Maryland v. R.R. Co., 89 U.S. (22 Wall.) 105

Its ninth section was as follows: Before any subscriptions shall be made by virtue of this act, p. 106the stockholders of the said company shall stipulate, agree, and bind the company ... 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, 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 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 ito 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 per 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 interest in said company.”

The bonds were issued by the State, but the commissioner sent to Europe was unable to negotiate them on the terms p. 107prescribed by the act. The State then sold the bonds to the company itself; but rated, as they had been by the State, at $120, they proved to be unsalable by the company.

The bonds that were issued to the company by the State, under this 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 railroad company paid the interest on them as it accrued, and all costs and difference in exchange, for the term of three years; and after the expiration of that term it continued to pay such interest, cost, and exchange, by applying directly the State’s guaranteed dividend of six per cent, on p. 108the stock subscribed under the act of 1836, instead of paying it over to the treasury. The company rendered no account, but treated the six per cent, dividend as equivalent to the five per cent, sterling interest, with the costs and exchange; and this continued to be its course of conduct to the 1st of July, 1865, from which time it ceased to apply the six per cent, dividend as formerly, but paid it directly into the State treasury in currency notes. The State had been, therefore, required, from the 1st of July, 1865, to the present time to provide for the payment of the sterling interest in London, together with all costs and difference in exchange; which, of course, had to be adjusted to a gold standard, while it had been in the receipt of the six per cent, dividend in currency.

But in the year 1861, already named, a general suspension of payments in coin took place throughout the country, and in 1862 and 1863, Congress authorized the issue of many millions of notes of the United States, which by the acts authorizing them were declared to be a tender in payment of debts. This act, this court held to be constitutional;* but the court also decided that a debtor could pay his debt with legal tender notes only when his contract did not specify that payment should be made with coin ;f in other words that a debtor might have defined the medium of payment as well as have promised to pay. So that after the passage of these acts there were two kinds of money or p. 109representatives of values with which debts might'be paid, coin and legal tender notes; an ordinary debtor being at liberty to pay in currency, though a debtor who had undertaken to discharge his obligation by payment in gold or silver would be held to his contract as specifically made;

It is not contended in this case that the contract between the parties contains any express undertaking to pay what the company assumed to pay, either in coin or in any specified kind of money, or with anything other than that which niigbt be a legal tender for the payment of debts, when the time for payment should arrive. But the argument on behalf of the State is, that the language used implies an undertaking to pay in coin, and that the case is therefore within the principle laid down in Trebilcock v. Wilson. Conceding that such an undertaking may be implied, when there is no express promise to pay in gold, still the implication must be found in the language of the contract. It is not to be gatheied from the presumed or the real expectations of the p. 112parties. As was said in Knox v. Lee* “ the expectation of the creditor and the anticipation of the debtor may have been that the contract would be discharged by the payment of coined money, but neither the expectation of one party nor the anticipation of the other constitutes the obligation of the contract. 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 always be equivalent to a binding engagement that they should follow/’ There is sound reason in what was said by Lord Denman in the Queen’s Bench, in Aspdin v. Austin,^ which was an action upon a covenant. “ Where parties,” said his lordship, “have entered into written engagements with express stipulations, it is manifestly not desirable to extend them by any implications. The presumption is that, having expressed some, they expressed all the conditions by which they intend to be bound under that instrument. It is possible that each party to the present instrument,” said he, “ may have contracted on the supposition that the business would in fact be carried on and the service in fact be continued during three years, and yet neither party be willing to bind themselves to that effect; and it is one thing for the court to effectuate the intention of the parties to the extent to which they7 may have even imperfectly expressed themselves, and another to add to the instruments all such covenants as upon a full consideration the court may deem fitting for completing the intention of the parties, but which they, either purposely or unintentionally, have omitted. The former is but the application of a rule of construction to that which is written; the latter adds to the obligation by which the parties have bound themselves, and is of course quite unauthorized, as well as liable to great practical injustice in the application.” Applying these principles, and looking to the contract, we discover no basis for such an implication as the plaintiff“ in error asserts.

