36 Md. 519 | Md. | 1872
Lead Opinion
delivered the opinion of the Court.
This action has been brought by the State to recover of the defendant, the Baltimore and Ohio Railroad Company, a large sum of money claimed to be due on account, and payable in gold, growing out of the State’s subscription to the stock of, or loan to the Company, of three millions of dollars, under the Act of 1835, ch. 395, entitled, “An Act for the Promotion of Internal Improvements,” better known as the “Eight Million Loan Bill,” passed on the 4th of June, 1836.
The defendant was incorporated by the Act of the Legislature of this State, at the December Session, 1826, ch. 123, for the purpose of constructing a railroad from the City of Baltimore to the Ohio river, with a capital stock of three millions of dollars, in shares of one hundred dollars each, with power to the company to increase its capital stock
In the meantime, between these subscriptions and the passage of the “Eight Million Loan Bill,” the Legislature of the State, by the Act of 1830, ch. 158, had authorized the defendant to embark in the enterprize of making a branch road, to afford easy communication between the city of Baltimore and the city of Washington, in the District of Columbia. The stock of this branch road was required to be kept separate and distinct from that of the main road; and of the stock necessary to construct and equip this branch road, the defendant was authorized to subscribe for all such portion of it as might not be subscribed for by other parties; and to borrow money, from time to time, to enable it to pay such subscription, and to pledge all its property and funds as a security for the payment of the money so borrowed. The Stale authorized a subscription of a half a million of dollars to such branch stock, which was made, and thereupon became entitled to two additional directors in- the company. (Act 1832, ch. 175.)
By the Act of 1835, ch. 127, passed February 25th, 1836, the city of Baltimore was authorised to make a further subscription of three millions of dollars, in áddition to its former subscription, to the capital stock of the defendant, and which
Thus it appears that the State and the city of Baltimore, had become largely and most materially interested in the prosecution and completion of the works of the company; as upon their completion and success depended the only chances of reimbursement and profit to either the State or the city, for their large outlay of capital, to say nothing of the large amount of individual subscription that had been made by the people of the State to the stock of the company. Indeed, it was regarded as of the greatest importance, in a commercial point of view, looking to the interest of the entire State, and especially to the city of Baltimore, that the completion of the road to its destined point on the Ohio river, should be assured beyond all peradventure.
Such then, was the relation of the State and of the city of Baltimore to this railroad company, and their great interest in the completion of its works, when, at the time of the passage of the Act of 1835, ch. 395, it was found to be necessary to extend the aid of the State to this and other internal improvement companies of the State.
By the 1st section of the Act just referred to, it was provided, that upon the assent and agreement to the several provisions of the Act, by the Chesapeake and Ohio Canal Company, and the Baltimore and Ohio Railroad Company, respectively, the Treasurer of the State should “ subscribe to the capital stock of each of said corporations the sum of three millions of dollars, and pay for the same in the manner and upon the conditions thereinafter mentioned.” As one of the conditions upon which the subscription to the stock of the defendant was authorized, it was required that a majority of the State’s directors in the company should certify under oath, that, in their opinion and judgment, such subscription by the State would, in addition to all other subscriptions, be sufficient
The 9th section of the Act contains the provisions more immediately involved in this controversy, and, so far as they relate to the railroad company, are as follow: “ That before any subscription shall be made to the capital stock of the said Baltimore and Ohio Railroad Company, under and by virtue of this Act, the stockholders of said company shall, in general meeting assembled, stipulate, agree and bind the said company by a proper instrument of writing, signed by the president and under the corporate seal thereof, to be lodged with the Treasurer of the Western Shore, to guarantee to the State of Maryland, after the expiration of three years from the payment by the State of each of the instalments on the stock hereby authorized to be made to the stock, of said company, the payment from that time, out of the profits of the work, of six per centum per annum, payable semi-annually, on the amount of money which shall be paid to the said company under and by virtue of this Act, until the clear annual profits of the said railroad shall be more than sufficient to discharge the interest, which it shall be liable so to pay to the State of Maryland, and shall be adequate to a dividend of six per centum per annum among its stockholders;' and thereafter the State shall, in reference to the stock so subscribed for, and on so much thereof as the State may hold, be entitled to have and receive a perpetual dividend of six pet' centum per annum, out of the profits of the work, as declared from time to time, and no more, and all and so much of such annual profits as shall exceed six per centum, shall be distributed to the other stockholders according to their several interests in said company; and in consideration of the interest so to be secured to the State, th said Baltimore and Ohio Railroad Company shall be, and they are hereby authorized, in addition to the charge now authorized to be made by said company for the transportation
The Act then provides, in subsequent sections, for the appointment of Commissioners to proceed to Europe to negotiate loans, and for the issue of the bonds or certificates of stock of the State, to raise money for and on behalf of the State, to gratify the purposes of the Act. The certificates of stock or bonds of the State were to be issued, in the aggregate amount not to exceed $8,000,000, redeemable at the pleasure of the State, after the expiration of fifty years from their date, and to bear interest at the rate of six per centum per annum, payable quarterly, either at the loan office in the city of Baltimore, or at some place in Europe, as might be arranged by contract. The certificates or bonds were not, however, to be sold at any rate or price which would yield to the State less than twenty per cent, net, above par. Of this premium, whatever part of it not required to pay the interest on the loan for three years after its negotiation, was, with its increment, directed to be invested, to constitute a sinking fund for the ultimate redemption of the debt incurred.
