United States v. Central Pac Co

Decision Date10 May 1886
PartiesUNITED STATES v. CENTRAL PAC. R. CO. Filed
CourtU.S. Supreme Court

Sol. Gen. Goode, for the United States.

John F. Dillon, J. E. McDonald, Thos. Simons, and R. J. Bright, for appellee, Central Pac. R. Co.

WOODS, J.

The appellee, the Central Pacific Railroad Company, brought this suit in the court of claims against the United States, to recover compensation for services rendered the United States in transporting persons and freight over those parts of its railroad in the building of which it had not been aided by the government. The United States demurred to the petition on the ground that it did not allege facts sufficient to constitute a cause of action. The demurrer was overruled, and judgment rendered in favor of the claimant for the sum demanded. From that judgment the United States have brought this appeal.

The appellee alleges in its petition that it was originally incorporated on June 28, 1861, under the laws of the state of California; that, with the aid of the grant of lands in alternate sections, and of bonds of the United States issued to it under the acts of congress approved July 1, 1862, and July 2, 1864, it built, either directly or indirectly, and became the owner of, 865.66 miles of railroad. In addition to this line of road, the construction of which was so aided by the United States, the appellee, during the period covered by the petition, controlled and used 383.67 miles of railroad acquired by consolidation with other companies, and 1,791.35 miles of railroad leased by it from other companies, making 2,175.02 miles, all of which had been constructed without any aid from the United States under the said acts of congress. The petition demanded pay for service of transportation rendered the United States over the 2,175.02 miles of railroad which had been so constructed without their aid.

The contention of the United States was that they were justified in withholding the compensation sued for by virtue of the provisions of section 2 of the act of May 7, 1878, (chapter 96, 20 St. 56,) commonly known as the 'Thurman Act.' We do not think this contention is well founded. The act of July 1, 1862, (chapter 120, 12 St. 489,) was passed 'to aid,' so the title declared, 'in the construction of a railroad and telegraph line from the Missouri river to the Pacific ocean, and to secure to the government the use of the same for postal, military, and other purposes.' The act of July 2, 1864, (chapter 216, 13 St. 356,) was an amendment to the act of July 1, 1862. By these acts certain railroad companies were aided in the construction of their roads. Among them was the appellee, which built the 865.66 miles above mentioned. It was aided in the construction of this part of its road by an issue of bonds made to it by authority of the acts of July 1, 1862, and July 2, 1864. The act of July 1, 1862, made the following provisions to secure the payment of the principal and interest of the bonds so issued:

'Sec. 5. * * * 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,' etc.

'Sec. 6. 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, and munitions of war, supplies, and public stores upon said railroad, for the government, whenever required to do so by any department thereof, and the government shall at all times have the preference in the use of the same for all the purposes aforesaid; * * * 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; * * * 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 the act of July 2, 1864, it was provided as follows:

'Sec. 5. * * * 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.'

These sections, taken together, constitute the contract between the United States and the appellee. U. s. v. Union Pac. R. Co., 91 U.S. 72; Sinking-fund Cases, 99 U. S. 700, 718; Union Pac. R. Co. v. U. S., 104 U. S. 662. This contract is binding on the United States, and they cannot, without the consent of the company, change its terms by any subsequent legislation. Sinking-fund Cases, ubi supra. These provisions of the statute law of the United States being still in force, congress passed the act of May 7, 1878, being the Thurman act, above referred to. The preamble of this act mentions by name the companies which had been aided by bonds of the United States under the acts of July 1, 1862, and July 2, 1864. The first section declares how the net earnings referred to in those acts shall be ascertained, and the second section provides as follows: 'That the whole amount of compensation which may, from time to time, be due to said several railroad companies, respectively, for services rendered for the government, shall be retained by the United States, one-half thereof to be presently applied to the liquidation of the interest paid and to be paid by the United States upon the bonds so issued by it as aforesaid to each of said corporations severally, and the other half thereof to be turned into the sinking fund hereinafter provided, for the uses therein mentioned.'

The case turns on the true interpretation of this section, the appellants contending that it authorized them to retain compensation earned for transportation over all the roads owned or leased by the appellee, whether the construction of such roads had been aided by the issue of government bonds or not and the appellee contending that the compensation referred to was that earned by transportation...

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