Thomas v. Cincinnati, N. O. & T. P. Ry. Co.

81 F. 911 | U.S. Circuit Court for the District of Southern Ohio | 1897

TAFT, Circuit Judge

(after stating the facts as above). The question now made at the bar was mooted by the sinking fund trustees nearly 15 years ago. Since that time no installment of rent has been paid at the time fixed in the lease for payment, and yet no one on behalf of the city has ever until now attempted to exact from the lessee company or its receiver the payment of one cent of interest for the delay. Receipts have been given, which, in effect, were receipts in full, whenever the installment without interest has been tendered within the 90-days period, and, as if to emphasize the meaning of the receipts for the balance of the installment, the receipts for partial payments, sometimes made have contained an express reservation of the right to forfeit the lease for a failure to pay the balance due, while this was significantly omitted from the receipts for the balance of the installment. If interest was due upon the installments of rent thus delayed' in their payment, it is very clear that the obligation arose, not by express agreement between the parties, but as damages for delay. An unbroken line of authorities establishes that, where interest is payable as damages, the reception of the principal without the interest, after default is a, conclusive waiver of the claim for interest. Cutter v. Mayor, etc., 92 N. Y. 166; Hamilton v. Van Rensselaer, 43 N. Y. 244; Society v. Wells, 68 Me. 572; Cordage Co. v. Brewer, 48 Me. 481; Canfield v. School Dist., 19 Conn. 529; King v. Phillips, 95 N. C. 245; Childs v. Insurance Co., 56 Vt. 609; Abbott v. Wilmot, 22 Vt. 437; Perley, Interest (1893) p. 140. It therefore follows that, even if the lessee company was bound to pay interest on delayed installments, the receipt of the principal without the interest was a waiver of the same. If interest was due, then the city has suffered a loss of $121,000 by the failure to exact interest, or to reserve a right to the same when the installments were received. If interest was due, it was the duty of the Southern Railway trustees to collect it, or to protect the city’s right to it. They did not do so. If interest was necessarily due, their failure to collect it was a dereliction of duty on their part, which it would seem might subject them to liability to the city on their official bonds. I cannot suppose that the trustees would deliberately contend for a construction of the lease which might involve this consequence, and I cannot, therefore, regard their action in demanding interest on deferred installments after 15 years of acquiescence in the payment of such deferred installments without interest as well considered. I should be loath to reach a conclusion in this case which might justify a claim of personal liability against them. I am very clear that no such personal liability exists. The trustees were the representatives of tne citv in the execution of its duty under the lease, and there was necessarily vested in them some discretion in determining how rigidly the lease should be construed in favor of the city and against the lessee company in all cases where any doubt existed. It was, of course, for the interest of the city to encourage the lessee to meet its liabilities.under a somewhat burdensome lease by not insisting upon a too harsh construction of its terms. The course which the trustees took in construing the lease as not compelling the payment by the lessee of interest on delayed installments during the 90-days period was in the proper exercise of a discretion vested in them, and I cannot hold it to have been otherwise, even at their own instance. It is possible that, had the question arisen and been litigated within a year or two after the execution of the lease, the construction would have been that interest was due, after the dates fixed for payment in the,contract of lease, upon delayed installments of rent (section 8181, Rev. St. Ohio), though it might have been argued with some force that, in the absence of an express provision for the payment of interest on the defaulted installment in the clause of re-entry in which the right to apportion the succeeding rent was expressly reserved, the tender of the installment in full without interest at any time during the 90 days succeeding the default would have prevented the right of re-entry and forfeiture from accruing. If so, it would seem that the only amount due during the 90 days, and until its expiration, would be the installment of rent without interest. It has in time past been made the subject of dispute whether interest does run on rent in arrears. At common law no distress was allowed for interest on rent. Lansing v. Rattoone, 6 Johns. 43; Dennison v. Lee, 6 Gill & J. 383, The theory of the courts first seemed to be that the rent, itself was a kind of interest, and that the interest on rent in arrears would be of the nature of compound interest, and so not permissible. Perley, Interest, 129; Burnham v. Best, 10 B. Mon. 229; Cooke v. Wise, 3 Hen. & M. 463. The general rule now, however, is that interest does accrue on rent in arrears from the time it is payable in money. Williams v. Sherman, 7 Wend. 109; People v. Dudley, 58 N. Y. 323. In Dennison v. Lee, 6 Gill & J. 383, the lessor reserved a right of re-entry in a certain time after the default in the payment of rent, and the re-entry clause expressly stipulated for interest on the defaulted rent. Interest was allowed on the installment of rent due in that case, and it was intimated that it would have been allowed even though no such express provision had been in the clause of re-entry. In some of the early cases with respect to interest on rent in arrears, it was said that the question of the recovery of interest was within the discretion of the court or jury to whom the issue of the amount of recovery was submitted. Graham v. Woodson, 2 Call, 249; Skipwith v. Clinch, Id. 253; Dow v. Adam’s Adm’r, 5 Munf. 21. It seems to me sufficiently to appear from what has been said that the question of the liability of the lessee company to pay interest on the installment during' the 90 days was in some doubt. It is well settled that, where the construction of a contract is doubtful, courts may use the actual construction put thereon by the conduct of the parties under the contract as a controlling circumstance to determine the construction which should be put upon the contract in enforcing the i-ights of the parties. Topliff v. Topliff, 122 U. S. 121, 7 Sup. Ct. 1057; Chicago v. Sheldon, 9 Wall. 50; St. Louis Gaslight Co. v. City of St. Louis, 46 Mo. 121; Jackson v. Perrine, 35 N. J. Law, 137; Stone v. Clark, 1 Metc. (Mass.) 378. Of course, if the lease here in suit expressly provided for the payment of interest on deferred'installments, conduct of the parties could not change the certain meaning of such a provision; but, where the obligation to pay interest can arise only by implication or legal inference, it seems clear to me that the implication or inference can be successfully rebutted by the uniform and constant conduct of the parties under the lease wholly at variance with such a liability on the part of the lessee.