These bonds or certificates were issued by the State, but the Commissioners sent to Europe to negotiate the loan failed to negotiate it on the terms prescribed by the Act. After such failure to negotiate the loan by the Commissioners, they sold to the defendant, and to the Chesapeake and Ohio Canal Company, each, bonds amounting to $3,000,000. This disposition of the bonds by the Commissioners seems to have been regarded as without warrant of authority; but the State, by resolution of the Legislature, (Resolutions of 1837, bio. 26,) ratified and adopted the contracts of sale, and declared the State’s subscription to the stock binding, but declared at the same time that the bonds were to be rated to the companies at $120 for each hundred dollars of the bonds.
The special contract, then, that gives rise to the present controversy, is found in the terms of the 9th section of the Act of 1835, chap. 395, as modified and extended by the 1st section of the Act of 1838, chap. 386.
The bonds that were issued to the defendant by the State, under the Act of 1838, owing to difficulties in disposing of them to advantage, were not appropriated by the company until about the year 1849, when they were placed on the market in Europe, and sold. As they were disposed of, the defendant paid the interest on them as it accrued due, and all costs and difference in exchange, for the period of three years, and, after the expiration of that period, it continued to pay such interest, cost and exchange, by applying directly the State’s guaranteed dividend of six per cent, on the stock subscribed under the Act of 1835, instead of paying it over to the Treasury. The defendant rendered no account, but treated the six per cent, dividend as equivalent to the five per
The State claims that it is entitled to be fully indemnified by the defendant; and that, as the sterling interest could only be paid in gold, or its equivalent, the six per cent, guaranteed dividend could only be paid in like currency. This, of course, depends upon the true construction of the contract, by which the subscription to the stock of the defendant was made, and the bonds of the State were furnished as means of payment for such stock.
At the trial in the Court below, the cause, by agreement, was submited to the Court without the intervention of a jury; and it was agreed that the cause should be referred to a special auditor to adjust the account between the parties; and that the Court should determine upon a proper construction of the Acts of the Legislature of the State, relating to the subject-matter, whether the six per cent, dividend provided by the Act of 1835, ch. 395, to be guaranteed and perpetually paid to the State by the defendant, was and is, or was and is not due and payable in gold. If payable in gold, a judgment for the State to be entered for the amount ascertained to be due; and if not so payable, judgment to be entered for the defendant.
Upon the Auditor’s Report, stating the account in various aspects, the Court below, upon determining the dividend to be payable in gold, found the sum due at the date of the judgment to be $281,489.39, for which judgment was entered,
blow, in order the more clearly to determine as to the rights of the parties under the contract in question, it is proper that we first advert to the law as to what currency was legal tender at the date of the subscription for the stock by the State, and what currency constitutes a legal tender at this time.
