Morley v. Lake Shore Ry Co

• Citation: 36 L.Ed. 925,13 S.Ct. 54,146 U.S. 162
• Decision Date: 14 November 1892
• Docket Number: No. 1,1
• Parties: MORLEY v. LAKE SHORE & M. S. RY. CO
• Court: United States Supreme Court

146 U.S. 162

13 S.Ct. 54

36 L.Ed. 925

MORLEY

v LAKE SHORE & M. S. RY. CO.

No. 1.

November 14, 1892.

W. F. Lucien Birds- Upson, Geo. Hoadly, and eye, for plaintiff in error.

E. S. Rapallo, for defendant in error.

Mr. Justice SHIRAS delivered the opinion of the court.

John S. Prouty, of the city and state of New York, was a holder and owner of certain preferred and guarantied stock of the Michigan Southern & Northern Indiana Railroad Company. This stock was issued in the city of New York, in the year 1857, and the guarantied dividends and interest were to be there paid. Subsequently, it being alleged that the said company was in arrears of dividends and interest due Mr. Prouty as holder and owner of its stock, an action was commenced by him in the supreme court of the state of New York in and for the city and county of New York, special term, upon the equity side, to compel the said company specifically to perform its contract and agreement with him. During the pendency of the action, evidence was produced tending to show that, after the commencement of the same, the said company was, with various other companies, merged or consolidated into the Lake Shore & Michigan Southern Railway Company, the present defendant in error. Upon this evidence the consolidated company was permitted to be brought in as defendant by supplemental complaint. In pursuance of this complaint, after a trial at special term, the supreme court, on motion, decreed that the railroad company should specifically perform all and every act and acts necessary and proper for the specific performance of the contract and agreement in the findings and decisions of the special term set forth, and made as therein stated, with the plaintiff as holder and owner of the stock in question, and to pay the plaintiff the amount of the arrears as dividends, being $27,426.67, with interest, the whole aggregating $53,184.88; and also decreed that immediately after service of a copy of the judgment the company should declare and make payable, and pay out of any of the net earnings of the company, the said sum of $53,184.88, together with interest thereon from the entry of said judgment; and that, in case of failure within 30 days after service of the judgment to pay the said sum of $53,184.88 and said interest, the plaintiff should have execution therefor against the defendant. On appeal by the defendant from this decree to the general term of the supreme court, (1 Hun, 655,) and afterwards to the court of appeals, (52 N. Y. 363,) the decree was affirmed, and was entered in the office of the clerk of the county of New York on the 26th day of January, 1878. The proceedings in the action prior to this decree do not appear in the record before this court, but such facts as are not shown by the record, and which deserve to be stated here, are gathered from the briefs and data therein cited, and seem to be undisputed.

The directions of the said decree not being complied with, on the 21st day of May, 1881, an execution was duly issued for the amount of the decree, with interest, and thereupon the defendant company paid to the sheriff the said amount, with interest at the rate of 7 per cent. per annum up to January 1, 1880, and interest at the rate of 6 per cent. per annum from January 1, 1880, to May 21, 1881, the time of such payment, and demanded that the execution be returned satisfied. It would seem that the reason for the refusal to pay 7 per cent. interest after January 1, 1880, was the passage of the act of June 20, 1879, of the legislature of the state of New York, changing the rate of interest upon the loan or forbearance of any money, goods, or things in action from 7 per cent. to 6 per cent. per annum, which act, upon January 1, 1880, began to take effect. The sheriff and plaintiff received the said sum on account, and demanded an additional amount which would be the balance due upon computing the interest at the rate of 7 per cent. per annum for the whole time. Thereupon the railroad company, by its attorney, obtained a rule to show cause why the said execution should not be returned fully satisfied, or why the said judgment should not be discharged, and marked satisfied of record, or why the sheriff should not be forever enjoined from making any levy or sale under said execution. This application was, at a special term of the supreme court of New York, denied. The general term of the same court afterwards affirmed the denial of this motion by the special term. 26 Hun, 546. An appeal was then taken from the said general term of the said supreme court to the court of appeals, where the decision of the supreme court was reversed, and that court was ordered to grant the motion. 95 N. Y. 428, 667.