It has been suggested that the action of the trustees of the Southern Railway in acquiescing in the claim of the lessee company that no interest was due for defaults in the installments during the 90-days period cannot affect the question of the lessee’s liability for interest, because the trustees had no right or power thus to bind the city to a particular construction. To this it may be said that the conduct of the trustees is not the only significant evidence of the acquiescence of the city of Cincinnati in the claim of the lessee company. The action of (he sinking fund trustees in passing a resolution that the claim was unfounded, instead of showing that there was no acquiescence on (he part of that branch of the city government, only emphasizes the acquiescence of that board in the act of the Southern Railway trustees. It was entirely within the power of the hoard of sinking fund trustees, and of the members thereof as citizens and taxpayers of the city, to institute litigation, through the city solicitor or otherwise, to compel the trustees of the Southern Railway to insist upon a different construction of the lease with reference to the payment of interest. They did not do so, but contented themselves with a resolution spread upon their minutes protesting against such a construction of the lease in order to avoid any official responsibility for it. They could not thus shift their responsibility as taxpayers and citizens and as a board charged with providing funds to meet the city’s obligations in such a way as to prevent the city itself from being bound by the action of the trustees of the Southern Railway. It .also clearly appears that the city council, the governing body of the city, was fully advised at the time of the construction that the trustees of the Southern Railway were putting upon the lease, and the city solicitor might have been called upon by that board to go into court to compel the trustees of the railroad to enforce the payment of interest. He might have done so of his own motion. Any other taxpayer, advised, as all of his class must have been, of that which was being done on behalf of the city in the enforcement and con- ■ struction of the lease, might have brought into litigation, and settled thereby, the question of the obligation of the lessee company to pay interest on delayed installments. No such action was taken. Municipal corporations, acting in their proprietary capacity, especially when engaged in business enterprises for profit, like that of owning and leasing a railroad, cannot, any more than private individuals, avoid inferences from their inaction and silence as to their acquiescence in and ratification of the acts and omissions of their agents after so long a period of time as 15 years, when the acts and omissions complained of have been constantly recurring four times a year, and have been well known to the public at large. I hold, therefore, that by the construction put upon this lease by the parties to it as shown by 15 years of operation thereunder there is no obligation upon the lessee company to pay interest upon installments of rent within the 90 days after said installments become due, and before the right of re-entry and forfeiture under the lease accrues, and that an order must be made requiring the trustees of the Cincinnati Railway to accept from the receiver in future the instillments of rent due under the lease, and to receipt therefor in full of said installments if paid in full at any time within the period of 90 days from the day fixed for payment in said lease.