At the date of the subscription in question, nothing but gold and silver coin constituted a legal tender for the discharge of debts contracted to be paid in dollars and cents generally. At that time the opinion prevailed everywhere, as well in the Senate as in the Courts, that gold and silver were the only legal tender that could be ordained, either by Congress or the Legislatures of the States. As evidence of this, Mr. Webster declared in 1836, in the Senate, himself no strict constructionist, that “ Most unquestionably there is no legal tender, and there can be no legal tender in this country, under the authority of this Government, or any other, but gold and silver, either the coinage of our mints, or foreign coin, at rates regulated by Congress. This is a constitutional principle, perfectly plain, and of the very highest importance. The States are expressly prohibited from making any thing but gold and silver a tender in payment of debts; and although no such express prohibition is applied to Congress, yet, as Congress has no power granted to it, in this respect, but to coin money and to regulate the value of foreign coins, it clearly has no power to substitute paper, or any thing else, for coin as a tender in payment of debts and in discharge of contracts.” (4 Webster’s Works, 265, 271.) This was the generally received opinion, and the acts and conduct of parties were regulated accordingly. The Supreme Court of the United States had declared in 1819, by its then great Chief Justice MabshaUj, that “ Nothing but gold and silver coin can be made a tender inpayment of debts.” Sturges vs. Crowninshield, 4 Wheat, 122, 205. And. in the subsequent case of
Relying, then, upon what was regarded as the settled law, beyond dispute or alteration, parties the most careful for the protection of their rights, at the period of the making the contract here involved, could well proceed in making their contracts upon the assumption that no other currency than gold and silver coin would ever be attempted to be made a legal tender.
Former opinions, however, of Judges and statesmen, however well founded, are no longer the received law upon this subject. The Congress of the Union, by several Acts, com''mencing with that of the 25th of February, 1862, known as the “Legal Tender Acts,” have declared that the notes thereby authorized to be issued shall be a legal tender in payment of debts, public and private. The constitutionality of these Acts has been brought into question before the highest Judicial Tribunal of the country, and their constitutionality finally sustained, though with much division of opinion. The first case in which the question Came directly under adjudication, was that of Hepburn vs. Griswold, 8 Wall., 603. In that case it was decided, by a divided Court of five to three Judges, that the legal tender clause in the Acts referred to was, so far as it applied to debts contracted before their passage, unwarranted by the Constitution of the Union. It was also decided that all contracts made prior to the 25th of February, 1862, for the payment of money, not expressly stipulating othenoise, were, in legal effect and contemplation, contracts for the payment of coin, and, under the Constitution, the parties to such contracts were respectively entitled to demand and bound to pay the sums due, according to their terms, in coin, notwithstanding the legal tender Acts. But this decision was allowed to prevail but for a short season. It was brought under review in the recent cases of Knox vs.
This last decision is now the law, binding alike upon this Court and all the other Courts of the country; and, so far as it is applicable to the case now before us, must guide and control our judgment.
It is settled, however, that the Legal Tender Acts only apply to debts which are payable in money generally, and not to contracts payable in coin specifically, nor to contracts payable in commodities; and that when a contract for money is by its terms made payable in specie or coin, judgment may be entered thereon for coined dollars. This has been recently ruled by the Supreme Court, in the case of Trebilcock vs. Wilson, 12 Wall., 687, in conformity to previous decisions.
In view of the law as it now stands, it is plain, that, to enable the State to recover in this case, it must be shewn, either by express stipulation or fair implication, that the obligation of the defendant was to pay the six per cent, guaranteed dividend in gold; or otherwise it could be, and has been, paid and discharged as it accrued due, by legal tender notes.
The preliminary question much discussed in the arguments at bar, whether the relation of the State to the defendant, as to the subject-matter involved in this case, is that of creditor, or stockholder merely, is one, in our view, not very material to be decided. It is certainly true, however, that the State, by'virtue of its subscription of the three millions of dollars to the stock of the company, did, in some sense, and to many purposes, become a stockholder; but, at the same time, it may be conceded that it became something more; and as' its stock was preferred, and a six per cent, dividend perpetually guaranteed, out of the gross profits of the company, a quasi relation of creditor was created, as well as that
This, then, brings us directly to the question: Was the obligation of the contract by its terms to pay the six per cent, dividend in gold, and nothing else? It is conceded that it is not required by any express terms of the contract; and if required at all, it can only be by implication — taking all the terms and conditions of the contract together. And while it is readily conceded that the real intention and obligation of the parties may be arrived at by implication in the absence of express stipulation, still, that implication must be the result of a fair and reasonable construction of the contract itself. It must not be founded upon conjecture, mere probabilities, nor upon what now appears to have been reasonable and proper for the parties to have done in order to accomplish the object in view. The question is, were the particular means contemplated to the end, and provided for by the contract itself, in such manner as to be fairly discoverable by the application of just rules of construction? And here it is proper to note a well recognized distinction between the mere expectation of parties, founded upon extrinsic circumstances, and the duty imposed by the contract itself. “ The expectation of the creditor,” said the Supreme Court in the legal tender cases before referred to, (12 Wall., 548,) “and the anticipation of the debtors may have been that the contract would be discharged by the payment of coined metals, but neither the expectation of the one party to the contract respecting its fruits, nor the anticipation of the other, constitutes its obligation. There is a well recognized distinction between the expectation of the parties to a contract, and the duty imposed by it. Were it not so, the expectation of results would be always equivalent to a binding engagement that they should follow. But the
