts of the Government as before. By the act of 1873 Congress interrupted the policy of allowing the company a credit for the advance, and u directed" the Secretary to assert for the Government the right of set-off, or, in other words, to insist to that extent upon the payment of the company's debts to the United States. If these advances for interest became debts of the company, due and payable as fast as they were made, the Government might rightfully and legally do one of two things: either it might treat them as fresh loans and charge interest upon them from the moment they were made, or it might insist upon their immediate repayment, in whole or in part. The act of 1871 authorized the credit; the act of 1873 insisted on the payment. The one did not extend to any cause of action belonging to the Government ; the other did not infringe any right vested in the company ; both left the original compact entirely untouched, as it stood declared by the statutes of 1862 and 1864.
We now come to the final question in the case.
The acts of 1862 and 1864 declared and still define the bargain, whatever it may be. The learned Assistant Attorney-General insisted that those statutes, in legal contemplation, are nothing more than a charter of and grant to the company, and that the consideration moving to the United States is in legal effect nothing more than the consideration of public benefit which is theoretically received for every statute creating a body-corporate. It is well known to "every one that when these statutes were passed the United States were threatened with dismemberment, and that thoughtful persons apprehended with concern the possibilities of the territory of the republic falling into three parts, and of the portion west of the Eocky Mountains, separated .by deserts and cut off by natural barriers, forming an independant sovereignty. It is also equally well known that constantly-recurring Indian hostilities upon the plains rendered some means of speedy transit indispensable. Finally, it is equally beyond dispute that the Government was possessed of quantities of unsalable lands, which it desired to bring within the reach of purchasers. Considerations, therefore, political and financial, of no common magnitude, must have operated upon the legislative mind as inducements for all the franchises and grants which those statutes created and conferred. Nevertheless, the magnitude of the consideration does not change the character of the legislation nor vary the rule of construction by which the rights of the grantee must be measured. The judiciary can never weigh the advantages that a particular grant secured to the Government, nor say in one case, "Here the consideration was so great that the statute should be deemed a contract and construed liberally; " and, in another, "Here the consideration was so small that no reciprocal advantages accrued to the Government, and the statute must be deemed a grant and construed strictly against the grantee."
But these acts of 1862 and 1864 contain something more .than provisions to create a corporation or confer upon it franchises and grants. The statutes really embody both a charter and a compact. As to those provisions which create the corporation, which limit its rights and franchises, which prescribe its obligations to the public, and confer grants and benefits upon it, the statutes are nothing but a charter; but as to those provisions which bind the Government to do something, which cast distinct obligations upon it, which carry it into the region of mercantile transactions, and make ittake afinancial part in the enterprise, the statutes belong to that class of legislation which is to be so construed as to carry out the liberal and just intent of the legislature. The rights and duties of the company as a body-corporate are not involved in this suit; the things which the Government agreed to do or not to do form the only subject for determination.
When the project of embarking the United States in this enterprise, by loaning Government bonds to the Pacific railways, was sanctioned, three contingencies must have been contemplated by Congress: 1. That the earnings of the company'in the way of Government transportation would be substantially equal to the interest on the bonds; a contingency most unlikely, although the Government could regulate the quantity of freight which it would send over the roach 2. That the earnings of the company would be materially greater than the interest; a contingency that would remove all question of present indebtedness, and tend to reduce the principal of the debt long before the bonds would mature. 3. That the earnings and five per centum would be materially less than the interest; a contingency that has actually happened. The amount which the Government was to loan to the company was known with tolerable certainty, and the earnings of the company could be found with some approximation to truth by ascertaining the quantity of freight which the Government would be likely to send over the road and the rates which would probably be charged. It was within the power of Congress to have provided that each party should pay its debts to the other as they accrued, and it was also within its power to make some other and more complicated .arrangement, by which each to some extent should share in the risks of the enterprise and participate to some extent in its success. The simplest form of transaction would have been that the one party should pay' the freight-bills whenever they were presented, and that the-other should refund the interest so soon as it was advanced. Was that the substance of the obligation which Congress assumed toward and exacted of this company ?
The act of 1862 fixed the time when the principal of the debt should become due, by saying the " company shall pay said bonds at maturity." With regard to the interest the act is not equally explicit, but, so far as its express provisions go, it provides this mode of payment: "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 f.u and after said road is completed, until said bonds 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 all which the act provides. First, services rendered to the Government; second, a portion of the net earnings of the company.
It is a fundamental principle of law that when one man pays money to the use of another a present debt immediately ensues* But it is doubtful whether this can be interpolated into a statute, and it is not applicable when there is an express agreement which prescribes a different time or a specific mode of payment. These provisions of this statute are not followed by a declaration saying in effect that, if a balance of interest remains after the application of these sources of payment, such balance of interest shall become immediately due and payable. On the contrary, the time and mode of payment, so far as they are expressly designated by the statute, are satisfied by the application of the moneys derived from those two sources.