The complainant thereupon, by a writ of error, brought the matter from the court of appeals, which is the highest court having jurisdiction thereof in the state of New York, to this court.

In considering this case, we shall find it convenient to have before us certain sections of the statutes of New York, namely:

Rev. St. pt. 2, c. 4, tit. 3, enacted December 4, 1827, and taking effect January 1, 1830, (1 Rev. St. 771:)

'Section 1. The rate of interest upon the loan or forbearance of any money, goods, or things in action shall continue to be seven dollars upon one hundred dollars for one year, and after that rate for a greater or less sum, or for a longer or shorter time.'

'Laws 1879, c. 538, p. 598, (an act to amend the title containing the section above quoted, passed June 20, 1879, and taking effect January 1, 1880:)

'Section 1. The rate of interest upon the loan or forbearance of any money, goods, or things in action shall be six dollars upon one hundred dollars for one year, and after that rate for a greater or less sum, or for a longer or shorter time; but nothing herein contained shall be so construed as to in any way affect any contract or obligation made before the passage of this act.

'Sec. 2. All acts or parts of acts inconsistent with the provisions of this act are hereby repealed.

'Sec. 3. This act shall take effect on the first day of January, 1880.'

Laws 1877, c. 417, pp. 468,477. (An enactment of June 2, 1876, taking effect September 1, 1877.)

'Sec. 1211. A judgment for a sum of money, rendered in a court of record or not of record, or a judgment rendered in a court of record directing the payment of money, bears interest from the time when it is entered.'

The first question we have to consider is the effect to be given to the saving clause contained in the first section of the act of June 20, 1879, which provides that nothing therein contained shall be so construed as to in any way affect any contract or obligation made before the passage of that act. This question is answered for us by the decision of the court of appeals of New York in this very case, holding that this saving clause is not applicable in the case of a judgment like the plaintiff's. In Louisiana v. Pilsbury, 105 U. S., at page 294, this court, speaking by Mr. Justice Field, says: 'Whether such a construction [by judicial decisions, upon a clause of the state constitution] was a sound one, is not an open question. * * * The exposition given by the highest tribunal of the state must be taken as correct so far as contracts made under the act are concerned. * * * The construction, so far as contract obligations incurred under it are concerned, constitutes a part of the law as much as if embodied in it. So far does this doctrine extend that when a statute of two states, expressed in the same terms, is construed differently by the highest courts, they are treated by us as different laws, each embodying the particular construction of its own state, and enforced in accordance with it in all cases arising under it.' 'The rule of construction adopted by the highest court of the state in construing their own constitution and one of their own statutes in a case not involving any question re-examinable in this court under the twenty-fifth section of the judiciary act, must be regarded as conclusive in this court.' Provident Inst. v. Massachusetts, 6 Wall. 611, 630. 'The construction given to a statute of a state by the highest judicial tribunal of such state is regarded as a part of the statute, and is as binding upon the courts of the United States as the text.' Leffingwell v. Warren, 2 Black, 599, 603. The meaning of a state statute, declared by the highest court of a state, is conclusive upon this court. Randall v. Brigham, 7 Wall. 523, 541. If, then, the law as enacted by the legislature, and construed by the state judiciary, will be the law of the state, it follows that, as to the proper construction of the statute, and as to what should be regarded as among its terms, no federal question could arise. The most that could be claimed would be that, although the statute of the state was unobjectionable, yet the state court had erroneously construed it. This would constitute a purely judicial error, involving no question of the validity of the law; which latter question alone is, by the plainest possible terms of the constitution and judiciary act, subject to investigation here. Assuming, then, that the statute in question was correctly construed by the New York court, our only inquiry must be as to the validity of the statute itself, as construed by the state court. Did, then, the law that changed the rate of interest thereafter to accrue on a subsisting judgment infringe a contract, within the meaning of the constitution of the United States?

Before we state the conclusions reached by this court, the contention on behalf of the plaintiff in error may be briefly stated, as follows:

The judgment was based on a contract, which, as soon as it became a cause of action by the failure of the defendant to comply with its terms, began, under the then existing law of the state, to draw interest at the rate of 7 per cent. per annum, and, when merged into judgment, was entitled to...