Now, applying these plain and well settled rules, upon what reasonable ground are we to infer and conclude that it was the intention of the parties to the contract in question, to make it the legal obligation of the defendant, to pay the six per cent, dividend in gold specifically, instead of money generally? We have not been able to discover any sufficient ground to justify such a conclusion, and think none exists. The terms of the contract in reference to the payment of the dividend, are, that the State should receive payment “ out of the profits of the work, of six per centum per annum, payable semi-annually on the amount of money which shall be paid to the said company, under and by virtue of this Act, until the clear annual profits of the said railroad shall be more than sufficient to discharge the interest, which it shall be liable so to pay to the State of Maryland,” and to pay a dividend of six per cent, per annum amongst its stockholders; after which the State shall be entitled “ to have and receive a, perpetual dividend of six per centum per annum, out of the profits of the work, as declared from time to time, and no more.” It will be observed that there is nothing in the language here used, to indicate, in the slightest degree, the intention of the contracting parties to make the dividend on the stock subscribed by the State, payable in gold, or in any other currency than money generally.
It has been ably and earnestly contended, however, on behalf of the State, that it was the intention at the time that full indemnity should be furnished by the' defendant for all outlay in defraying the five per cent, sterling interest in London, together with all costs and exchange; and as to do which the State has been required to purchase gold at large premium rates, nothing of less value should be received in payment of the six per cent, dividend; that it was the intention
In addition to the foregoing considerations, there are others, suggested by the very nature of the contract itself, its objects
The case of Lane County vs. The State of Oregon, 7 Wall., 71, was much relied on in the argument for the State, as furnishing an instance where the obligation to pay gold was implied from the nature of the case itself. But we think the analogy between that case and the present is very imperfect. In that case the taxes, by the express terms of the law, were required to be paid over by the receivers of them, in gold and silver coin; and the State Courts having held that the statute of the State of Oregon required, either directly or by clear implication, the collection of the taxes in gold and silver, the Supreme Court said that such construction had nothing strained or unreasonable in it. Of course, if the taxes were
It appearing to this Court that the six per cent, guaranteed dividend was and is payable by the defendant in money generally, and not in gold specifically, the judgment of the Court below must be reversed, and, under the agreement of the parties, judgment will be entered for the defendant.
Judgment reversed, and judgment for the defendant.
Dissenting Opinion
delivered the following dissenting opinion:
This Court, in the opinion delivered by Judge Alvey, has rested the reversal of the judgment of the Superior Court of Baltimore City and the determination of the case, upon the authority of the recent decisions of the Supreme Court of the United States in regard to the operation and effect of the Legal Tender Acts of Congress, .upon the theory that the case comes within the federal jurisdiction.
The learned Judge of the Superior Court, in pronouncing his judgment with the same decisions before him, had reached a different conclusion, and adjudged that the contract here in question, authorized the State to demand the debt incurred thereby, to be paid in gold, and was not within the scope of the Legal Tender Acts as expounded by the Supreme Court.
With great respect for the opinions of the majority of my brethren, it seems to me the judgment below ought to be affirmed; and it is proper and due to the magnitude of the case and the importance of the principles involved, as well as to my brethren, that I should state the reasons as they occur to me for this conclusion.
The bonds having been passed to the company by virtue of said Act, the company had paid the interest thereon from the time of their negotiation in 1849, until July, 1865, when it declined further to pay the interest; and the State, to maintain her credit, having paid the interest in gold from that time, claimed that the company was bound in good faith, and according to the provisions of law authorizing the issue of the said bonds for the use of the company, to indemnify the State. The company, on Ihe other side, insisted that it was only bound to pay the six per cent, provided by the Act of 1835, ch. 395, and that this it could pay in currency since the passage of the Legal Tender Acts by Congress.
Under an agreement of the parties, the case was submitted to the Court to determine from the interpretation of the Acts of 1835, ch. 395, 1836, ch. 261, 1838, ch. 386, and the other legislation of the State creating the contract between the parties, whether the compauy was bound to pay to the State the six per cent, provided by the Act of 1835, ch. 395, in gold.