We are asked to consider the circumstances which at’ p. 113tended the legislative enactments, and induced them. The State was then in part the owner of an unfinished railroad. It was important to the interests of the people of the State, as well as to the State as a stockholder, that the road should be finished, and to accomplish its completion pecuniary assistance by the State was needed. For this purpose the State lent her credit. This was the object she had primarily in view\ It is said she had also in view her own protection and that of her citizens against loss in so doing, and that it must be presumed the legislature discharged its duty, and made effectual provision for such protection. This is assuming what cannot be conceded. It assumes that it was the duty of the legislature to exact from the company all that could be exacted, and this though the company was in great need of assistance, and though it was the interest of the State that such assistance should be furnished. But if the assumption might be made, it would still be inadmissible to deduce an implication of a promise, not from the contract itself, but from the extraneous fact that such a promise ought to have been exacted. Ordinarily a reference to what are called “surrounding circumstances” is allowed for the purpose of ascertaining the subject-matter of a contract, or for an explanation of the terms used, not for the purpose of adding a new and distinct undertaking.

VOL. XXII. 8 p. 114from time to time as it should fall due. But nothing in the statutes, read as a whole or read with reference to the required guarantee, or read in the light of the circumstances then existing, exhibits any undertaking that the company’s stipulated payments should suffice to discharge the liabilities of the State. On the contrary there is much in the statutes to repel any possible implication of an engagement to indemnify, and to make it apparent that such an obligation was not intended to be imposed or assumed. As has been noticed, the company was required by the act of 1836 to pay, after the first three years, six per cent, interest out of the profits of the work, and pay it semi-annually, until the net profits should be adequate to pay a six per cent, dividend, and thereafter pay a perpetual dividend of six per cent annually. But the bonds first authorized to be issued by the State to pay her subscription were bonds bearing six per cent, interest payable quarterly, and running not less than fifty years. The commissioners for their sale were also authorized to make the interest on the bonds payable at the loan office of the State, in the city of Baltimore, or at some place or places in Europe, should they find it advantageous so to contract. It is manifest, therefore, that if the bonds had been made payable in Baltimore, principal and interest, the semi-annual payment required of the company would not have met the obligations of the State, which were to pay quarterly her interest. And if the bonds had been made payable in Europe, still less would the six per cent, due from the company, though paid in gold, have enabled the State to pay7 her interest abroad. In addition she must have paid exchange and the cost of transmission. This seems to indicate clearly that the act of 1836 not only was not, but that it was not intended to create an obligation to indemnify the State. And this is not all. The bonds first issued were exchanged under the act of 1839, and sterling bonds bearing five per cent, interest payable semi-annually in London were given to the company in their place. . This act required the company to secure the payment of the interest at the rate of five per centum per annum on the stock (the sterling p. 115bonds) created by the act, semi-annually, at least ninety days before the first day of January and July in every year for the term of three years from the date of the bonds or certificates of stock, together with the cost of transmitting the interest to London to be there paid, and also the difference in exchange of currency between London and Baltimore. This was a stipulation for indemnity. It covered all that the State was required to pay as interest on her sterling bonds. But it was expressly limited to the interest for the first three years, and hence it excluded any implication of an obligation to indemnify against all liability of the State to pay the subsequently accruing interest. Unless this is true the limitation to three years is unmeaning. After the expiration of that period, nothing more was required than the semi-annual payment of six per cent, as stipulated by the act of 1836.

The bills of exception disclosed the testimony on which this instruction was founded, and the question now before p. 117this court was whether the verdict founded on that instruction should be set aside and the judgment reversed.

We do not think that a close examination into these is necessary in this case. According to Keene’s testimony there was clearly no contract binding him to divide the profits with Fant. He says the promise was entirely p. 120voluntary, and that no portion of the profits was mentioned. By voluntary he undoubtedly means that it was not a part of the agreement by which he obtained the money, but a gratuitous promise to reward his friendship if he succeeded in his venture.

, 11 ’ ’ ßyder v‘ Wombwell, 4 Law Reports, Exch. 33. t 11 Howard, 862. { 1 Wallace, 869. ton i7i n°h’ 219 ’ See also Bapk of the United States v. Smith,.11 p. 122Wheainstructing them in the rules of law by which that evidence is to be examined and applied, and finally, when necessary, by setting aside a verdict which is unsupported by evidence or contrary to law.

Tested by these principles we are of opinion the Circuit Court ruled well. If plaintiffs had secured a verdict on the testimony before us we think that court ought to have set it aside as not being warranted by the evidence. It is n0 possible with any just regard to the principles of law as to partnership, and the rules of evidence as applied to p. 123thistestimony, to come fairly and reasonably to the conclusion that Fant was Keene’s partner in this transaction.