The Assistant Attorney-General has argued that these were not intended to be the exclusive sources whence the repayment of interest on the bonds might be drawn; but that they were " inserted to create a sinking-fund for the ultimate payment of the bonds," inasmuch as lands were to be sold by the company " on which the Government originally held a mortgageP If the amount derived from those two sources, it was said, should exceed the interest on the bonds, the Government would put aside the remainder as a fund for the final extinction of the debt, and would allow interest to the company upon it. However judi-' cious and just such a course might have been, there are two reasons wby the court cannot give such a construction to the statute. In the first place, it does not provide for a sinking-fund, (which is an artificial means for paying a debt unknown to the law, and necessarily the creation of express agreement or express enactment,) nor does it authorize the alio wance of interest on any such fund, nor couple these two sources of revenue with any object save that of being " applied to the payment of such bonds and interestP In the second place, though lands were to be sold upon which the Government held a mortgage, still the the avails were to go into the road upon which the mortgage rested. The form of the security changed, but the mortgage followed the proceeds; the security was transmuted, but not relinquished, and the change from unsalable lands to a completed railway, in the contemplation of Congress, might have increased its value.
Moreover, (and this is the chief point in the case,) the statute makes no distinction between principal and interest, nor indicates in any way that -the debt for the one shall mature at a different time than the debt for the other. Furthermore, a previous section of the statute declares that for " the amount of said bondsf 11 together with all interest thereon which shall have been paid by the United States," they shall constitute a mortgage upon the road. In the present predicament of the transaction, the Government is largely in advance for interest; and there at first appears to be no consideration received which should bind it to suffer a serious, if not disastrous, loss. But if we reverse the condition of affairs, it will be seen that a similar loss would fall upon the company, and a corresponding gain inure to the Government. That is to say, if the Government had required a larger amount of transportation, and the net earnings had greatly exceeded the reality, so that the two more than equaled the interest, then the company would be paying off the principal of its ultimate indebtedness to the Government long before the Government would be paying its debts to the bondholders. And as the company has mortgaged its road " to secure the repayment" "of the amount_ of said bonds f "together with all interest thereon which shall have been paid by the United States," a corresponding loss of interest, upon interest would likewise fall upon it. Now, when the statute has provided two sources for the payment not only of interest, but of a great deal more — that is to say, of a portion of the principal before it becomes due — what reason can there be for the judiciary to interpolate, by mere construction, a third source into the statute ? Assuredly none. If the statute had stopped at interest, and had provided that the remainder, if any, of the transportation-moneys and five per centum should be paid to the company, there would be good reason for saying that a reciprocal obligation was implied, and that the company should be held liable to make the interest-account whole. But, in the plight in which Congress has placed the-reciprocal and intermingling rights and interests of the parties, we perceive no reason why the Government should call the the varying balance of its advances a liquidated present debt, subject to immediate collection.
But beyond the confines of all disputed construction there remains one uncontroverted provision in the statute, which seems decisive of the legislative intent. The only party to whom an option was reserved by the act is the Government, and that option is the important right of making the company's services as little or as great as it pleases. If it. requires these services, the company cannot withhold them j if it refuses .all employment, the company cannot exact it. As the compact originally stood, the Government could keep down this interest without the expenditure of any ready money, by simply furnishing to the company this employment, and it might push the advantage to an unlimited extent, even to carrying the earnings of the road to the liquidation of the debt before it had matured. The subsequent statute, which substituted a half, for the whole of the earnings, did not affect the legal import of the Government's reserved discretion, nor change the legal relations of the parties, nor vary the construction applicable to the original statute. It was an alteration in degree and not in kind, and still left the company in this matter of service entirely subject to the orders of the Government. In contemplation of law, the wrong and injury of which the Government complains are entirely of its own choosing. Courts of law cannot be invoked to aid persons where they themselves possess the means of redress. If an ordinary party were to come into another court with such a complaint, he would be told, "Either you have willfully withheld this employment from the other contractor or you have been unable to furnish it to him. If the former supposition is the fact, then the fault is your own, and you cannot ascribe wrong to one who, .you confess, has always been willing to repay you in the man- uer which your agreement prescribes. If the latter is the fact,, then, because the sources of payment which you provided disappoint you, and because the payment in kind which you elected to fake gives you more of the transportation-service than you really require, you are trying to shift your loss to other shoulders than your own. Your misfortune is really this, that you made an improvident bargain."
The judgment of the court is that the claimant recover of the defendants the sum of $512,032.50, and that the counterclaim of the defendants be dismissed.
Bichardson, J., was absent when this case was decided.