As I understand the question in issue, it is substantially whether the company is bound, by the relations between the parties created by the said Acts, to pay back to the State in gold, the money the State has paid on the sterling bonds issued under the authority of the Act of 1838, ch. 386.
There could be no difficulty about the case if what constituted a legal tender at the time of the creation of the dealings between the parties by the Acts in question, was unaffected by the Legal Tender Acts and the decisions of the Supreme Court thereon, which are now considered by a majority of this Court conclusive of the case. Although I consider the said Acts and decisions as not applicable to this case, still it is proper I should at least advert to this aspect of it, as my brethren have rested their decision upon them.
According to these canons of judicial construction, I have not been able to discover in the Legal Tender Acts and the decisions of the Supreme Court thereon, clear authority for the reversal of the decision of the Superior Court.
It had become an established maxim of constitutional law, and so regarded by all the authorities of the Federal Government and the States, and as such recognized by all judicial tribunals throughout the country, that nothing but gold and silver could constitute a legal tender in the payment of debts or discharge of contracts. The States were prohibited from making any other tender, and the Federal Government was clothed with no power under the constitution to substitute paper, or anything else as a legal tender. Every body understood this to be the established constitutional law upon the subject, and contracts and dealings were regulated by parties according to this standard.
But during the late civil war — when expedients were adopted of questionable character in times of peace, and when the federal authority was stretched to the utmost extent, and unusual and extraordinary powers were assumed and exercised, upon the ground of military necessity, under the urgent circumstances existing, the Congress of the United States, in undertaking to meet the exigencies of the occasion, passed, after considerable opposition, the Legal Tender Acts of February 25th, 1862, July 11th, 1862, March 3d, 1863, June 30th, 1864, and the joint resolutions of January 17th,
These proceedings were regarded by the Congress of the United States at the time as justified, more as war measures than as strictly and truly within its constitutional authority. It is certainly not the safest role to place implicit reliance upon acts done or precedents adopted in the critical exigencies or extraordinary circumstances of a wide-spread civil commotion, threatening in its results fundamental dismemberment and disorganization of tlie government and its various departments. Accordingly it was found that when the constitutionality of these acts of Congress was first brought in question before the Supreme Court of the United States, in the celebrated case of Hepburn vs. Griswold, 8 Wall., 603, that Court decided by five judges to three that the Act was in violation of the Constitution so far as applicable to contracts antecedent thereto, and that all contracts prior to the passage of the Act for the payment of money, without express stipulation to the contrary, were payable in gold and silver.
In the later cases of Knox vs. Lee and Parker vs. Davis, 12 Wall., 457, when the twm additional judges that liad been appointed subsequent to the decisions in the former case, sat, the Court, by five judges against four, (the two new judges concurring with the previous minority,) thus making a bare majority, overruled the doctrine held in the case of Hepburn vs. Griswold, and decided that the Legal Tender Acts are constitutional, and apply equally to debts contracted before or after their passage.
But the Court, as at present constituted, in the case of Trebilcock vs. Wilson, 12 Wall., 687, in accordance with previous decisions, has determined that the Legal Tender Acts only apply to debts payable in money generally, and not to special contracts which require payment in coin, and' sanctions the law asserted in Bronson vs. Rodes, 7 Wall., 229, leaving special contracts to be construed by their particular terms, so as to effectuate 'the intention of the parties, of course,
In the case of Lane County vs. Oregon, 7 Wall., 74, the whole Court affirmed the obligation to pay the taxes in gold from mere implication.
From a careful examination of all these cases, together with Butler vs. Horwitz, 7 Wall., and the Legal Tender Cases, 12 Wall., 553, it is apparent that although the Supreme Court has reversed the decision of Hepburn vs. Griswold, thereby affirming the constitutionality of the Legal Tender Acts, when applied to debts contracted before their passage, as to those afterwards; that Court has not decided that those Acts are applicable to all contracts indiscriminately. But as to contracts with special provisions, express or implied, requiring a different medium of payment, that Court, I think, has made a distinction, that they are beyond the operation of the Legal Tender Acts. When the medium of payment is provided for expressly or impliedly, and is made an ingredient of the contract, or when its terms and provisions fairly require, in order to carry out the intention of the parties, tlfat the payment shall be in gold — how could the integrity of the contract be held unimpaired by a different construction, cfcc.?
The States are restricted from the enactment of laws impairing the obligation of contracts, and certainly no authority is conferred on the Federal Government,'or any department. thereof, to exercise such power. No construction should be given to any decision of the Supreme Court that can be consistently avoided, that would operate to trench upon the inviolability of contracts, or in effect repudiate their integrity.
At the time the cause of action accrued in this case, and when the trial was first had, as the unquestioned law and rulings of the Supreme Court then stood, the claim of the State was recoverable in gold. The late decisions having intervened, it is insisted, have deprived the State of the right to demand payment in gold. I submit, with due deference,
The former decisions of that Court have been reversed to a qualified extent only, and this has been by a bare majority of the Judges. Under these circumstances, whilst recognizing the authority of these decisions in regard to the constitutionality of the Legal Tender Acts, and with every disposition to treat them with the respect due to our highest judicial tribunal, whenever their views are clearly announced; it is at the same time due to that Court, where their rulings are doubtful, and the antecedent law so clearly settled, that they should not be misunderstood, and effect given to their decisions to an extent not contemplated by them. Every reasonable effort should be made to give such construction to their decisions as will reconcile them, if practicable, with the antecedent law, and thus administer substantial justice between litigants, and maintain the integrity of their contracts.
From the obscurity and uncertainty of the law of legal tender now upon the subject, to make the most of it towards sustaining the views of the company, upon the assumption that the contract in this case is not one of indemnity to the State for its disbursement in gold for the company; and that it can be brought within the range of federal jurisdiction, I
o On the contrary, according to my apprehension, tire Supreme Court has not settled any such principle; and it seems to me, under the circumstances, the decision of the Superior Court ought to be affirmed, and the option given to the company to have the case reviewed by the Supreme Court, when that Court can authoritatively decide whether, according to their views, the provisions of the contract here in question, aré reached by the Legal Tender Acts.
Much of the able and ingenious argument of the learned counsel of the company was directed to show that the State was a mere preferred stockholder in the company, and not a creditor, which latter capacity might entitle her claim to greater consideration.
I concur with the majority of the Court, that whether the State was the one or the other, or both, in a qualified sense, does not materially affect the question involved, because in either character the State was entitled to be paid in gold, as the law of tender stood at the time of the contract.
But the rights of the State are not precisely and fully stated, or certainly not to their equitable extent, by considering the State as claiming simply in either of these capacities as ordinarily understood, because the State has equities beyond those of a mere stockholder or creditor. The State may in some sense be described in her relations with the company, as a creditor or stockholder; but in truth, as I understand the transaction made by the statutes in question, the State, by the issue of her bonds, merely intended to facilitate and aid the company, by enabling it to effect a loan through the credit of the State; and the - company to indemnify and secure the State from loss, undertook, in the mode and form prescribed by the Acts of the Legislature authorizing the loans, to furnish that security or indemnity. In order that the State might
The enterprise being one of great promised public utility, and calculated largely to develop the resources of the State, had claims upon the State, as the sovereign authority, to lend its assistance to promote the success of the company. Such considerations and inducements undoubtedly prompted the State to lend her credit to the company and to incur the risk of the security upon the guaranteed payment of the six per cent, from its profits, which were for that purpose and to that extent sacredly dedicated and pledged by the contract. The substantial import of the transaction between the State and the company, shows very conclusively to my mind, that it was a contract to secure the State, on account of the State becoming responsible for the company on the loan made to the company; that the company, for the purpose of indemnifying and securing the State on account thereof, gave the lien of six per cent, per annum interest on the debt upon the profits of the company.
This is the substance of the arrangement between the parties, disclosed by the provisions of the statutes relating to the transaction as between the State and the company. The former stands rather as the surety or guarantor of the latter on the sterling bonds; and in good faith, the company, the true debtor, has bound itself in effect by the stipulations of the contract, to pay the interest of .this debt in gold, in order to relieve and indemnify the State, which duty it punctually performed until July, 1865, after which, failing to do so, and the State to maintain her credit, having been compelled to pay the interest for the company, now has a just and valid
This I take to be the true and legal theory of the contract. But if it is not in legal effect a contract of indemnity, and it is simply an ordinary contract on the part of the company to pay the State the six per cent, interest on the amount of the loan, or substituted stock as the creditor, or preferred stockholder of the company; in that event the nature of the contract requires that the company shall pay its debt to the State in the same medium of payment the State has to discharge the debt contracted for the company — the State being obliged to pay in gold — the company, by virtue and in pursuance of the contract, is under a legal obligation to discharge its debt to the State in gold.
I hold that no rulings of the Supreme Court, under the Legal Tender Acts, authorize a different medium of discharge.
A brief examination of the stipulations between the State and the company, as indicated by the legislation of the State, referred to in the agreement, will clearly show, according to my judgment, that it was a contract of indemnity by which the State was to be secured and kept harmless by the company, under the arrangement made by the various provisions and stipulations found in the statutes upon the subject.
The Act of 1835, ch. 395, provided for currency six per cent, bonds ,of the State, to be met and discharged by the six per cent, interest or dividend to be paid by the company. The terms of that Act were modified by the Act of 1838, ch. 386, by substituting in the place of the six per cent, currency bonds, the five per cent, sterling bonds, and the contract was changed by the consent of the parties accordingly.
The company could have paid the six per cent, interest in currency to meet the interest upon the bonds of the State, payable in like medium, (currency,) as authorized by the Act of 1835,. ch. 395, so long as the provisions of that Act continued to embrace the terms of the contract, and currency might be the medium of payment of both ; but, by the
The contract of the parties was converted by that Act into mutual stipulations for payment in gold. This was the effect of the Act of 1838, ch. 386, changing the currency bonds of the State into sterling bonds, affecting alike each party in regard to the medium of payment. These statutes created the contract between the State and company, by which the State practically authorized the company to use the sterling bonds in effecting a loan for her own accommodation; the company agreeing to secure the payment of the interest thereon for the State’s indemnification.
It was to all intents and purposes, when reduced to its plain elements, free from the mass of verbiage used in the statutes, the debt of the company itself. It was neither an investment by the State in the stock of the company, nor a subscription to its stock simply as an ordinary creditor or stockholder, but a form adopted by the parties to secure the State for the loan of the bonds to the company.
What is there in the whole proceeding reduced to its natural dimensions, to show it to be any other thing than the debt of the company contracted by it through the agency of the State, and upon the guaranty of the State; the interest of the debt secured to be paid to the State by the lien of six per cent, on the profits of the work ?
This seems to me to be the plain and simple analysis of the 9th section of the Act of 1835, ch. 395, and the 1st section of the Act of 1838, ch. 386; the material provisions creating the contract between the parties. By the said 9th section the State was entitled to secure a perpetual dividend of six per cent, per annum from the profits of the work, and no more, on account of the loan contracted by or for the company, for
This fact, per se, is sufficient to show that the State was not a mere stockholder. Besides, this Court has decided (State vs. Baltimore and Ohio R. R., 6 Gill, 383, 384,) that the guarantee to the State of the six per cent, under the Act of 1835, ch. 395, is from the gross profits of the work, and in no manner impaired by the Act of 1838, ch. 386; shewing very clearly the State was not an ordinary stockholder. Under the 1st section of the Act of 1838, ch.- 386, upon the acceptance of the provisions of that Act by the company, and the execution of the required guarantee, sterling bonds redeemable in London at any time after fifty years, bearing interest at five per cent., payable semi-annually in London, on the 1st of January and July in each year, were authorized to be issued for the use of the company in lieu of the previous securities authorized by the Act of 1835, ch. 395; and equivalent to the amount of the bonds delivered up by the company. The Commissioner of Loans was required to give to the company in the proportion of $3,200 of the sterling bonds for every $3,000 of the prior securities delivered up — the company paying the interest at five per cent, on the stock created by the Act semi-annually, at least ninety days before the 1st of January and July, for the term of three years from the date of the bonds, together with the costs of transmitting the interest to London to be there paid, and also the difference in exchange of currency between London and Baltimore. In brief, under the Act of 1835, ch. 395, the interest on the loan of the currency bonds authorized by that Act was to be met for three years from the expected premium on the sales of the bonds; after that time the company guaranteed six per cent, to the' State.
But if the statutes in question do not make the contract one of indemnity, and the State is merely a creditor or stockholder, the special provisions of the contract will not be gratified if the company is permitted to discharge its part of the contract in currency, whilst the State is required to meet her obligations in gold. The mutual obligations of the same contract require the same medium of payment to be applied to both parties. Neither party, as the terms of the contract show, intended that the State should be a loser by the accommodation, and any construction so resulting, must be erroneous.
Parties may expressly or constructively contract to pay in gold or paper, in meal or malt, or other commodity; and in the same contract there may be stipulations for respective payments in different mediums; but when the contract is silent as to the one, and express as to the other, I know of no analogy, or any inductive process, by which an inference can be deduced, that the payment is to be made in two different mediums — the one in gold, the other in paper. Without some express provision to that effect, I am not able to perceive upon what principle of just construction such a result can be reached. I cannot believe that the Supreme Court ever intended to sanction such an application of the Legal Tender Laws of Congress.
The majority of this Court has treated the contract between the State and company as if it were an ordinary one for the payment of money, that is, that the company was simply bound to pay the six per cent, as so much money generally, without other purpose or object (whether considered as interest or dividend was immaterial,) and viewed in that light, that it was embraced by the rulings of the Supreme Court upon the Legal Tender Acts.
If that were the true interpretation of the contract, and it contained but the simple obligation to pay the six per cent, upon the stock or loan, as such, disconnected from the other consideration, that the six per cent, so to be paid was to enable the State to pay the interest on the debt contracted by the company, or by the State on her account, there might he ground for resting the case upon the decisions of the Supreme Court, and permitting the company to discharge its obligations in the currency provided by the Legal Tender Acts.
But with deference to their views, I submit that the contract is a special one, and for a specific purpose, to wit: In consideration of the Stale having agreed to deliver the sterling bonds to the company to enable it to realize the money thereon, the company contracted to pay to the State five per cent, per annum on the sterling debt or stock, as it is called
It seems to me, much of the fallacy of the view taken in defence of the company, proceeds from considering the case as if there were two several and distinct contracts between the State and the company.
By the one, that the State simply agreed to advance the sterling bonds, the company to pay the State interest thereon, as creditor or stockholder of the company. By the other, that the company agreed to pay the six per cent, to the State for the loan of the sterling bonds. Whereas, in legal contemplation, the Acts referred to, constitute but a single contract between the parties, with mutual stipulations and obligations as stated.
Where there are relative and dependent rights and obligations, and mutual stipulations between the parties, well defined and prescribed by the one contract, and making a part thereof, and provided for in the creation of the contract, all the elements of the transaction, and the considerations governing the contracting parties must be regarded, in order to
It is a well settled rule in the construction of contracts that the intention of the parties must be regarded, and this applies as well to the medium of payment as to any other provision, if that be one of the elements of the contract.
If parties contract to pay money generally, although gold may be understood to be the only legal tender, and consequently gold may be in the contemplation of the parties, yet, as I understand the decisions of the Supreme- Court, such contract must be taken with the understanding that the law may change the character of the tender of payment.
But if there is a special contract stipulating for payment iii gold, from its nature express or implied, gold must be' the medium of payment. That stipulation being part and parcel of the contract, must be carried into effect as such in good faith. If a contract provides, by express or implied terms, that whatever should be the medium of payment, gold, silver, paper, or other commodity, of the one, the same should fee applied to the other; and the one has' to- pay in- gold, can there be any question that the other is required, under the obligations of the contract, to meet his in. gold t Certainly it was, and still is competent for parties so to contract, and the Courts must enforce their contracts accordingly. The provisions of the contract may be express or contingent as to the character of the medium of payment, either in gold, paper, or other commodity; or it may be but a matter of inference,, to be deduced from the nature of the obligations of the-contract-.
The State, in this instance, is obliged by the contract between the parties to pay in gold in Europe on her sterling bonds, issued for the use of the company; and the company agrees and obliges itself to furnish the money in the payment of the six per cent, interest on the correspondent debt it owes to the State on account thereof, which must be in the same kind of money — there being'ho provision of the contract to discharge the company by any reduced medium of payment. The Supreme Court, in none of its decisions, as I apprehend them, has ever intended to sanction an application of the Legal Tender Acts, capable of accomplishing such unjust and unequal results, in the adjustment of the respective rights of the parties under the same solemn and bona fide contract, as inferred by the opposite theory.
According to my apprehension, the six per cent, provided by the Act of 1835, ch. 395, to be paid to the State, was and still is due and payable in gold, and the State is justly and legally entitled to the $289,489 claimed by her.
Judge Dobbin, of the Superior Court, in my judgment, was right in holding the company bound under the contract, and the mutual stipulations thereof, to pay the claim of the State in gold, and that the Legal Tender Acts and the decision of the Supreme Court thereon, have not relieved the company from that obligation. The judgment below should accordingly be affirmed.